Technical Gaps: A whole new innovative science in trading raised from million years old truths of “Spirituality”.

Sometimes we say trading is a game of numbers; gambling is another word used for trading. People who make profits or losses conclude their experience as a matter of fate.  But do we really think that there is a hidden meaning in every number appearing on your trading terminal!

If we go through the spiritual truths and their related literature we can learn that their lies an outer world to which we can communicate, but what lies between the outer world and our present body world is the interesting thing. It is a GAP. There are various levels of this GAP, which acts as resistance and support to your evolution process, once you start enlighten your soul you are able to break the resistance and enter into the next GAP level. This is how our soul evolves.

What if I tell you that the million years accepted truths can also be applied to financial markets prevailing all over the world. There are GAPs that exist in the price section of the security. As per technical school of thoughts Gaps are the areas where no trading takes place,as found by Dynamic Levels, I must tell you these new innovative technical gaps are the levels where whole lot of trading takes place and they acts as better resistance and support levels for prices . Like our soul, the market evolves by breaking and resisting on different levels of these gaps.

How to identify these gaps?

Like average true range (ATR) in technical analysis there is a new concept that is ADM, Average Daily Movement. It is high subtracted by low of daily movement of the market, this value is averaged for the last 250 trading days, the resulting value is ADM. Suppose we are looking at the chart of a security irrespective of time frame i.e. daily, weekly, monthly (no intraday time frames as ADM is calculated on High-Lows of daily levels), if there exist a difference of more than one ADM between two lows or two highs of two different candles; we say there lies a Technical Gap.

How to use these gaps?

Gaps provide important support and resistance level. If we are analyzing an uptrend in the market and there lies a gap in the lower side, this gap acts as a good support level. We can execute a buy entry at that level. Same is the case when we analyze downtrend and finds a good gap level in the upper side, this gap level acts as a good resistance and their we can execute a short sell position or book our profits. When these resistance and support levels break, we call it breakout. Generally successful breakout happens 2 times out of 10 times of occurrence of breakout, rest 8 are false breakouts.

Gaps and their relevance with Time frames:

Gaps exist at daily, weekly and monthly time frames. As time frame increases the strength credibility of gap level increases. It is because weekly gap means price has already tested itself for the period of five trading days, and monthly gap means price has tested itself for the 21-23 trading days over that month. It means noises arising in market due to occurrence of news; events etc are already discounted over the time period.

For more clarification and any query contact me on: Jainarpit.upes@gmail.com

The Fibonacci Relevance: The series with divine ratios

By name Fibonacci seems so complex but what if I tell you that all your surroundings, your body, your planet on which u live, the whole galaxy is configured itself as per the series which was invented by a mad man named Leonardo Fibonacci in 1202 when he was observing rabbits breed. This series has find importance in many facets of nature till now.

The series is as follows: - 0, 1, 1, 2, 3, 5, 8, 13, 21, 34….and so on. What do we see? Each number in the series is the summation of the previous two numbers. For example 2= 1+1, 13= 8+5 etc.

Even the human anatomy is full of Fibonacci numbers or ratios. The core human body has five outlets (two hands, two legs and one head), and each outlet has five other outlets. For instance, the head and legs culminate in five, in turn, fingers (including thumb). The head has five ‘outlets’ in the form of two nostrils, two ears and one mouth.

I won’t say that occurrence of Fibonacci numbers are universal but there occurrence are large enough that cannot be ignored!

The ratio of each number to its succeeding number tends towards 0.618. The ratio of each number to its second succeeding number tends towards 0.382 and so on.

Here comes this magical series relevance in the magnificent industry of financial markets. Traders study chart and we know that market moves are very similar to moves of a crawling snake. Often market moves in trend’s (up: down) but as we study in books they are not exactly the same when we look at live markets.

Market retraces itself when we study it for a particular time frame. Even most of the times market bounce back at the levels defined by this series. Most common are 61.8, 50.0, 38.6, and 23.6.

