Module - III

Module - III
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Introduction
In this module we will learn some important

aspects of Trading.
Types of Trading Styles
Different Types Of Trading Styles – Which One Is For You?
The world of trading has a lot of variety in terms of opportunities. Due to the vast variety of
opportunities that exist in the dynamic mechanism of the stock markets, many different
types of trading styles can be applied. It is very important to choose a trading style which
suits your personality and preferences. It is also heavily dependent on your psychology. To
become successful you will need to prioritize a style according to how your mind works.
It basically depends roughly on,
 Time you have

 Money on want to invest
 Knowledge you possess
Once you become Master, You will not in need of anyone’s advice to invest your hard
earned money. You can deal all these types all by yourself.
Intraday Trading
Most commonly practiced among retail traders in the Indian stock market, positions are
squared off before the closing hours of the market. Intraday trading philosophy is that
overnight exposure is risky. Traders book profits or losses quickly and do multiple trades
every day. It suits people who are least bothered about fundamentals or the things that are
considered important to be a successful investor in the long-run. To them, it’s all about
money management, timing entries & exits and position sizing appropriately. You can be
trading the momentum. Intraday trading involves taking on additional leverage to generate
higher returns. They are always looking to make higher returns than other trading formats. It
is also among the most aggressive types of trading styles. Intraday trading format thrives on
high volatility as the number of opportunities go up during such times. A successful intraday
trader understands the importance of consistency and the power of compounding returns on
a short-term basis. If consistency is maintained, then returns can be compounded on a
monthly or quarterly basis. Intraday trading is only suitable for those who can dedicate a fair
amount of time tracking the movements of stock markets regularly.
Swing (Short-term) Trading
The principal difference between intraday trading and swing trading is the timeframe. Swing
traders attempt to predict the short-term fluctuation in stock prices overnight. So positions
can last anywhere from 1 day to a few weeks. The leverage used by Swing traders is
generally lesser than intraday trading. Due to overnight risk, stockbrokers in India charge
SPAN + Exposure margins. In a way, it enables traders more firepower to withstand
overnight price movements and hold positions for longer hence trying to book higher profits
per trade. If you like to analyze short-term price movements using technical analysis, then
this is your ball game. True swing trading also involves a great deal of money flow analysis. If
this is what you like doing then stick to this trading style. It is rewarding and the price
movements are more predictable. However, risk management will need to be more
sophisticated. In this style, you must be able to ignore minor intraday fluctuations without
breaking a sweat or getting worried. However, most swing traders also do intraday trading
so it is one style which can be merged but, it is important to draw a line somewhere and
focus on specializing in one particular trading style.
Positional (Long-term) Trading
This is a type of trading style which ignores the minor short-term fluctuations that swing
traders are fully focused on. Positional trading involves lesser leverage than swing trading.
The holding timeframe of each trade is higher as these traders anticipate a big price
movement in the coming future. Timing the market is not the top priority for this category
of traders as they are willing to weather the storm and wait out a few months to see a large
gain. Their focus is usually a hybrid of technical and fundamentals. To be able to hold
positions for a longer time period, they feel like they have to be sure of what’s happening
within the company. They’re usually looking for the underlying stock to gain more than 20%
in the near future. Positional traders have the aptitude and inclination to lean more towards
investing in the long run.
Time Frame
What does Time Frame mean?
Time frame refers to the period that a trader chooses to operate in. The time frames can
encompass seconds, minutes, hours, days or months. Traders may use multiple time frames
to analyze and track a trade or they may just stick to one. Time frame is also written as
timeframe.
In trading, finding the right time frame can be a journey of discovery. Generally speaking,
the shorter the time frame, the more technical signals it will produce. A 5 minute chart will
naturally have more technical signals and chart patterns than a weekly chart because more
price action is being displayed on the smaller scale, whereas a weekly chart shows daily
price action by summarizing all the minute and hourly price action into a single daily data
point. If a trader wants to be in the thick of the action, making decisions at a rapid pace,
then a shorter time frame like 5 or 10 minutes may be best. If a trader wants more time and
conformation on signals, then an hourly or daily chart may be best. A beginner trader
should try out different time frames to find the one that suits him or her.
What is the ’Best’ Time Frame to Trade?
Use Timeframes that Match Your Goals
Often times, traders can get conflicting views of a Stock by examining different time frames.
While the Stock Price on daily Chart might be showing an up-trend, the hourly can be
showing a down-trend. But which way should we trade it?
This can provide conflicting signals and counter-productive unrest in the trader’s mind as
they are attempting to line up trades. For this reasons, it’s important for the trader to plan
the time frames they want to trade as they build their strategies.
In many cases, traders can benefit from using multiple time frames; in an effort to
incorporate as much information as possible into their analysis.
Incorporating a longer time frame will allow the trader to see a ‘bigger picture’ of the Stock
so that they may get an idea of ‘general trends,’ or the sentiment that may exist; while the
shorter time frame chart can be used for plotting the actual trade. This leads into a very
popular permutation of technical analysis in which traders incorporate multiple time
frames into their approach.
Here are the timeframes used by different Traders using Trading style.
 Intraday Traders : 1 minute, 5 minutes, 10 minutes, 15 minute.
 Swing Traders : 30 minutes, 60 minutes, Daily.
 Positional Traders: Daily, Weekly, Monthly.
As I told you earlier, you must know what Type of Trader you are. Then use these
timeframes to trader with.
Trend exists in all timeframes, Trend in one timeframe may or may not be the same in every
Timeframe.
In simple words if you are a Long term (Positional) trader and you see a clear Trend in Higher
timeframe like Weekly/Monthly, then it doesn’t mean that you will buy it for few days hold
as a Short term (Swing) trader.
Similarly, If you are a Short-term Trader and you see a Up-Trend then it does not mean that
you should go ahead and take Intraday Trades. (It is possible but needs far more experience
and knowledge as Intraday Trading is all together a different world and it’s covered in detail
in another Course, If you like you learn it in easiest way then please click on the link Below,
http://www.managetrading.com/PriceActionCourse.aspx
NIFTY in 5 minute Chart NIFTY in 60 minute Chart
Crossover
NIFTY in Daily Chart NIFTY in Weekly Chart
Same Chart different Trend and sentiments:
In the chart above, you can see the numerous opportunities.

