The collision of two contra beliefs in technical analysis - an interesting discussion between me and a student.

A while ago I was explaining the exit strategies to one of my students, where I explained him to pay attention to the MA which are tested back-to-back since last few weeks (if there is one) to use them as TSL instead of the default TSL as per strategy as it is as per the behavior of the stock.

He asked me a question - "Sir, during our CRMC module you taught that as a level is tested back-to-back, it becomes weaker, not stronger. This is going contrary to that belief."

This thread contains the answer which I gave him, and an interesting tale of making sense between the two exact contrary beliefs in TA. (1/n) When we read John J. Murphy or any other conventional TA book, it always says that the more time a support or a resistance level is tested, the stronger it becomes.

But when you learn the concepts of @realsamseiden, renowned trader who is known as the father of supply and demand trading - he presents a counter view. He says that the more time an order block is tested - it becomes weak.

For momentum traders, this is the exact concept which creates VCPs.

Understanding Return Drivers -

In my situational awareness webinar, I explained 3 key drivers for high returns -

1) Compounding (Long term 10 Years)
2) Earnings driven (6 months to 1.5 years)
3) Momentum driven (1 day to 1 month)

There can be several different types of people who use compounding to make money - the first type is ignorant investors who don't know much about the stock market but want to become part of wealth creation through stocks. They invest in mutual funds or bluechip companies prioritizing sustainability over scalability.

The second category of people who make huge money is those who bet on scalability along compounding. Take example of Rakesh Jhunjhunwala - he made huge money out of Titan as not only the stock compound but also grew significantly. (1/n) In the stock market, every year's biggest winners, aka monster stocks or model stocks, list is always dominated with earnings driven movers. In almost all stocks, earnings are cyclical - stocks post 4 to 6 quarters of huge earnings growth followed by a downcycle. Take an example of Laurus, which once had a TTM EPS of ₹18.30 with P/E ratio of 35-40 at the peak price of ₹720. Today, at ₹400 the stock is at 100 P/E with only ₹3.49 TTM EPS. One more bad quarter will drop EPS by ₹1 or ₹1.5 (if earnings come similar to Dec quarter) and P/E will shoot up to 200 at current prices.

Laurus will definitely go through another earnings cycle sooner or later but what is important is, if we aren't an investor, it doesn't make sense to sit into a stock for a 60% drawdown. Rather, a new entry again when it gives an EP will make our gains much bigger.

Short term momentum is totally driven by technicals and are apt for swing and short-term trading. There are different tendencies which help us make quick money through these phenomena. (2/n)

A must read thread on how some of the great traders work.

But while this is one great way to manage positions, I will present some others ways which can go exactly contrary to the explained rules and styles in order to explain how decision making should be done in many ways to generate similar outcomes and should be done according to your objective rather than how one or few traders trade.

The ultimate objective is to explain a trading decision making framework.

Thread - (1/n) Lets understand how and why we make trading decisions (we all use it, but we do it in subconscious mind and don't realise it).

This framework has 3 parts -

1) Expected Outcome or Reward from the decision - Why are we making the decision?

There are 4 reasons behind any trading decision -

a) Earn Money (example - entering a trade or holding it)

b) Save Capital (example - taking a loss at or before SL)

c) Save Profit (example - using TSL or selling into strength)

d) Save Time (example - not sitting through pullback, taking precise entry or tight SL, selling into strength or time stops)

There can be more reasons as well, but these mostly cover all popular reasons. (2/n)

Last Friday, I wrote about Understanding Risk and Resources. Today, I am writing the second part of it - Understanding Risk, Resources and how to achieve Optimum Performance in Trading. As you have gone through the work of people who achieved optimum performance in trading consistently like @DanZanger @Qullamaggie etc., you will realize one common thing - their techniques and tactics are nothing special or much different than ours.

The key trait for insanely successful entrepreneurs are their ability to take unusual risks when the opportunity arrives. For this, they need to know their resources and associated risks well.