Now it sounds good as now by analyzing market based on these levels we can predict when bulls will take the charge in falling market. It is like being god of the market. Isn’t it?

The Fibonacci levels are used by jobbers and scalpers at large scales to buy on dips in up-trend and sell on rallies in down-trend and we use the Fibonacci levels in pivot point analysis also.

There are more tools that can be seen in state of the art software’s of big boys (research companies) in financial market. We should use at least 3-4 of them as ultimately we want good decision to be made!

Road-map of combining different technical tools in trading:

Today, we are living in an age of internet. Knowledge from various sources is at our doorstep with few simple clicks. I believe mere availability of tremendous knowledge is not a need of time, we should select among them to reach our goal in short time as we say “Time is precious”.

There are lots of tools/indicators available today to carry out technical analysis on charts. Traders and researchers develop different type of tools day by day to lead in the quest. While approaching for new tools we forget the basic idea that by using those tools we just wanted to trace the psychology of markets.

We should choose among the available tools/indicators to come out with a sound result and low risk decision. We should follow a predefined methodology in deciding which tool to use at what time?

As per my experience and industry specific standards the process should involve following steps:-

Step 1- Define the basic trend of security

Step 2- Drawing trend lines with important support and resistance price levels for future reference.

Step 3- Incorporating short term, medium term and longer term moving averages on the price chart to help us get a better perspective of the price behavior.

Step 4- Determining price levels using the retracement theory.

Step 5- Adding indicators- to actually “tell” us what to do with the security, i.e. whether to buy or sell.

Playing in stock market is a game of probabilities; through analysis we tend to increase our probabilities of success. To arrive at the meaningful analysis we should combine different tools in a pipeline; one after another. Otherwise availability of different tools will only lead to confusion nothing less or more than that! 

Need of emotional maturity while Trading?

I have seen many traders whether playing on large spreads or short (intra-day) spreads, all have different characteristics and different strategies all the time.

But one thing that is common are most of them behaving in the same way when trade comes to profit or loss!

When people are free to do what they please, they will imitate each other (Eric Hoofer). The same thing can be applied to the trading industry.

Have you ever been to floor of broking or trading companies, if not then you must go there once, you will see a hell lot of people glued to big LCD’s where rates of different securities are turning red and green. No matter you identify the changing color or not, people faces will tell you how much green color they saw today. People clap on consecutive three or more greens and can be seen tensed on two reds.

Here the role of emotional maturity comes in to picture, if you are emotionally mature then it helps dealing with these kinds of situations. Don’t! Panic if you make loss or don’t give a self-pat when you make profit- this will help you to make better decisions to handle your trades. As this industry is based upon the decisions you make at the right time, better decision making will lead to better profits in future.

Don’t get addicted to what you get by gambling between the numbers of clicks!

People have general tendency that they get addicted to trading no matter it is the time of good opportunity or not, they just marry with the trade. The thought process behind this is simple the more I will trade-the more profit I will make. But this only leads to turning your savings into losses in trading.

Do not try to kiss all the girls!

I don’t mean the exact words, in fact I mean do not put all your fingers in different securities when you cannot handle all at the same time, this will only lead to erupted volcano of losses many times.

Be emotionally mature; enhance your decision making capabilities in weak times.

You will turn yourself into a successful trader and a better human being indeed!

Africa oil and gas scenario: A complete research on upcoming energy developments in Africa

The energy industry is the totality of all of the industries involved in the production and sale of energy, including fuel extraction, manufacturing, refining and distribution. In last two decades the Energy sector has seen some significant developments.

The first and foremost includes “Demand-Side Development”, the awakening of the two Asian giants – China and India. Both these economies have launched an energy-intensive rapid-growth paradigm, playing ‘catch-up’ in the unstoppable global development game. With their combined population accounting for more than one- third of the global population and their low per capita energy consumption base, these two economies will block an increasing share of the declining global energy sources, especially hydrocarbons.

