Trading Steps

Trading before an Event

2013-05-10T10:07:00.001+05:30

One of our readers purchased PUT options in Infosys just before the Q4 results were announced. After results, Infosys fell almost 20% giving large profits on the PUTs purchased. Our reader is a wise trader. He has questions on the trade. Here is his email:

Quote

Sir,
I was lucky that
1. I got a sell signal on Tuesday and took the trade.
2. My stops did not get hit in the rise of Wednesday and Thursday
3. I benefited from the fall on Friday
Having said that, given the volatility of Friday, it was a high risk trade and could quite easily have gone the other way.
Under these circumstances, the three options I have going forward is,
1. Do not trade high volatlity events at all
2. Trade the event, but only by buying call or put options hence limiting downside risk but paying high IV in premiums, or
3. Continue trusting my signals, and trade them with futures, and expect that, over time, the percentages would work out in my favour.
I am still in favour of option no 3. From a trade management perspective, is this sound thinking ?

UnQuote

My Notes:

I do not trade news events. But if you do trade them, then option 3 – trade with futures is the best way, since call and put options command large premiums which inevitably drop after the event. The important point is consistency. You have to take all your signals, to enable probability to work in your favour. The mechanical systems that we run, ignore news events, continue to trade just as in option 3 above. We expect that the negative impact will be balanced out by the positive impact over a long period, giving us a net positive edge,

The Nifty takes a one day breather

2013-04-26T16:29:00.000+05:30

Friday saw a minor decline in the Nifty. This comes on the back of big gains seen for the past two weeks. One day is not the start of a correction.It is possible that markets can resume their rally.

Technical Traders should always go with the trend. The basic theme is: assume that the trend continues until proved otherwise.

[I will be in Kolkata on Saturday and Sunday to meet my parents. My visits to Kolkata usually coincide with a meltdown in the market. I wonder if this is a technical indicator?? This was in a lighter vein]

Is falling Gold Good News for Indian Stocks

2013-04-16T08:45:00.002+05:30

Analysts are suggesting three positives for the Indian Stock markets:

01. Falling Inflation
02. Lower Crude prices
03. Falling prices of Gold

Our current account deficit is large mainly because of huge imports of Gold and Crude, therefore, a fall in prices results in lower deficit which could start a virtuous economic cycle.

As Indians, let us hope so.

As traders, we can trade the markets without getting influenced by news or perception. As of now, the Nifty is in a downtrend, for the short term trader, a trading range is developing with resistance at 5600 and support at 5500. Trade a break from this range on either side. If the news is going to make the markets bullish, a breakout will put us in a long trade.

Gold: Reasons for its fall

2013-04-16T07:00:00.003+05:30

Fund Managers using technical analysis outperform

2013-04-13T22:31:00.001+05:30

Source: http://allstarcharts.com/mta-symp-2013/

Wyckoff Made Easy

2013-04-13T22:06:00.000+05:30

Derek Hernquist provides an excellent post on influence of demand and supply on security prices, in his post titled "Supply Side Trading", which you can read here.

I had the opportunity to hear Roman Bogomazov in Singapore during the 2012 IFTA conference. He gave a brief 10 minute presentation, an excellent talk on wyckoff. His way of explaining a complex topic was a wonder.

Excerpts:

Going through slides, Roman commented that analysis of longs should always start with an assessment of supply.

I think it represents everything that is right about price analysis, and everything that is wrong about media narratives. The presence of low supply means an absence of a juicy story, and thus can get ignored. But for me it is the critical factor in finding low risk trades, and on occasion having one of those turn into a high reward trade.

My Notes:

Please read the full post, as well as the links in the post.

Today, Puneet Rathi gave an excellent presentation on synergy between derivatives and technicals, at the monthly ATA meeting in Delhi. I wrote about the meeting a few days ago. IF you live in NCR and did not attend, then you are missing out on a lot of learning and education.

Godl, Silver are going through a mini crash today

2013-04-12T22:22:00.001+05:30

With almost 4% declines, Gold and Silver are going through a min crash in world markets. In India, on the MCX, Silver prices opened at 51778 and are currently at 49695, more than Rs 2000 decline, almost 4%. Same is the case with Gold.

