Chart Reading : Lesson - 4 (Part : 2): Pullback

In our last lesson, we discussed regarding the Breakout trading system. No trading system is 100% accurate. To follow the Breakout, sometimes you may caught by the Fake-out. How can we overcome this. We can overcome this by Pullback trading system.

Buy at 1st Pullback after a breakout.

Okay, Let's see the chart.

Pullback

After a breakout, if you find a Higher Low (HL), yes, it's a Pullback. Buy at 1st Pullback after a breakout. Always try to catch the 1st Pullback. If you miss the first one then you may get more breakouts as well as pullbacks but you may compromise with profit.

Please keep in mind that Lower Low (LL) is not a pullback. If a Higher Low (HL) can not resist, then you will see a break down.

Which trading system should follow? Breakout? or Pullback? Ask it to your money management policy. It's not a bad idea if you use the both policy. Some money for Breakout and some money for Pullback and Some money for...... I will share you later.

Chart Reading : Lesson - 4 (Part : 1)

Today, I will discuss regarding the Breakout. Before discussion, pls. see the Chart - 1 first :

After breaking the resistance, price went to up

When price breaks a Support or Resistance level, we usually call it Breakout. Breakout occurs with high volume and big movement.of price.

Some investors follow Breakout Trading Strategy/Technique i.e. they buy shares when price break the resistance level and sell share when price break the support level. Please check some previous chart and I hope you will find that several successful trend started after a breakout. A portion of my capital, I invest according to the Breakout Trading Strategy/Technique.

No trading system/technique is 100% accurate. So, you may sometimes caught by breakout, usually we call it - "Fakeout". Please see the below Chart -2 :

After breaking the resistance, price went to down

To overcome this problem, pls wait for the next lesson. Best of Luck!!!

Chart Reading : Lesson - 3 (Part : 4)

Throughout our Lesson - 3, we are discussing identifying Market Trend (Up Trend/Bullish, Down Trend/Bearish and Sideways) manually. This post is the closing of the Lesson - 3.

Usually, we like the Up Trend or Bullish market because it gives us profit.We dislike the Down Trend or Bearish Market because it gives us loss. And we feel safe in sideways market because at least, share price is not going to down.

Why we dislike the down trend market? Because, in down trend market, our view is short term, we hold shares and hope that market will rebound soon and gives us a big profit. So, we can't able to cut the loss early and finally, we carry the small loss to huge loss.

If we can able to cut the loss early, we will also enjoy the down trend as like as up trend. We will only dislike the Sideways market because it will give us nothing. I'm finishing this post by a famous quote :

"Winners hold their winning trades, losers hold their losing trades."

Chart Reading : Lesson - 3 (Part : 3)

In our previous two lessons, we saw how to detect the Up Trend/Bullish market and Down Trend/Bearish market manually. Today, we will see how to detect the Sideways Market. It's easy.

When you will not able to detect the Up Trend market or Down Trend market, you may sure that you are staying in a Sideways market. Please see the below chart :

(Pls. click on the image to enlarge)

In Sideways market, you will not able to detect several confirmed HH-HL or LL-LH. We always avoid this market. Because we will not play for nothing. For details pls. wait for Chart Reading : Lesson - 3 (Part : 4). by JC

Chart Reading : Lesson - 3 (Part : 2)

In our Chart Reading : Lesson - 3 (Part : 1), we discussed regarding the identifying Up Trend/Bullish. Today, we will discussed regarding the identifying Down Trend/Bearish. Please see the below Chart :

(Pls. click on the image to enlarge)

After a bullish or Up Trend, if you find that price is forming Lower Low (LL) and Lower High (LH) one after another, you can say it Down Trend/Bearish.

When price form a Lower Low (LL), please don't be Panicked for Sell. Market always gives you a chance for Sell by forming Lower High (LH). Yes, the Lower High (LH) is your EXIT/Sell point.

Precondition of Lower Low (LL) and Lower High (LH) : The LL or LH must be below the previous LL or LH respectively. Please check it with the above chart. by JC

Chart Reading : Lesson - 3 (Part : 1)

One of my previous post, I discussed regarding the Market Trend and I showed you how to detect the market trend by Bollinger Band. The Link is http://dse-analysis.blogspot.com/2011/10/market-trend.html. Throughout our Lesson - 3, we will detect the Market Trend manually. A Chart Reader should have a ability to detect the market trend manually.

