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Making

Money through stocks

Introduction ............................................................................................................................................ 2
45 degree works all the time ................................................................................................................... 3
M pattern and W pattern ........................................................................................................................ 4
Volume based strategy ............................................................................................................................ 5
Creating your own trading system ........................................................................................................... 7
My simple scanner .................................................................................................................................. 8
Day trading Habits ................................................................................................................................... 9
Most active scripts by volume ............................................................................................................... 10
Open high low close analysis ................................................................................................................. 11
Bollinger bands and Andrew pitchfork ................................................................................................... 12
Using Open interest analysis.................................................................................................................. 14
Confidence is the key............................................................................................................................. 17
Introduction

In stock trading, there are some factors that you must keep in mind before trading. Yes, it is a risky
business and not many succeed. If you are in the opinion that you can get rich overnight, then you are
wrong. Stock trading is a systematic way to get rich and its long term process. You will have to
understand about money management and know about the risk reward ratio.

Stock market is about understanding the crowd behavior and there are only two things to keep in mind,
when to buy and when to sell. Fear and greed are the two emotions of the crowd which you must be
able to study in advance. Technical analysis is one way to predict the future trend of the stock apart
from the news of stock. How the stock behaves is indicated clearly from the charts.

I always recommend using the candlestick patterns which can help you read the bullish or bearish
patterns. The charts indicate whether bulls win end of day or the bears, price trend can be easily
manipulated using the candlestick pattern and the EMA. As the technical analysis began to expand and
the studies like MACD, RSI , CCI , Bollinger became popular. Every technical analyst had their own way
on reading the charts.

The Gann analyst told the market is bearish, while the Elliot wave analyst showed us why the chart was
bullish. Why these trading systems have difference. What is the real way to analyze the market and
what works? The buy and sell points differ from individual, for every buyer there is a seller. Both of them
are right , until one of them loses the money to the other.

Any indicator which is designed by the technical wizards make use of only three factors which are price,
volume and time. If you look deeply every indicator or oscillator are made using any one of these
factors and these three tell you the truth. What we can learn from the technical wizards are to
understand the way how the market worked and the experience of the traders.

1/ never trade without a stoploss because you need to have money to trade another day

2/ market is always right and use trailing stoploss to not lose your profits.

3/dont predict the top and bottom of the market

4/when in doubt, get out of the trade

5/believe the words of someone if you think he is smarter than you.


6/ maintain your health well, because it is the best investment you make

7/ confident is the key to success

8/ donate a part of your income to the needy people

45 degree works all the time

This is the easiest method to find the bullish or bearish stocks and it works on all charts. But you should
be able to spot the early winners and gainers. After one hour of market open, look out for stocks that
are 45 degrees. Chart pattern works all the time and when you practice daily, you will find the right one.
We want to buy or short-sell the stocks and you must concentrate the stock with huge volume.

You can see from above chart, if you have purchased around 10 am and hold till end of the day, you
would have made 2 to 3 percent.
In the above chart, we can see a negative 45 degree or less which is a strong negative trend. We can
short-sell the stock for one to two percent.

Additional tip : Look out for total seller quantity greater than total buyer quantity and vice versa for
stock buying.

M pattern and W pattern

M pattern and W pattern are chart patterns which you want to notice when you are reading charts. M
pattern forms when the stock turns bearish and W pattern forms when the stock turns bullish. Chart
patterns are like ECG of stock market. A successful stock trader notices the important chart patterns
and trades accordingly.

Why the chart patterns are effective than any other indicator? Chart patterns are universally followed
by anyone and there is no confusion. Suppose one technical analyst follows the MACD, while another
follows the RSI but the low is not broken with volume there is no possibility of stock going down. So
everybody follows the chart patterns and volume apart from indicators.

M pattern is also called as head and shoulder pattern. W pattern is also called double bottom pattern,
which is a strong bullish pattern. The volumes also play a role in finding the best reversals whether it is
bullish or bearish. Chart patterns are psychological when analyzing would give the levels for bulls and
bear. Sentiments in the market decide the price going up or down.
Double bottom chart pattern conforms that there are more buyers and sellers are less. While the double
top pattern shows that the prices would fall in the coming days. These patterns are easy to find the 5
min chart, 30 min chart and hourly chart. The volumes decide the price movement up or down. As the
volume decides the price movement, we will find another volume based trading strategy in the next
chapter.

Look out for the stock in news and your motto should be to find the chart patterns and gain 2 to 3
percent for the day. We will be successful when we follow the rule.

Volume based strategy

Volume based strategy is simple and you have find the huge volumes in the 2 min or 5 min chart. These
are strong clues to make more money. We see the crowd interested to buy or sell the stock, how is the
bar is it up bar or down bar? Is it a bullish bar or bearish bar? This would give the clue to trade further.
Does it break low point in the chart or close to the high in the chart?