Often, in the current environment, a rally in share prices (risk ON) is accompanied by a fall in precious metal prices. The theory is that Gold and Silver are safe havens, therefore when traders are willing to take risk (buying equities), they ignore safe havens (Gold, SIlver).

With this theory, today's decline may be attributed to increased appetite for risk. But, that is not always a valid theory.

Often, Equity and Precious Metals will fall together when investors are worried about all kinds of speculative risk. Then, there is a shift from all risk assets to risk free assets. That may be going on today. If so, it is not good news for equity investors.

Trading Beliefs and Process

2013-04-11T21:42:00.003+05:30

Derek Hernquist, Portfolio Manager, explains his trading beliefs and process in an excellent post titled 'Process'. You can read it by clicking here.

Derek explains his trading / investing beliefs, thus:

1) Without a marketwide appetite for risk, company signals go mostly unexploited

2) Market moves start inward and spread outward, so studying the “market of stocks” makes more sense to me than studying $SPX

3) Fear(of loss and/or missing out) dominates market activity at the margin, and when enough people are “at the margin” we have a great opportunity to trade

4) I have no way to “outknow” the information on any stock, sector, or asset class; time spent trying is time taken away from honing my true edge

5) Determined trends unfold very deliberately, with regret acting as a powerful catalyst for continuation

6) Distinguishing between a positive feedback loop(trend) and negative feedback loop(range) is the most critical factor in market speculation

He describes his process as " measure relentlessly and objectively…from 15 minutes to monthly, from balanced to extreme, from expanding to contracting, from high to low, by speed and magnitude, etc. I’m looking for very specific market conditions that, in some timeframe, indicate the presence of a determined trend. I care not only about the % of stocks that are “healthy”, but how that number compares to prior readings. Level, direction, and momentum of these readings are all factors in spotting the right climate for speculation"

Please read his blog post here.

Follow Your Charts

2013-04-11T07:16:00.001+05:30

The next meeting of The Association of Technical Analysts, will be held on Saturday, April 13 at New Delhi. Topic is: Derivatives - Synergy with Technical Analysis. IF you live in the NCR, do consider attending. Full details are available here.

The Nifty has been moving around the 5500 - 5550 range for the past five days. I have discussed on TV, the strong support offered by this trading range. There were repeated close below the range, suggesting that the support is not holding. Finally, on Wednesday, April 10, the Nifty made a DOJI, first dipping well below 5500 and then recovering to close at 5550, at the top of the day's range. In the afternoon, around 5545, I suggested buying the Nifty with a stop below 5500.

The reason for the buy was a favorable risk reward as well as the sign that 5500 is holding inspite of the choppiness that we have seen.

As with all trades, there is no assurance that this one will work out. Our trades work on probability. The outcome of a group of trades is likely to be positive. Results of individual trades, cannot and should not be predicted.

Peter Brandt on managing a trade

2013-04-07T21:36:00.000+05:30

Khushang Thakkar pointed out a new post by Peter Brandt. Click here to read it.

Mr Brandt explains his trading philosophy, as well as discusses a potential trade. The post is worth reading, again and again.

Peter Brandt risks about one percent of his capital on any single trade. He calculates his return on the capital he allocates for the trade. (My Notes: The capital allocated will be much more than the margin, maybe three to four times more.) He expects a return of 5 to 10 percent on his capital.

The trade setup is identified based on a number of features, including:

Pattern - Weekly
Pattern - Daily
Length of Patterns
A "Launching" or "Ignition" pattern within the larger pattern
Trend - Daily (using a moving average as proxy)
Trend - Weekly
Any other technical factors

Mr Brandt suggests that large profits are attained by holding a position, not by active trading.

Traders actually do this

2013-04-03T06:49:00.002+05:30

What We,Traders actually do:

-- Overconfident about our ability to pick profitable trades

-- Keep losing trades in hope of 'recovery'

-- Never follow the proven adage of letting winners run.

-- Do not apply a simple trend following indicator to our charts.

-- Easily manipulated by analysts and media into making rash, impulsive decisions

-- Blindly follow people who promise 100% return in one month, without asking the obvious question: why does not he do it for himself?

-- Understand the psychological problems that all other traders face, but refuse to acknowledge that we face the same problems

-- When mid caps start a rally, traders lose their inhibitions and start buying these highly risky stocks as if the shares are running out of supply.

-- Refuse to believe that markets change.

