Market Trend

For a Trader or investor it is extremely very important to understand the market trend .You may have heard the famous saying that the Trend is the friend. Lack of knowledge of market trend often leads to bad entry into the market and loss of capital.

We can note that the market behaves in three ways. First, it can go up. Second is it can take a downward trend. The third is it may travel in a sideways which means a consolidation phase

In addition to this, we also come across 1. Short-term trend, which indicates the market trend is short lived. 2. Intermediate term market trend, which is normally followed by upswing or downswing. 3. Long term market trend, which indicates that the market is continuing its course in either way

How can we use these trends for trading stocks

For buying  one has to confirm that If the long term trend (seen on monthly charts) is up. Then, wait for the intermediate term trend (seen on weekly charts) to break up out of a long running consolidation. Then check for first short term (seen on daily charts) drop turns up. This could be a comfortable entry point

For selling the hidings one should look for the long term trend (seen on monthly charts) of the market is down. Then wait till the intermediate term trend (seen on weekly charts) of the market to break down out of a long running consolidation Upon confirmation of this condition the trader can initiate selling after the first short term (seen on daily charts) rally turns down.

Low Volatility Entry

Here we take into consideration of Gann’s rule of buying based upon the market making new highs on the monthly and weekly charts. We make use of daily short-term reactions and take up positions. Since the market is trending upwards, the risk involved is not too much. This type of entry can sometimes return big profits.

When assessing the market trend we can conclude safely that the trend is strong when the Long term, Intermediate term and the Short term are all pointing up and in the same direction.

Charts play an important role in deciding the Market trend. To be specific a Monthly chart give us an idea about a long term market trend. A weekly chart tells us the Intermediate market trend and the Daily chart indicates the short-term market trend

Before entering the market it is better to look for market activity that can tell us something about the market trend. The market is likely to have low activity at the bottom and abnormally high activity at the top. The average daily, weekly or monthly range will indicate if the market is near a top or bottom. 

When the market trend is likely to change, the number of days of a reaction will increase. This is the first indication of an upcoming change of trend in a market. One has to pay attention to the number of days reaction in both calendar and trading days. When calendar days are counted all days must be taken into consideration. 

To count the trading days some points must be noted. When the current trading day’s high and low are inside the previous day’s high and low it is not counted. The market must have two days of consecutive newer highs or lows. If there is break in the rally, it is better to halt the counting and begin a new count.

Understanding the market trend gives the share trader a basic knowledge of important trends, which in turn helps him to make safer decisions

Market related News expressed from leading Brokerage Houses

 I give below a summarized view of leading broking houses. To begin with Gold prices are expected to see $1230 (INR.26800) and selling can be expected at this point. Prices on down side can test $1210 (INR.26500)these price can form a range in which the gold could remain. Price mentioned here is the support and resistance levels. The overall sentiment remains negative  for Gold..

 November Copper prices will see support at Rs.414.50 The price of Copper is likely to move sideways to higher towards Rs.418.0. If buying interest continues further upside is possible. Otherwise price will again come down. On lower side Copper has  support at Rs.412.0

 Crude oil prices have strong support at Rs.5525 and as far as prices are holding this support, prices can trade sideways to higher and fresh upswing  can be seen if it goes above Rs.5650. For intraday traders prices can have intraday resistance at Rs.5590. A break down below Rs.5525 can extend towards Rs.4450 in coming days.

 SPOT USDINR prices are expected to open higher above 60.90 and prices are expected to have support at 60.90 where buying should be observed Prices on higher side can test 61.10. Prices are unlikely to fall below 60.80 The overall trading remains positive.

According to Agriculture Ministers statement Kharif food grain output is expected to fall by 7 per cent to 120.27 million tons (mt) this year. This if confirmed, the biggest drop since the severe drought some five years ago. An extended dry spell in the first six weeks of monsoon season, with subsequent floods in some places, has damaged crops. However, analysts said an adequate grain stock would keep the inflationary price trend at bay. Agriculture minister Radha Mohan Singh also said the estimate may be revised upwards later. “Planting of crops is as per average of last five years, and is now 3% lower than previous year. We estimate Kharif production to be approximately 120 mt," Singh said. "This is not final data, though. Production figures always increase by the fourth estimate," he said. In 2013-14, the country's Kharif output rose to a record 129.24 mt. Singh said he expected the Rabi (winter crop) production to increase with un sown Kharif area of over three million hectare to go under oilseeds this season. Rice production is estimated to fall to 88.02 mt, from 91.69 mt in the previous year, although the crop was planted on 36.67 million hectares, about the same as 36.79 million hectares a year ago.  Agriculture secretary Ashish Bahuguna said the delayed onset of monsoon led to late sowing of plants and was bound to have an impact on the crops productivity. The dry spell along with floods in several parts of the country has also impacted productivity, he added.