Trader would have had shorted the Nifty in Day trading (with 5 minute chart) within shaded
area.
A Trader with Short-term view, when see the chart in 60 minute timeframe would like to
stay away from the chart as Price has breached 100 SMA Trend filter.
Same shaded area, for a trader doing Multiple time frame analysis, however, can easily spot
the Buying opportunities for Short-term with Daily timeframes which offers the ‘bigger
picture view’ from the longer-term chart so that traders can properly grade sentiment and
trends.
Trader with longer-term view can easily say that it’s not a time to buy here and let’s wait
for a healthy Pullback.
PullBack
What is a 'Pullback'
A pullback is a falling back of a price from its peak. This type of price movement seen as a
slight pause in upward momentum.
Often pullbacks are seen as buying opportunities after a stock has had a large upward price
movement. Buying weakness and selling strength is the art of buying pullbacks. Stocks that
are in up trends will pull back offering a low risk buying opportunity and stocks that are in
down trends will rally offering a low risk shorting opportunity.
As a trader, you have to WAIT for these opportunities to happen because...
Doesn't it make more sense to buy a stock after a wave of selling has occurred rather than
getting caught in a sell-off?
Doesn't it make more sense to short a stock after a wave of buying has occurred rather than
getting caught in a rally?
Absolutely! If you are buying a stock then you want as many sellers, out of the stock before
you get in. On the other hand, if you are shorting a stock, then you want as many buyers in
the stock before you get in. This gives you a low risk entry that you can manage effectively.
Pullback (in the opposite direction
of the strong move
Strong Up move again

In the same Previous direction
Strong Up move before Pullback
Pullback end
Where do you buy a pullback
Where do you buy a pullback and where do you short a rally? You buy them and short them
in the buying zone and it is where Stochastic comes handy.
Firstly we see Price moving comfortably above 100 SMA which is assumed to be a strong
move already and with Patience we watch the stochastic to come down to it 20 level which is
oversold zone, once Price reach there we look for as many Support at that level to confirm
our prediction and we take the trade.
Advantages of trading pullbacks:

You get a good trade location as you’re buying into an area of value. This gives you a
better risk to reward profile.
Where does the pullback end?
1. Stochastic reach its 20 level or near it.