-- Do not adapt to market cycles and changes in market behavior.

All is Not Lost.

Traders have one big advantage and this advantage can overcome all the problems mentioned above.

Traders have a passion for trading.

If you live to trade, love trading then you are half way to success. An open mind and hard work will take you to your destination. Certainly.

Elliot Wave for Systematic Traders

2013-03-24T19:54:00.001+05:30

I received an email from a price patterns follower which says this:

"I hope you are doing good. I am about to start reading of the book
"Five Waves to Financial Freedom: Learn Elliott Wave Analysis" by
Ramki Ramakrishnan. I have always stayed from Fibbonacci and Elliot
waves because it just didn't make any logical sense to me, but I've
finally decided to at least have a good reading on the principle before
making a judgement.

I wanted to know your views on Elliot Waves. If you have some time
could please share your insights on your blog with regards to this
topic."

My Response:

The trader who wrote this email works mainly on price patterns which he has converted into automated systems. When a systematic trader wants to read Elliot Waves, it could mean one of the two things:

1. The trader has suddenly developed a thirst for knowledge of waves, OR

2. Indifferent market conditions has caused enough pain to switch from patterns to 'something better'.

My response is not a criticism of Elliot Waves. Far from it. Traders have any number of tools at their disposal. Each trader finds his or her method. Each method is unique to the trader. Elliot Waves are as good as Channel breakouts or the trading of new highs/lows.

My point is something else: Do not think that Elliot Waves will provide you with a drawdown free / loss free trading method. It will not. It has the same advantages and drawbacks as any other trading methodology.

Therefore, understanding of Elliot Waves for the sake of acquiring knowledge is a very good idea. If the hidden desire is to get some new method, then the trader will be disappointed. He will also get diverted from his skills.

What do readers say?

Meditation for traders

2013-03-21T20:33:00.003+05:30

Akshay Gupta contributes this post.

One of biggest hedge fund managers credits meditation as key to his success in the following interview.

Ray Dalio on Meditation from Meditatio WCCM on Vimeo.

Ray dalio of bridgewater associates says " Meditation, more than anything in my life, was the biggest ingredient of whatever success I've had".

Ray says that it provides him clarity and open mindedness,which i think are two most important qualities for someone who is trading the chaotic world of financial markets.
As Dalio notes, the key for beginners is to challenge themselves to stick with meditation for the first six months. Those who do stick to it and invest at least 6 months in it,never stop doing it.

Zen and the Art of Trading

2013-03-17T16:33:00.003+05:30

Sumit Singh, a young trader sends this:

An interesting similarity I found while reading two different books on two different subjects:

“The “Holy Grail” is not some magical source that is the key to the markets, as most people believe. Nor is it about following someone else’s philosophical secrets of trading. The metaphor of the “Holy Grail,” according to scholars like Joseph Campbell, is all about finding yourself. Similarly, the “Holy Grail” in the markets - the key to unlocking profits - is all about finding yourself. To unlock the “Holy Grail,” you need to appreciate your own ability to think and be unique. People make money by finding themselves, achieving their potential, and getting in tune with themselves so that they can follow the flow of the market. Getting in tune with yourself means finding an inner peace inside. It means finding a balance between profits and losses. The Holy Grail is not a magical trading system; it is an inner struggle. Once you’ve discovered that, and resolved the struggle, you can find a trading system that will work for you”.

Van Tharp - “Trade your way To Financial Freedom”

“I want to tell you that it is destructive to believe anybody, and it will be harmful to your life. No belief, no belief at all! Whosoever makes a belief system a basis for his life is entering into a world of blindness – and no light can ever enter into his life. He can never attain to light in his life. Someone who believes in others will never be able to know himself”.

Osho – “The Path of Meditation”

Selling at the Highs of a Reaction

2013-03-17T16:32:00.000+05:30

It is much easier in a bear market to recognize the top of a rally than the lows of a decline. When a rally hits the top of an advance, Dow theory traders will expect resistance to step in. 'Top' is usually previous support that is likely to become resistance. A decline is likely to begin.

What happens after the decline is crucial. If, on the next rally, prices remain below the top of the previous advance, then the down trend is confirmed.

For the Nifty, the high(5945) made on Friday, March 15 was below the previous swing high(5971) made on March 11. If the March 11 high is not breached in the next few days, then a confirmed down trending pattern will be established.

