Update 25th May 08

Hmmm... another disaster start for the week... because of the time constraint... i decided to just add charts ofthe trades i have take. The review of it will be over the weekend...

Rule Additions and trading experience for the week 5th May to11th May 2009

Finally I am back to blogging again. What i am doing today is based on my experience over the last 2 weeks, i decided to add new rules to my trading. Here they are:

1. Even before i take any trade, I will calculate the amount of loss i will incur if at all i am hit by a SL.
2. I will say it out loud to myself that "I know that i will be incurring Rs: xxxx loss if i take up this trade. I am aware of it and i am risking this amount for a potential profit of Rs: xxxx.
3. If at all i place a limit order to enter a trade, i will immediately place my SL order, even if the entry is not hit.
4. I will use my NHNL indicator to measure weather the market is in a trend mode or in a trading range mode. I will take trades only in trend mode. If NHNL is <>= 10, the maket are in trading mode.

This is the end of my rules. Now my observations about my trading.

1. I am still booking small profits and letting my losses Run.
2. Had i stick to my SL, my profits would have been double of what i earned this week. I am now realizing why its so important to strictly follow SL, It make a lot of difference to your trading success and profits.
3. I observed a new behavoiur in stocks.. which makes me better understand how MACD works. Tomorrow before markets open, i am going to build my own custom indicator and observe it for a week. If this observation is correct, it would help me in designing a trading plan using MA's.

Here is the explination about it:

I was observing if i could find a relible BO pattern in stocks having MA contraction. What i found was, if the contraction happens because of a sharp correction opposite to primary move.. those sort of contractions are very likely to BO in the direction of primary move.

So this is what i want to do. I will build an indicator which measures the difference between my short term MA and medium term MA.
Long when:
when both these averages are above the long term MA.
The indicator is in the same trend as the stock (i.e. the stock must be in an uptrend and the oscillator should be above zero, once in a while touching the zero line. The height of the indicator during successive peaks should be almost same or the peaks should keep on increasing.)
When i find a stock with this properties.. its a strong trending stock, ideal to go long when the indicator approaches zero.

SL can be when the indicator makes a new low during the trend.
TGT can be when indicator reached the top or when there is a divergence.

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Waiting for an excited day trading for the next week...... here are some more things i want to do...
1. Do chart study of all the sample charts i have created. See if you can find any new observations.
2. build NHNL indicator for last year and study it to decide trend period and trading period.

Trades on 10th Dec 08

Reliance:

View Short: Entry: 1163.4 Exit: 1173


BHEL:
View Short: Entry: 1397 Exit: 1406.8
View Short: Entry: 1392 Exit: 1390


SBI:

View Short: Entry: 1153 Exit: 1173.4

Trades on 8th Dec 2008

Here are todays trades:

Reliance:

Trade 1: Long view, Entry: 1178, Exit: 1167.8

Trade 2: Short view, Entry: 1167.8, Exit: 1166

Nifty:

Trade 1: Long view, Entry: 2863, Exit: 2855.5 (Supposed to take short position, but placed a wrong order)

Trade 2: Short view, Entry: 2848, Exit: 2838

Trade 3: Short view: Entry: 2808, Exit: 2775

Trades on 1st Dec 08

Here are my trades for the Day:

HDFCBANK:

Trade 1:

Long View Entry: 963 Exit: 958

I have noticed HDFC Bank looking strong among all stocks in my watchlist. So was waiting for a pullback to go long. I got the pullback at around 11:15. So have taken a long position at 963. I decided 960 as Stoploss. In less than 10mins my stoploss was hit and i got out at market price, which was 958 at that moment. 

I don't find any fault in myself about this trade, it genuinely looked like a pullback.

Trade 2:

Long view Entry: 961 Exit: 962.4

After noticing HDFC Bank going up after a pullback, i placed an order to enter at 955. I missed on that price and it went to 961 before i could change it to market order. 5Mins after my entry, i realized that there might not be anymore up move left. Nifty has made day's low on futures and even banknifty confirmed a downtrend. So i got out of the trade immediately at 962.4

Fear of loosing out on the upmove has made me to enter this trade. I should avoid such entering trades in a Hurry

Trade 3:

Short View Entry: 958 Exit: 950

At around 1pm I noticed HDFC Bank not making anymore new highs. Nifty has hit day's high at almost the same time but HDFC Bank, which looked strong isn't making new highs anymore. In fact it formed an ascending triangle. Nifty quickly moved to the bottom of its trading range and broke it. So i expected HDFC Bank also to breakdown its triangle formation. So entered short at 958. Out of fear of loosing one more trade, i was happy when HDFC Bank reached 950, so i got out of the position. The entry was pretty good in this trade, but the exit was horrible. It was such a wonder full trade to be in... i stupidly got out of it.....

It looks like, i have some serious shortage of skill in converting a good trade into actual profits in my account.

