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Trading Lessons: Divergences

December 30, 2008

These days the markets are generous to the beginners. Extremely generous to the beginning traders. They are learning to trade simply as per their entry setups and exit setups. Quite generously they are not facing any whipsaws, backlashes, traps etc.On 26th, a simple observation of trendlines, price action, pivot levels and volume watch could land a basic beginning trader with an excellent “Short till it drops” setups. With proper exercise in stop loss management, it was pure gold in trading.

A simple setup for shorting NIFTY

Now, to carry off the good work, yesterday was an excellent day to learn,realise and trade a classical chart pattern like divergence. [Exhibit please!]

A Lesson on bullish divergence

And as a setup like this will have it, it rewarded a trader who took a good calculated risk. In fact rewarded it well.

In fact,as such setups go, a beginning trader should, in my opinion, watch price action, volumes extremely closely. And depending on whether the prices are trending or ranging should select one of the indicators. I use MACDhistogram and Stochastics, but other sytems like Directional Movement,RSI and %R are equally good.

In effect, it must be realised that it is not the tools which make an artist, its the artist which makes the tools.

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2 Comments leave one →
  1. neet permalink
    December 30, 2008 9:07 pm

    sir where to get this charts

  2. December 30, 2008 9:19 pm

    Hi Neet,
    First and foremost new year wishes to you.

    And yes, dont call me Sir. I am Jump.:)

    To get these charts, sign up with an Indian market chart provider

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