2. Towards previous resistance turned support
3. Towards a dynamic support (smaller moving averages like 20, 5 SMA are known as
dynamic support and resistance as they move along with the Price.
These are the confluence to confirm the End of Pullback in expectation of a nice up move.
(Trend continuation)
For Higher probability trades, these are some confluence factors you can consider:
 Trend
 Support & resistance
 Moving averages
 Multi-year highs/lows
 Oscillators overbought/oversold
 Chart Patterns (covered in Professional course)
 Intraday Price movements (covered in Intraday course)
High Probability Set-up
Lets take a example. Pullback
4. Smaller SMA like 20 Or 50 SMA support

P
5.Previous Support 1.100 Moving average R
I
C
E
3.Trendline
80
20
2. Stochastic
High Probability Set-up
In above example, ‘’X” is a Pullback where different

Technical aspects comes together to form Highest
potential area where we should take our trades.
Speed of a Pullback
One most important thing to remember to catch a Healthy

Pullback, which most of the traders fail to idetentify, is the D
“SPEED OF THE PULLBACK”
What is it?
Speed of the pullback is identifies by the its length.
B
Length of the Pullback

Length of the
Strong move.
A
High speed Pullback
It is one where Pullback move itself goes below its previous

Up-move.
B
Fig. shows AB as the strong up-move, we wait for a Pullback
But if we see that Pullback move has gone below “A” or at A”,
Then Pullback is considered to be a High Speed Pullback. D
High Speed Pullbacks must be avoided for buying.
Why so? Ask yourself, If it’s a strong Trend in Price then why A
Pullback is going down? It could be the first sign that Price may go X
down and we may see a Trend Reversal .
Out of 100 setups 60-70 % fail.
Be safe and stay away from these setups.
Because Most Trader lose money is here.
High speed Pullback
High speed Pullback
A
X
Low speed Pullback
It is one where Pullback move never goes below its previous

Up-move.
D
Fig. shows AB as the strong up-move, we wait for a Pullback
This time Pullback stops immd. and starts to move in the
up direction again to resume the prior Trend, then Pullback is B
considered to be a Low Speed Pullback.
Low Speed Pullbacks are BEST for buying. If we want to

make
Money consistently from the market, then this is our chance. X
You will
Find plenty of opportunities with low speed Pullback. A
Why so? Because it simply confirms our prediction, We knew it’s a strong Trend, we
expected to buy Stock at low price, and Price is moving up again so it’s a good sign.
Out of 100 setups 90-95 % become successful.

Low speed Pullback
Low speed Pullback

X
A
Risk : Reward
What is the most important part of trading.?
Risk : Reward
Risk : Reward is the most important aspect of the trading.
This ratio is calculated mathematically by dividing the
amount he or she stands to lose if the price moves in the
unexpected direction (i.e. the risk) by the amount of profit
the trader expects to have made when the position is closed
(i.e. the reward).
As a trader, we can control our risk : reward on every trade.

