There are lot of TAs in Bangladesh, Yes it is really a positive news for all of us to learn and use our self judgment which is a very important issues for our stock business ! At present, DSE and CSE are going implement TA system for the traders. Beside to learn TA, you need to be smart enough for being a successful traders, you have to compile with some world recognized business rules. If you study enough, you may be able to setup yourself trading rule and pattern. You must use a good trading system(Profita, Aptistick, Metastock, Flexgraph, Amibroker etc.). Here I’m going to show a little from myself.
We're going to cover the 2 major components that every successful trading system has in common.
- Entry rules (when you get in.)
- Exits rules (when you get out.)
Entry Rules*
Entry conditions are a precise set of rules that a stock must pass before you will enter a trade. I believe these rules must leave no room for judgment and should most definitely adhere to the KISS principal - that is, Keep It Simple Seen.
Note: I am a technical analyst by trade. It is my belief that all fundamental and economic influences on a stock price are taken into consideration by the market. Therefore, I focus my attention on price action.
And remember, there is no Holy Grail of entry systems. There is no specific formula in TA world that will get you in at exactly the right time, every time. It's our goal to construct some simple, yet robust entry rules…
Here are a few components that I think are important when identifying possible entry points:
- Price: It is important to set price maximums/minimums because a stock's price may determine its attributes. e.g. speculative stocks tend to be cheaper, and blue chip stocks tend to be more expensive.
- Liquidity:This is a measure of how much money the stock trades. You need to set minimum levels of liquidity to keep you out of stocks that simply don't trade enough.
- Volatility: This is simply a measurement telling you how much a stock moves. It is important to trade stocks that move enough for you to make a profit, yet they aren't so erratic that you cannot get to sleep at night.
- Trend: The cornerstone of technical analysis is the trend. Remember "the trend is your friend" and you always want to trade with it, not against it. You need a way to measure this.
- Trigger: This is the point that indicates it is time to enter a trade. The trigger condition occurs only at one point in time and isn't held "true" over extended periods of time... e.g. a moving average cross over.
When combined, these components are going to make up our entry rules. But before we even begin action, we must first determine one of the most critical elements of any system.
What time frame are we going to trade?
- Short-term (e.g. reversal trader.)
- Long-term (e.g. trend follower.)
There are distinct differences between these 2 types of systems and your choice here will have a marked effect on every decision, thereafter.
Short-term systems tend to require a greater time commitment and require more money. The benefit of trading more often is that usually this means your profits are more consistent too.
Conversely, longer-term systems tend to require less time, and less money. However, since you are keeping your positions open longer, you need to wait until positions are closed out before you can collect any profits.
Generally I like the traders and some of closest friends, especially those who are just starting out, to begin with a trend following system. The reason being is that it takes less time, less money, there is less risk and it is easier than short-term trading.
Moreover, trend following systems tend to have higher win to loss ratios and are therefore, psychologically easier to follow.
Exit Rules**
Actually, there are five reasons that should be part of your stock exit strategy:
- The price has reached the predetermined target you established when doing your homework before you made your purchase;
- The price drops back down to your trailing stop order that you have set according to your stop rules;
- You need the money for some other purpose (to buy another more promising stock, to invest in some other asset or for some other good reason;
- As a part of good capital management you wish to realize some of the gains and reduce your holdings of this stock; and
- You have reached the end of the time you gave for this stock to perform and you believe there are better opportunities.
Have a nice day !!!
Original Post:
Kaushik Hira
Original Link:
http://www.facebook.com/home.php?sk=group_147436708639146&view=doc&id=153475191368631
No comments:
Post a Comment