5 Tips When to Buy a Stock & When to Sell a Stock
stock market is risky but if you can understand then that is very easy today i discuss 5 Tips When to Buy a Stock & When to Sell a Stock
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TABLE OF CONTENTS
- INTRODUCTION
- CANDLESTICKS PATTERN
- MORNINGSTAR PATTERN
- EVENINGSTAR PATTERN
- HEAD & SHOULDER PATTERN
- REVERSE HEAD & SHOULDER PATTERN
- PIVOT POINT
- RSI
- INTERPRET PIVOT POINTS + RSI + VOLUME
- CONCLUSION
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INTRODUCTION
top five strategies to decide when to buy and when to sell stocks completely
based on technical analysis you might have experienced so many times that you
buy a stock it goes up for some time maybe and then it starts its downward
journey today we are going to try and understand what should be your strategy what
should be your focus point so read full article
- CANDLESTICKS PATTERN
let's start with the very first technique which is our candlestick chart patterns this is
one of my favorite chart patterns and believe it or not whatever data i have back
tested this has given a pretty good probability what is the probability of winning
your trades
- MORNINGSTAR PATTERN
so what is the first pattern it's the morning star pattern the step number one
there has to be a downfall step number two you have to see that three candlestick
pattern that magical candlestick pattern the very first one has to be a big red candle
followed by a doji and followed by a big green candle so when should you enter
possibility number one some people feel that they should enter the
moment when the third candle the green candle engulfs the first big red candle
possibility number one
possibility number two some traders like where we want to play safe okay and
they will wait till the third candle completely engulfs and closes above the first red
candle so they want to be sure they say even if i enter at a little bit high price we are
with that if your trade goes well then ideally you should see a very nice upward
trend post the morning star button but if your trade goes against your
expectation big question is where do you place your stop loss stop loss has
to be placed at the lowest point the lowest point is the wick of what the
second candle which is generally a doji candle i hope you have understood this
- EVENINGSTAR PATTERN
what is an evening star pattern now first condition is what there has to be
an uptrend post the uptrend you should again see that three magic candlestick
pattern what is the three magic candlestick pattern the very first one is a big green
candle followed by a doji candle and then followed by a big red candle ideally
when can you enter again two possibilities
possibility number one the third candle engulfs the first one or
possibility number two let the third candle fully form
let it close well below the first one and then we will enter the
trade if things go well ideally that's a classic way when you can short the
position that's a short sale and if your trade goes wrong then where is your
stop loss stop loss has to be placed at the highest point of the second candle i hope
two important points
- if you're interested to read more about these patterns these are known as
written a separate blog on that so if you want link is given below
let's understand an amazing practical application of the morning star and the
evening star pattern this is the chart of eyeshare motors okay it's a daily
chart here you can see how does the morning star candle formation happens
okay so here you can see step number one is what a downfall you can see a
big downfall and you know when the downfall starts a normal person is like i'll be
interested now i'll enter now i will enter and then ideally your subconscious mind
should sing that song and when should you ideally buy is when this morning
star candlestick entire pattern can be seen so which two types i already told
you third engulfing the first or after the third is complete okay and here you can
see how beautifully the stock has moved up after the morning star pattern
right and second one was the evening star pattern and in the
same stock you could see an evening star pattern right up on the top and you can
see that it was such an amazing run up for
the stock you saw those three magic candlestick patterns okay one two three and
after this was completed after this was formed and then it started its downward
journey i hope you have understood how the practical application should work for a
morning star iop[]ias well as an evening star
- HEAD & SHOULDER PATTERN
well the next one through which you can understand when to enter and when to exit
a stock is the head and shoulder pattern understood shoulder head shoulder
simple enter and stop loss so let's try and understand this practically this is a chart
of maruti now you can see below
this is nothing but the left shoulder then you can see a big head and followed by
a right shoulder now can you visualize this with my shoulders and the
head so you can see that left and right shoulders are almost similar in height
and head has a higher high okay now what happens is that you can now try and
draw a visual line joining these three points and this is called as a neck line
okay now once the neckline is broken on a downward side ideally this starts the
bearish trend of the stock
can i enter at this point when the neckline is broken
answer is yes
this is where ideally you should enter the stock this is going to be a short side
