Mnemonics and stock trading: patterns and rules

Below is the list of patterns,rules(or whatever you call them) that I follow or check before I enter the market or a stock……The mnemonics that I use also has been included:

I call them my ‘checklist for trading”! I don’t think,one can do well in trading(or anything else in life),if one doesn’t have ‘pre-defined’ rules for trading!! A trader without pre-defined,tested rules is a novice,confused,indiscipline trader. It doesn’t matter how long the trader is trading in the market,if he doesn’t know his ‘rules’ of trading well,he is just fucked!

I have kept the ‘mnemonics’ with the rules. These mnemonics are what make me easily recall hundreds of different techniques,rules,ideas or trading experiences I have from real trading……

The patterns:

1. Market cycle/phase(ie, Wyckoff method/where the market is at the moment) – Wigs + Cycle+Startrek’s phazer
2. Market Structure/Trend(Structured+Dynamic…hiher high,higher lows) – Fly+Train
3. Seasonal trading – Scissor
4. Candlesticks patterns….(ie,Pinbar/Hammer) – Candle/ Pin+Hammer
5. Trend continuation(i.e….pullback type trading) – Train+Con
6. Trend termination (reversal..ie.V pattern) – Train+Termite
7. Support resistance failure(ie,breakout/breakdown from a range) – Bread
8. Support resistance hold(range trading….buy at support and sell at resistance) – Soup +Old
9. Contraction and expension – Con+Ex gf
10. Impulse+Momentum – Mombati+Pulse machine
11. Pullback pattern(simple,classic,complex) – Harpoon
12. L pattern – L letter
13. W patterns – W letter
14. Volume Spike and Volume Trend – Bulb +Spoke
15. Pullback failure – Pully+Tail
16. Elastic price pattern – Elastic Man
17. First pullback after breakout – Floss+Pully+Bread
18. Descending/ascending patterns –  Disc+Ace
19. Oscillator trading– Pendulam
20. Historical breakout – Histacin tablet
21. Retesting – Tester/trash
22. Extreme Sentiment – Ex girlfriend+Scent
23. Value Price – Vulve
24. R multiplier – Rainman

Here are other related articles:

Mnemonics and stock trading: introduction

Mnemonics and stock trading: psychological biases

Volume Spike and Trading in DSE

There is a trading strategy that has stood the test of time in Dhaka Stock Exchange since 2008!

And that is: Volume Spike.

I remember that even I developed an indicator for tracking Volume Spikes in the stocks of DSE many years ago.

I still use that indicator. And majority of my successful trading has been based on that indicator of finding volume spikes!

In recent times,I have been trading both “GP and BRAC” because of the way their volume spiked on 09/07/2020 for GP and 09/08/2020 for Brac! And both have been very successful trading,as always!

Nothing can beat Volume Spike. It has been giving me money for ten years!

I added Brac even on last trading day just because of the way its volume was moving. And today,Brac had risen 5%! This is why I love Volume Spikes so much! And it is one of my best trading strategies!

PinBar in DSE and in other markets

I have seen this again and again………..and again….and again……Not only in Dhaka Stock Exchange,but also in other exchanges including Forex market,which is dominated by Technical Analysis!

PINBAR!

Pinbar at the top seems to have a high rate of success. After the Pinbar appears,we can expect some falling days,indicision days later. It is crazy how many times Pinbar weakened the Index of DSE. Pinbar has been so important in my own trading that I have added it to my trading strategies!

In the latest move of DSE,a Pinbar appeared on 17/08/2020! This weakened the DSE because of which we saw indecision and falling days in DSE later.

Today,too,another PinBar appeared showing that Index is rejecting the 5000 price level again. Very interesting…..Though,today’s Pinbar is somewhat bullish. 

Why are sellers so active and buyers so nervous at this level is not clear to me. But it is clear that market is having a hard time to penetrate 5000!

Looks like,Market needs more time and force(from buyers’s side) to breakout from the 4900 to 5000 zone!

Let’s hope it does in coming days. I hate October month. I don’t usually trade in October! I am desperately wanting the index to go above 5000 before October comes!! 🙂

But my “GP and BRAC” are doing well so far. So,I am not very concerned about Index at the moment…..

 

Sweetspot trading

The best way,I found,to trade in the market is to find the ‘sweetspots’ in an uptrending stock or sector/or index! When a stock is in uptrend,it goes through a series of ‘higher highs and higher lows'(pullback) type situation.