Please see the below Chart :

(Pls. click on the image to enlarge)

If you find that price is forming Higher High (HH) and Higher Low (HL) one after another, you can say it Up Trend/Bullish.

Precondition of Higher High (HH) and Higher Low (HL) : The HH or HL must be above the previous HH or HL. Please check it with the above chart. by JC

Chart Reading : Lesson - 2 (Part : 5)

Today, I will show you how a simple single line gives you a BUY or SELL signal. To draw this simple single line, you need not to be a TA or an Indicators Operator. If you read my previous post, I think, you've already got the point. If not, please see the below chart :

(Pls. click on the image to enlarge)

I hope the above chart is clear. Now, your job is to draw the present trend line and wait for the breakout of that trend line. Simply the best. 


If you don't know how to draw a trend line please visit the link : http://www.dse-analysis.blogspot.com/2011/10/chart-reading-lesson-2-part-2.html by JC

Chart Reading : Lesson - 2 (Part : 4)

In Lesson - 2, we are discussing Support and Resistance. Today I'll discuss regarding Fibonacci Retracement to determine Support and Resistance. If you don't know how to draw Fibonacci Retracement by charting software like Amibroker, you may visit the link first : http://dse-analysis.blogspot.com/2011/10/how-to-draw-fibonacci-retracement-line.html

Please, see the below Chart - 1 of Islami Bank. I did not draw anything on the chart. It's a blank chart.

Chart - 1 (Pls. click on the image to enlarge)

Now, I'm going to draw a Fibonacci Support line on a short period. Please see the below Chart - 2 :

Chart - 2 (Pls. click on the image to enlarge)

Chart -2 is little bit hazy. Okay, now pls. look at the below Chart - 3. I've taken a longer period to draw a support line.

Chart - 3 (Pls. click on the image to enlarge)

I hope Chart-3 is clear. Now, I'll give an example of resistance. Please see the below Chart -4.

Chart - 4 (Pls. click on the image to enlarge)

Does Fibonacci Retracement works in our market? Sometimes it works, sometimes is not. But we should know its use. Jokhon amader desh-er trader ra Fibonacci Retracement  ratio onusarey buy/sell bosatey obvosto hoye jabey takhon eta "Leonardo Pisano Bogollo" babu-r mathematics calculation er jorey joto-ta na besi kaj korbey tar cheyey emni-emni besi kaj korbey. by JC

Chart Reading : Lesson - 2 (Part : 3)

We did not finished yet our Support and Resistance lesson. So, ar ektu pain dibo. Today, we will discuss regarding Dynamic Support and Resistance. Please look at the below chart :

(Pls. click on the image to enlarge)

Don't think it's a Holy Grail. It's a nothing but a moving average. The above chart is our DSE General Index.

Usually, people takes two different periods of moving average and crossover of the two different periods of moving average gives them buy/sell signal. [Like EMA (10) for short period and SMA (20) for long period. Some people take three different periods like EMA (10) for short period, SMA (20) for mid period and SMA (50) for long period].

This time we've taken a single period of moving average [say SMA (20)] to determine the support in an up trend and resistance in a down trend.

Finally, chose your moving average (SMA, EMA, WMA, etc) and its periods carefully. Please, don't ask me for the best one. In share market, nothing is best. So, chose it as per your trading strategy. by JC

Chart Reading : Lesson - 2 (Part : 2)

Today, we will try to identify the Support and Resistance by Trend Line. Please look at the below Chart - 1 :

Chart - 1 (Pls. click on the image to enlarge)

As indicated in the Chart - 1 :
Line A : We have tried to draw Up Trend Support Line (Please see below to know how to draw a trend line).
Point B : After few months later, we found that price went up than our expectation. So, the Line A ended in Point B. Please note that now the Line A is invalid. End of this lesson we will discuss regarding invalid trend line.
Line C : As price went up than our expectation, Line C has been drawn which was New Up Trend Support Line.