so this can be done in futures not in Intraday so you can short the stock when
the neckline is broken what can be your target now if you want to calculate it
precisely it's calculated something like this you have to first try and calculate
the distance between the neckline and the top of the head and whatever is this
distance place it from this point to this point okay so same distance is going to
be achieved the same target is going to be achieved below the neckline and if you
can see here this target was also achieved very recently on third may 2021 this is
how a head and shoulder pattern looks like now if you see here what happened the
stock started going down but then it reversed from here now should i have booked
my loss here what could be a stop loss it is generally at the shoulder point so in our
example here somewhere here around seven thousand seven hundred you can say
this could have been your stop loss i hope you have understood this
- REVERSE HEAD & SHOULDER PATTERN
now moving ahead to the inverted head and shoulder pattern now what will
happen shoulder head shoulder analyse neck line again these three points can be
joined shown in below chart
and this is where the neckline can be drawn this is which type of fat pattern this is
where your bullishness is going to be seen no what when should i enter is the first
one the moment this neckline is broken ideally here this is where you should
enter price target you should be calculating it in this way this is the
distance between the neckline and the head this distance you should add it up
here and this is where the price target is and in chart you can see this target
was achieved on 14th december it's an old one 2012 it's the chart of tata
motors now your stop loss could have been this point of your right shoulder i
hope you have understood when to enter when the neckline is broken when to exit
ideally at the target price achievement or if the stop loss is hit when is the
target price achieved that distance you have to count from neckline to the head and
stop loss is that point where your right shoulder point is made i hope both are
absolutely clear
- PIVOT POINT
let's move on with the third indicator the pivot point indicator i'm going to tell you how to first apply that pivot point on the normal trading view chart so first i go to
fx function i search pivot point standard i click that once i click that now i go to the
setting wheels in type drop it down and select fibonacci and then click ok once this
is done your levels will be set up as per the fibonacci
what do we mean by pivot?
imagine a clock now in a clock what is the center point where all the hands of the
clock are actually linked with so that is nothing but the pivot point so if i come back
to the candlestick pattern this is the latest candlestick chart of maruti and suzuki
given below
i hope you have understood this how to draw the pivot it was simple effects go to
pivot point put it on the chart and then select fibonacci what do you see here p
p means what pivot r one is what resistance one r two resistance to r r3 resistance 3
similarly on the lower side you can see s1 s2 s3 will stand for support
1 support 2 support 3 question is when to enter as per this pivot point strategy it
is said that if you can see the pivot being strongly held okay or you can see a very
big bullish pattern on the pivot itself breaking the pivot from the bottom you may
enter that specific stock now we see here in maruti has it broken with good volumes
or something like that by the way this is the volume no not very amazing
volume scene but it has respected the pivot level okay so i should be keepin a watch on tha
if you see the next day next day you can see a big green candle and this is supported with good volumes you can see here
pivot keto it's well above the pivot point plus you can see that this r1 level resistance
one has also been taken out so in the first one and half hour itself the volume had
surpassed the previous entire day's volume so that shows how big strength is seen
in that stock so you can see that big green candle being formed that is where
during the day one could have taken a trade r1 broken but you can see that at r2 it
took a resistance and came down a little bit today on 23rd of june you can see that
the stock has also broken the r2 and now it is going towards r3 okay now if
someone would have already been
long a person may have taken partial profits here because ideally r2 generally acts
as a strong resistance but what happens here you can see that the volumes are also
very high even today so there's a great chance that it might
test r3 tomorrow but is this the only way just say the pivot take the position can you
do that answer is no you have to check out macd you have to check out rsi you have
to check out volumes and then based on the big combination of
all these things you have to decide whether to buy or whether to sell whether to
enter whether to exit all these things
- RSI
so let's move on with our next parameter which is rsi relative strength index now
what does this indicator tell us strength strength at which the stock can go in the
upward direction it shows the momentum of that stock so possibility number one
i'll say that the stock will go up
possibility number two i'll say that the stock will go up but with good strength with
good speed and if i want to know the second one strength speed that is indicated by rsi
- now how to put it in trading view?
