Wise Stock Investment Techniques

Introduction: Investors often complain that i have not done enough for the. However
the fact of the story is i have done a lot of works for the investors and a glimpse of that
is quite visible in my FREE E-book. "Essential of Stock Trading", this too is available in
this site for FREE download. We all must understand the real problem which an investor
faces almost every day.
Which stock to choose for investment from a basket of stock available in the
stock market?What is the logical reasoning behind this choice?. I have tried to
answer only these two questions in this article.
However as an investor you may impliment many other good trading models for
successful construction of your investment portfolio.Formula
1: Buy the stocks having low P/E ratio.Day trading mechanism devised into three
categories.Formula
2: Buy the value stock or growth stock having low debt / equity ratio and high
reserve and surplus.Formula
3: Buy the stock having good track record of giving bonus shares to his
investors.Formula
4:Buy stock having low PEG ratio (i.e. price to earning ratio divided by annual EPS
growth).Formula
5: Buy Value stock with high beta or growth stock with low beta.Formula
6: Estimate the beta of the stock for 3 month,6 month and 1 year or the expected
duration of your holding to know how muct return it will offer with specific % movement
in the index.Formula
7: Try to Use the GRACH method to find the expected volatility the stcok may show
during the period of your holdingLearn Intraday Trading
Introduction: If you are new to the day trading then you must be wondering which
method I should follow, which software is best for day trading etc. In this process of
gathering information and experiencing with new tools day traders used to lose
maximum part of their money.In all my seminars and lectures I have taught proven
wonderful day trading mathematical models. In this I am going to describe the simplest,
no cost principle for the day traders. I will not recommend you to buy any software or
tools to implement my principle.Only tool you need is a simple mathematical calculator.
Most of the time day traders used to forget their finest experience in the stock market. I
have pulled those finest experiences and prepared this course for you. This course is
FREE to all.

I have devised this study into two parts in part one I will describe the basic principles of
day trading and in part two I will describe few examples and give you few home work.
You need to do some paper trade (virtual trade) to practice this principle.
Types of Day Trading:Day trading mechanism devised into three categories.
Stop loss trading mechanism:In this principle trader initiate position with some stop
loss in mind if the trade goes against the trader then trader exit the position with some
acceptable loss.
Swing Trading Mechanism : In this principle trader initiate positions keeping in mind
that if the trade goes against the view then trader will initiate an opposite leg trade upon
achieving the stop loss. Say you have bought tata steel at 450 with stop loss 435. As a
swing trader your view will be if tata steel will fall to 435 you will close your existing long
position and re-enter fresh short position in same counter.
Decoupling Trading Mechanism: This principle is called advanced hedging principle.
you can find more about this technique in my article on Introduction To Decoupling
Method. Many mentors say about discipline and trade objective. I would say that it is
practically impossible to be a 100% disciplined trader. However trade can have
objective. I always say do not expect too much from market. Be objective and keep
minimum exposure with the help of decoupling method or option hedging - See more at:
http://www.smartfinancein.com/stock-trading-article.php#sthash.QCaZ7Utm.dpuf
Intraday Trade Using Gann Method
Introduction: I found W.D.Gann's method of geometric proportion is one of the best method for
intraday trading. Though W.D.Gann was not a stock trader but after many years of experiment
in stock market i found this method is one of the most successful method for day traders.
Gann's Method is devised into two parts. A. Forecasting the price and time using the natural
numbers , geometrical angles and specific geometrical figures. B. Forecasting the price and
time based on astrological angles,formations and geometrical figures.
How it is different from the technical analysis? In technical analysis we often use
averages,drawing tools like trend lines,various oscillators and indicators to derive the future
price projection which may be translated in the general terms resistances,supports,targets,stop
loss. However in gann method we use harmonic rhythms. like I can say price 30 degree up from
the current level or down from the current level will give me the resistance or support. If you will
notice my words carefully I have not used any drawing tools or any statistical values for deriving
this resistance or support.
You must ask me, Why such assumption ? This is the wonderful discovery done by
W.D.Gann. He is the man who fond that in this universe every number is associated with other
numbers with some degree relationship. This conclusion he has derived after arranging the
natural numbers in geometrical spiral of square, triangle, hexagon. At last i will say, we all will

