How to trade with an oscillator

[avad]

Thanks Smart_Trade

i think you misunderstood my 2 and 4 trades. I think my amateur editing of the picture is responsible for yhis,

i will again post the trades. Plz go through them.

I took 4 trades.

http://imageshack.us/photo/my-images/6/tradesfor4thnov.png/

first one was buy low sell high,

second one was short high cover low,

third was again short and cover,

fourth was by low sell high.

Sorry if i am wrong

Anyways i traded the nifty on paper today as i trade stocks especially icicibank. But i think the system works more better with nifty.Comparing todays trades icicibank gave me 13rupees move,which was sweet but when i compare the nifty and icicibank trading nifty seems more easy. .

i have never traded nifty because i had heard 'horror' stories of daytraders who lost lot of money on nifty trading. This was when i used to trade on pure gut instinct(viz. gambling). I know there are futures and options but what is differencr brtween them? which should one trade.

Currently i trade in only 2-3 stocks

 

[avad]

http://imageshack.us/photo/my-images/215/1nov11.png/
/
i have another question. How would you have traded the 1st nov?. Also how to superimpose the %K and %D on one pane?

Thanks

 

[Smart_trade]

http://imageshack.us/photo/my-images/215/1nov11.png/
/
i have another question. How would you have traded the 1st nov?. Also how to superimpose the %K and %D on one pane?

Thanks

Oscillators will work great in a sideways market environments....but in trend days they will not give very good trades. Nov 1 was a downtrend day and oscillators will not give very good signals on such days. Also most people trade oscillators in a too simplistic way of 80/20 band etc...go beyond that and try to understand what the oscillators are telling you...that day on 2-3 attempts the stochastics was not able to make any progress above 50. Now a bad trader will say today no signals on the stochastics....but a good trader will go beyound that and say well, market has no strength for stochastics to go much above 50 so we have a strong downtrending day at hand and let me make the best of it.

Trade on the pivots and price action with adds.....the area near 2:00 was extreme panic area....take some profits off.....rest all marked on the chart.Ignore the small green bar which is a signal on some other method......no long trades on that day.....

Smart_trade

 

[timepass]

Aside :

ST, in your above chart I see that you are using MAs 21 & 55. Can you please shed some light on that. Why 21 & 55, and what conclusions you draw from them and how would you trade them, combination with other indicators etc..

 

[avad]

Thanks Smart_Tade

I had read somewhere on the forum that price is king while indicators are secondary in trading.I want to know what is price action as i have tried to search it but ended with not so good materials. It would be helpful if you explained it a bit.

 

[poortrader]

Hi ST
Thank you for the illustrative example. I have a question regarding the VWAP theory once again. This time you have advised to book profit on extreme distress. Is it because of the trending nature of market going in same direction. Because as per our previous interaction you had suggestion that the trend becomes strong when the spread between VWAP and price is high. I understand that traders should be trapped for VWAP to work, and in this example it was only stretching too far in the same direction...time to book profit...Am i right?

Oscillators will work great in a sideways market environments....but in trend days they will not give very good trades. Nov 1 was a downtrend day and oscillators will not give very good signals on such days. Also most people trade oscillators in a too simplistic way of 80/20 band etc...go beyond that and try to understand what the oscillators are telling you...that day on 2-3 attempts the stochastics was not able to make any progress above 50. Now a bad trader will say today no signals on the stochastics....but a good trader will go beyound that and say well, market has no strength for stochastics to go much above 50 so we have a strong downtrending day at hand and let me make the best of it.

Trade on the pivots and price action with adds.....the area near 2:00 was extreme panic area....take some profits off.....rest all marked on the chart.Ignore the small green bar which is a signal on some other method......no long trades on that day.....

Smart_trade

 

[Smart_trade]

Hi ST
Thank you for the illustrative example. I have a question regarding the VWAP theory once again. This time you have advised to book profit on extreme distress. Is it because of the trending nature of market going in same direction. Because as per our previous interaction you had suggestion that the trend becomes strong when the spread between VWAP and price is high. I understand that traders should be trapped for VWAP to work, and in this example it was only stretching too far in the same direction...time to book profit...Am i right?

Poortrader,

On the chart you will see that the market was trending down all through the day and between 1:15 and 2:00 it gave a steep vertical fall.When this happens, market takes a rally. If you see VWAP around 2:00 after the steep fall, the difference between VWAP and the NF price had gone to over 40 points. If you see the VWAP chart for the past you will observe that maximum difference is between 40-42 points....in very rare cases it goes above 50. So 40-42 indicates extreme panic and hence worth taking some profit off......if the market crashes further, we have some positions...if it takes a rally as it did that day, we have booked part profit at a very advantages position. When the market trends one way, less traders get trapped.....as you rightly pointed out......maximum positions are trapped when the market takes a intraday sudden reversal as the trapped guys have no chance to cover due to sudden reversal.

The final profit taking was done on pivots...

Smart_trade

 

[Smart_trade]

Aside :

ST, in your above chart I see that you are using MAs 21 & 55. Can you please shed some light on that. Why 21 & 55, and what conclusions you draw from them and how would you trade them, combination with other indicators etc..

21 MA in any chart and any timeframe ( starting from 1 min to daily ) is called " Holy Grail". Market has a strong tendency to come near the 21 MA . If the market is trending down , it will take a rally when you have a large difference between the price and MA.But in a down trend the market will not pivot above the 21 MA and take out that pivot....so the moment you see market coming close to 21 MA it is a great place to initiate/add short positions .55 MA line indicates long term trend in this timeframe and 8 EMA line is for profit taking in case of steep rise/fall. These lines are jusr set ups...the trades are taken on pivots as always.....

The MA lines were just there on my charts and I fergot to delete them before posting the chart. Nice observation.....

Smart_trade

 

[lvgandhi]

Poortrader,

On the chart you will see that the market was trending down all through the day and between 1:15 and 2:00 it gave a steep vertical fall.When this happens, market takes a rally. If you see VWAP around 2:00 after the steep fall, the difference between VWAP and the NF price had gone to over 40 points. If you see the VWAP chart for the past you will observe that maximum difference is between 40-42 points....in very rare cases it goes above 50. So 40-42 indicates extreme panic and hence worth taking some profit off......if the market crashes further, we have some positions...if it takes a rally as it did that day, we have booked part profit at a very advantages position. When the market trends one way, less traders get trapped.....as you rightly pointed out......maximum positions are trapped when the market takes a intraday sudden reversal as the trapped guys have no chance to cover due to sudden reversal.

The final profit taking was done on pivots...

Smart_trade

Max diff between vwap and price was 32.13 at 14:10 with price being 5293.75 and vwap was 5325.88 as per my chart for nifty in 5 min TF. I get data from Global datafeed which is supposed to be accurate to exchange data. Any reason for difference between or values?

 

[Smart_trade]

Thanks Smart_Tade

I had read somewhere on the forum that price is king while indicators are secondary in trading.I want to know what is price action as i have tried to search it but ended with not so good materials. It would be helpful if you explained it a bit.

Yes in the market Price is the King....all other things are secondary. For price action you can read material on candlestick charts ( the meaning of these patterns and what they indicate ), Wykoff,VSA.......there are some recent books on Price action but I find them too complicated and unnecessary.

The best way to learn price action is to observe hundreds and thousands of charts and read the supply/demand equations on the chart.....it will come by putting in plenty of screen time and thinking about each bar and its significance to supply/demand and the way the market moves.

I have not come across a concise book or material which will teach the price action in practical way......so one has to learn by experience and observation.

Smart_trade