We will be looking for volumes that are above five day moving average or volume that is 50 percent or
above the previous volume. This is the way you can plot the mutual funds buying and institutional
investor buying or selling. The high and low of particular bar is very important because it decides the
trend. Volume decides the buying and selling power, huge volumes I mean.
In June 2016, the stock started to fall. When there is high volume, we come to a conclusion that it has
made the bottom. Once when the price crosses the high of the volume bar, we can start to buy. When
there is huge volume after several bearish bars, it is an indication that bottom is coming soon.

In another example, the stock makes high with huge volume and after several days its not able to
compete with the price. When the price falls below the low of volume bar, we can see the price falling
hard in the coming year.

This strategy of volume trading works well on weekly charts, daily charts and 30 min charts as well. The
idea is spot them correctly and judge your trade. Chart reading is a skill and you will develop slowly.
Creating your own trading system

Creating your own trading system is a complicated task and there are many trading strategies viz., Trend
following system, EMA system, and counter trend system. You can use the five day high price and five
day low price as your strategy. The breakout or breakdown depends on volume; we should be sure
about the trend to trade the opportunities.

Trading must be your passion and you should be happy to trade every day. Habit makes one a successful
trader. Genius with no roadmap will fail ultimately while an average person with definite steps would
move towards their goal. To achieve financial success, you must train your mind and it is not possible in
one month. It is a long term process and you have to get rich systematically.
How can you create your trading system? How can you be successful in stock trading? No trading system
is 100 percent correct and you cant plot the crowd emotion. You can predict the emotion of crowd with
the news and stock indicators. But you cant be right always; stock indicators are used with the news of
the stock.

Trading system is like a blueprint for the traders. It is considered to be a traders plan which you use
EOD. It is a guide that helps you get the best out of the market. You can design your own trading system
and create your own strategy which has to be very simple. Tuning is necessary, initial days you must
tune your system.

We must have less stoploss and the risk to reward ratio must be greater than three. You can design
system with Amibroker or Metastock. Fine tuning the system gives you higher accuracy; most stock
analysts do the same. For designing a system, you must consider several things in mind like

1. News
2. Stock levels
3. Supports and resistance levels
4. Chart patterns
5. Crowd behavior

It is not like you get a buy signal and you can start buying. It involves a lot of analysis regarding the
peoples behavior. Will the crowd buy above this price or sell below the price, it all depends on the
crowd and how they react to the news. As a stock trader or analyst, you should be aware of the crowd
behavior and understand the trading psychology or otherwise called as the price action well.

Even the best traders in the world would fail 4 out of 10 times but overall you must be positive and
never lose your investment. If someone had the best trading system, he would get rich and not share it
with you. There is no formula to success, you just have to be able to read the chart pattern and align
your trades with the index.

My simple scanner

My simple scanner that I use EOD as well during real time would be the five day High/Low Indicator. This
is a very simple indicator, as I run my scanner every 15 min. I would get the stocks that have crossed
above the five day high price or to the lowest price in the last five days. Both these levels act as
resistance and support, which makes or breaks.

News is the first factor for any stock movement or it could be a rumor too which drives the stock.
Investors are shaken by the bearish sentiments and once when the price falls below the five day low
price for the first time since one month, you can sell one lot. The same thing holds for the five day high
price.
Volume and crowd behavior decides the trend after breaking the five day high price or falling below the
low price. One of the easiest ways is to use the JSTOCK scanner which is easy and simple. If you are good
at coding, you can try using Metastock or Amibroker trading platform. We need the end result to be
correct and be on the profitable side. There are many people fooled with fake trading systems and they
end up paying a lot of bucks but only simplicity works all the time.

Fibonacci levels can be used to find the stoploss or use the lower high or higher low to use as the
resistance or support level. It works all the time, because it is used universally by all traders. Risk
management, too much greediness can spoil the trades or use trailing stoploss to save your investment.
If you dont use stoploss in your trades, you cant be rich. Never be in fear to take the losses, small losses
have to be taken or you would end up making huge losses.

Day trading Habits

If you are a trader and you wanted to earn money from the markets. Then you must be familiar with the
fundamental and technical analysis completely. There are plenty of ways by which you can analyze the
market. Depending on the country, the habits of the traders differ but the price, volume and time are
the best indicators. Any new market indicator is made from the existing price, time or volume.

The eastern countries are familiar with the candlestick patterns and Ichimoku cloud trading, while the
western countries make their trade based on news using line chart. Whatever the system one follows,
there should be discipline with the trading. Every trader makes bad trades once in a while, never change
your stock trading strategy instead pick the right trades intuitively. Yes, trading involves intuition which
is chart reading and its called common sense by the experts. You will know to read stocks after you
have traded for years. Always make the loss minimum and gains maximum for stable financial career.