agree that the price of a stock or commodity or any financial instrument irrespective of the
currency it is trading in, is a number only.
How one can do intraday trade using gann method ? Though many different approach and
methods I have describe on my book on Gann Methodbut one of the simplest method is
projection the price from static degree proportions. In this method we will follow the following
procedure and assumption. A. we will assume the 180 degree as number 1. - See more at:
http://www.smartfinancein.com/Intraday-trading-using-gann-method.php#sthash.6YJ9vkQ0.dpuf
Intraday Trading Using Gann Method
B. we will derive the resistances from the low and supports from the high in every 15 degree
interval. C In the price cross over of 30 degree in resistance side we will buy the stock and viceverse. Do remember we will use this method for making swing trade. That means we will close
our buy position at the sell entry point and initiate fresh short at that point. Some time we will
come across with the situation where in the buy entry and sell entry will be placed very close to
each other even equal to each other. This is called congestion band. If congestion band present
in my experiment then I will make entry on the 1st target points. Let me explain with an example
: Say I have identified day high and low of State Bank of India (SBI) as 2220 and 2176 at a
particular time and currently SBI is trading at 2187. if I wish to enter a trade based on this
procedure then I will do the following. A.Assuming 180 degree as 1 the 15 degree will be
0.0833. B.My resistances will be two square of (square root of LOW+0.0833),two square of
(square root of LOW+0.0833*2),two square of (square root of LOW+0.0833*3) and so on. In SBI
case it will be 2183.78,2191.57,2199.37,2207.19,2115.03,2222.88.Supports will two square of
(square root of HIGH-0.0833),two square of (square root of HIGH-0.0833*2),two square of
(square root of HIGH-0.0833*3) and so on. In SBI case it will be
2112.16,2204.33,2196.51,2188.71,2181. Now I will conclude my experiment with following out
come my buy entry is 2191.57 and sell entry is 2204.33. In this case the sell entry is higher than
the buy entry price and the current price also below my buy entry price. If such a situation exists
then I will place my buy entry stop loss 2183.58 and sell entry stop loss as 2112.16.
What will be my swing trading decision in this case ? If the stop loss triggered for me after a
failed attempt of buy entry then I will close the buy trade at 2183.78 and initiate fresh short trade
at that point with stop loss for 2191.5 and targets will be 2176.06,2168.34... this is derived by
subtracting the difference of 2183.78 and 2191.5 from 2183.78. same way you can derive the
targets for the long entry if the stop loss of 2112.16 trigger.
how to do intraday trade using fibonacci method- See more at:
http://www.smartfinancein.com/Intraday-trading-using-gann-method-page1.php#sthash.SknJ7pN5.dpufDay Trade Using Fibonacci Method

Fibonacci Retracement Technique proved to be the best and simple technique for day
trading. The Retracement is of two types a. Growth Retracement :If the price action is
rising in nature but in between some correction brings down the price and again

escalate to higher levels then we can this Retracement as a growth Retracement. The
cause of growth retracement is due to profit booking, short term correction or portfolio
churning by Institutions.
b. Decay Retracement: If the price action is in falling in nature but in between some
technical bounce back. or relief rally happens due to short covering then we classify this
as a decay Retracement. The cause of decay Retracement is a correction, technical
bounce back or relief rally.
Retracement again has three trade decisive zones: Bounce back or Trend
Continuation zone:If the price finds support at 50% of retracement of its prior swing of
up move or resistance at 50% of retracement of its prior swing of down move then this
retracement is called bounce back price zone.
Example: Say nifty has fallen from 4700 to 4500. The prior trend of this 4700 high was
a rising trend started from 4000 then it is classified as growth retracement. Taking the
50% retracement of this high low movement of 700 points to 350 I will say if the price
finds support at 4350 then uptrend will resume and has high probability of crossing the
previous high. Now the next big question is how do I will know that 4350 support is a
valid support or is a mathematical eye wash for me. Support must be validated by the
volume. By simple observation if I will find the fall below 4350 invites buying and
escalates the price to bit higher level then I will conclude this price is a valid support.
Death Zone or trend reversal zone: In retracement principle if the price retraced more
then 61.8% of its prior swing then it has remote chance of going back to its prior trend.
Range bound or consolidation zone: if price finds support or resistance at 38.2%
retracement or never crossover the 38.2% level from the50% retracement then I can
classify the retracement as a consolidation zone. - See more at:
http://www.smartfinancein.com/day-trade-using-fibonaccimethod.php#sthash.Zikol3FA.dpuf
Day Trade Using Fibonacci Method
Every morning when market wake up the stock or indices make some high and low by
taking the high low difference with the help of above discusses ratios we can make
fantastic trade decision. Example :Say at one point of time I found Nifty future is trading
at 4565 and at that particular time the high and low recorded for the day is 4625 and low
4530. The high low difference is 95 points. This retracement happen in a raising trend
henceforth the price point 4577.50(50% retracement) will act as a support or buy entry
point for the long traders. The 61.8% retracement price from the high this is 4566.29 will
act as the Death zone entry point. If the price falls below that then it will achieve its 1st
target at 78.6% retracement down side from the high. 78.6% works as the 1st
termination point of the death zone. After which the free fall to 1.618% of retracement is