The other major development in the energy industry, this time on the supply side, is the emergence of new hydrocarbon supply regions in Russia, Central Asia, Africa and Latin America. Of all these regions, Africa has indeed become the target of predatory acquisitions and unpleasant practices for international extractive enterprises engaged in the extraction of minerals, gold, diamonds, oil and timber. Many global giants such as Baker Hughes, BP, Chevron, Exxon-Mobil, Gazprom, Petrobras, Petrochina, Royal Dutch Shell, Schlumberger, Total etc. have already marked their presence in African market.

Africa is the world’s second-largest and second-most-populous continent. It is surrounded by the Mediterranean Sea to the north, both the Suez Canal and the Red Sea along the Sinai Peninsula to the north east, the Indian Ocean to the Southeast, and the Atlantic Ocean to the west.

Africa’s share of global oil and gas production has stood at 10% and 6% respectively over the past 24 months. 2012 has been marked with extensive activity by IOC’s and expectations that the unexplored acreages of African coasts would yield substantial resources. Africa also produced an estimated 230 billion cubic meters of natural gas in 2012, and this is likely to increase to around 250 bcm in 2013, with new supplies from Angola, Mozambique and Tanzania.

Future prospects of emerging oil and gas opportunities:

With huge resource base in Africa it can be forecast-ed that it will be a new center of attraction for investment in hydrocarbon sector in the world. As per “business monitor international and Reuters” there are several upcoming oil and gas projects in this region including  6 new refineries  planned in Algeria , 200,000 bpd refinery in Zaire by Angola. Moreover ,Congo plans to build a second refinery in the country .as far as major  investments are considered Egypt is all set to spend US $18 bn in this sector and in 2016 African richest man Alhaji Dangote is willing to invest US $8 bn in Nigerian refining sector. With increased production of gas in Mozambique, Tanzania their lies a huge investment potential for financial and hence infrastructural development.

 Among the countries with emerging oil and gas developments, Mozambique, Tanzania, Uganda, and Madagascar have shown great progress towards commercial development of newly discovered resources. Uganda and Madagascar are most likely to be the next oil producers in the continent. Mozambique will probably be the first country in East Africa to develop the capability to export liquefied natural gas (LNG), possibly followed by Tanzania.

Trading Advisers: Angels or Demons?

We see many people trading all day recklessly without any analysis. They are just checking their luck with every click when they enter into a new transaction.

There are another bunch of people who are shooting guns on the shoulders of advisers. These advisers are angels for their clients sometimes but the same advisers turn demons when they enter at the wrong time.

We enter into a transaction, when make loss we demand advice's of some high minds existing on this earth and believe they will turn our losses into profits with some magic band, but end up with amplified huge losses. Do we judge ourselves that was it a right time to call adviser or should have consulted him earlier?

It is well said that “Don’t waste your time beating on a wall, hoping to transform it into a door”, then why do we carry our losses for the long time when we are unable to bear them.

Brokers will provide you ten times of leverage in Indian market and five hundred times of leverage on foreign market but we forget while using that leverage we are also amplifying our forthcoming losses associated to it!

Averaging the loss is a trending concept in looser market, but do we really average our loss?

Traders with limited skills and knowledge enter into trade and act stubborn in reviewing their decision once made. They forget that they were dealing with the future, so whatever analysis they did they were bound to mistakes some times. As a trader your aim should be to decrease the number of wrong trades and increase the number of  profitable trades, but they make one decision and keep supporting it until all their money is evaporated from their accounts; Do we trade just to prove ourselves right? Or to make profit!

Though it sounds difficult to master on this discipline to be able to accept our own mistake but it is necessary too.

Remember discipline is famous in two things the most: ARMY and TRADING

If u miss this fact then dear reader welcome to the hall of fame of loser’s!!!