While the Markets will do what they want, traders will look to sell on any rally that comes about.

A Crash Course in Economics

2013-03-09T17:59:00.000+05:30

SOCIALISM
You have 2 cows.
You give one to your neighbor.

COMMUNISM
You have 2 cows
The State takes both and gives you some milk.

FASCISM
You have 2 cows.
The State takes both and sells you some milk.

BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other and then throws the milk away.

TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.

VENTURE CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of
credit opened by your brother-in-law at the bank, then execute a debt/equity
swap with an associated general offer so that you get all four cows back,
with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a
Cayman Island Company secretly owned by the majority shareholder who sells
the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one more.

AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyze why the cow has dropped dead.

A FRENCH CORPORATION
You have two cows.
You go on strike, organize a riot, and block the roads, because you want three cows.

AN ITALIAN CORPORATION
You have two cows, but you don’t know where they are.
You decide to have lunch.

A SWISS CORPORATION
You have 5,000 cows. None of them belong to you.
You charge the owners for storing them.

A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment and high bovine productivity.
You arrest the newsman who reported the real situation.

AN INDIAN CORPORATION
You have two cows.
You worship them.

A BRITISH CORPORATION
You have two cows.
Both are mad.

AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
Nobody believes you, so they bomb the crap out of you and invade your country.
You still have no cows but at least you are now a Democracy.

AN AUSTRALIAN CORPORATION
You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.

A NEW ZEALAND CORPORATION
You have two cows.
The one on the left looks very attractive.

A GREEK CORPORATION
You have two cows borrowed from French and German banks.
You eat both of them.
The banks call to collect their milk, but you cannot deliver so you call the IMF.
The IMF loans you two cows.
You eat both of them.
The banks and the IMF call to collect their cows/milk.
You are out getting a haircut…

Stay Hungury, Stay Foolish

2013-03-06T03:04:00.003+05:30

If you are new to trading or have been struggling for a while, please have a look :

Excerpt from Paul Tudor Jones's Interview in Reminiscences of a Stock Operator

2013-03-05T21:51:00.001+05:30

Q. Part of the appeal of [Reminiscences] is Livermore’s journey of self-discovery as a person and as a trader. Have you had the same experience as a trader and portfolio manager, or was your path easier or harder?

Jones: Probably the best lessons to be learned from this book come from his repeated failures and how he dealt with them. In the book I think he lost his entire fortune four or five times. I did the same thing but was fortunate enough to do it all in my early twenties on very small stakes of capital. I think I lost $10,000 when I was 22, and when I was 25 I lost about $50,000, which was all I had to my name. It felt like a fortune at the time.

It was then that my father flew up from Memphis and sat me down in my tiny New York City apartment and began lecturing me as lawyers do. He commanded, “Leave the gambling den behind. Come home and get a real job in a safe profession like real estate.” Of course, I did not, and the rest is history. And real estate these past few years has been about as safe as shooting craps to pay the rent, so I was twice blessed. If I’d have taken my father’s advice, I might have lost all of my money again these past few years in my fifties.

Anyway, I think it’s no coincidence that our greatest champions, our greatest artists, our greatest leaders, our greatest everything all seem to have experienced some kind of gut-wrenching loss. I think their greatness, in part, was fashioned on the crucible of that defeat.

Two years before Lincoln was elected as maybe our finest president, he lost that monumental Senate race to Stephen Douglas. To a certain extent, I think that holds true in my field as well, and I am leery of traders who have never lost it all. I think that intense feeling of desperation that accompanies such a horrifically deflating experience indelibly cauterizes great risk management reflexes into a trader’s very being.

Cycle of Development for a Novice Trader

2013-02-27T15:41:00.001+05:30

Don't see the problem and do not know to stop.
See the problem and can't stop.
See the problem and stop it before it is too costly.
See the problem developing and stop it.

