Sunday evening replies to comments

Manohar asks: “what is the meaning of buying on dips ? ”

Buying on dips is a trading strategy that looks for pullbacks in an uptrend. The pullbacks are defined by chart patterns and NOT by a percentage.

Piyush Sharda writes:” A lot of times i have sat in despertion when i see a profit turning in a loss.”

My Notes:
True. Trading and human psychology can sometimes go in different ways. In extensive back testing for intra day systems, we find that the systems make money when they are able to capture large trending intra day moves. Similar findings have been made by traders in the USA. Such moves may come only once or twice in a month. But we hold on to positions, waiting for a move like this. Therefore, a number of winning positions turn into losses, waiting for more thrust that does not come about. The big profits more than compensate for these losses, but the waiting for the profits can be frustrating. (No one said trading is easy. My own experience suggests that gains come to people who can take the pain!)

Now, the problem is that traders can abandon the trading methods out of sheer frustration because the waiting can be very difficut to do. To take care of these issues of psychology, we suggest that traders follow the “2 for 1” money management method. Take positions in two contracts. If you see a decent profit, take the profits in one contract, while let the second contract work according to the trading system. This will provide a lot of psychological comfort and also ensure that on many days, the profits in one contract will more than compensate for any adversity in the second contract.

Saket says: I am new at trading and would want to know the differnce between swing and positional trading n also which charts to use i.e 5min,60 min daily etc for which trading(intraday,swing n positional)

My Notes: Swing Trading tries to capture reversals after the market is overextended on one side. Typically, trades last for 1 to 5 days.

[An example: a dip in an uptrend is a swing buying opportunity. The idea is to capture some part of the upward rebound]. You carry overnight positions. Position trades look for a trend and the positions can last for many weeks.
5 minute charts are used for intra day trading. 60 minute and EOD charts can be used for swing trading. For position trading, EOD charts are used.