SWING TRADING
If market bucks the global trend or Asian market trades with positive bias, go long with Punjloyd. Keep stoploss 257.95 and set 1st profit target 301. Optimise profit by placing suitable trailing stoploss.
Sunday, August 12, 2007
Friday, August 10, 2007
Trading Systems
Volatility Breakout Systems
by Linda Bradford Raschke
Breakout systems can actually be considered another form of swing trading, (which is a style of short term trading designed to capture the next immediate move). In other words, the trader is not concerned with any long term forecast or analysis, only the immediate price action.
Volatility breakout systems are based on the premise that if the market moves a certain percentage from a previous price level, the odds favor some continuation of the move. This continuation might only last one day, or go just a little bit beyond the original entry price, but this is still enough of a profit to play for. A trader must be satisfied with whatever the market is willing to give.
With a breakout system, a trade is always taken in the direction that the market is moving at the time. It is usually entered via a buy or sell stop. The bit of continuation that we are playing for is based on the principle that momentum tends to precede price. There is also another principle of price behavior that is at work to create trading opportunities. That is, the market tends to alternate between a period of equilibrium (balance between the supply and demand forces) and a state of disequilibrium. This imbalance between supply and demand causes "range expansion", (the market seeking a new level), and this is what causes us to enter a trade.
There are several ways to create short-term volatility breakout systems. I have found that different types of systems based on range expansion test out quite similarly. Therefore, whichever method you choose should be a matter for your own personal preference.
In designing a system, one can choose to place an entry stop off either the opening price or the previous day's closing price. This entry stop can be a function of the previous day's range or a percentage of the previous 2.10-day range, etc. Mechanical exits can range from using a fixed objective level to using a time function such as the next day's open or close. Most of these systems function best when a very wide stop is used.
Training Benefits for the Novice Trader
Derived from Trading a Volatility Breakout System:
Trading a short-term breakout system can be one of the best exercises to improve your trading.
First, it teaches you to do things that are hard to do - buying high or selling low in a fast moving market! For most people, this feels quite unnatural!
Second, it always provides a defined money management stop once a trade is entered. Not adhering to a defined money management stop is the most common cause of failure among traders.
Third, it teaches a trader the importance of follow-through once a trade is entered, as most breakout systems perform best when the trade is held overnight.
Last, it provides a great means for traders to improve their execution skills. Most volatility breakout systems are fairly active compared to a long-term trend following system. A trader can gain skill in placing orders in a diverse number of markets. Having a mechanically defined entry point is sometimes just the thing needed to overcome a trader's fear of pulling the trigger. The order is placed ahead of time and the market then automatically pulls the trader into a trade if the stop level is hit.
Even if a person prefers to ultimately enter orders using discretion, trading a mechanical volatility breakout system can still be an invaluable exercise. It should at least increase a trader's awareness of certain types of price behavior in the marketplace, especially if one is conditioned to entering on counter-trend retracement patterns. It can't but help impress upon one the power of a true trend day.
Pros and Cons of Trading a Breakout System:
Like most systems, volatility breakout systems will clean up in volatile or runaway markets but tend to thrash when conditions get choppy or volume dries up. I believe they are still among the most profitable type of system to trade, and I also feel they will continue to be profitable in the long run. They are "durable" and "robust", though they tend to deteriorate when too large of an order is placed (i.e., greater than 50 contracts). However, so that you do not get the impression that there is a Holy Grail of systems, the following considerations should be kept in mind:
Entries can be nerve-racking, especially when the market is in a runaway mode. The best breakouts won't give you retracements to enter on. You are either on board or you are not! If you conceptualize that the best breakouts turn into trend days, and are most likely to close on the high or low for the day, then it is not so difficult to enter. Usually it is best to have a buy/sell stop already resting in the marketplace.
Sometimes a market gaps open outside your initial entry level. These often turn into the best trades. They can also turn into the most aggravating whipsaws. Big gaps test out that one should still take the trade, but they will definitely add more volatility to your bottom line. If your trade gets stopped out and an new signal is given in the opposite direction, this reversing trade usually more than makes up for the first loss.