Not an accomplishment it is necessary

2013-02-26T18:49:00.000+05:30

A fascinating post by Eli Radke of traderhabits.com :

It is important to understand the difference between a prerequisite and an accomplishment.
Zero is the necessary minimum to achieve a task. Showing up to work is not an accomplishment it is a prerequisite for keeping the job. Trading has prerequisites that can be confused for accomplishment. Here are some:

Admitting you are wrong/made a mistake. Mistakes happen and you are going to be wrong. Recognizing them is the first opportunity to change the amplitude. And that pain, disgust, anger, loss is the fuel for change. If you are out of control than you wake up one day out of the game. The seeds of your thoughts and actions will eventually manifest themselves. Everything works for awhile but as traders we are looking for what we repeatably do. Admitting you are wrong or made a mistake is not an accomplishment it is necessary.

Following your rules. Discipline is necessary when conducting any experiment I say experiment because each day and each trade has the potential to be different. I have an idea how a trade is going to develop but anything can happen. If you are not following your rules you are never going to understand why it worked or not. Inability to follow your rules is an indictment on the rules themselves as much as on the trader. Following your rules is not an accomplishment it is necessary.

Preparing. You may or may not enjoy preparing. If you do not enjoy the preparation it is in part because you do not see the benefit. As a football player we practiced 5 days and played one game. This made it possible to react and not just make decisions. There is a huge difference in results with increased reaction time and being in the “moment”. Not to mention the mental energy it takes up. Once again, anything can happen and there is a chance that something new will happen. But preparation takes care of enough of it to make it pay off. You never know when the trade that makes your day, week, or month will present itself. Preparing is not an accomplishment it is necessary.

Post trade analysis (wins and losses). As a trader we are always asking ourselves what is working right now. You can never understand that without knowing why something worked or didn’t work. Just like with preparing, have a process and it will happen more quickly. Performing post trade analysis is not an accomplishment it is necessary.

Mental Awareness. There is no way to get rid of bias, we can only see and admit the risks that it presents. Even with algo trading you have to set the parameters. Understanding where you are at mentally or admitting to it is important. My best days as a trader or athlete were not the days I was most healthy. It was the days I got the most out of what I had available to me that day. I pushed at the times I knew it wouldn’t spin me out of control. I knew where I was and how to adjust. Most things can be overcome as long is there is awareness. Having mental awareness is not an accomplishment it is necessary.

I am sure there are other prerequisite as well (add yours in the comments). The purpose of this post was not to make anyone feel bad. There is something to be said about getting your prerequisites but that is just the start. I was at a high school the other day and there was a sign saying that graduation was a great accomplishment. For some it is but for most of the people it is not. I actually could not believe that sign exists, they were selling their students shorts. Just like anyone who confuses prerequisite with accomplishment. Prerequisites get you to zero.

Attaining prerequisites is not an accomplishment it is necessary.

Fish at a Pond with a lot of Fish

2013-02-26T18:48:00.000+05:30

Risk management goes beyond only thinking in terms of stop losses, position sizing and profit protection tactics, argues Ivan Hoff of Ivanhoff Capital.

Read the complete article on: How to Manage Risk

Can You Trade without Mind ?

2013-02-17T09:02:00.001+05:30

Mushin (Japanese: English translation "no mind") is a mental state into which very highly trained martial artists are said to enter during combat. They also practice this mental state during everyday activities. The term is shortened from Mushin no Shin, a Zen expression meaning the mind without mind and is also referred to as the state of "no-mindness". That is, a mind not fixed or occupied by thought or emotion and thus opens to everything.

The origin of the Mushin concept comes from Muga-Mushin. Muga means no-self (derived from the Sanskrit anatman) and Mushin no-mind (also from the Sanskrit acitta). Muga and Mushin point to the same thing, the state of egolessness, but from different perspectives. Muga refers to the negation of the physical state, Mushin to the mental state of empirical existence. It is somewhat analogous to flow experienced by artists deeply in a creative process.

Mushin is achieved when a person's mind is free from thoughts of anger, fear or ego during combat or everyday life. There is an absence of discursive thought and judgment, so the person is totally free to act and react towards an opponent without hesitation and without disturbance from such thoughts. At this point, a person relies not on what they think should be the next move, but what is their trained natural reaction or what is felt intuitively. It is not a state of relaxed, near-sleepfulness, however. The mind could be said to be working at a very high speed, but with no intention, plan or direction. Mushin is the state where a person finally understands the uselessness of techniques and becomes truly free to move. In fact, that person will no longer even consider themselves as "fighters" but merely living beings moving through space.

