Learner Thread

[icecool]

Hi all,

This thread is mainly by a beginer in trading. My aim is to learn trading by keeping the charts as simple as possible. I have been told that simple things work beautifully. I have been told that I must learn to trade based on price, volume and time data alone. That is why as far as possible, I am traying to avoid indicators.

As I said I am a newbie, I definitely require your help. Your help to rectify my mistakes, your help and guidence to improve my thought process and learning process. I have heard that this forum contains many expert traders and that members here are extremely helpful to one another. I have also heard that there are many invaluable threads in this forum that an aspiring trader must read.

I shall post charts mainly from NSE and BSE (Indian Stock Exchanges) and ocassionally I shall try my hands at US traded charts. Those will be paper trades.

Thanks for reading my first post patiently.
icecool

Bump: Here is the first stock. ICICI Bank. For non Indian traders yahoo ticker code is ICICIBANK.NS

First long term picture. Monthly.




Stock is in clear downtrend eversince it hit its all time high slightly above Rs. 1400/-. What is surprising is that ever after correcting so much, i.e. from Rs. 1400/- to all the way to Rs. 400, the second boxed area did not offer any support. At least a short term counter trend bounce also did not happen. Price went straight down through that boxed area no. 2.

See volume at price on the leftside of the chart. Balanced trade did take place around this box no. 2 area. But this has not supported price this time.

But, notice that the highest volume is on that candle which pierced through box no. 2 area. It closed in the middle. Is it indication of strength? Next candle is also down but with lesser volume and it closed below box no. 2 area.

Now how do you interpret this chart? As strength creeping in or as further weakness ahead?

Bump: Now the weekly chart of the same stock (ICICI Bank)



Highest volume is on the inside candle (bar) which closed on the lows. See the first arrow candle.

See the second arrow candle. It seems like an upthrust. Don't they imply inability to rally? i.e. increasing supply? I mean dumping of stock irrespective of value? Also, see the distance from the trendline to these two arrow marked candles. Is it not significant that this sign of weakness is appearing when the stock has already moved far away from the trendline? I mean stock is not even making an attempt to reverse close to supply line (trendline)?

Bump: I donot know what does that bump in my post mean. I posted my first post about two hours ago and second post (monthly chart post) about 30 minutes ago and third post (weekly chart post) about 5 minutes ago. To my utter surprise, all these posts are now appearing together with the word "bump". I donot know whether this post is also going to "bump"

Bump: As expected the fourth post also "bumped". Now here is the daily chart of ICICI Bank



Are we seeing sign of strength in daily chart?

[phreddy]

I have had this 'bump' thing also. Don't know what it is. In my case it repeated what I had just posted. When I tried to edit I couldn't get into the post. When I apologised in a second post it placed the second post with the first and repeated the second post.

Strange

[icecool]

Originally Posted by phreddy I have had this 'bump' thing also. Don't know what it is. In my case it repeated what I had just posted. When I tried to edit I couldn't get into the post. When I apologised in a second post it placed the second post with the first and repeated the second post. Strange

I too have absolutely no clue about this bump thing. I have sent a message to forum moderators using contact us button on the top left. I am sure that they will look in to the matter and if something is wrong from our side, they will inform us. I am awaiting their reply. But it is highly irritating to see this bump stuff.

[icecool]

Just a followup on ICICI Bank chart. As noted in earlier post longer term trend (monthly chart) is indicating down. Weekly trend (medium term) down. Daily chart (short term) is a little bit iffy. I have seen a selling climax which is followed by a successful test and the second test is in progress. Best option is to wait until daily chart shows a clear picture. But see daily chart where today's candle is added.



Since last six candles, effort is being made to raise up. I Give attention to the sixth candle from the right edge. It has higher volume and its low is a pivot low, but it has closed in the middle with next candle down. Infact next two candles are inside candles. In the two subsequent candles eventhough volume is slightly higer than inside candles, virtually no headway is made in the upward direction. Last candle, i.e. today's candle is having wide range body and it almost qualified as an outside bar reversal candle. It missed this title by a whisker. Today volume is slightly higher than yesterday and today's close has been on the lows.