How to draw a Trend Line :
It's simple. Just locate two major Top or Bottom and connect them and then extend the line to future days. Pls. look at the below Chart - 2 :

 Chart - 2 (Pls. click on the image to enlarge)

I hope the above Chart - 2 is clear. B is the first bounce. If the future price bounce back near the Trend Line 2nd time (1st time is point "B" in the chart) then we will get a confirmation that our Trend Line is Valid otherwise, it may be a invalid trend line. The more bounces off a trend line the stronger the trend.

Whenever we draw a trend line, we should keep in our mind that we will not draw a trend line by forcing them to fit with the Market

Now, please look at the below Chart - 3 :

  Chart - 3 (Pls. click on the image to enlarge)

I know, after seeing the Chart - 3, Some TA will come to kill me. Because, I've violated 1 basic rules of Channels. Actually, Channels consist of two parallel line. But our above Chart - 3, we did not follow it. Because, First of all, we are not a TA or a Indicators Operator, we are a simple Chart Reader. Secondly, we did it for our easy and clear understanding.

Now, we will see the Down Trend Support Line and Down Trend Resistance Line and also give a test. Please see the Chart - 4 :

  Chart - 4 (Pls. click on the image to enlarge)

Now, we will see Valid and Invalid trend line. Please, see the Chart - 5. Chart will say everything. No description this time.

  Chart - 5 (Pls. click on the image to enlarge)

Finally, Please note that I've taken the High or Low price to draw the trend line. You can take Pivot Point.

WoW!!! Aponi etokhani porey felechen. Allah aponakey valo-e dhorjo dhorar khomota diyechen. Best of Luck. by JC

Chart Reading : Lesson - 2 (Part : 1)

Usually, we most of the investors know - "Buy Low (Supply), Sell High (Demand)". In a chart, we call it - Buy at Support, Sell at Resistance. I don't like this policy. But as a chart reader we MUST know "Support and Resistance". Our Lesson - 2 will be regarding Support and Resistance. We will try to find the support and resistance zone in many ways by the several part of Lesson - 2.

Okay, Let's start. Please see the below chart :

I'm not going to give any definition of Support and Resistance. Our chart will say everything. Please keep in mind that (1) Price may not always bounce back from Support or Resistance. Support/Resistance has been created to break out or break down. (2) Support and resistance levels are sometimes not exact price levels. Say Price of XYZ share got a support at Tk. 10, 2nd time it got the support at Tk. 9. 90. So, we will say support zone is AROUND Tk. 10. by JC

Chart Reading : Lesson - 1

Today we will know the definition of candlestick by a different way. Pls. look at the chart - 1.
I hope now everything is clear to you. Still confused? No problem, go down.

Chart - 1

Now, pls. look at the Chart - 2 :

Chart - 2

Okay, I'm going to give a definition of the above Bearish Candlestick.
1. Open price of the share.
2. Price goes to high as buyer dominate the market. (From 1 to 2)
3. At one stage investors think that price will not go further up. So, they sell their shares. Due to the sell pressure, price goes to Low. (From 2 to 3)
4. Some investors think that price will not go more below. So, they start to buy and price goes to up and (From 3 to 4) and market time is over.
5. Lower and Upper Shadow (The outer side of Open and Close price)
One thing is missing. The shaded area i.e. the price between Open and Close is call Real Body.
I hope already you have find the difference of Bullish and Bearish Candlestick. Okay test it.
Bullish Candlestick : Open is grater than Close
Bearish Candlestick : Open is less than Close
Are you still confused? Need more easy clear definition? Okay, pls. see the Chart - 3:

Chart - 3

1. At 11:00, Open price of a share is Tk. 5.
2. Investors think that price may not go up. Due to sell pressure, price goes to down at Tk. 3.
3. Some  investors think that this price is the lowest price of the share. So, they start to buy shares and due to huge buy pressure price rises to Tk. 9.
4.  Some investors think that price may not go further. So, they sell their shares and price come down to Tk. 7. Now, the time is 3:00 pm. Market is close.

Thanks JC.

Chart Reading : Introduction

I've got several message from my friends that they are not able to understand my uploaded chart. To honor their request, I've started this learning session. I hope you will enjoy it.

Thanks, JC