When the share market is under correction, it often is a puzzle as to how to "bottom fish" the stocks. While there is no exact "holy" method to predict as to how long the broader market could fall, there are however some basic rules which could help in getting the stocks at the least price. Following the pattern of Support and Ressistance will help a great deal. Having said that what is the time duration that the Support and Ressistance levels are to be calculated? The one day calculation for stock markets will produce inelastic signals that it is very hard to compute and the signals will more likely to be false. A five day period stock study is more ideal, especially for people who like to quickly get in and get out of share markets.
To calculate the Resistance and Support, you need to understand the pivot point formations. Just look at the following diagram.
The support and resistance frequently get shifted from one level to another and your pivot point is exactly at the center of the distance between resistance and support. This means that when you exactly enter the trade near to the pivot point position, it is almost guaranteed that you will be quickly stopped out of the trade either in profit or loss. For our trading pattern with Risk to Reward Ratio at 1:3 you need to get stopped out quickly so that another trade is possible at the earliest. This will improve the volume of trade and profit accrues very rapidly, subject to the condition that all trades are closed only as per the trade system and not that you manually stop the trade. This is the key.
So exactly How can we calculate the pivot points and How do we enter? Well, you can measure them when you take the High Low and Close for the last period. Sum of High, Low and Close divided by 3 is the Pivot Point. When the price action direction is up i.e. from below the pivot point levels and interpolates with the rate at pivot point, it is a Buy signal and vice versa. Here, at this point, you will get a quick exit opportunity either with 2% loss or 6% profit. The important concept here is the more quickly you are stopped out, you make more trades within the boundary of our Risk to Reward System and more often than not, there will be one winning trade to every two losing trades. Or, for every 4% that is lost, you make one 6% profit. When there are twelve trades, it will easily be 8 losing trades and 4 winning trades. This will mean that 8x2 = 16 p.c. losing trades and 4x6 = 24 p.c. winning trades. When you are focussing on the correct set up and gradually improve your winning trades, your portfolio will consistently improve.
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To calculate the Resistance and Support, you need to understand the pivot point formations. Just look at the following diagram.
The support and resistance frequently get shifted from one level to another and your pivot point is exactly at the center of the distance between resistance and support. This means that when you exactly enter the trade near to the pivot point position, it is almost guaranteed that you will be quickly stopped out of the trade either in profit or loss. For our trading pattern with Risk to Reward Ratio at 1:3 you need to get stopped out quickly so that another trade is possible at the earliest. This will improve the volume of trade and profit accrues very rapidly, subject to the condition that all trades are closed only as per the trade system and not that you manually stop the trade. This is the key.
So exactly How can we calculate the pivot points and How do we enter? Well, you can measure them when you take the High Low and Close for the last period. Sum of High, Low and Close divided by 3 is the Pivot Point. When the price action direction is up i.e. from below the pivot point levels and interpolates with the rate at pivot point, it is a Buy signal and vice versa. Here, at this point, you will get a quick exit opportunity either with 2% loss or 6% profit. The important concept here is the more quickly you are stopped out, you make more trades within the boundary of our Risk to Reward System and more often than not, there will be one winning trade to every two losing trades. Or, for every 4% that is lost, you make one 6% profit. When there are twelve trades, it will easily be 8 losing trades and 4 winning trades. This will mean that 8x2 = 16 p.c. losing trades and 4x6 = 24 p.c. winning trades. When you are focussing on the correct set up and gradually improve your winning trades, your portfolio will consistently improve.
Here's a latest recommendation:
I am available for one to one teaching on Money Management and Risk Management upon request. Get in touch with me for quotes.
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