Learn Technical Analysis With Example

The famous investor Bruce Kovner quotes, “Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I am getting out before I get in.” It simply means, planning a stoploss is very essential. If you wish to become a successful trader then how to analyze the current market data and trade practically in the market? Let us find this out in our today’s blog.

If you want to be successful in the share market then you will have to marry twice i.e. you will have to marry trading and investing. But you will have to note down that for trading you will have to allocate less capital while for investing you will have to allocate more capital. 

Now be it trading or investing, it is important to keep in market valuation first and then trade or invest. The popular trader Ed Seykota says three things are very important for him while trading; first is Trend Analysis, second is reading the Chart Pattern and third is determining the Buy and Sell signal. 

Currently, if we analyze the chart then till the time Nifty is above the level of 11,184; the momentum is upwards. So where do we trade now? The famous American trader Jesse Livermore says, “Watch the market leaders.” So if we analyze the charts of different sectors then we’ll find that IT Index is indicating a comparatively strong strength. Also, as mentioned in our previous videos, shares move together in a group. So trading in the shares of the IT sector would be a good idea currently. 

We had uploaded a blog on 12th July in that blog we had updated and educated you’ll about a company named L&T InfoTech. In that blog, we had mentioned that L&T InfoTech had given a signal of an uptrend. After that, the share of the company increased a lot. 

Talking about the current situation, which are the shares that are giving away a signal of an uptrend or indicating of moving out of the box? Now, what is this box technique? See, if you want to become a successful trader then if we opt for the share which is moving out of the box then we can earn good returns there. We have already uploaded two blogs on the topic of the Box technique, do check them out. 

The famous dancer Nicolas Darvas who earned millions from the market by trading quoted that while people were working in the market during the day, he used to go to sleep and while the share market used to close and people went off to their beds, he used to analyze the data of the market. It simply means that Nicolas Darvas wasn’t actively trading in the market. He used to earn good returns by carrying-out positional trading in the market. So we too can analyze the data of the market on Saturday and Sunday when the market is closed so as to plan ahead for the upcoming week. 

If we analyze the data of the previous weekend then which share are moving out of the box and giving out a signal of an uptrend? Now, there are two such shares here, whose chart structures are very interesting. The first company is TCS and the other is Coforge whose previous name is NIIT tech. If we analyze the chart of TCS, we’ll find that till the time the share of TCS is above the level of 2,215; it is in an uptrend. Similarly, if we analyze the chart of Coforge, we’ll find that till the time the share of Coforge is above the level of 1879; the share is in an uptrend. 

So if we trade bullish in the shares that are in an uptrend and later if the market falls then? How to think of the market? American trader, Michael Carr says it isn’t important to think about how will the market perform rather what is more important is to think what will you do if the market performs otherwise. Simply put, it means if we trade while the share is in an uptrend and now the market is going into downtrend suddenly then what is important is we should trade with a stoploss.  

Nicolas Darvas who earned millions from the market by trading believes the most scared person in the entire market is his own self because the share can move its direction anytime hence, he uses a stoploss while trading. And we too believe the same that if you don’t follow your stoploss while trading, then your loss won’t ever stop. See, not all our trades will prove to be right in the share market. Hence, George Soros says, it isn’t important how many times your prediction went right or wrong, what is important is how much money you make while you are right and how much you lose while you are wrong in the market. 

This 4-step analysis that is:

Understanding the Market Valuation

Checking the Market Direction

Checking the Share Direction

Placing a Stoploss

All these steps are practically covered for 60 days in our Smart Investor Training Program in our app called Aryaamoney. If you wish to you can subscribe to it. 

Talking of long-term investment, then TCS is a good option. But as the market valuation is expensive hence, you should invest less here and if the market valuation becomes moderate or low and you get an opportunity to invest then you can increase your investment in this share. That means you should create a pyramid of your investments here. But if you are trading here, then you need to follow the stoploss. Thus, while investing, you should follow the rules of investing, and while trading, you need to follow the rules of trading. Try to maintain separate accounts for trading and investing. 

If you wish to open your demat account with the leading brokers of India then, we have mentioned the link below for the same. 

Here, I would like to give a disclaimer/disclosure that I, my company as well as the Director Board of my company may have or may not have an investment in the above-mentioned companies and the above-mentioned companies are for education purposes. So before investing in such companies, it is advisable that you carry-out your risk profiling as well as analyze the risk involved therein and also, have a discussion with your financial advisor before making any investment decisions as share market investments are subject to market risks. 

Until our next blog…

Happy Trading, Happy Investing!!!

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