Trading Lessons

Trading, investing is my enjoyment – an outlet for my analytical, avid reader and reserved/introvert side.

Routine:

  1. Have a rough plan on how to in/out incl dates, fibonacci, target $ & the corresponding profit.
  2. ROutinely check eod charts for entry.
  3. Whilst still working full time, I will go in/out med term 1-3 years, based on chart/dates.
  4. Once I can devote a good time on stock research – full time – I can do value investing more thoroughly i.e. know know my stock’s business operations.

Style of (stock) trading

  1. Medium term 1 – 3 years (trending for stock)
  2. Blue chip
  3. Top down – fundamental in the right (economic) cycle for the industry & the best company (Strategic)

Style of (forex) trading

  1. Ranging
  2. Top down – fundamental in the right (economic) cycle for the trade (short/long)

Trend

  1. Ranging (70%  80% of the time)
  2. Trending upwards
  3. Trending downwards

 

Identifying Trend

  • Overlapping Bollinger Bands with standard deviation 1 and standard deviation 2

The ones overlapped are indicators to buy or sell or do nothing.

  • MAs
  • ATR (below 25, no trend, above 25, there is a trend)
  • Leading indicator: Divergence

Continuation = Hidden divergence

Reversals = Regular divergence

 

Lagging: test strength using ADX

If above 25, trend is strong

 

Trading in a ranging trend

Note to self: my favourite.

Identifying the ranging trend:

  1. ADX below 25
  2. BB sd 1 n sd 2 overlapping
  3. MAs
  4. ATR
  • Low ATR is below 20 = ranging
  • Increasing ATR = increasing volatility
  • Decreasing ATR = decreasing volatility

Indicators for trading

  • Oscillators: RSI and stochastic  overbought and oversold
  • Support and resistance line

Trading in a ranging trend – be wary of reversals and retracement

Reversals

  1. Fundamentally supported
  2. Broke through strong support or resistance levels
  3. Broke through trendline

Retracement

  1. Fibonnacci won’t go past 50%
  2. Won’t break strong support

Trading in a ranging trend  be wary of breakout

Note to self: I look for safe and secure profits, I have incomes from elsewhere, I don’t trade on breakouts.

How to gauge the volatility

  • BB

Contract or tight = low volatility

Big band = high volatility

Low ATR is below 20 = ranging

Increasing ATR = increasing volatility

Decreasing ATR = decreasing volatility

  • As simple as body of the candle (1day completed, at min)
  • Economic data
  • Business calendar
  • Most importantly, the fundamental *and* the sentiment supporting the price change
  • I won’t cover the rest. I won’t trade breakout.

Indicators

Oscillators:RSI & Stochastic

……

Divergences

  1. Regular
  2. Hidden

What to use

  • Trend line
  • Candlesticks  double bottom or double top
  • Support or resistance lines
  • RSI or MACS lines only

Regular divergence

If trend line of the candles are going up (remember how to draw trend line properly) and,

the peaks or troughs of the momentum indicators forms the opposite direction trend line,

Indicator = reversal.

Hidden divergence

If price trend changed direction recently, and

momentum indicator is still on the old trend,

Indicator = price will continue on the new trend.

Exit point –

when HH is being established

 

Key points used:

  1. Fibonacci extension
  2. Dates (company (results hearings/div announcements/etc), economic data calendars, and global eg key election dates, key public holiday (of US, EU, AU), trade wars, IMF, G20, etc.)
  3. Software:
    1. Tradingview
    2. Yahoo Finance
    3. Note: check only at end of day is sufficient