A high reward for our risk is an obvious goal of every trader.
Risk : Reward
Risk : Reward in real charts
Target
Reward
Entry
Risk
Stoploss
Avoiding the loss-making problem described above is pretty simple. When trading, always
follow one simple rule: always seek a bigger reward than the loss you are risking. This is a
very valuable piece of advice that you must remember before taking entry. Typically, this is
called a “risk/reward ratio”. If you risk losing the same number of points as you hope to
gain, then your risk/reward ratio is 1-to-1 (sometimes written 1:1).
If you target a profit of 40 Rs/Share with a risk of 40 Rs/Share, then you have a 1:1
risk/reward ratio.
If you target a profit of 80 Rs/Share with a risk of 40 Rs/Share, then you have a 1:2
risk/reward ratio.
If you follow this simple rule, you can be right on the direction of only half of your
trades and still make money because you will earn more profits on your winning
trades than losses on your losing trades.
What ratio should you use? It depends on the type of trade you are making. You
should always use a minimum 1:1 ratio. That way, if you are right only half the
time, you will at least break even.
Generally, with high probability trades, a higher risk/reward ratio is recommended,

such as 1:2, 1:3, or even 1:4. Remember, the higher the risk/reward ratio you
choose, the less often you need to correctly predict market direction in order to
make money trading.
Mastering Market emotions and Mental Psychology
Trading Psychology
Trading Psychology
Trading Psychology
Trading Psychology
Trading Psychology
What’s Next?
What’s Next?
At Managetrading.com we also have courses, which you might be interested in,
 Advance Level Course for Short-to-long term traders

. Learn The ultimate formula for wealth, freedom and happiness, it’s easy too.
. Learn The “New” Trading Secret Weapon.
. Learn Every Tool You’ll Ever Need To Be a Profitable Trader, Always.
 Professional Level Course for Short-to-long term traders

. Learn The One Skill that Makes you Unstoppable as a Trader.
. Learn What The Highest Money Making Traders Do Differently.
. Learn The game-changers that will help you to transform your Trading.
 INTRADAY Trading Course for Day traders.

. Learn The Best Kept Secret in Our Toolset, and earn on Daily basis, no matter what your
knowledge level is and also where Market is (Up or Down), this Technique will always work.
. Learn A Simple Calculation That Can Make The Difference Between Success and Failure.
Course Closing Summary
I will suggest you get clear with all the concepts, go through module over and over
again and then only take your real trades.
If you still find yourself confused feel free to send your queries, I would love to
answer you. support@managetrading.com
As always, we welcome any feedback or suggestions.

http://www.managetrading.com/frmcontact.aspx
Thank You and Stay Blessed !
Disclaimer
These educational recommendations are based on author’s

personal observations & on the study of technical analysis
and hence, do not reflect the fundamental validity of the
script. Due care has been taken by the author while
preparing these comments & outcomes, But still no
responsibility will be assumed by the author for the
consequences whatsoever resulting out of acting on these
recommendations. You are advised to take your position
with your best sense and judgment. This document does not
claim for profits/Losses. Some Information, here with
provided is obtained from the sources deemed to be reliable
but is not guaranteed as to accuracy and completeness.
End

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Module - III

In this module we will learn some important

 Time you have

Use Timeframes that Match Your Goals

 Intraday Traders : 1 minute, 5 minutes, 10 minutes, 15 minute.

 Swing Traders : 30 minutes, 60 minutes, Daily.

 Positional Traders: Daily, Weekly, Monthly.

NIFTY in Daily Chart NIFTY in Weekly Chart

In the chart above, you can see the numerous opportunities.

Strong Up move again

Advantages of trading pullbacks:

1. Stochastic reach its 20 level or near it.

Lets take a example. Pullback

4. Smaller SMA like 20 Or 50 SMA support

In above example, ‘’X” is a Pullback where different

One most important thing to remember to catch a Healthy

Length of the Pullback

It is one where Pullback move itself goes below its previous

High Speed Pullbacks must be avoided for buying.

High speed Pullback

It is one where Pullback move never goes below its previous

Low Speed Pullbacks are BEST for buying. If we want to

Out of 100 setups 90-95 % become successful.

Low speed Pullback

As a trader, we can control our risk : reward on every trade.

Generally, with high probability trades, a higher risk/reward ratio is recommended,

At Managetrading.com we also have courses, which you might be interested in,

 Advance Level Course for Short-to-long term traders

 Professional Level Course for Short-to-long term traders

 INTRADAY Trading Course for Day traders.

As always, we welcome any feedback or suggestions.

These educational recommendations are based on author’s

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