[This fascinating insight has been contributed by Vibhor. The art and practice of ZEN has been a source of inspiration to me. For Traders, the achieving of Mushin may be the final frontier - the way to excellence in trading.]

Charts for Jan-Feb 2013

2013-02-14T15:15:00.002+05:30

If you wish to suggest a chart, please email the chart image with pattern and target to sudarshansukhani@gmail.com . Kindle send only successful, completed patterns.

From Raghavendra Thokala

From Pratik Mukasdsar

From Abhijit Patra

From Kishore Lekhwani

Antifragile

2013-02-14T11:29:00.000+05:30

[Vibhor has provided the following post. It makes for interesting reading].

Nassim Nicolus Taleb’s new book “Antifragile: Things that gain from disorder” is an engaging yet complex book to read. It offers an antidote to his previous masterpiece "The Black Swan" by explaining how to build systems that can actually benefit from stress. It divides the world and all that's in it (people, things, institutions, ways of life) into three categories: the fragile, the robust and the antifragile.

Fragile: Can get harmed by volatility

Robust: Holds up and is thus ‘volatility neutral’

Anti Fragile: Benefits from volatility’s presence

You are fragile if you avoid disorder and disruption for fear of the mess they might make of your life: you think you are keeping safe, but really you are making yourself vulnerable to the shock that will tear everything apart.

You are robust if you can stand up to shocks without flinching and without changing who you are.

But you are antifragile if shocks and disruptions make you stronger and more creative, better able to adapt to each new challenge you face. Taleb thinks we should all try to be antifragile.

Here is a summarization of some of the ideas put forward by Taleb:

The antifragility property only exists up to a point (e.g. modest physical stressors can be good for one’s health via triggering the healing and building response – immodest physical stressors, not so much).
Time is nature's greatest filter, eliminating all but the antifragile, meaning that what is oldest today — be it a canonical book or the game of chess — has stood the test of time and isn't likely to disappear any time soon whereas the books and games released tomorrow may become outdated and irrelevant in a year.
Fragility in the parts often commutes to heightened antifragility for the system as a whole (individual restaurants are fragile, but the restaurant business is not)
The transfer of fragility from one group to another, e.g. banks capturing the upside of speculative activity, then handing taxpayers the bill via bailouts, is morally reprehensible and should be stamped out. The agency problem can be solved by forcing risk takers to have skin in the game. Entrepreneurs, who take serious risks with their own capital, are the true heroes of modern society.
It is not necessarily better to be wealthy than poor. Beyond a certain point, the property of being wealthy (owning “stuff”) morphs from antifragile to fragile (via increased anxiety, expectations / obligations, banal social commitments etc.)
Academia deliberately misinterprets the evidence: Wealth and prosperity beget institutions of higher learning, not the other way round. Countries get rich and then build universities – universities do not help countries get rich. Real world practitioners have embedded knowledge that theorizers wrongly take post-hoc credit for (the “lecturing birds how to fly” effect).
Optionality is the property of asymmetric upside (preferably unlimited) with correspondingly limited downside (preferably tiny). Optionality can be found everywhere if you know how to look. That which benefits from randomness (increased potential for upside in the presence of should be embraced. That which is harmed by randomness should be avoided like the plague.
Absence of evidence should not be mistaken for evidence of absence.

Buy on Amazon

More on Antifragile :Embrace Optionality and Don’t Drink Orange Juice: “Antifragile” Review

Best Chart Patterns of 2012

2013-02-06T21:56:00.001+05:30

Peter Brandt (my favorite trader) has written a blog post 'best dressed list of 2012' which showcases the best looking chart patterns found last year. His rules for selection are:

1. Clearly defined chart pattern on daily and weekly charts with at least 12 weeks in duration.

2. Clean breakout with little or no pattern retesting.

3. A sustained move to the target.

This is an interesting idea. Creating a chat book of such patterns is useful to all traders. A reading of his post is recommended, if just to observe the patterns that he identifies.

AN INDIAN LIST

Readers are requested to identify similar charts from the Indian Markets. If you wish to send me the chart then email is to: sudarshansukhani@gmail.com. Or, you can mention the pattern in comments, here.

Here is a classical head and shoulder pattern in Ambuja.

Hind Unilever (Contributed by Sunil Hajeri)

ONGC (Contributed by Rakesh Sethia)

Tata Motors (Contributed by Sunil Hajeri)