𝑻𝒐𝒑 𝑩𝒐𝒐𝒌𝒔 𝑭𝒐𝒓 𝑴𝒐𝒎𝒆𝒏𝒕𝒖𝒎 𝑻𝒓𝒂𝒅𝒊𝒏𝒈 (𝒕𝒐𝒑 𝒓𝒆𝒄𝒐𝒎𝒎𝒆𝒏𝒅𝒂𝒕𝒊𝒐𝒏𝒔 𝒂𝒕 𝒕𝒉𝒆 𝒆𝒏𝒅 𝒐𝒇 𝒕𝒉𝒆 𝒕𝒉𝒓𝒆𝒂𝒅) - Brad Koteshwar - The Perfect Speculator
Brad Koteshwar - The Perfect Stock

Chris Kacher & Gil Morales- Trade like an O'Neil Disciple
Chris Kacher & Gil Morales- In the Trading Cockpit with O'Neil Disciple
Chris Kacher & Gil Morales - Short Selling with the O'Neil Disciples (2/n)

#𝗗𝗘𝗘𝗣𝗗𝗜𝗩𝗘 𝗣𝗮𝗿𝘁-𝗜

Building Database of Setups to Conduct a Deep Dive -

In series of threads, I will explain you complete process of conducting deepdives.

You'll also learn about the way to create proper scanners for any setup in this thread. (1/n) First thing, what is a #deepdive in trading?

Deep dive in trading is popularized by the veteran trader and exceptional mentor @PradeepBonde who revolutionized the way we approach momentum trading.

Deepdive is a process through which we conduct acid test of our beliefs (2/n)

When I wrote this thread 6 months ago, many people came and said that they expect a rally by Oct. 2022. What they missed out is due to the lack of understanding about the inherent behavior of bear markets.

Bear market always extends beyond the expectation - they not giving (1/n)

https://twitter.com/swing_ka_sultan/status/1542788992621494272

up on the market confirmed my bias - told me that we are no where near the bottom. We still aren't anywhere close to the bottom. We still lack the pessimism we saw in 2019 July-Aug correction.

But we are definitely midway now or somewhat past midway. Hadn't ever seen a (2/n)

An example of why I believe volume indicator of #MBMV2_0 is the most important indicator for understanding market participants behavior -

From last 3 days before 25th Jan, I was seeing an unusual pick up in volume which might not be very substantial in itself (1/n) #MBMV2_0 but was unusual - because the context wasn't supporting it. We usually see a pick-up in volume only when confidence in the market picks up, when stocks start moving up.

But this time the market was actually negative and had shown a pick-up in volume, that too before (2/n)

Neil, the IPOBase strategy you shared in your newsletter - which was shared by your friend - was popularized in India by my research which was published in March 2021. It is actually O'Neil's work, but had never been popularized here because no one ever did a #deepdive on it. (1)

https://twitter.com/NeilBahal/status/1595983913322942466

But #IPOBase in not only about buying the high of the listing week. It is infact an extremely poor interpretation of the work.

A strategy is not only limited to a setup, what makes it effective is when you manage it according to its nature & potential. (2)

𝟮𝟮 𝗸𝗲𝘆𝘀 𝗳𝗼𝗿 𝘀𝘂𝗰𝗰𝗲𝘀𝘀𝗳𝘂𝗹 𝘁𝗿𝗮𝗱𝗶𝗻𝗴 (𝘧𝘳𝘰𝘮 𝘭𝘪𝘷𝘦 𝘭𝘦𝘤𝘵𝘶𝘳𝘦 - 𝘤𝘰𝘮𝘱𝘪𝘭𝘦𝘥 𝘣𝘺 𝘢 𝘴𝘵𝘶𝘥𝘦𝘯𝘵) - 1) Try to Simply your trading approach after a point of time. One more indicator / tool / strategy won’t make you a good trader. (2/n)

Some insights on #Volume -

t.me/MMT_Broadcast/…

https://twitter.com/swing_ka_sultan/status/1599347177062805505

Q&A on #MagnitudeTrades, #CANSLIM & #SellingIntoWeakness

t.me/MMT_Broadcast/…

As this is a question several people asked me, hence posting it as a thread.

I rarely follow any rule, I believe in my abilities to identify character. It makes me able to make decisions in confusing situations too.

#IPOBases are volatile in nature. What I saw before (1/n)

https://twitter.com/say2alok/status/1597992354668912643

entering this stock was 3 days out of which on 18th Nov. gave a strong recovery and closed strongly. Next two days saw a volatility contraction in form of inside bars.

If a stock is not falling down, it is first sign of a probable recovery. Anything which is not going down (2/n)

Srikanth, market doesn't work in that way. What we are seeing on the name of 52 week high etc is just an effect, an indicator of demand.

