I would like to thank all the readers of this blog. As a Nifty trader my major focus was only on Nifty and today i would like to discuss some thing about trading in equity market.These are just some basic rules and guide line i follow when i trade, it can be true or false
1. As a trader the first thing one should notice is never trade on hope and stock market is not a place to experiment the trades. It is all about making money and that's it !!!.
As W D Gann says "When you have nothing but hope to hold on to, get out of the market".
2. Before getting into stocks have a look into the specific index where you can have a broader outlook regarding a sector. For example if Bank nifty is expected to perform better first have a look at the levels of bank nifty and then move into specific stocks in Bank nifty.Thus before selecting the stock one should have a clear cut view about the particular index.
3. Select high beta stocks for the purpose of trading.For example in the cement sector we have many stocks like ACC, Ultratech , Ambuja cements, JK lakshmi etc, but you know a greater movement could happen in Ambuja than in J k Lakshmi. One can choose the movement mainly on the basis of volume.Select those stocks from a sector which are trading with good volume and those stocks would give you a greater momentum.
4. Which stocks to buy or sell - Always sell those stocks which are trading with high volume and if you want to do bottom fishing catch those stocks which are trading with lower volumes but a major one in the sector. For example on a buy trigger i would first buy SBI instead of Axis bank and on a sell trigger i would first sell Axis bank just because Axis bank trades with a better volume.The logic behind this would be if you are trying to buy near the bottom it should not give you much loss, if the volume is more the stocks can give a wild movement.
5. Always see the time a stock spent at the top or bottom. The more time it spends on the downside the more sharp would be the move. One could have a look into the chart of Idea for a distribution pattern which happened in a huge selling 2-3 months ago. For a buying or accumulation pattern one can look into Bhushan steel.Thus only trade in those stocks which is showing a good accumulation/distribution pattern.
6.Never short a market that is rallying on the upside or never buy a market which is giving short covering rallies. In an upside rally buy the dips and on a short covering rally sell the highs. Never buck the trend !!!
7. Always buy those stocks which are the major one's in a specific sector and don't buy only because the price of the stock is less. It is good to remember that if the price of the stock is less there should be a valid reason for that and if every one is moving away from that stock why should you buy it??
(Followed by weekly analysis of Nifty 30th Jan - 3rd Feb 2012)
