Top trading mistakes

1. Trading without a game plan : many of them enter a trade hoping that share will go up certainly, however not sure how high will it go. One should assume several things before entering a trade. They are as follows.

 Is there any upside or downside left on the stock? You should analyse this according to technical analysis or seeing the sentiment prevailing in the stock.  normally a stock moves 3% up or down in a day.

What is the possible target? What is the Stop loss that you should keep?

2.  Another mistake is not following the game plan. Changing game plan shows emotional instability in trading. If emotions rule you in trade, you should not trade.

3. Taking two many positions which you can not monitor: You can monitor 2 to 3 stocks at a time . So limit your positions to what you can control.

4. Not booking profits: A penny in the pocket is better than a dollar in the bush. So unrealised profit is just a illusion. In trading the maximum probability goes in favour of loosing. So you should be quick in booking profits because it is a rare opportunity.

5. Letting the looses run and close the position expecting it to go in favour of your position. Accept lose and try in next time. You can not win always.

6. The biggest mistake is proving that you are correct. In stocks only market is correct. There are millions of people trading, you are a worm considering the vast network of traders. Accept it and act accordingly.

7. Trade your emotions instead of signals: buy when you are greedy and sell when you are afraid.

Apart from the above mentioned mistakes there are lot of crazy mistakes that every trader must have come across. 

How to trade using Moving Average Convergence and Divergence(MACD)

MACD uses two moving averages. They are two Exponential Moving averages. By subtracting longer period MA form shorter period MA we will get a line that oscillates above and below zero called MACD line. 

An increase in gap between the MA's creates a falling MACD and vice verse. The gap between the 2 MA's is the momentum.

MACD comes along with a histogram and it is very easy to interpret. When MACD crossover occurs that is when trend reverses and you can enter in to a position.

 If MACD cross over occurs in the upside plotted in the histogram, you can buy the stock. If it is crossing downward, then you can enter a short position.

Please watch the below mentioned video to understand the trading using this indicator.

How to trade using Simple Moving Average.

       

A simple moving average is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes and long-term averages are slow.

SMA can be used to predict trend, decide exit and entry points etc.

You need to use 50 SMA and 30 SMA to analyse the trend(Industry standard).

If short term SMA is above long term SMA, stock is in uptrend and vice verse.

You are buying the stock at a fair value in terms of SMA if you buy the stock close to its SMA.

In the above mentioned chart of SBI, the stock entered a uptrend when price crossed the 50 day SMA, For July,September SMA and price was crossing each other several times indicating a side ways movement. Again SMA cross over happens and new uptrend begins. Once again stock can go side ways or downways if it break the 296.00 (50 day SMA).

Why Market plummeted today

The massive mess that we seen on the market today is due to concerns over the economic strength of europe. Euro is sliding and it touched a nine-year low against US dollar. Euro will slide further.


Greece was in debt crisis from 2009. They have trouble in paying back the debt. On 2 May 2010, the Eurozone countries, European Central Bank (ECB) and International Monetary Fund (IMF), later nicknamed as the Troika, responded by launching a €110 billion bailout loan to rescue Greece from sovereign default and cover its financial needs throughout May 2010 until June 2013, conditional on implementation of austerity measures, structural reforms and privatization of government assets. A year later, a worsened recession along with a delayed implementation by the Greek government of the agreed conditions in the bailout programme, revealed the need for Greece to receive a second bailout worth €130 billion (now also including a bank recapitalization package worth €48bn), while all private creditors holding Greek government bonds were required at the same time to sign a deal accepting extended maturities, lower interest rates, and a 53.5% face value loss.

Again the same parties provided third round of funding to greece. However as like all the times greece did not full fill the austerity measures provided to them.

Greece recorded a Government Debt to GDP of 174.90 percent of the country's Gross Domestic Product in 2013. India recorded a Government Debt to GDP of 67.72 percent of the country's Gross Domestic Product in 2013

It is also revealed that greece had set up a deal with goldman sachs to hide its debt. Italy also in the radar of such a deal. Portugal and Ireland may follow greece.

If Greece does not full fill debt obligations,the debt owning banks from Germany and France as well as IMF will be in slight trouble. A debt default from Greece will cause higher intrest rate loans to remaining europian countries. Europian Central Bank is thinking serious about a quantitative easing which will even cause euro to slide further.


We may face some reduced capital inflows from abroad. However domestic economy is safe and keep buying stocks in this dip. SBI is a buy at current rate. Accumulate private and good PSU banks. They are going to fetch you good returns in the coming quarter.

JACKPOT CALL FOR 06/01/15

                                         

 Sell Idea cellular for first target of 146 second target of 143. Dont sell if stock remains near 150.00

Spectrum reserve price has increased to 20% from previous expectations. So Idea has to spend much more than expected. This is going to ruin there balance sheet. Bottom line performance will be a tough job for idea. Chance of FII selling shares as 3 year growth is limited.

                                    Nifty next week

Nifty is near very crucial point as per Ichimoku Cloud and big move is round the corner. Also 20/50 SMA are converging any break above 8310 can see explosive move on upside and break of 8214 can see move below 8174/8120. Nifty gave the explosive move today and closed above the resistance of 8310 and 61.8% retracement of 8374. 8288/8300 is good support zone and dips near this shall we bought into.

FIIs are back from holidays and we can expect a bull run in the market. CAD deficit of current financial year target is expected to acheive 99%. It is a good indicator of sound economic background which can support the growth. PM has announced that he will not interfere in banking system which sounds positive for the economy since political pressure was behind the kingfisher loans.

Next week the biggest movers could be private banks. Axis bank may test 525.00, Public sector banks are also in the hot list. Spectrum pricing and can bring up buying interest in telecom stocks.

Stocks to buy on 2/01/15

Muthoot finance is a buy for target of 220.00, S.L is 208.00.

Watch out for enough volume in the morning and buy in pre open market if it suites your risk apettite.