Gurunatha Views

Stochastic RSI

Sandeep Palankar 4:30 PM, Thu, 14 November 24

What Is the Stochastic RSI?

The Stochastic RSI (StochRSI) is an indicator used in technical analysis that ranges between zero and one (or zero and 100 on some charting platforms) and is created by applying the Stochastic oscillator formula to a set of relative strength index (RSI) values rather than to standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold

Parabolic SAR

Sandeep Palankar 4:27 PM, Thu, 14 November 24

#Parabolic SAR is a powerful tool that helps you analyze trends. SAR stands for Stop and Back. This means that the indicator can not only determine the trend, but also signal when it is time to close the trend trade and look in the opposite direction. The indicator was developed by J. Welles Wilder, who is also known for creating tools such as ATR and RSI.

How to interpret a parabolic SAR indicator

Parabolic is very easy to use. Makes points that determine the trend. When the points are below the price, the trend is bullish, while the points are above the bearish trend.
When the trend changes direction, the parabolic signal gives an input signal. It signals a bearish turn when it crosses the price upwards and forms 3 descending points above the candlesticks.
The parabolic signals whip when it crosses the price to the back and forms 3 ascending points below the candles.

ANALYZE EQUITY STOCKS

Sandeep Palankar 4:22 PM, Thu, 14 November 24

There are several methods to analyze equity stocks Here are some of the most commonly used methods

1. Fundamental Analysis:- This method involves analyzing a company’s financial statements, such as the income statement, balance sheet, and cash flow statement, to evaluate its financial health and performance. Fundamental analysis also involves analyzing the company’s management, competitive positioning, industry trends, and growth prospects.

2. Technical Analysis:- This method involves studying past market data, such as stock prices and trading volumes, to identify patterns and trends that can be used to predict future market movements. Technical analysis is based on the assumption that historical price movements can provide insight into future price movements.

3. Valuation Analysis:- This method involves evaluating a company’s stock price relative to its financial metrics, such asearnings per share, book value, and cash flow. The goal of valuation analysis is to determine whether a company’s stock is undervalued or overvalued relative to its financial performance.

4. Peer Analysis:- This method involves comparing a company’s financial performance and valuation to its industry peers. This analysis can provide insight into a company’s competitive positioning and growth potential relative to its peers.

5. Macro-Economic Analysis:- This method involves analyzing broader economic trends, such as interest rates, inflation, and GDP growth, to identify potential risks and opportunities that may impact the company’s financial performance.

Its important to note that no single method is foolproof and that investors should use a combination of methods to evaluate equity stocks and make informed investment decisions. Additionally, investors should regularly monitor their portfolio and update their analysis to adjust for changing market conditions and company performance.

Sandeep Palankar 4:15 PM, Thu, 14 November 24

Mistakes to avoid while trading in Options :-

1. Trading Options without Knowledge:

The first mistake that every novice trader makes while trading in options is lack t.
Trading in options is quite difficult without having proper knowledge of it.
There are many basic options terms like call, put, premium, margin, strategies that an option trader should know before jumping to trading in options.
They should also know about different types of options, greeks, historic, and implied volatility as they are important parameters when it comes to analyzing the options.
Without gaining knowledge traders may incur losses in the market and they get discouraged.2. Buying Out-of-the-Money (OTM) Call Options:

2. Buying Out-of-the-Money (OTM) Call Options:

New options traders get attracted to buy OTM options as they are cheap but buying OTM call options are one of the hardest ways to make money consistently.
Those who buy OTM call options follow the strategy of buying at low and selling at a higher price.
But limiting to this strategy will not help you in making profits consistently.

