WHY TECHNICAL ANALYSIS? WHAT IS THE NEED FOR IT?

Transcription

1 WHY TECHNICAL ANALYSIS? WHAT IS THE NEED FOR IT? The Architecture of Technical Trading Mohamad Shaker

2 Karachi Stock Exchange Do you sit here while trading?

3 Making money? losing money?

4 What do you do when you lose money?

5 Why Technical Analysis? What is the Need for It? (Day Trading) is a profession that generates money Only by using technical analysis and charts, we can read the historical performance of stock movements within specific periods. Only by using technical analysis and charts, we can read perfectly the Trading environment and identify participants; long term investors, swing traders, day traders or scalpers. Only by using charts, we can watch different time frames and choose the best time frame for our stock entry and exit points. Only by using charts,we anticipate turning points and identify patterns based on the stock s history, behavior and characteristics. Only by using charts we can clearly recognize participants and their intentions and we act accordingly. Knowing the participants intentions makes take good decisions. Only charts, indicators, patterns repetitions and setups reflect the reality of the market. Without them, you trade in the dark. Are you ready to become a chartist?

6 Case Studies of Local Stocks Stocks traded on Karachi Stock Exchange for example are probably the most influenced stocks in the world by technical analysis. Probably some market makers, fund managers and professionals use technical analysis based on their good reading of traders behaviors and intentions. Those professionals lead stocks very professionally. Most traded stocks trade with clear trends, use repetitive patterns and technical indicators perfectly. Karachi Stock Exchange listed stocks are very predictable and follow trend, pattern formations and reflect professionalism. Those who lead the market are joined by the rest of investors and traders once professionals ignite the stock and start the process. Trade stocks with easy reading. Don t trade stocks that are not in the professionals hands. They ll drive you crazy.

7 KS 100 Index - Daily Chart Watch this area Resistance Resistance Five bottom formation Double bottom formation Perfect Patterns Formations

8 Pakistan Oilfields Ltd - Daily Chart Resistance Watch this area Resistance Double Bottom Symmetrical Triangle Bearish Flag Clear Uptrend with many Pattern Formations

9 Trading Setups Engro Group Ltd - 5 minutes Chart Consolidation breakout and then breakdown Consolidation breakout above support Resistance Ready for breakout or breakdown Resistance Support Support Ascending Triangle broke out Consolidation and Ascending Triangle breakouts and breakdowns Easy reading consolidation periods and other patterns

10 Bulls and Bears Controlled Market Two powerful groups control the financial markets; (Bulls and Bears - they are both traders - winners) There is one weak and losing group between them: (the betweeners) BULLS ARE IN CONTROL MARKETS GO UP U P T R E N D BEARS ARE IN CONTROL MARKETS GO DN DOWNTREND Fighting over control UPTREND DOWNTREND

11 Bank Alfalah Ltd - Daily Chart Big Trend includes smaller trends This stock is mostly controlled by Bulls

12 Summit Bank - Daily Chart Bulls are leading

13 Market Turning Points - Trend Change Bulls and Bears exchange places and thus exchange control Bulls can become Bears and Bears can become Bulls Fighting takes place over control at market turning points because Bulls want to keep the market going higher and Bears want to bring it down At market turning points, many support and resistance levels get tested and retested, broken down and penetrated You are not advised to participate in the fighting over control unless you are one of the market makers or you lead a huge fund that weights on the market. Wait until a winner and a clear direction emerge and then go with the winner A clear trend is every one s path. Trading the trend makes your life easy Anticipating trend change requires full comprehension of the big picture, market reality, skill and talent. Use Market (internal) and stocks indicators to support your decisions.

14 Summit Bank - Daily Chart Turning points and change of trend

15 D. G. Khan Cement Ltd - Daily Chart Choose stocks with that have completed downtrend or consolidation Turning points and change of trend

16 D. G. Khan Cement Ltd - Daily Chart RMO Trade Model

17 Breakout - Breakdown Trading Stock Consolidation Consolidation is simply another description of a trading range and the complete absence of a trend. These periods can make for frustrating trading if you are looking for a large price move, as price remains range-bound within a consolidation area. Consolidations often follow uptrends or downtrends, and are a representation of a stable market which lacks emotion ahead of the next significant move in prices. Consolidations are healthy in stocks which have just made large price moves, and help to alleviate the overbought or oversold readings of indicators. Choose stocks in consolidation and wait for increasing volume supported breakout or breakdown to enter. The longer the consolidation is, the more powerful the breakout or breakdown is.

18 Breakout and Breakdown Trading Buy breakout RESISTANCE Breakout SUPPORT LEVEL BREAKOUT CONTINUES CONSOLIDATION Sell short breakdown RESISTANCE Breakdown SUPPORT LEVEL DOWNTREND CONTINUES CONSOLIDATION

19 Nimir Industrial Chemical- Daily Chart Breakout and Breakdown points

20 Attock Refinery - Daily Chart Ascending triangle breakout Breakout and Breakdown points

21 World Telecom- Daily Chart Consolidation breakout Breakout points

22 Using the most advanced technology in trading for professional day traders in brief Take Care of Your brain now, it will take care of you later

23 Using the most advanced technology in trading for professional day traders Trading with limited resources will not bring you wealth. Trade like a professional using advanced technology. You will be rewarded You need: - Trading Money (not borrowed) - Knowledge (fundamental and technical analysis) - Trading corner (desk) at home or better yet office - The best PC in the world with four or more attached screens - Fast internet line - Great charting system. MetaStock is great. - Cool emotions, no pressure during trading Don t be cheap spending on developing yourself. You will make more money as you spend on yourself

24 Do you trade from a similar corner? If not, rethink it over

25 This is not enough Sleeping time

26 Maybe

27 This is good

28 This is great

29 What about this trading room Tell me something, can you compete with this guy with your small and old laptop?