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Jayesh Patel

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Trading Strategy: Lessons

Few months back I started sending out emails to friends and relatives about basics of my techniques that I use for short to medium term trading. The purpose was to share my knowledge and invite greater participation to test these techniques real time in US stocks. Though the total number of SIGNALs I use are more than ten, I sent out four lessons explaining four different signals. The result: each of those emails were great success, very accurate and great timing... I have put them here, if you are interested. Try them.

Trading technique basics
Summary of first 4 lessons: Nov 3, 1999. (Quick view on stock charts)
Lesson 1. FullStop, Aug 11, 1999
Lesson 2. Gangotri. Aug 17, 1999
Lesson 3. Kick. Sept 21, 1999.
Lesson 4. Jump. Sept 22, 1999.


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Trading Strategy basics: Let me explain you all my 'indicators' which help me 'guesstimate' (guess+ estimate) very basic 'demand and supply' dynamics of mysterious market and to capture changes as and when they happen. Tell me if you guys are interested because this is highly technical. It is also the most courageous and unique approach to analyze the market trends. I understand that each of you may not be interested in it. If so, pls ignore this email.)

BASIC ASSUMPTIONS AND FRAMEWORK:
Every news, fed action, corporate result, analyst's recommendation or anything you may think of affects a stock' price (list of such influential factors would run into hundreds). As you would appreciate, the combined effect of all such factors is often so complex, 'mysterious' and offsetting that it often makes us believe that the markets are 'crazy'. However, each such development continuously boils down to 'shifts' of demand and supply curves which in turn pushes prices into a different 'range'. The shifting of demand and supply curve is very dynamic and hard to interpret individually.
I ATTEMPT TO WATCH AND UNDERSTAND THIS VERY LOWER LEVEL OF MARKET BEHAVIOR and for this all I use is daily prices- Open, High, Low, Close and sometimes Volume. I understand that ONE can never be cent percent true about markets. So I target that I should be true 70%.(So pls don't bug me if I am wrong. However I would be really happy to discuss failures and learn from them.) Trade only when the potential for profit is three times more than likely losses. Be patient and wait for such opportunity.

The above three things give me three different prices:
Action price (at which to buy or sell),
stoploss price (the price at which I would acknowledge that I made mistake and would stop my losses from accumulating further) and the
target price (at which I would book profit if I am true).

Unlike most other analysts, I give lot of importance to the daily OPEN price. Open price is the price at which a stock/market starts trading. Yesterday's prices, overnight developments, newspaper articles, nightly business reports etc and also institutional investors and all sorts of traders with their 'homework' start trading when the market opens. So the Open Price is a very good indicator to understand the aggregate effect of everything taken together that has happened since close of yesterday's market and opening of today's. I hope I am able to make my point clear with you.

GUIDING PRINCIPLES AND OBJECTIVES:

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Lesson 2. Gangotri. Aug 17, 1999.
This is the last E-MAIL related to STOCK MARKET that is sent to almost everybody who is on my list. Unless you have responded positively, you would not be sent such stock related emails in future. Sorry.
Do you remember last e-mail? It was sent to everybody during the market hours when the NASDAQ was approx. 2510. Our target was 2610 to 2690. We are there.Today, something significant seems to be happening. NASDAQ is at 2660.

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(Use your own judgment and strategies in making your investment decisions.)