In stock market, if you are an investor you should be good with the latest news and fundamentals of the
stock. While if you are an aspiring trader, then you must develop the art of chart reading and keep
yourself up to date with the latest happenings in the stock market. There are numerous stock trading
techniques and this book is about just four of the major techniques used by many traders. Your ultimate
goal is not to get rich overnight but to gain confidence in trading and become financially independent
step by step.

For becoming a doctor or engineer, you must study for 4 to 8 years of regular study. But for stock
market, not many traders develop the traders mindset. They keep on losing their money and keep
changing the trading systems. There is no fancy trading system out there which can make you rich
overnight, if it does then why does someone want to sell it to you. I do agree in trading seminars where
you can learn something new but I never recommend trading systems which gives instant BUY or SELL
signals. A lot of traders are scammed by fake trading systems, making them ignorant. Using Google
Finance along with your stock broker terminal is more than enough to make amazing trades.

Fund management is a great subject for the traders to learn. Many traders put the profit money again in
trading and lose it. Never be greedy with the trades, stock market is not a lottery ticket. Speculation is a
bad habit for the traders. Always take calculated risks, save money for the next day. Set daily targets and
never overtrade because its not healthy to a trader. Many of them suffer from stress of the same
reason. I believe you would stop being greedy about stocks and invest/trade systematically.

Be greedy with the news; make it a habit to read more. It gives you more wisdom; many institutional
investors read a lot before making a decision. Have a mind map of the trading day ahead; you will have
to make trades only at particular time intervals. As you know, markets goes through up phase or bull
phase, consolidation phase and bear phase or down phase. If you trade when others arent trading, you
would get caught in the consolidation phase. BUY when others are buying, SELL when others are selling;
you will find it how to do it from this short e-book.

Most active scripts by volume

Life is already complicated enough and you as a trader must follow simple rules to be successful. In the
world of stock trading, the money moves from the hands of dumb trader to smart trader. A smart trader
has complete control of what he/she is doing. He or she is confident to take any trade and confident
enough to take stoploss points also. When you are in doubt, dont trade in confusion which too much
pressure.
Why to find the most active scripts by volume? It is because in trading, you must be with the side that is
winning. Volume decides the sentiment of the stock, either buying power or selling power. It is good to
trade with the stocks that have good volume, we see many traders trying to put their money in stocks
that never move a cent. If you change your approach to trade in the stocks with high volume, then you
can certainly make successful trades.

As a trader you must gain confidence with your picks. You will have to be intuitive to tell whether the
stock would go down or up. Never short a stock that is above the open and Never sell the stock when is
below the open price. We see many traders, randomly short-selling and buy stocks for day trading, if
you dont plan your trades, you will regret later. Buying or selling with high volume stock gives you a lot
of opportunity to make money. However if you are clueless of the trend, you are in trouble.

There are some stocks bought or sold by big market players. If you go against them, you will be at loss
for sure. Daily when the market opens, you will be looking for the top volume gainer stocks. You dont
worry about the trend, because we will use the Bollinger bands and Andrew pitchfork to trade
effectively, which we will see in the next chapter.

Open high low close analysis

This is one of the easiest methods to find the best stocks for day trading. I recommend to all the traders,
because of its simplicity. The idea to find the stocks having open values same as low price, in this
scenario which is a strong buy. However you must look at the volumes for day trading.
Open = low (buy)

The reverse condition where the open price is equal to high price will be a strong sell.

Open = high (sell)

Stoploss would be the immediate resistance or support.

But this trading setup works only for the first 45 minutes, after that its not worth buying or selling the
stock.

Bollinger bands and Andrew pitchfork

What is the usual sentiment with the traders according to different time intervals during the day? For
the first two hours, most traders would be looking for stocks that can be bought. Next two hours, 75
percent of the stocks fall to 1 to 2 percent. During the last two hours, the market depends on the
emotions of the bull and bear.
Traders must align their trading patterns with the index. When the index is up by one percent, do you
short-sell any stock? NO! You must look for stocks to buy. Always align your trade accordingly with the
index price. Coming to the volume analysis which we did in the previous chapter, we will use the
Bollinger bands to guide us to make perfect trades.

Try using investopedia for learning about Bollinger bands and Andrew pitchfork, Bollinger bands can find
the stocks moving above the usual price of 20 day moving average and also the stock below the channel
of 20 day moving average ( otherwise called lower band). Step one, we look for the high volumes and
step two, and we look for the signal from Bollinger bands.

