Here, we have used a simple trendline to define the ongoing trend. But the way we can do that is by being able to address the downside risk and allow the market to tell us when that is getting out of whack.
In the example cited, Titan seems interested in moving higher and giving us more profits. But your method can help you track the market’s intent. The reward is decided by the market you do not control that ever. Watching the downside means you decide the risk. As a trader, you are prepared for additional engagement with the market. (Of course, it is possible to do the same in the higher timeframe charts as well, but that would require more efforts.
Small trendlines have been drawn in the intraday chart that signals resumption of the trend with the break of minor trendlines. Once the correction is complete and the trend resumes, you can get back in with additional positions. So, the longs are to be retained through the corrections. Until this occurs, the stock is into an uptrend (which, anyway, is being signalled by the weekly and monthly charts) but neither has occurred so far. Keeping it in line with Raamdeo’s advice of watching the downside, we can keep looking for two things – first a break of the support trendline and second, a change in the higher top-higher bottom pattern.
But traders also have to deal with corrective phases because, they are a lot closer to the market action than investors. We can see in the 30-minute chart that the main trend remains upward, because the dips respect the trendline and every bottom is a higher one, as prices keep thrusting to new highs. Trading requires you to be a lot more active and here comes the trouble. Therefore, it is easier to remain invested in Titan using just a trendline as a risk definer (that’s the simplest it can ever get!). In this example you will find that dealing with the downside required very little effort on the daily and weekly charts but needed more attention on the intra-day chart. In the weekly chart, we find that this break in trend was just a minor poke on the downside (see the small arrow) and the uptrend remained largely intact all through. While intraday chart shows some ongoing pullbacks, the daily chart shows just one interruption in the trend – where the trendline was broken (marked X) and then trends resumed (marked with an arrow). In the chart, we find three timeframes – 30 min, daily and weekly and it is apparent that a good uptrend is essaying in all time frames. Once you adopt the mindset of accepting the downside risk and allowing the method to take care of the upside, you can get out of the persistent problems that most traders face.Ī good example to use here would be Titan (or, for that matter, any trending stock). That may take hours or days or sometimes weeks. In quite the same manner, when one trades using a method it demands that you allow the possibilities of the method to come through. It is a style that is not for everyone, as it needs a certain mindset. That may take months, sometimes years and sometime decades. Value investing calls for remaining invested until price and value meet eventually. Look carefully at that and then allow the trade to run as per the dictates of the method. The method itself will tell us about the risk involved. The method is the door, and faith in the method is the key to that door. Ultimately, they end up with small profits on successful trades and large losses on unsuccessful ones.
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