Trading is trading and it would not exist, if 90% of all people trading in it make losses. It is like if 90% of people act in one direction, then the market must move in the other direction. An important word in previous line is "act". This is so because people think its better to go for bet1 and they act on bet2. That is markets. It requires a strict discipline.
So, what makes a stock, index or commodity to change its price and sometimes this change is rapid and many a times it is very slow. A lot of scholars would say, prices mimic fundamentals, news and positivity or negativity around it, but there never is any accurate measure. Lets take stocks. A stock can trade in any type of profit to price or earning to price or book value to price ratio. There is absolutely no clarity. There never will be for trading in capital markets is a game of focus not economics. Having said that only focus will not take you anywhere. You bets should should have considered many technical, news and fundamental parameters. But as per my experience I would say trading in capital markets is 80% technical and 20% fundamentals or news.
I would put them as five rules for trading in markets. Let us elaborate on them one by one. All of them are purely technical and very insighful.
Rule 1 : Theory of supports, resistances and trend-lines
This is the most fundamental rule for trading.
What are resistance and support ?
Ans: Prices fluctuate as waves forming crests and troughs. A crest is a simple resistence and trough is a support. Once the price movement goes below a support, then the same support will become a resistance. In short, crests and trough are your points(i should say points of insane focus), if the price is below the point then its your resistance and if the price is above the point, then this particular point is your support. In the below graph C,A and B were your points and A', B', C' and C'' are points achieved again.
Rule 2 : Tracking of Open interest and volumes.
Rule 3 : Theory of decisive crossover
Rule 4 : Candlesticks and trend reversal patterns
Rule 5 : Elliot wave principle
So, what makes a stock, index or commodity to change its price and sometimes this change is rapid and many a times it is very slow. A lot of scholars would say, prices mimic fundamentals, news and positivity or negativity around it, but there never is any accurate measure. Lets take stocks. A stock can trade in any type of profit to price or earning to price or book value to price ratio. There is absolutely no clarity. There never will be for trading in capital markets is a game of focus not economics. Having said that only focus will not take you anywhere. You bets should should have considered many technical, news and fundamental parameters. But as per my experience I would say trading in capital markets is 80% technical and 20% fundamentals or news.
I would put them as five rules for trading in markets. Let us elaborate on them one by one. All of them are purely technical and very insighful.
Rule 1 : Theory of supports, resistances and trend-lines
This is the most fundamental rule for trading.
What are resistance and support ?
Ans: Prices fluctuate as waves forming crests and troughs. A crest is a simple resistence and trough is a support. Once the price movement goes below a support, then the same support will become a resistance. In short, crests and trough are your points(i should say points of insane focus), if the price is below the point then its your resistance and if the price is above the point, then this particular point is your support. In the below graph C,A and B were your points and A', B', C' and C'' are points achieved again.
Rule 2 : Tracking of Open interest and volumes.
Rule 3 : Theory of decisive crossover
Rule 4 : Candlesticks and trend reversal patterns
Rule 5 : Elliot wave principle
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