expected. Since the current price is in the entrance point of the death zone I will advise
you to sell nifty future keeping the 50% retracement price 4577.50 as stop loss for target
4550.33 the next free fall target will be 4471.29. Consider the case if Nifty is trading at
4580 which is in the entrance of the bounce back zone I will recommend buy with stop
loss 4566.29 for 1st target at 4588.71 the free raise target will be calculated from the
low 4530 with ratio 1.618 on price range 95 having the termination at 4683.71.
What will be the next calculation method if these free fall or free rise price point
penetrate successfully?You need to apply the parallel projection or growth projection
principle which you can find on my book on
Fibonacci Method. The study of fibonacci method will not get complete without
studying the clusture, and phi ellipse. same way the fibonacci fan line also the finest tool
one can use for short term trend analysis. you can get many more successful examples
on fibonacci method success in real trade practice under the section my experiment on
fibonacci method. The key success in fibonacci swing trading technique is totally
depend on you. you must understand the growth,decay retracement procedure. After
which you can make an insight investigation where the current price is? if these two
decission of your are in right path then i am 1000% sure that you will win that trade.
Many traders made the mistake in those two dicisive steps.The most common mistake
the trader does is they buy at the death zone of growth retracement and sell at the
death zone of decay retracement. - See more at: http://www.smartfinancein.com/daytrade-using-fibonacci-method-page-1.php#sthash.N2emtyL5.dpuf
Day Trade Using Elliot Wave Principle
Introduction:After extensive research on the Elliot wave theory with an objective to
simplify it to an maximum extend so that it can be understood by the trader community
I have come across with many issues and some simple and gentle solution. I have
developed one calculator based on those achievements however this tool only attends
the limited logical part of the wave theory.The wave approach of analyzing the price of
stock, index or commodity starts with the cycle. This debated word cycle means the
occurrences of similar kind of trend in future. In wave approach the cycle is again
simplified by the way of classifying it in time frames. For example the grand super cycle
is the name given to a trend which happened or reoccurs once in a decade.
Why cycle is so important for us? Answer is so simple. Say the average lifespan or
life cycle of human is 70 years. This means the older generation dies or disappears in
every 70 years and new generation having the similar behavior, life style, habits fill that
gap. Many such examples we are experiencing on cycle every day in our life. Hence I
can conclude with at present what ever we are experiencing in nature was being
experienced by our ancestors some time in past. This may be the literary definition of
cycle and sounds much philosophical.The 2nd principle followed by wave principle is

"Every price action in a cycle is harmonic in nature". Based on these two principles
Elliot gave a set of rules and guideline for constructing the price waves in a harmonic
cycle. The price trends never follow all the guidelines given by Elliot. However it follows
all the rules. The price and time action rules to form a wave pattern are derived from the
Fibonacci ratio. Totally 8 different waves are being classified grouped into two
categories Impulsive waves: In this category 5 waves are placed and named as 1-2-34-5 . Corrective waves: in this category 3 waves are placed and named as A-B-C . The
confirmation or completion of wave 2 and wave B are used by the traders to take a long
and short position in a particular counter. However during the process of this journey of
completing the
Impulsive harmonic cyclic pattern the wave pattern meet with many guide line or
rule violations. - See more at: http://www.smartfinancein.com/day-trade-using-elliotwave.php#sthash.2OJndaCV.dpuf
Day Trade Using Elliot Wave Principle
These action of violation is called wave failures. Many times you would have heard
from the analysts that fifth wave failure happened in so and so counter. Some time
some waves used to stretch beyond its permissible guideline parameter. This
phenomenon is calls wave expansion . In order to give you some experience in wave
principle of trading. we have devised one simple calculator for you. which is available on
our calculator section. Two different approach is being followed by the analysts to
forecast the trend as per the wave principle. A.Wave count approach. Under this
approach the analyst devise the long term cycle to smaller cycles.Then each wave in
the long term cycle is studied and different wave patterns are placed within it.After
which an wave count report is produced which includes each primary waves sub
wave,sub wave patterns,number of failure waves,consequence of these failure waves.
Based on this data the future long term cycle is placed and trend parameter was get set.
This process require in depth understanding of the wave principle and quite difficult to
do manually. Though now a days many software's are available to help you in
this. B.Wave Pattern Construction Approach: Under this approach you need to
construct the waves construction start and end points manually based on the wave
rules for a prior trend. After which you need to find the failed waves or expanded waves.
After this process you can forecast the trend passed on your past experience of wave
construction. Do remember in this process you are not investigating the sub waves or
the wave within a wave or smaller cycle wave inside the big cycle wave. However in the
wave counting approach all those things are attended carefully. Also read the elliot
wave calculator manual for extened set of example and explanation.Our Elliot wave
calculator will help you in deriving some finest trade decision but it will not guide you in
learning. If you are a beginner then you must have to learn the wave rules and cycle

