1.Exiting on Weakness – Positional Trades
Ride the trend till it lasts.
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Use a trailing stop loss to stay in the trade for maximum time.
As long as trend is strong,
price won’t hit TSL rather it would move steadily in the direction of the trend.
When the trend loses its strength,
it breaks the TSL where u exit ur holding.
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Few Common methods of TSL are
-Short term moving average such as 30 EMA
-ATR based Methods such as Chandelier Stop/Super Trend
-Break of last Swing low, in uptrend/ or last swing high in downtrend
-Parabolic SAR indicator
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Pros on the methods are squeezing the maximum profit from the trade. Big wealth creators are found and ride this way even for years.
But this is emotionally very challenging to hold one trade for years & many traders aren’t psychologically adaptable to do it this way.
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2.Exiting On Strength – Short term trading such as scalping or day
Scrips are chosen based on high momentum in short term in the past. Betting on its continuation at a faster pace, a trader sets his target already when he enter into his trades.
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Common methods to fix the target
-Floor pivots.
-Fibonacci levels
-Supply/Demand zones
-Important levels from previous day such as PDL, PDH etc.
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One advantage with this method is that
risk/reward in the trade is already determined in all the trades,
be it loser or winner.
It takes out lot of emotional stress in trading.
But disadvantage can be cutting a potential big winners into comparatively smaller ones
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Pullback trading - trading an instrument when there is a weakness in the major Trend. For example suppose a stock is going up since last more than 80 days & is trading close to multi year highs it can be considered to b in upTrend.
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As an additional confirmation one can make sure that moving average are perfectly aligned according to their length; 20>50>100>200. These two conditions filter all the stocks which are in bullish trends in medium term. This is where one stock qualifies for pullback trading.
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One should avoid penny, illiquid and circuit mover stocks. Scan for stocks with price >20 and average daily volume > 100000 and also there should not be any open circuit freeze in recent past. This will remove nearly all the untradable stocks from WL.
The scrip has given an almighty breakout into new ATH last month and this month its being pulled back substantially. Here first criteria of strong bullish trend in HTF is satisfied with a fresh ATH breakout.
Step 2: Chk weekly TF to assess the details of breakout
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1. BO is from an inv. H&S pattern 2. There was 3WTC pattern just prior to BO 3. BO had a strong follow up week with higher ROC 4. Pocket picot volume on BO and follow up bars 5. Pullback lack volume and last bar is bullish pinbar
Its simply an approach by means of which a trader is able to make most logical decisions and act precisely upon it. There is nothing else to it
How to build it?
It varies from one trader to another. I will exemplify one of my friend here
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He had severe issues with cutting his loss. He will just keep holding it hoping for a reversal to wipe off his loss. He never take SL.
But he found a seemingly stupid but practically wonderful solution to it.
Instead of SL hit , he started thinking "Sunny Leon hit"
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It was around that time Sunny Leon started acting in main stream movies as well. He just gave a definition to SL so that he is not scared of it any more, rather likes it very much.
What happened is that he wasnt worried about cutting loss anymore.
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Most traders conceive that strongest chart patterns are the ones which are most visually convincing. They are pushed to think those patterns offer high probability trades.
But the truth is patterns are just consolidations where trend continuation demands accumulation
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and reversal demands distribution (uptrend case). This criteria has nothing to do with how the pattern looks to ur eyes. Trend continuation patterns starts with profit booking where price might dip with comparably big red bars which fizzles out faster.
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Price reaches a point where buyers find it as fair value. It's here price starts accumulation. Price makes sideways trendless move here till supply no longer able to contain price inside the range. It's here demand finds further strength and price goes up.
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Look at the table below. Its bid/ask table for an imaginary stock
CMP is 149.90
Highest bid is at 150 and lowest ask is at 150.
So the next trade will happen at 150 increasing the price.
But buy orders for 2500 quantity are there at 150 while there is only 200 quantity to sell.
What will happen now?
There are 2300 pending buy order at 150 with all the asks at 150 os exhausted. They will have to buy at next best ask level which is 151.
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He will buy all the 150 number of shares available at 151. Now the price increased again
CMP 151 with huge quantity to buy but poor qunatity to sell
Price movement depends on how rushed or agressive either parties are
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When a conceptual content is posted in Twitter, how would u treat It?
Absolutely all the info can b tweeted as one liner punch dialogue. But some topics, some handles, sometimes posted as fairly lengthy threads.
Where does it differ??
What does it offer??
Suppose I post a lengthy thread in 10 tweets, what I attempt is to provide a primer on the subject. Putting it more simply, its like a 7min Highlights of a 7hr ODI match.
Similarly a thread gives u a very good idea about a topic so that u get a fair understanding on it
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It helps u to decide.
If u found it not good enough, u can leave it then & there.
But If it's suitable to ur trading, then u need to go through the reference books, videos and blogs to dig it in deep and study it in-depth.