[documentation] How I take a long trade.let's get straight to the point.
If I believe that I want to be long a stock, I:
1. make sure the underlying index is in a long trend (rather, it has not corrected sharply in the near left, because all indexes are long by default, they enter bearish periods from time to time.)
NIFTY 3 day chart: - nifty above 7SMA (doesn't matter what EMA you use, as long as it is not obnoxiously large like 77. with that value, the underlying is about to be above it forever).
(you can look at other indices like the nifty smallcap but we live in an age where everything is fucking correlated. don't overkill.)
preliminary check complete.
SUZLON, alright. let's swing long.
1. how did I shortlist SUZLON? well, I have been following a bunch of stocks for a long long time. I came back to check how this one was doing, and viola, I had a solid trade idea. (I have swung Suzlon on the long side successfully before, and that just adds fuel to my fire; this step isn't necessary either).
second, and most importantly, fundamentals. look at these things for the Q in particular:
a. increasing EPS quarterly YoY.
b. EPS growth Q YoY >> EPS growth trailing 12 months. (in lazy words, the company owes more pennies to shareholders this Q that it did on average in the last 12 months. this + point a guarantees(though nothing is certain) that the upward trend of the company's trajectory is more probable than a downward trend)
c. increasing revenue growth, total equity growth, etc. these things help weed out the losers from the probable winners. don't swing a long when you can see some faults. use your abilities to their best, hombre.
fundamentals aside, I am a technical trader. if I wanted to be a fundamentalist, I would buy an index and subscribe to a church/temple/mosque/whatever. as a technician, I believe that there is more money in the mountains and troughs of a stock's chart.
the technicals:
first, the trade setup.
1. whatever my idea may be, I look for the max possible loss I will be taking if shit goes south. there's no such thing as peace of mind, but there's relative peace of mind knowing what you lose when you're wrong. where do we set the SL?
look at the D chart:
60? wrong. everyone and their momma will have their stop at a juicy round number. remember, the stock does not owe you to bounce off an arbitrary level at an exact point. so where then?
look at the 3 day chart (here, any higher tf will work, I just prefer D, 3D, 7D).
the current rally started where the lightbulb is placed. SL will be just below that: 58.92 or whatever fraction shines your shoes. keep it below 58. that gap between 60 and 58 is where you will turn most of your SL losers to at least breakeven winners. so, SL: 58.92 .
2. I scale into my longs. further reduction of risk as I work with unrealised profits. A wise man once said, great rallies don't end in a single day. lower risk, lower but more sure reward. me likey. I divide my net buying into four chunks. the buying will look like this:
py(pyramid) 1: 66.66
py2: 67. (but i need a strong day for this).
py3: 71.69.
py4: near ATH: 75?
these pyramids are approximate and I have no idea how the stock will behave on the daily chart. maybe it jumps 10% in a single day. maybe it takes 17 small green days. I don't know and I don't care. I want to get in my position between 67 and 75 with some unrealised profits.
next steps:
1. TP levels and 2. updated SL.
let's start with 2.
2. updated SL.
you don't want a popcorn trade, trade that goes in your favor, completes its course and drops back down to your SL, giving you a burnt taste in your mouth. no sir. you want to figure out what the stock is doing to a better than a 50/50 chance. remember, huge profits >> positive breakevens >> negative breakevens >> SLed trades >> massive loss still held because of hopium. remember that order. you will graduate from consistently left to consistently right (hopefully, not politically).
yada yada yada, how will you update the SL, wildhorse3?
1. till the stock goes well above 76; no updates to SL.
2. if the stock goes to 75 (prior resistance); has a sharp reversal; then we wait for a confirmation to get out/downsize. i'm talking about this situation.
look at the possibilities:
if red happens (aka failed retest); downsize rapidly, get rid of pyramids, congrats, you had a positive breakeven. pyramid later on if the stock does move to the up; that's for later.
scenario green: do nothing, hold now, you made it. in this case, move the SL up to ~67; don't move it up to 72 like a fool (just yet). the reason: you want to give the stock some room to move. when something goes up, it does not owe you anything, and that includes, going up in the near term, going sideways, going down. (I don't mean to scold you, this text is written for just one person, and that is me. I scream when I remember a past mistake. take my lessons, or don't.)
keep repeating this till eventually, you're out of a trade because your SL was hit. (and hopefully this SL was a level where you made bank)
1. TP levels
gonna keep it simple, I am not used to writing long paragraphs. if you want to read more, I have a telegram channel where I keep blabbering. reach out for an invite. TP levels:
a. zoom out.
where might bears make money?
ATH? das right. make that your TP1.
b. what if das not right? zoom further out
190? 400? these log charts are sneaky! further older ATHs? well das semi right.
c. just tell me the levels, bitch.
okay, and mind your language.
I don't know. I look to cover my losses, and I let a winner run (small losers, big big winners) when the pain of holding is greater than the joy of holding, I start closing the position. how do I measure the pain?
well, I open my portfolio 15 minutes before close of the day. If I am greeted by a blast of red fumes, I know I need to work on my holdings in the near term (not. right. away.) if it is lush green, I:
a. keep an eye open if it is too lush. stocks don't go up forever, and usually the green climaxes are so lush that it makes you want to buy more. that, my good sir, is the time to sell.
b. if it is moderately okayish, modest toned down green; I do nothing.
in summary, a summary:
a. I wanna swing SUZLON long.
b. SL: 58.92
c. pyramiding (4 increments): between 66 and 75.
d. why SUZLON, why now? read this wall of text. as for why now, I will need to make another wall of text explaining why I enter now. (the gist: trending on D, 3D, 7D, nice overdone pullback, good market, above SMA, burst of volume post earnings, solid fundamentals, a FAFO idelogy).
d. TP: if you want a level, go for 82.69.
