Mr. X marked 1500 as a strong support in HDFC Bank. Next day, stock opened at 1510, came down and hit 1500.
ABC went long in the stock. A few minutes later, stop got triggered. What went wrong here?
(2/n)
Common price action trading mistakes that cost me lakhs of rupees:
A thread 🧵
1. Front running the market based on my analysis:
Any analysis we do should be proved by market as correct before we jump into a trade.
How?
(1/n)
Mr. X marked 1500 as a strong support in HDFC Bank. Next day, stock opened at 1510, came down and hit 1500.
ABC went long in the stock. A few minutes later, stop got triggered. What went wrong here?
(2/n)
At supports and resistances marked by a trader (you), wait for market to show the stock is actually taking support/resistance at those levels.
(3/n)
Essentially, on a lower TF, check for bullish price action at support, bearish price action at resistance before you enter the trade.
(4/n)
If you are a price action based trader, the most important guiding principle for you is:
1. Higher the timeframe, more accurate and reliable the technical analysis
2. But big moves start on small timeframes first.
(6/n)
The key is to balance these two principles and have a structure where you analyze markets on a TF and trade on a TF which complement each other.
(7/n)
If you are a day trader, do not pick stocks on 15 mins TF and trade on 15 mins. Switch your analysis to hourly TF/daily TF.
It will help avoid choppiness in the markets to a large extent.
(8/n)
A divergence is a signal for a potential reversal which MAY occur, but not a confirmation.
Just taking reversal bets on divergence will sooner or later burn big holes in your pocket.
(9/n)
Every divergence does not mean reversal and every reversal does not come with divergence.
(10/n)
Some people use RSI, MACD, Stoch RSI all on one chart.
On a minute basis, even though these oscillators have their own differences, fundamentally on a broader perspective, they have the same purpose.
(11/n)
So, pick one oscillator and do not clutter your chart and minds in live markets.
(12/n)
This could get a bit unpopular but I like to put the truth out:
Bullish candle patterns work well in bull markets and bearish patterns work well in bear markets.
(13/n)
(14/n)
More from Killer Trader 📉📈
More from Genericlearnings
You May Also Like
I’m torn on how to approach the idea of luck. I’m the first to admit that I am one of the luckiest people on the planet. To be born into a prosperous American family in 1960 with smart parents is to start life on third base. The odds against my very existence are astronomical.
I’ve always felt that the luckiest people I know had a talent for recognizing circumstances, not of their own making, that were conducive to a favorable outcome and their ability to quickly take advantage of them.
In other words, dumb luck was just that, it required no awareness on the person’s part, whereas “smart” luck involved awareness followed by action before the circumstances changed.
So, was I “lucky” to be born when I was—nothing I had any control over—and that I came of age just as huge databases and computers were advancing to the point where I could use those tools to write “What Works on Wall Street?” Absolutely.
Was I lucky to start my stock market investments near the peak of interest rates which allowed me to spend the majority of my adult life in a falling rate environment? Yup.
Ironies of Luck https://t.co/5BPWGbAxFi
— Morgan Housel (@morganhousel) March 14, 2018
"Luck is the flip side of risk. They are mirrored cousins, driven by the same thing: You are one person in a 7 billion player game, and the accidental impact of other people\u2019s actions can be more consequential than your own."
I’ve always felt that the luckiest people I know had a talent for recognizing circumstances, not of their own making, that were conducive to a favorable outcome and their ability to quickly take advantage of them.
In other words, dumb luck was just that, it required no awareness on the person’s part, whereas “smart” luck involved awareness followed by action before the circumstances changed.
So, was I “lucky” to be born when I was—nothing I had any control over—and that I came of age just as huge databases and computers were advancing to the point where I could use those tools to write “What Works on Wall Street?” Absolutely.
Was I lucky to start my stock market investments near the peak of interest rates which allowed me to spend the majority of my adult life in a falling rate environment? Yup.