3. Trading Illiquid Options:

Liquidity refers to how quickly one can buy or sell something without a significant price movement.
A liquid market is the one that has active buyers and sellers.
Stock markets are usually more liquid than option markets as the traders are trading in just one stock whereas the option traders have many options contracts to choose from.
For example, stock traders will just need to select Reliance stock to trade, but options traders have to choose from different expirations and strike prices.
Also one should try to choose options of the underlying assets that are liquid.4. Limiting to one Strategy:

4. Limiting to one Strategy:

As we have discussed above, the option traders should not limit to one strategy when it comes to trading in the options.
There are a number of options trading strategies available like covered call, straddle, and strangle and so on.
Depending on the market situation and price movement, the option traders should try to implement different types of strategies.

5. Selecting the wrong Expiration date:

It’s usually difficult for the novice traders to choose the expiration date and they end up selecting the wrong one.
When selecting the right expiration date, the option traders have to consider certain parameters.
Liquidity in the underlying assets, the timeframe in which the prices could move to the expected levels, results, or any corporate actions that are going to be announced by the company are some of the factors that traders should look when choosing the expiration date.

6. Neglecting Volatility:

Implied volatility is a measure of calculating the expected volatility for a particular stock in the market for the future.
Option traders should analyze if the implied volatility is low or high, which helps in determining the price of the option premium.
The traders should analyze if the premium is expensive or cheap that helps in selecting the option strategy that they should take when trading in options.

7. Ignoring event calendar:

Option prices usually react when an event is coming like dividends or bonus shares.
Investors tend to read the increasing value in options as a sign of a big move in its current direction.
For example, price movement in the option at the time of Infosys results announcement tends to raise without any a rise in the underlying stock.
Thus it is important to keep a track of the event calendar.
Above are some of the mistakes that novice options traders usually make when starting trading in the options.
One should remember that a successful options trader is the one who keeps learning from the mistakes they make when trading in options.

Bollinger bands

Sandeep Palankar 4:13 PM, Thu, 14 November 24

One of the classic trend indicators is the Bollinger bands (BB) indicator, developed by John Bollinger. His book Bollinger on Bollinger Bands contains a detailed description of how to use it on its own as well as with other tools of technical analysis. BB is very popular among traders all over the world. It is a type of statistical chart characterizing the prices and volatility over time of a financial instrument or commodity, using a formulaic method.

How to use Bollinger bands to trade Forex

The assumption is that the price spends 95% of the time between the outer Bollinger bands and only 5% of the time outside of them.
Bollinger bands help to determine how big is the deviation from the average price of a currency pair.
The middle line may be used as a level of support/resistance, while the outer borders can act as profit targets. There are also strategies that suggest reversing trade from outside bands.
The slope of BB and the position of the price relative to the middle band allow judging the direction of the current trend. It’s an uptrend, if Bollinger bands have an upward bias and the price tends to be above the middle line.
It’s a downtrend, if the band’s bias is negative and the price spends the majority of time below the middle line.

TRADING PSYCHOLOGY

Sandeep Palankar 4:08 PM, Thu, 14 November 24

Trading psychology :-

Physical commodity trading features the exchange of actual goods. This is different from trading stocks or bonds, which are considered financial instruments. As such, physical commodities are tangible assets including metals, agricultural products, natural gas, crude oil, and even energy resources.

Some key elements of trading psychology include :-

Emotions : –Fear, greed, and anxiety are common emotions that can affect a traders ability to make rational decisions. Successful traders learn to manage their emotions and not let them dictate their trading decisions.
Discipline : –Discipline is crucial in trading, as it helps traders stick to their trading plan and avoid impulsive or emotional decisions.
Patience : –Successful traders understand that trading is a long-term game and that patience is key. They don’t rush into trades or get frustrated when things don’t go their way.
Mindset :-A positive mindset is important in trading, as it can help traders stay focused and confident, even during challenging market conditions.
Risk management :–Risk management is crucial in trading, as it helps traders protect their capital and avoid significant losses. risk management and use strategies like stop-loss orders and position sizing to limit their exposure to risk.
Overall, trading psychology is a complex and nuanced topic that requires self-awareness, discipline, and a willingness to learn and grow as a trader.