Monday, January 19, 2009

The Two Themes in Indian Stock Market.

There are only two themes in Indian Stock Market.The market is in a trending mode or in a ranging mode.When the market is trending it can be either in an uptrend or downtrend.In an uptrend you can buy pull backs and in a down trend you can sell bounces.In the range bound market you can sell moves towards the top of the range when buying dies out OR buy moves towards lower end of the range once selling dries up.These are the two themes existing in every time frame.A trend in a shorter time frame may be part of a range in a longer time frame.A range in a shorter time frame may be a consolidation with in a larger trend.This is one of the very basic understanding a stock trader needs to have.Once you conceive these two theme you can formulate your stock trading methodology using these themes.Warren Buffet said " Be fearful when others are greedy and greedy when others are fearful " .The emotions of greed and fear makes the price extremes in any time frame, even in trending or in ranging markets.The downside extreme of the market is reached when the stock traders are ruled by the emotion of ' fear' and the upside extreme is reached when the stock traders are ruled by the emotion of 'greed'.Once price reaches any one point in these extremes price retraces in trending or ranging conditions.When you have decided your style of trading, scalping,day trading, swing trading or position trading , you can choose your time frames and design your system parameters to suit your style using these themes.Good trading to my readers. Muraleedharan.

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