CHECKLIST FOR SHORT TERM TRADE

CHECKLIST FOR SHORT TERM TRADE

If we are going for short term trade , than we would be keeping it in our HOLDING. So here we are confident about one thing that we are going to BUY , i mentioned this due to nature of different types of trade , it can be Intraday or option trading. Following procedure is purely for Equity Market.

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So lets begin

1) Price Action - Do not always jump on a stock and buy at whatever rate market offering

                             

It has been observed that a beginner and Novice always go for a stock

1. Which is top gainer for that current movement. 
2. Which is being talked about.
3. Which is having a bullish rally. 
4. Penny stock gave a movement.

In such situation Traders loose their money in most of the time. Generally people go for the stock which is in bullish race or being talked about , both the cases are almost same because when any stock is bullish race than only it will talked about,but remember one thing such scenarios where stock is visible that it is in bull run , up to that time 40-50% of Bull Race has been done , when it will be talked and when the news reached to you till than 60-70% of Bull Race would be complete , the remaining 30-40% is the most risky portion where patience required but short term traders do not have that much spare of time , so they book 4-5% profit or make loss by coming out in uneven situation as remaining 30-40% portion is the longest duration of that particular Bull Run , it will take long time , it will be mix with Green & Red Candle , it will have very small bodies , very small movements which will make trader to take action early. One Should trade before Bull Run started and that will only be possible with the help of technical analysis but remember one thing , technical analysis is the tool which depends on price action but not vice e versa , it shows you price action in different forms which is easy to understand. 

2) Volume - Do not trap yourself in Planned Price Action

One Should co-relate the price action with the volume being traded many traders stuck in such situation where false/fake Bull movement of stock is planned and executed . What happen is stock having low liquidity at the moment gets attention of market for sudden buying , which grabs interest of beginners and novice traders (generally these stocks are penny but such thing are visible with big stock too) , novice trader start buying in that small movement in hope of big move ahead but get stuck in trap. So one should always notice behavior of volume to the stock price.

1. If Price Increases with the volume increases than it indicates stock is indicating buyers pressure.
2. If Price increases with the decrease of volume than no trading should be carry out.
3. If Price decreases with the increase of volume than it indicates stock is indicating sellers pressure.
4. If Price decreases with the decrease of volume than no trading should be carry out.

Only two conditions are favorable in such condition , that is condition no 1 & condition no 3.

But how will you know if volume increased or decreased , i mean against what you will compare this thing. You need some comparison , so far comparison for volume , we have Moving Averages of Volume.

Moving Average of Volume is nothing but taking a average of volume from past 20 trading days , for every new trading day and plot it so if volume of today crosses over moving average of 20 days than it will be treated as volume increase. 

if today's trading day is T Day than , We need to take volume data from T-1 till T-20 Days , and average the data , average value will be the value for T day's Moving Average for 20 days.

Don't Worry you don't have to do this for every day you have Technical Tool - "Moving Average" in almost every trading station. You just need to put days or you can call interval for which you need Moving Average.

You can take out Any moving average but what is useful are as follows;

1. MA 5 
2. MA 20
3. MA 50
4. MA 200

MA Stands for Moving Average and numeric no denotes the interval for which you need moving average.

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3) Moving Average Combinations For Comparison

There are different types of Moving Averages Comparison stated by various people for various type of trading or as per requirement. My Opinion and experience filter these out

1. MA 5 vs MA 20 - For Intraday & Short term Trade
2. MA 20 vs MA 50 - For Short Term Trade to Mid Term Trade
3. MA 50 vs MA 200 - For Mid Term Trade to Long Term Trade

If we talk about our section which is for short term trade lets study MA 20 & MA 50

MA 20 will stand for Moving Average Volume for the 20 trading days interval 

MA 50 will stand for Moving Average Volume for the 50 trading days interval

So when we take Moving Average indicators in chart , we have to take 2 , so that we can by changing intervals can have comparison. Here you have to do one thing , you have to colour code these both so as to get a understanding in First Look. I will tell you how. first basic. 