Amibroker AFL with Buy Sell Signals

I am posting another AFL, which can be useful to plan your trades. This AFL is particularly useful for traders who do swing trading. In swing trading the trader prefers to wait for a trading signal based on confirmed change of trend. This signal can take short to long trading days. In this trading system a trader can safely find an entry point, but waiting for an exit signal can take away some of the gains generated.

Most analyst advice, whenever a trade is entered, the exit point too must be decided based on some criteria. These criteria can be anything from percentage of return to specific price target.

What this AFL attempts to do is it gives an entry point along with a target price to wait for an exit. It also cautions the trader, with a stop loss level. The back ground color can be adjusted to suit the viewing comfort. The chart window also displays a trending ribbon, which serves as a trend indicator. The time frame can be adjusted for daily, weekly or monthly. In every time frame chosen, the entry and the exit points can vary. My opinion is to look for a weekly mode setting, which can give a meaningful value. A word of caution here – deploy this AFL along with other indicators for confirmation of trends. I suggest, the Stochastic Momentum Index for confirmation. I have tweaked the codes slightly to avoid booking profits too early.

Please back test this AFL before taking a call.
The AFL can be downloaded free from here

Happy trading and best wishes.

Candlestick chart pattern identification AFL

Today i am posting an AFL, which could point to finding some of the important candle patterns. The patterns include Morning Doji star, Morning star, Three white soldiers, Piercing Line, Downside Tasuki Gap, engulfing Pattern, Abandoned Baby, Dragon fly Doji and Harami. When these patterns are identified, the number 1 appears in the results window, indicating the confirmation of the pattern. The volume is also included in order to select the desired volume levels. The results can be exported using the File menu in the analysis window, in the form of CSV, txt or html format. It is better to export it the the .csv format, so that it can be easily manipulated and analyzed in MS Excel program.

This afl will not show any charts in the chart window, because this is meant for analyzing the stocks. it is quite tedious to check candle pattern one by one for the reversal patterns. This AFL comes in handy to do this work in the shortest possible time. 

This AFL can be stored anywhere in the computer, but its preferred destination is the customs folder in the formulas folder. The amibroker has all the options to run this afl. One can scan the entire symbol list or selected symbols. Similarly, it can be run for any number of days or a single day.

Under Apply to , there are three options all symbols, current symbol and use filter. This mean the user can select a single stock or multiple stocks. Under the range from a single day quote to date range specified quotations could be selected for explorations. The above description is for a new user.

Finally using the candlestick chart patterns for trading purpose, need sufficient knowledge of various candlestick patterns. I suggest that the readers  to take interest in acquiring knowledge about candlestick chart patterns.

Click here to download the AFL for pattern identification

Amibroker AFL for Butterworth Trending System

After a long gap, I am posting another AFL here. This AFL is known as Butterworth Trending system. The basic purpose of this system is to identify buy or sell signals that carries a high winning ratio. This AFL is most suitable for delivery-based trades and strictly not for intraday trader.

Before deploying this AFL, I request the trader to study the charts generated by the AFL. Because this system is good as a trend indicator rather than a buy sell generator. Therefore using this system along with another system to enter trade is advisable. Since long-term goals are looked for with this AFL, I would suggest that use of weekly or monthly mode in the chart patterns. 

It is always better to use another indicator along with this trading system. I also would like to suggest another AFL - Stochastic Momentum Index (download from here) that can be used along with this AFL. The suggested settings are look back of 35 smooth I of 3- smooth 2 of3 and the signal also at 3. Combination of these two AFLs (plotted separately on the chart window) could give out an early alert to the trader. The trader must study the system well and develop a trading plan. If cleverly used, this AFL is bound to bring in some profits.

I am not the creator of the AFL mentioned here The AFL has been coded by R.Rajandran of Marketcalls, who is doing an excellent service to the trader community. All credits goes to him.

Happy trading and good luck.

Download Butterworth TrendingSystem