To sumup right edge on daily chart

1. Selling climax followed by a successful test. Thereafter a second test.

2. After the second test an attempt to move higher, which does not seem to be very convincing.

3. I am keeping in mind that longer term charts (monthly and weekly) are showing downtrend. So going long will be against longer term charts, i.e. against the predominent trend in longer term chart.

4. A window of opportunity is opening up to go short in daily chart, i.e. to align myself with the trend shown in longer term charts.

5. Has to wait for my moment to short. I am in no hurry. Let us see.

[icecool]

Thanks for a friend of mine for pointing out my mistake about my inability to notice a small rally when the price hit box 2 area for the first time. I am referring to monthly chart posted in the first post.

I stand corrected. I notice that when the price hit box 2 area in July 2008, that indeed arrested the downtrend for the moment and price rallied on the next month candle up to around 800 area. This is apparent if I see the weekly chart.

This is why I said this forum is great. People help one another. I am constrained not to disclose the name of my friend as he wishes to remain anonymous. Thank you my dear friend.

[icecool]

Nothing much to write about today's action. Battle is going on between the bulls and bears. Today's battle resulted in narrow range bar closing on the high, nevertheless lower close if compared to yesterdays' close. Volume is less than yesterday. Today morning bears had perfect opportunity to take it down. They opened is low and with a gap. That gap itself was their undoing. There was attempt to close the gap and bears could not douse this battle fire with bombarded selling. Result, narrow range and the stock closed on the high. What does the slightly lesser volume very near to the support mean? The picture in daily chart is still inconclusive. Will the support hold or will it breakdown? Jumping before seeing the evidence of one side (bull or bear) winning the battle may prove costly and it may be a pure gamble.




I am posting chart of the same stock daily to note my feelings and my reaction to the chart as it unfolds. I am deliberately avoiding posting of many charts at this point of time. If that is done, I may not follow them up closely and carefully and most importantly, I may not realise my mistakes in analysing the charts unless I do it continuously.

[icecool]

First daily chart with today's candle as an addition



Another day of tight range and low volume passes away. Battle is still undecided. As and when chart develops it becomes clear that the candle which I have marked with arrow and labeled as “Key Candle?” in the chart is the important candle. There are seven candles subsequent to that arrow marked candle whose closed is either within the range of that key candle. All these seven candles have volume less than key candle volume. I have marked the upper and lower boundaries of the tight range that ensued subsequent to this key candle. I am noticing that price has not been able to break this range significantly and set a trend in the direction of break.

Now these are the thoughts that are passing on my mind.

1. Key candle had high volume but it has closed in the middle.

2. Key candle has appears to be a second test of the selling climax

3. After what appears to be a second test (key candle) price indeed tried to go up, but did not find any enthusiastic response from the bulls. That is why price came down again to see how much interest bears have. Low volume implies that bears are not interested at this moment. So another test drive to the upside since yesterday including today. Volume is even less.

4. So in nutshell coil is being wound close and tight. Breakout in either direction would give mouth watering profits. But I have to wait until a clear direction emerges.

As between yesterday and today, it was the bulls who had advantage today morning. Because, yesterday’s close was on the high. They used this advantage and opened the price with a gap on the high. Immediate response would be to close this gap, which indeed happened. But the price did not go above the high (which was established immediately after opening) after filling this gap. Lackluster trading ensued and ultimately price closed well above middle. Today’s candle has taken away the advantage of the bulls (which was there on the yesterday’s close) to a great extent. But since the price closed above the middle, I am expecting another test of the upper boundary of the range (drawn on horizontal lines) most probably in the early opening session and I am waiting to see the response at this upper boundary of the range.

So a test of patience is on the cards. But impatient trading would result in wrong entries and the consequent result would be either

1. a stop loss hit or
2. an inordinate wait when the market moves sideways before establishing trend and this sideways movement will result in anxiety and a heightened possibility of committing error out of emotional stress.

[icecool]

The anticipated move to the upper boundary of the trading range (please refer to yesterday’s post) did take place today. But this upper range test did not take place early morning session as I was expecting yesterday. When it came close to that upper level it necessitated a closer look in shorter timeframe chart. First see 5 minute chart.



The red horizontal line in the 5 minute chart is the upper trading range line from yesterday’s daily chart. The approach to this upper line was not at all inspiring. Low volume protracted affair. But since I have been itching to make a trade, I wanted to see the breakout of this upper line and then to see the pullback to this line. This indeed took place on the candle marked with second arrow from the left. Then a small trading range followed. I entered a long trade on the break of the high of fourth candle from this second arrow marked candle.