Whipsaws are a drag but they are also inevitable when trading a breakout system. Many times I have bought the highs and sold the lows. It takes a great deal of "confidence in the numbers" to trade this type of system. System testing should always be done for a minimum of 3 years, preferably 10. Be sure to then examine out of sample data to see how the system performed.
On balance, a volatility breakout system can be traded on most all markets. However, a market might be very profitable one year and yet perform mediocre at best the next. A portfolio of 10 to 12 markets seems to work well. The problem with trying to trade too many markets at once is that it can become quite difficult to keep up with the activity level if your parameters are fairly sensitive. Many times in systems development, people overlook what one person can realistically manage.
Enhancing a Basic Volatility Breakout System:
Adding filters can sometimes create further enhancements. Examples of types of filters include: indicators to determine whether or not a market is in a trending condition, seasonality, days of the week, or degree of volatility contraction already present in the market. Periods of low volatility in the market can be defined by a contraction in true range, a low ADX, or a statistical indicator such as a low historical volatility ratio or a low standard deviation.
A system then might look something like this:
Initial volatility condition = true
Buy or Sell on a stop based on the current bar's open, plus or minus a percentage of the previous day's range.
Initial Risk management stops once a trade is entered.
Exit strategy.
Types of variables which can be used in a simple range expansion breakout system:
Period - is the breakout based on a function of the previous day or the previous 10-day period, for example?
Range - does it use the average range for that period or the largest, smallest, or total range?
Percentage - what percentage of the range is used? It is possible, for example, to use 120% of the previous 3-days' total range.
Base - is the range function added to the previous day's close or the current day's open. This function may also be added to the high or low of the previous bar or a previous period such as the last 10 days.
As a general rule of thumb, the greater the percentage factor used, the greater the percentage of winning trades will be. However, the overall system may be less profitable because fewer trades are taken.
Once again, an example of an initial condition might be: Enter a trade only on a day following the narrowest range of the last 7 days. Or, take a trade only if the market has made a new 20-day high or low within the last five trading days. Whenever you add a filter to a system, be sure to compare the results to a baseline and examine the difference in activity level.
EXIT STRATEGIES:
Time based (2nd day's close, 1st day's opening)
First profitable opening (Larry Williams)
Target or objective level (1 average true range, previous day's high/low)
Trailing stop (displaced moving average, parabolic, 2-day high/low)
RISK:
Controllable Risk - the amount of risk which can be predetermined and defined by a money management stop.
Types of money management stops:
fixed dollar amount
function of average true range
price level (i.e., bar high/low)
Uncontrollable Risk:
Overnight exposure (close to open risk). You cannot exit a position when the market is not trading. Thus, you are subject to adverse gaps, which can be exaggerated by news or events.
Slippage risk. Fast market conditions or thin, volatile markets often cause a trader to get filled at prices much worse than expected.
In general, the numbers behind most systems are very dependent upon capturing a few good trades. You can't afford to miss the one good trade that can make your month.
Here are some tips for trading this or any other system:
1.Gain confidence by first trading a system on paper.
2.Make sure you can successfully trade a system mechanically before attempting to add any discretion.
3.Track your actual performance against the mechanical system at the end of each day, rating your success by whether you can match the system's performance.
4.Monitor performance over an adequate sample, perhaps 100 trades or a set number of weeks. Do not let a down week or trade deter you.
5.Manage the exits rather than filter the entries. It is impossible to tell in advance which trades will be the good ones. The one entry skipped might be the BIG ONE, and one can't afford to miss it. Managing the exit means two things: The first, learn when it's okay to let that occasional great trade run an extra hour or two before getting out; the second (which really depends on one's skill level), learn to recognize a bit sooner when a trade is not working and exit just before the stop is hit.
All systems display subtle nuances and insights into the market's behavior over time.
6.Keep a notebook of your observations and patterns you notice. In this way you truly "make the system your own".