We know there are only three phases in the stock market. Bull market, bear market and flat market. But
unfortunately we all get trapped with the flat market. But when you use Bollinger bands in your trading
routine, you will get to make successful trades. When the price breaks below the Lower band (for the
first time) and you already know the stock is bearish then you can make short-sell trade.

If the market is strong bull and you see stocks making high for the first time during the day above the
upper Bollinger band, you can buy. You must find the clear trend before making a trade which will come
to you by practice and after reading numerous charts daily.

Andrew pitchfork is a great tool where you can find the current trend of the market. You can predict
whether it would be bull, bear or flat trend. When the Andrew pitchfork pattern is up trending and you
feel like a buy call here then you can buy stock for day trading. Do the opposite for sell trade, we can see
the Andrew pitchfork falling down.

Wait for the patterns to appear and wait for enough volume to make perfect trades. We need volume,
which is the driving force in the stock market. You should be thorough with the resistance and support
levels to start with. For many traders, I do suggest the Gann square of nine values to make extra-
ordinary trades.
Using Open interest analysis

Change in open interest percentage min and max (10 to 30), which gives you the best stocks to trade for
intraday. Open interest can actually be used for making best trades. It can act as the trend decider and
give the real meaning for the bulls and bear. Lot of stock analysts recommends this method to choose
stocks wisely for day trading.
You had found the stock which has high volumes and you are in the confusion to short-sell or buy, how
will you come to a conclusion? The only way to find it is the open interest change percentage. When the
price increases with the increase in open interest, then you can buy the stock. When the price decreases
with the decrease in the open interest percentage, then its a strong bear. We will look out for stocks
that have strong bull or strong bear. These are the stocks which you want to target and put your cash,
other stocks have less chances.

It is good if you find the open interest real time scanner or open high low finder. Scanning tool gives
plenty of trading opportunities. Imagine you have scanner showing stocks that make high or low in day
trading. If you have checked the stocks along with the strong bull condition and when the stock makes a
high price, you can definitely go for buy.

Strong bull + high price after first hour = BUY for the day

Strong sell + low price after first hour = SELL for the day

Another quick method would be using JSTOCK to scan stocks that have made 7 percent or above in the
past two days. The bulls have hold on the stock and there would be very less bears. Once when it moves
below the open price and turns negative, the bulls would feel tensed and want to close their position.
You can get trades like this every day and you must start to use JSTOCK for scanning purpose.

In stock market, trading psychology works better than levels. Levels are just numbers and when you
short-sell a stock below the support, it means that below the support level there would be no buyers.
This is one of the best methods to make 3 percent easily. Trading depends on crowd behavior and levels
are psychological while you are trading.

Add the stock analyst picks also before starting your day trading, it may work or may not but you get the
volumes from the stock. Lot of stock analyst picks which they show in TV doesnt have the success ratio.
One stock analyst was proud to say that the performance of his calls made around 34 percent last year.
But if you have reversed the trades, you might have got 60 percent success.

What I recommend is to add all the stocks in your radar

1. High volume stocks


2. Stock analyst picks
3. Open interest percent ( High/Low)
4. JSTOCK scanner stock list which made 7 percent or above in the past two consecutive days
5. Last hour gainers/ Last hour losers

During the day, I look out for stocks where the total buyers are greater than the total sellers. The
chart pattern is bearish/downtrend
Andrew pitchfork downtrend + (total sellers > two times the total buyers) = SHORT-SELL

Andrew pitchfork uptrend + (total buyers > total sellers) = BUY

Trading is intuition based job and it comes with practice. Stock movements happen due to crowd
behavior making a stock bullish or bearish.
Confidence is the key

When I started trading, I had the fear to make a single trade. I prepared the whole day for making the
first successful trade but I kept failing. When I bought, the market went to the sell zone. When I sold, the
market came back to the buy zone. I was confused where to buy and where to sell, we all go through
these emotions.

Many times we will have losses but it has to be minimal. Take stoploss to avoid huge losses, never trade
more than you afford. Stock market is all about peoples emotions, if you read them rightly you are a
winner. It doesnt happen overnight, you have to learn day by day to make better trades. As you keep
looking charts daily, you will get a clear idea and become a pro.

Never get tensed to put the order, lot of traders are worried and stressed too much. Have a positive
mindset and keep trying to achieve your goal. Creative visualization is the best way to achieve what you
want, to develop the traders mindset. Every trader becomes panic during the day, which has to be
avoided. You should have a clear mind all the time to make wise decision.

Look at the volume, look at the price; is the price looking cheap for you? How are the volumes of the
stock? Do you think, you can make one percent with day trading today? You should make a mind map of
what you will be doing today! The markets are interlinked, American markets depend on the European
market and European market depends on the Asian markets. Once when you get familiar with one
market, you will get to learn more every day.