As words express MA 20 is short duration moving average compare to MA 50 , so here any increase or decrease in volume first will be reflected in MA 20 than MA 50. So price action too corresponding to the volume will move . So if MA 20 line is crossing over or is above the line of MA 50 and price is increasing than indicator recommending Buying. 

Traders who can take risk , will take a trade prior to cross over as it will start molding or you can say where convergence will start one can take a trade , but note it down that it is not adviced to be fully depend on one indicator or any indicator as indicators are indicating you as per price action in different easy form to understand. So always apply multiple check points to ensure you trade risk free.

So when i talked about colour coding here is funda for the same , when line goes up and down you will take time until you get used to it to understand , but my funda is , in our case that is MA 20 & MA 50 , you put green colour in MA 20 and red in MA 50 , so that when MA 20 crosses over MA 50 you will see on chart green is crossing over red , which will be clear signal of Buying.

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4) Three Terminals One Platform 

I am trading from 3-4 Years and used many indicators for better results and profit , but from last year i am stuck on this . Three Terminal One Platform . it is nothing but , combination of 3 individual indicators which will i tell you how to use in a single window and get the best indication of price action. These all 3 are free indicators in most trading platform.

Here they are

1. Bollinger Bands
2. MACD
3. RSI

They are different in nature and different in anticipation of price action but when all three indicates the same it will give you 95% correct results.

Bollinger Band indicates the so called limit of the stock along with volatility parameter. i will go in very simple language here , there are two outer boundaries in Bollinger Bands , between these two fins , the price goes , some times due to high volatility price goes beyond the bollinger bands , and some times it is as narrow as a line. These is one centre line according to Mentors that line is a neutral line , if price is up its in buying range and if price is down its in selling range.

MACD (Moving Average Convergence Divergence) is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA

RSI (relative strength index) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100.

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5) TIME FRAME

Time Frame is where we can see price action effect on candle stick through various intervals . Which is used mainly are :

1. 5 Min 
2. 15 Min
3. 30 Min 
4. 1 Day
5. 1 Week

For short term trade one should use 1 day and 1 week combined for better forecasting of stock's price action. In every interval one should search for pattern , as there is a major chance that candle stick would be making any pattern and that is being followed , generally traders don't use it as a tool , but this is the tool which predict the movement in upcoming interval. 

I personally use 15 Min , 1 Day & 1 Week Candle stick pattern along with my Three Terminal One Platform , which provides me link to :  Day Trading - Short Term Trading - Mid Term Trading

One Should practice a lot so that , every time he should check before trading a stock. one should see every interval for better price action and better price for support functioning.

I would like to give disclaimer over here that , indicators are just indicating the price action they are not 100% correct.

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6) SUPPORT & RESISTANCE

In general , Support and resistance are that value that from where in past reversal of trend has been observed. They are the point where Bulls & Bears faced each other to take the command over price of the stock. Here our assumption of Share Market comes in play : "History tends to repeat itself" . Its in human nature only , we are following the same. Such values also comes by Fibonacci Ratios , some other people also gave the theory on the same topic and generated their support resistance . There is one Pivot point around which Support & Resistance is plotted.Let assume Support as S1,S2,S3 and Resistance as R1,R2,R3 and pivot point P , so For P , R1 is the first resistance and S1 is firth immediate support. When one is trading at P , he should take S1 as stop loss and R1 as a ceiling. if it crosses R1 than he should change his SL from S1 to P , and take R2 as ceiling. and if things goes wrong and it start coming down and breach S1 so he should take support of S2 and resitance value will be P.

For Short Term Trade one should open 30 min and 1 Day frame and apply pivot points to decide what will be the target and what will be stop loss.

You will understand once you will practice it . Generally Risk Reward Ration are calculated by Support and Resistance method only.



If you understand all this , you will get to know that without technical analysis you are just playing blind or one can say purely on LUCK.

For Study Material-Click on the topic you will be redirected to blog

https://jainsahab24.blogspot.com/2020/04/how-to-understand-share-market-step-by.html