7.Never be concerned about how many other people are trading systems. If slippage seems excessive, it often suggests a significant breakout from a triangle or period of congestion. Remember: Something had to drive the market far enough to penetrate the breakout point in the first place!
by Linda Bradford Raschke
Breakout systems can actually be considered another form of swing trading, (which is a style of short term trading designed to capture the next immediate move). In other words, the trader is not concerned with any long term forecast or analysis, only the immediate price action.
Volatility breakout systems are based on the premise that if the market moves a certain percentage from a previous price level, the odds favor some continuation of the move. This continuation might only last one day, or go just a little bit beyond the original entry price, but this is still enough of a profit to play for. A trader must be satisfied with whatever the market is willing to give.
With a breakout system, a trade is always taken in the direction that the market is moving at the time. It is usually entered via a buy or sell stop. The bit of continuation that we are playing for is based on the principle that momentum tends to precede price. There is also another principle of price behavior that is at work to create trading opportunities. That is, the market tends to alternate between a period of equilibrium (balance between the supply and demand forces) and a state of disequilibrium. This imbalance between supply and demand causes "range expansion", (the market seeking a new level), and this is what causes us to enter a trade.
There are several ways to create short-term volatility breakout systems. I have found that different types of systems based on range expansion test out quite similarly. Therefore, whichever method you choose should be a matter for your own personal preference.
In designing a system, one can choose to place an entry stop off either the opening price or the previous day's closing price. This entry stop can be a function of the previous day's range or a percentage of the previous 2.10-day range, etc. Mechanical exits can range from using a fixed objective level to using a time function such as the next day's open or close. Most of these systems function best when a very wide stop is used.
Training Benefits for the Novice Trader
Derived from Trading a Volatility Breakout System:
Trading a short-term breakout system can be one of the best exercises to improve your trading.
First, it teaches you to do things that are hard to do - buying high or selling low in a fast moving market! For most people, this feels quite unnatural!
Second, it always provides a defined money management stop once a trade is entered. Not adhering to a defined money management stop is the most common cause of failure among traders.
Third, it teaches a trader the importance of follow-through once a trade is entered, as most breakout systems perform best when the trade is held overnight.
Last, it provides a great means for traders to improve their execution skills. Most volatility breakout systems are fairly active compared to a long-term trend following system. A trader can gain skill in placing orders in a diverse number of markets. Having a mechanically defined entry point is sometimes just the thing needed to overcome a trader's fear of pulling the trigger. The order is placed ahead of time and the market then automatically pulls the trader into a trade if the stop level is hit.
Even if a person prefers to ultimately enter orders using discretion, trading a mechanical volatility breakout system can still be an invaluable exercise. It should at least increase a trader's awareness of certain types of price behavior in the marketplace, especially if one is conditioned to entering on counter-trend retracement patterns. It can't but help impress upon one the power of a true trend day.
Pros and Cons of Trading a Breakout System:
Like most systems, volatility breakout systems will clean up in volatile or runaway markets but tend to thrash when conditions get choppy or volume dries up. I believe they are still among the most profitable type of system to trade, and I also feel they will continue to be profitable in the long run. They are "durable" and "robust", though they tend to deteriorate when too large of an order is placed (i.e., greater than 50 contracts). However, so that you do not get the impression that there is a Holy Grail of systems, the following considerations should be kept in mind:
Entries can be nerve-racking, especially when the market is in a runaway mode. The best breakouts won't give you retracements to enter on. You are either on board or you are not! If you conceptualize that the best breakouts turn into trend days, and are most likely to close on the high or low for the day, then it is not so difficult to enter. Usually it is best to have a buy/sell stop already resting in the marketplace.
Sometimes a market gaps open outside your initial entry level. These often turn into the best trades. They can also turn into the most aggravating whipsaws. Big gaps test out that one should still take the trade, but they will definitely add more volatility to your bottom line. If your trade gets stopped out and an new signal is given in the opposite direction, this reversing trade usually more than makes up for the first loss.
