Trading is simple and complex; all we do in a market is buy, sell or wait.
It is simple because there is little to do; there is buying, selling or waiting. We already know what is to be done, but when to do it makes it a very complex art and skill.
We buy when we expect the price of a stock to move up or increase in value of price. We sell when we expect the price to go down from that point. The first position taken by the trader of buying and holding is called a long position in the investing and trading world. The second position taken by the trader of selling for gains is called a short position generally seen in trading. The terms used are to go long(i.e. for buying and holding the stock) and go short (i.e. for selling for small intervals as the price would come down).
And most of the time, we wait for the right opportunity, and almost 90 per cent of our time is spent waiting for that golden moment when you can place a trade to practically sure profit.
The first mistake of many traders that are new to this field, they trade and trade a lot even when the market movement is sideways(a sideways move means the market is neither going up trend nor downtrend).
Markets move in a trend always, and the trend can be seen in a longer time frame, even if it is moving in a sideways movement in a shorter time frame.
These trends can be primary and secondary based on the direction opposite or supportive of the preceding movement.
There are two helping terms in the stock market when anyone gives you trading or investing calls. A trading call is provided by an expert who has done some analysis and is expecting the price to move significantly, which can give you profits in the period stated by them; taking someone's call is up to you to decide, but in this blog, we will learn how can we learn from technical analysis how to give those calls.
Always remember that the blog is educational and examples used, if any, never a recommendation to invest in such a way. I am not responsible if you make losses in the market. If you replicate any trick or strategy discussed, it is solely your responsibility to learn these and execute them yourself.
The terms that will help you the most are stop-loss and target. A target in a call (a trading call and not the call option in case of future and options trading) is where you expect the price or premium to move. You should undoubtedly exit the trade at this point, i.e. whatever you have earned, take it and leave the position, also called squaring off in intraday terms. A square-off is closing the work that was just made before; there are two types of square-off strategies: to square off partially or ultimately. Partial square-off is done when you feel there is a possibility of earning more if you hold the position. You square off a fraction of the initial quantity, and Full square-off is nothing but ending all the quantities of stock that were traded when the trade was started.
What happens if the price moves in the opposite direction? If you start your position either long or short, the other term is stop-loss. A stop-loss is a feature in the app or website that you trade that helps prevent losses, a position taken by any trader can never guarantee returns, and things could always have the probability to go against you that day. So we use this feature and set it as a primary barrier. When set, the trade will reach auto square off when the price crosses that point, saving you from making massive losses. It is better to keep a stop loss; we always decide our stop losses and not the target at first.
A stop loss based on your risk-taking capacity is calculated based on the risk-reward ratio. In the beginning, you can place these stop losses on TradingView's paper trading corner on the website. Always practice keeping a stop-loss; if learnt over time, this concept will make you a profitable trader and very difficult to master at first.
Some initial problems you will face are sometimes you will keep a stop loss only to see that price reversed and meet your target from that point onwards. It will happen initially, and sometimes it is bound to occur if your stop loss is based on something other than previous support resistance or swing patterns and solely on your risk capacity.
Ankush
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