Our indicators must be able to detect those ‘higher lows’ areas,where we can re-enter a stock/sector/index. If not,we are doomed!!! We should be able to mitigate the chaos of price movements in a chart and catch the optimal entry positions in an uptrending stock!!!

May be,I should not be too concerned about missing the first move(usually V pattern) of a stock. V is pretty hard and risky pattern to trade. “W” pattern is better than “V”! I should be waiting for the first pullback/sweetspot to appear!!! I have seen in recent times,a lot of stock going through this pullback type situations and gave profit from pullback…ie,SPCL!!

I the issue of missing the first pullback by not being able to detect it on time.Even if I could detect the first ‘pullback’,I would start to doubt its potential,so would not enter…..Very problematic situation.

That is why,I have developed some indicators,with which,I can trade this type of ‘sweetspot’ situations very very well and with ease!!! I found that if a stock is trading in a ‘straight zone'(white line),it means,it is in rest or pullback. And in both situations,there is a high chance that the stock will move further! So,with my new chart setup,it has been easy for me to detect the ‘sweetspots’. Got some fine trade recently in DSE and Forex with the chart setup!

 

 

 

Here is a successful trade by detecting the first pullback/sweetspot….

 

Some stocks with volume spikes

Here are some stocks that have been going through volume spikes in the DSE in recent times….There are a lot more!!!

Accumulation is happening in them! It is clear! But will the traders that are accumulating now be able to push the stock higher? Well,we cannot know for sure! Just because big traders accumulated a stock doesn’t mean,it will surely rise.

Because in order to get the stock higher, the big traders will have to allure the ‘mango traders’ in the market to buy the stock. If big traders fail to allure the small traders to buy the stock,the stock won’t rise!

Now,that is ‘unpredictability in action’.. 🙂

 

This is a companion post of my previous post on Volume Spike

 

Volume spikes in stock trading

When I trade in DSE which is a stock market,I heavily focus on Volume! I am not sure how we can successfully trade a stock without volume!!! Yes,we can. But we don’t need to…or,we ‘should’ not….

One the other hand,when I trade in Forex,I don’t use Volume in anyway. Trading in Forex doesn’t require volume analysis at all. It is all about price there!!

Why volume?

Clearly,It has more advantage than disadvantage!!

The most important advantage of it is: volume is a leading indicator. Not a lagging indicator. It indicates what happened in past,and what has just happened at present. And it is one of those indicators that clearly shows what is gonna happen in coming days in a stock! Unlike ‘moving averages’,volume shows the what the smart money is doing right now! And based on that,we can take better decisions….

There are two types of volume trade in stock market:

1. Volume spikes
2. Volume trend

I personally treat them separately and I mostly trade “volume spikes”….I rarely care about volume trend.

So,what is volume ‘trend’?

Well,it is easy! As the price goes up or down,volume also goes up and down. This is the ‘trend’ of the volume. As a general rule volume should go up or down as the price goes up or down. Volume trend is the totality of traded volume during a period of time.

In the following image,the arrows are showing volume trend.

 

And what is volume ‘spikes’?

Volume spikes happen independently of the trend. A sudden breakout in volume is volume spike! A spike/breakout in volume tells us that something significant has happened in the stock. The stock may go dry,volumeless for some days,then,suddenly there is a spike/breakout of volume from a specific level. If that happens,we need to check out the price and try to interpret what the heck just happened!!

If we see the chart below,after some dry volume,there is suddenly a burst of volume in the stock/sector. And that happened just at the bottom indicating ‘buyers’ are coming in.

Then,again,we can clearly see ‘huge spike’ of volume just at the top of the price level. This clearly indicates,no more buyers are left in this stock and smart money dumped their holds to the mango people…..

Volume spikes happened independently of the overall trend….We could have a couple of dry days,then,suddenly one significantly high volume day. Then,again dry days before the trend changes.

 

 

 

Bottom line: a sudden breakout/rise in volume tells us a trend change may be coming!!!

I feel,interpreting volume spikes is easier than all other techniques.

Now,here are some things that volume spike could indicate:

1. Volume spike indicates accumulation inside trading range! This is a crazy good and highly effective thing to observe in the market.

2. Volume spike indicates an overbought or oversold situation. Another very important one.

3. Volume spike indicates a breakout happened. Well,what can I say! In recent times,this has happened a lot in DSE!

4. Volume spike indicates that the underlying trend may continue…After a pullback,new buyers come in pushing the volume high.

 

I will elaborate these four things sometimes in future!!