SBI:

Long View, Entry: 1055, Exit: 1056

The markets started to fall since about 1pm, so did the SBI. Interestingly, from 1:30 to 2:30 nifty lost about 3% but SBI stayed at 1050 for the whole hour. That's when i realized SBI would be one of the first stocks to move up when markets recover. The risk reward is very good. So entered SBI at market (1055). This entry was a bad one. A closer look at the chart, indicated that 1050 to 1048 would be an ideal entry. After the entry, i was waiting for the markets to recover so that SBI would move up. The markets kept on falling for the rest of the day and SBI haven't recovered. Finally 15 mins before close, out of frustration i places a cover order at 1056 which got triggered. But SBI went up to 1062 in that move. This trade both Entry and Exit are driven more by emotions than by logic. A logical trade would have easily given a 1% move.

Trading on 28th Nov 2008

These are today's trade details:

Today i selected HDFC because, there was a meeting going on between RBI and banks and interest rate cut is expected by the market.

Long View: Entry: 1410 Exit: 1405.5

After tracking the markets for more than an hour. I observed HDFC looking pretty strong, its moving up when markets are moving up and falling only a little when markets are falling. So went long on HDFC at 1310 at 11:12am. I decided to have a stoploss as 1300, it broke once at 11:40 but recovered within a min and came back to entry level. It broke again at 11:42 and recovered in 2 mins. At this point i am worried that HDFC could break down at any moment and make a loss. At around 11:57PM, Nifty which formed triple bottom at 2730 broke down. This just added as a stimulus to my fear, i got out immediately at 1405.5 only to see that HDFC staying firm at and above 1405. It haven't gone down any further in spite of market going down by another 1 to 1.5%.

Short View: Entry: 1478 Exit: 1470

After missing the complete upmove in HDFC, i saw it struggling to move above 1480 for about 15mins and has fallen to 1470. At this point it was clear that HDFC would have correction after a good upmove. So waited for a small pullback and shorted at 1477 at 3:05 pm. In about 4mins HDFC started to fall. At the same moment, my trader friend has messaged me to short HDFC. This boosted my confidence about the trade. HDFC has then fallen down to 1457 in about 15 mins. My over confidence about this trade has blinded me in identifying reversal points. My target of 1457 has reached but greed took over me. Finally i realized the reversal in HDFC only after it reached 1470. I got out immediately at that price.

No Lessons today.... Only thing is i am vexed of trading this way. I don't want to have this sort of trading life. Things need a change and I will make that change immediately.

Trading on 26th Nov 2008

Today is the day of rule breaking.

Trades in HDFC:


Trade 1:
Short View: Entry: 1325 Exit: 1335

This is the first trade of the day. As per my rules, at that point i am supposed to take a long position. I was having a short view about the market today, so ended up taking short position. Even after realizing it, i haven't exited the trade, but the good thing i have done is, i placed a stoploss. In the next few mins it got triggered and thrown me out.

Trade 2:
Short View: Entry: 1345 Exit: 1358.25

This time i followed the rules. Identified HDFC facing resistance at 1350 (this has been a psychological figure in my mind about HDFC). Last 3 trading days it held this value, inspite of markets falling. It finally broke today and i expected to face resistance at that level again. It strugled crossing 1350 for about 15mins, so shorted it at 1345 and decided 1355 as stop loss. Finally after 30mins it broke the 1350 resistance level and started to move up fast. After it crossed 1355, i placed a market order to exit the trade and got out at 1358.25

I have no regrets for this trade, i followed my plan.

Trade 3:
Long View: Entry: 1370 Exit: 1387

Finally i gave up my short view of the market. Identified the retracement in HDFC and jumped in at 1370. After entering the trade, i was still thinking about my previous losses and getting worried about if this could also be a loss... So i got satisfied if with just 15pts move and exited at market after it hit 1385.

Postmortem Analysis: This trades entry was a good entry. It would have paid off well had i held on to my position with good Stop Loss. Previous trade losses should not affect present trade. It only makes you worry and make you take irrational decisions.

Trades in SBI:
Short View: Entry: 1091 Exit: 1110.7


This is my second trade, where i broke my rule. Entered short into SBI, when the markets are all going up. The mistake is, i entered with a gut feeling that its going to go down, i havent verified it. Just when i was looking for an opportunity to go short on the market, i heard my friend saying exactly what i want to hear. He said, it seems like the markets are going down. I just went short immediately after i heard him. Only to realize that, i might be wrong. Even worst part is, i haven't got out immediately and let my emotions ride me. So, the remaining part of the story is obvious. It happened many times in the past and it happened again today.

Lesson:
- Never enter the market in a hurry.
- When you realized, you entered a wrong trade... get out immediately.
- Find a way to get all these lessons into your mind ASAP... You are repeating your mistakes over and over.

Trades in BHEL:
Long View: Entry: 1260 Exit: 1270


This is a perfect rule based trade. Identified a bottom formation at 1260, entered in long. Should have had a bigger picture in mind to have identified a better target. Even during this trade, my mind was occupied by the loss trades i made in HDFC, which made me worry a bit and exit with a small move.

Lesson: Try and approach every trade as a new one. Dont let your previous trades effect you decisions.