Whipsaws are a drag but they are also inevitable when trading a breakout system. Many times I have bought the highs and sold the lows. It takes a great deal of "confidence in the numbers" to trade this type of system. System testing should always be done for a minimum of 3 years, preferably 10. Be sure to then examine out of sample data to see how the system performed.
On balance, a volatility breakout system can be traded on most all markets. However, a market might be very profitable one year and yet perform mediocre at best the next. A portfolio of 10 to 12 markets seems to work well. The problem with trying to trade too many markets at once is that it can become quite difficult to keep up with the activity level if your parameters are fairly sensitive. Many times in systems development, people overlook what one person can realistically manage.
Enhancing a Basic Volatility Breakout System:
Adding filters can sometimes create further enhancements. Examples of types of filters include: indicators to determine whether or not a market is in a trending condition, seasonality, days of the week, or degree of volatility contraction already present in the market. Periods of low volatility in the market can be defined by a contraction in true range, a low ADX, or a statistical indicator such as a low historical volatility ratio or a low standard deviation.
A system then might look something like this:
Initial volatility condition = true
Buy or Sell on a stop based on the current bar's open, plus or minus a percentage of the previous day's range.
Initial Risk management stops once a trade is entered.
Exit strategy.
Types of variables which can be used in a simple range expansion breakout system:
Period - is the breakout based on a function of the previous day or the previous 10-day period, for example?
Range - does it use the average range for that period or the largest, smallest, or total range?
Percentage - what percentage of the range is used? It is possible, for example, to use 120% of the previous 3-days' total range.
Base - is the range function added to the previous day's close or the current day's open. This function may also be added to the high or low of the previous bar or a previous period such as the last 10 days.
As a general rule of thumb, the greater the percentage factor used, the greater the percentage of winning trades will be. However, the overall system may be less profitable because fewer trades are taken.
Once again, an example of an initial condition might be: Enter a trade only on a day following the narrowest range of the last 7 days. Or, take a trade only if the market has made a new 20-day high or low within the last five trading days. Whenever you add a filter to a system, be sure to compare the results to a baseline and examine the difference in activity level.
EXIT STRATEGIES:
Time based (2nd day's close, 1st day's opening)
First profitable opening (Larry Williams)
Target or objective level (1 average true range, previous day's high/low)
Trailing stop (displaced moving average, parabolic, 2-day high/low)
RISK:
Controllable Risk - the amount of risk which can be predetermined and defined by a money management stop.
Types of money management stops:
fixed dollar amount
function of average true range
price level (i.e., bar high/low)
Uncontrollable Risk:
Overnight exposure (close to open risk). You cannot exit a position when the market is not trading. Thus, you are subject to adverse gaps, which can be exaggerated by news or events.
Slippage risk. Fast market conditions or thin, volatile markets often cause a trader to get filled at prices much worse than expected.
In general, the numbers behind most systems are very dependent upon capturing a few good trades. You can't afford to miss the one good trade that can make your month.
Here are some tips for trading this or any other system:
1.Gain confidence by first trading a system on paper.
2.Make sure you can successfully trade a system mechanically before attempting to add any discretion.
3.Track your actual performance against the mechanical system at the end of each day, rating your success by whether you can match the system's performance.
4.Monitor performance over an adequate sample, perhaps 100 trades or a set number of weeks. Do not let a down week or trade deter you.
5.Manage the exits rather than filter the entries. It is impossible to tell in advance which trades will be the good ones. The one entry skipped might be the BIG ONE, and one can't afford to miss it. Managing the exit means two things: The first, learn when it's okay to let that occasional great trade run an extra hour or two before getting out; the second (which really depends on one's skill level), learn to recognize a bit sooner when a trade is not working and exit just before the stop is hit.
All systems display subtle nuances and insights into the market's behavior over time.
6.Keep a notebook of your observations and patterns you notice. In this way you truly "make the system your own".
7.Never be concerned about how many other people are trading systems. If slippage seems excessive, it often suggests a significant breakout from a triangle or period of congestion. Remember: Something had to drive the market far enough to penetrate the breakout point in the first place!