Question is what generates demand? Think on it - why you buy a stock? You buy it because you believe stock will go up. Hence behind your (1/n)

https://twitter.com/mynameisnani75/status/1594417002458001408

action is your belief, your conviction which is the cause behind creating demand. Now think, where this conviction comes from?

For you, it might comes from technical aspects but for institutions, who makes these charts, the reason to buy or hold a stock is only value. (2/n)

#SA_Notes for 21-11-2022

- Market is bear grip - both in long and short term.

- Volume still staying around 0.45, not suggesting any extreme. There is a high chance to see a continuation of the current situation for some more time.

- Bull swing is not yet around the (1/n)

https://twitter.com/swing_ka_sultan/status/1593426903045922817

corner. Don't be in hurry to label any green day a start of a bull swing. Whenever market will stretch in shorter term time frame, it will give a green day or a strong opening, only to be sold off later. Beware of bull traps.

Such actions further tighten the bear grip. (2/n)

यदि हमारे शास्त्रों में कोई सबसे दिव्य ज्ञान दिया गया है तो वो है 'अहम् ब्रह्मास्मि'! तुम में स्वयं ब्रह्म होने की क्षमता है, किंतु ब्रह्म होने की अनिवार्य शर्त एक ही है - आस्था की समाप्ति।

मुझे नहीं मालूम नास्तिकता इतनी अप्रिय क्यों है, क्यों इतनी नकारात्मक मानी जाती है। (1/n) जनतंत्र की भांति शायद यह इतना आधुनिक विचार है जिसके लिए मनुष्यता अभी तैयार नहीं है, उसे संभालने में सक्षम नहीं है। आस्तिकता आस्था से निकलती है, आस्था में प्रश्न की संभावना नहीं, केवल समर्पण की है। यहां केवल भक्त और भगवान का संबंध संभव है।

नास्तिकता प्रश्न का अधिकार देती (2/n)

Hi Srikanth, you asked a very good and valid question. And I will love to revert on it.

First thing is, you need to understand that TA & a trading system are two different things. TA doesn't makes money, your system does.

TA just tells you that there are higher odds of (1/n)

https://twitter.com/mynameisnani75/status/1594022880786120704

something happening over another thing.

If you read the bible of TA - John J. Murphy's Technical Analysis of the Financial Market, you won't be able to make money from it, as it might tell you about all sort of studies that can tell about having higher odds of one outcome (2/n)

Much thanks bro. TBH, I want to change the complete way how technical analysis is done & taught in programs like CMT - I want to make it a study of the psychology of market participants rather than keeping it limited to drawing lines and spotting patterns and hoping them to (1/n)

https://twitter.com/Finstor85/status/1593922985123090435

work.

It makes me really disappointed when people approach me and ask whether it is a right setup. Is it a right CNH? Is it a right VCP?

They are living in illusion where they forgot the cause, and are thinking that effects they seeing is everything.

This SHOULD change. (2/n)

Color of a small size candle (size is high - low) doesn't matter much - whether red or green. With big volume it can be interpreted in 2 ways -

1) Inter institutional transaction - one major shareholder sold, and other one bought it from him. As we are not seeing any (1/n)

https://twitter.com/DharmenderPers1/status/1593498111833702400

price movement, it means no share came into public to be absorbed.

Problem arises when institution sells and public is supposed to absorb the supply.

For example this is Dixon on 25th July, 2019, almost a month before the huge move triggered. (2/n)

Hi Nishant, I wrote a detailed thread on why I think it can fail. While any setup can fail, but obviously some are more failure prone and some are less.

We were taught to measure base in 2 ways - depth and duration. These are the key factors which differentiates a (1/n)

https://twitter.com/nishantpatel9/status/1572310309578346497

flat base kind of setup from larger bases like CNH and W Bottom, VCP as pattern etc.

According to WON, a base can qualify for a flat base if it is 4 week long and upto 15% deep. But WON himself says that Flat Bases are weak bases - they work better when they emerge as a (2/n)

Shared some #SituationalAwareness notes today morning in Mentorship group -

Situational Awareness (notes 1 July, 2022) -

Long Term View -

1) Long term view is bearish. Do not expect a bull market anytime soon. These are the magnitude of past bear markets on the (1/n) small cap index (all calculations are done from peak to trough) -

a) 2008-09 - (-78%) in 60 weeks (roughly 15 months)
b) 2010-13 - (-46%) in 146 weeks (roughly 2 year and 3 months)
c) 2015-16 - (-31%) in 43 weeks (roughly 9 months)

(2/n)