you have to just click that fx and then hit rsi that is relative strength index so
generally what are the inbuilt parameters inbuilt parameters are 70 30 what i
always put up is the 60 40 parameter so i'm just taking it down to 60 40 and
then i press okay
i'm giving you an example of asian paints this is around december it has broken the
60 rsi you can see 60 rsi is broken on the upward side from below now once it
has broken this is ideally where one may enter a stock again same thing just because
rsi across the 60 are you going to enter answer is no this is one of the indicators
correct so rsi broken 60 from below that's where
ideally one can consider entering and now see this i'm just putting this as a vertical
bar okay just for those who want to learn about this all to v is the shortcut for this
automatically a vertical bar is drawn so this is where the 60 level was crossed it's going up
the rsi at this candle rsi at this candle is 80.87 so it is said that above 60 the stock
starts showing strength but once it reaches 80 now it is tired now see it has gone up
so much it will be tired now at some point of time it has to go down right
- point to be noted
number one is once it crosses 60 it is ideally a green signal to buy once it
is at 80 it's a warning signal stock is tired you may exit your position
and one last time is this the only indicator answer is no i hope you have understood
very well how to use rsi to decide when to enter and when to exit
- INTERPRET PIVOT POINTS + RSI + VOLUME
well let's move on with last strategy i'm going to tell you this combined strategy
wherein i want to check three parameters
number one pivot
number two rsi and
number three volume
how can i use these three in combination to decide when to buy when to sell okay for buying let me tell you ideally what would i check number one rsi should have cross 60 number two volume should be highest in the last five trading sessions
and number three is that i would check whether that candle has very clearly given a breakout above pivot point and it is somewhere between that pivot
to r1 so let's see if i can see the all these three conditions being met in anyone stocks
jubilant food works we are somewhere around this is kind of an old data this is
4th of august 2020 now which is this point this is the point when 60 has been hit so
again i'm just drawing alt v here for vertical line this is where the 60 point has been
crossed you can see in picture chart now if you see here just one day before
pivot has been honored and the stock tried to go up but did not close at r1 it came
down again so it was not above it was not able to go it was not able to close
above r1
what happened on the next day next day the this stock itself has opened up as a gap
up and it has shown a very nice positive journey throughout the day and it has
almost closed at the highest point almost right now let's see what has happened
with the volume candle now you can see that this is the volume candle in picture
and it is way above all these previous candles generally has checked only last five
candles this is like last what 15 20 candles whatever i can see on the screen one may
say out of those this candle is the highest so three all three criteria number one
criteria is rs i went above 60 number two it is going strong it has already gone above p1 and it is
already testing r1 and number three volumes are very high now ideally if you
remember i told you r2 can be a question point so immediate next day was a
caution point for me but now i'm going to combine it with volumes are also
going very strong on day two also you can see that rsi is still above 60. you
remember i said that the stock will go up and up and up and up but it will be tired
at some point in time what is that some point in time when rsi is about to touch
80. so if you see here at this very point it has touched 80 okay i'm drawing a
horizontal line this is the eight take a line and which one is this day again put a
vertical line this vertical line you can see this was the highest point again seven
percent move in a single day ideally this is where we should stop because from
here if you can see again the stock is slowly and steadily the rsi is going below the
80 level and eventually it has gone even below 60 level does this mean that the
stock compulsory must show downward journey no can you miss out on the
probable profit answer is yes shall i show you what happened
the downward journey did not start and this is what was the highest point after
which a downfall started so please understand with technical analysis are you going
to get all trades correct no but is your probability of winning going to increase
answer is yes i hope you have understood how the combination of rsi volume
and pivot can be used together to gain more confidence while entering or exiting a
specific position
CONCLUSION
Using these strategy you can invest more and more and get a profitable return
i recommend you to use INTERPRET PIVOT POINTS + RSI + VOLUME strategy all you
need to focus on all strategy at a time if you have any query just comment down or you can
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