Our friends at Elliott Wave International (EWI) regularly put out great free content on their site. If you’ve visited their site before, you may have seen “Chart of the Day,” a featured series of videos that take a quick, but close examination of a chart from one of EWI’s paid publications.
In the long run, the direction of most equity markets is always up. That’s the best reason one can think of for long term buy and hold style of investing. However, there are downsides in the short term. The efficient market hypothesis indicates that investors (or fund managers) can’t do much about these temporary downsides. Does that mean the market is efficient?
Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit — and more importantly, do it consistently. How do they do that?
Do you see a pattern you recognize in this chart of Reynolds American (RAI)? The Wave Principle separates price action into two categories: motive and corrective, and this price chart has a clear example of one category.
Generally Panic events trigger strong emotional reactions that often results in ending up catching the trade at unfair price zones and makes too much cognitive bias which will not allow a trader to revise their trade decision. Lets analyze what happened on Nifty Futures. On 10th Nov 2016 SGX Nifty was trading around sub 8200 levels at the pre-open and market opened with the strong tone of bearishness as the global markets are in panic, S&P futures overnight markets crashed, Asian market crashed.
The Bloomberg Tradebook Trader Exercise has been designed by The ReThink Group to assist traders in practicing the thinking style. This mind game can be accessed over the web and bloomberg terminal. Ironically, brain and behavioral research shows that the markets only masquerade as a numbers game. They are actually a game that neuroeconomists have called “intentional social risk”.
There are events like Union Budget 2016,BR-Exit where the downtrend was imminent followed by the faster recovery and in most of the panic situations recovery was faster than we think. And there are times where we face slower markets. One of the problem we face in today’s trading world is market changes its opinion faster than a human mindset and there are times it frustrates a traders and changes its opinions slower than we think.
See examples of a head-and-shoulders pattern in a chart of SPY By Elliott Wave International A head-and-shoulders pattern is one of the most well-known classic chart patterns. In this 4-minute video from Jeffrey Kennedy’s Trader’s Classroom, you’ll see an example of a bearish head-and-shoulders formation and a bullish, inverted head-and-shoulders pattern in the chart of […]
The Heatmap shows the Nifty historical monthly high-low swing data points which gives you a broad overview about the nifty monthly swing range. Here are some of the visual data points collected from the Nifty high low swing range heatmap.
Gaps are nothing but lack of trading during the market open caused by either by a day traders or professional institutional traders/investors. There is a old saying that ‘all the Gaps will fill’. It is often observed that wider the gap introduces more volatility in the markets. And gaps are created because of extreme sentiments among traders/investors (Macro Events, Earning announcements, earnings expectations) which make them to bring flood of orders during the market open
The confidence level exhibited by the unskilled trader who is new to the market is enormous in most of the cases and after few trades they will start behaving like an expert. Most of the traders who are young to financial markets would have experienced such tremendous confidence in financial markets during their initial stage of trading/investing.
Backtesting is a process of Testing the trading conditions with respect to the past historical data, evaluating not only the profitability of the system but the underlying risk factor associated with the Trading/Investing Model. Proper Backtesting gives belief and enough confidence to a trader to trade a set of rules. But are the newbie traders really doing proper backtesting?