Identifying Contraction.

There are no set rules for identifying contraction but some properties are available, that indicates or suggests that the contraction may start;

1. When prices are far away from MA
Suppose a stock have in a strong uptrend in EOD Chart. In 60 min chart, if the 20 period MA is far below from the prices then there is a strong chance to begin a contraction.
2. After a rally of 30-40% in Stocks and 20-25% in Index
Prices have a tendency to trading in a range after a rally.
3. When volatility are its low : A high volatility in a stock suggests the movement will be more and a low volatility suggest the movement will be less in price.
4. When volumes are decreasing: Decreasing volumes in a stock suggest that the interests of traders are coming down in a particular stock. This will lead a less movement of the prices and a range may visible.

This post has been adapted from a  presentation by Mr Sunil Miglani, made at ATA on July 14.

Trader vs. Analyst

There is a big difference between an Analyst and a Trader.
An analyst tries to be correct on his call whereas a trader should think about profit only.
Analysts study industries, companies and economic conditions. Traders study price and could care less what company the price represents.
Analysts are paid for being right. Traders are paid for managing risk. These two skill sets are a world apart. Most of the people who try to be traders by being analysts usually lose their grip at both ends of the rope.