I must note that I was itching to trade, not the best frame of mind advisable to trade. The long wait had that much effect upon me. I was a bit hesitant to take long trade seeing the nature of approach to the upper boundary line and subsequent development. That was not a confident trade. Bit iffy minded trade. At the end of the day, when I reflect back, I must admit, that trade was taken more on impulse rather than on cool reflection. So here is a weak point about my trading mind.

Anyway, trade was taken with a stop just below fifth candle from the first arrow marked candle. As I said, I was hesitant at the time of entering the trade, I had decided at the time of entering the trade itself that I shall exit the trade if the price hits 363 (highest price for 01/12/2008), which is slightly above the upper boundary of the trading range and which is also the highest price in that trading range. That was promptly hit and I was out with profit. I should also mention that as and when higher pivot low was formed stop was moved upward.

But when I reflect back, I notice that there was no definite trade plan in my mind at the time of entering the trade. I tried to develop one as and when the chart developed. There was no definite holding period (i.e. whether to take intraday trade or delivery trade) nor the exit method was fully satisfactory. Now I am asking myself why did not I wait for the break of the trendline or for the formation of lower high pivot?

Anyway, some lessons are noted. If I have missed any (there will be many) please tell me. As I have to leave for the time being, I shall examine the daily chart later.

Bump: A quick note before going to bed. See updated daily chart.



Price indeed broke out of the range created by “key candle” narrated in my yesterday’s post. What is the quality of this breakout? Volume is slightly better than yesterday and day before yesterday, but by no means a high volume. In a breakout candle I would like to see much more volume than the volume on present volume. Today’s range is slightly wider than last two days range. Today’s close was on the high and above the upper boundary of the range created by key candle. I am expecting a higher open tomorrow morning. Whether the bulls will be able to sustain is to be seen. A higher opening will suck in many novices and if it tumbles down thereafter swiftly, that will lock in many novices into a position where they will definitely hope and pray. That is the perfect time to bring it down further.

It is the volume on today’s candle that is striking a discordant note in my mind. Lower volume on a breakout means, professionals are not enthusiastic at the moment. That does not mean that they will not change their mind in future. I will have to see the quality of pullback. Let us see how tomorrow unfolds.

Bump: I hate this "bump" stuff. It irritates me very much. I donot know how other readers of this thread are feeling about this bump stuff. So far no reply from moderators of this forum for my queries on bump stuff. I know this post too will "bump" to the end portion of my earlier posts made today. As there is no other alternative and as no one is guiding as to why this is happening and how to avoid it, I have to tolerate it. Please bear with it and with me as well

[icecool]

Today morning for all practical purpose, we had a gap down opening. Do not bother about the first candle which is right there on the opening bell. None of us could see that freak trade around 364 on the open. We could see only around 355 around the opening bell. This gap down opening itself charged up the bulls. They made and attempt to close this gap, which was successful. Not only that, look at the volume when yesterday’s high was breached to the upside! There was an opportunity to make some quick bucks, which was promptly made. Then came that wide range candle with extremely high volume and it closed in the middle. It came after a substantial upmove. It was clear that it was a buying climax. I have marked this candle with arrow (third arrow marked candle from the left). Further confirmation of this buying climax came when price could not take out the high of this wide range candle. The moment low of this buying climax candle was breached I got out of my longs and created a short simultaneously. Initial target was day’s low and if it also breached, the next target was the red upper range trend line from the range generated by key candle in the daily chart referred in my earlier posts. Why? Because any pullback after breakout will test the area of breakout. Resistance becoming support. Frankly, I was expecting strong support at the day’s low. Ultimately, that held out to be the support, albeit at slightly lower level, enough to clear all sell stops below the day’s low. I closed my short position when the price came close to day’s low made on the early morning. I felt bit tired and hence moved away from my screen. To be honest thereafter I did not look at the market until they were closed for the day.



I shall update daily chart and weekly chart tomorrow, if time permits.

[jonbig04]

Have you tried looking at larger time frame charts, find your S/R levels there and then watching to see how price reacts to them during a smaller daily chart? You should be able to see some very obvious and fascinating S/R action if you do.