Friday, August 3, 2007
Trading Strategy
POSITION TRADING
ITC : Provided market sentiment remains bullish, if it crosses 169.7, go long with stop loss 164.85 and set profit target 179.oo.
REL : If it opens positive i.e above 753.00, go long with stop loss 734.80 and set profit target 766.5 and 791.75.
ITC : Provided market sentiment remains bullish, if it crosses 169.7, go long with stop loss 164.85 and set profit target 179.oo.
REL : If it opens positive i.e above 753.00, go long with stop loss 734.80 and set profit target 766.5 and 791.75.
Thursday, July 5, 2007
Wednesday, June 20, 2007
THE WRONG E-MAIL
A man left the snow-filled streets of Chicago for a vacation in Florida. His wife was on a business trip and was planning to meet him there the next day. When he reached his hotel, he decided to send his wife a quick e-mail.
Unable to find the scrap of paper on which he had written her e-mail address, he did his best to type it in from memory. Unfortunately, he missed one letter and his note was directed instead to an elderly preacher's wife, whose husband had passed away only the day before. When the grieving widow checked her e-mail, she took one look at the monitor, let out a piercing scream, and fell to the floor in a dead faint. Hearing the scream, her family rushed into the room and saw this note on the screen:
"Dearest Wife,
Just got checked in. Everything prepared for your arrival tomorrow.
Tips for 21st June'07
If market changes gear and fans bearish mood.......
- TATASTEEL : If it breaks 606.00 convincingly, then go short with stop loss 613.10. Keep profit target 599.25, 594.50, 590.25.
- TVSMOTOR : If it goes below 65.5, then go short with stop loss 66.65. Keep profit target 64.25, 62.25, 61.5.
If market maintain momentum or trade with positive bias.......
- RELIANCE : If it goes above 1736.25, go long with stop loss 1719.75. Keep profit target of 1747.75, 1777.25, 1794.5. Go for position trading if it crosses 1798.75. Maximize profit by keeping trailing stop loss.
- AIAENG : Buy AIAENG with stop loss 1584.25 and keep profit target 1648.80, 1685, 1694.90
Tuesday, June 19, 2007
Quote of the Day:
A great many people think they are thinking when they are merely rearranging their prejudices.
--William James
--William James
Monday, June 18, 2007
Sunday, June 17, 2007
Quote of the Day:
Every successful enterprise requires three men - a dreamer, a businessman, and a son of a bitch.
--Peter McArthur
THE SEVEN HABITS OF HIGHLY EFFECTIVE PEOPLE
Habit 1: Be Proactive -- Principles of Personal Vision
Habit 2: Begin with the End in Mind TM
Habit 3: Put First Things First TM -- Principles of Personal Management
Habit 4: Think Win-Win TM -- Principles of Interpersonal Leadership
Habit 5: Seek First to Understand, Then to Be Understood TM
Habit 6: Synergize TM
Habit 7: Sharpen the Saw TM
Saturday, June 16, 2007
Tips for 18th June'07
If market remains bearish or trades with negative bias...
- ESCORTS : Go short if it goes below 112.3 with stop loss 113.5 or days high whichever is less. Keep profit target 110.5, 109, 107.
- EKC : Go short if it goes below 984.20 with stop loss 1004.25 or days high whichever is less. Keep profit target 960.5, 935.25.
- IDEA : Take bearish view if it breaks down 115.2 ( previous day's low) and go short with stop loss 116.5 and keep profit target 113, 112, 111.15 and 110.6
If market remains bullish or trades with positive bias...
- RELIANCE : Buy RELIANCE and take position intraday if it trades above 1680 with immediate profit target 1694, 1699 and 1708. If it crosses 1711 or closes above 1701, add further position and go for swing trading with trailing stop loss.
- SBIN : Go long on intraday basis if it trades above 1335.1 with stop loss 1319.75. Keep profit target 1352, 1469, 1387 and 1400. If it stays above 1349 for some time, position trading is also possible and profit may be optimised by placement of suitable stop loss.
Wednesday, June 13, 2007
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