rules. After which you need to under stand the 13 different wave patterns. This will
completing your 1st step of learning. Then you need to study the price patterns applying
the 2nd approach discussed by me . After gaining the gradual experience you can
migrate to the wave count approach. you can complete your learning within few months
with the help of software. But it is not impossible to master this technique without the
help of software. I have published the complete wave rule and patterns on my book
on Technical Analysis volume -3.you may find many more on web too - See more at:
http://www.smartfinancein.com/day-trade-using-elliot-wave-page1.php#sthash.KFF9MamM.dpuf
Date

Open

High

Low

Close

Total Trd Qty

01-Jun-07

1364

1385

1356

1378.9

1908666

04-Jun-07

1400

1418.4

1390

1406.4

2182423

05-Jun-07

1400

1444.85

1393

1436.5

1808672

06-Jun-07

1445

1454

1381

1389.5

1857287

07-Jun-07

1382

1401.9

1353.25

1360.65

2148431

08-Jun-07

1331.3

1387

1321.3

1356.6

2037482

Analysis: Bullish engulf find pattern form in a down trend. The price trend of Tatasteel was
down in the previous time period. above the OHLC data is given for reference.From the above
OHLC data if you observe on 19th June 2007 the high is higher than the 18th June 2007 high
and 19th June 2007 low is lower than the 18th June 2007 low and the 19th June 2007 closing is
higher than the opening which forms a white candle and confirms the formation bullish engulfing
pattern.Pattern breakout: on 19th June 2007 the high to low price range is 617-585=32 price
units. The 78.6% (i.e. the Fibonacci retracement ratio) of the price range is 25. The pattern
breaks out will happen at a price of 617 +25= 642. As long as the price maintain below this
price one can assume that that the throwaway can happen at any stage.Continue
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Date

Open

High

Low

Close

Total Trd Qty

01-Jun-07

1364

1385

1356

1378.9

1908666

04-Jun-07

1400

1418.4

1390

1406.4

2182423

05-Jun-07

1400

1444.85

1393

1436.5

1808672

06-Jun-07

1445

1454

1381

1389.5

1857287

07-Jun-07

1382

1401.9

1353.25

1360.65

2148431

08-Jun-07

1331.3

1387

1321.3

1356.6

2037482

Analysis: Bullish engulf find pattern form in a down trend. The price trend of Tatasteel was
down in the previous time period. above the OHLC data is given for reference.From the above
OHLC data if you observe on 19th June 2007 the high is higher than the 18th June 2007 high
and 19th June 2007 low is lower than the 18th June 2007 low and the 19th June 2007 closing is
higher than the opening which forms a white candle and confirms the formation bullish engulfing
pattern.Pattern breakout: on 19th June 2007 the high to low price range is 617-585=32 price
units. The 78.6% (i.e. the Fibonacci retracement ratio) of the price range is 25. The pattern
breaks out will happen at a price of 617 +25= 642. As long as the price maintain below this
price one can assume that that the throwaway can happen at any stage.Continue
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Target: Engulfing pattern target is unlimited until and unless the price does not form any bearish
reversal candle pattern in the chart. In more than 50% cases the throw away happens before
giving a break out in this pattern. Volume: Volume used to be moderate in the engulfing day.
Sudden rise in volume you can observe in the pattern break out day. Pattern failure: If the price
moves below 585-25 = 560 then we say that the bullish engulfing pattern is a failure. What will
be entry and exit point? The entry is suggested at a price above the engulfing days high having
stop loss below the pattern failure price point. The target is unlimited until and unless any
bearish formation does not takes place. It is also advisable to make an entry in the counter after
the pattern break out happens. In the above example the pattern failure does not happen but

throwaway happens multiple times before giving a breakout on 14th July 2007.In this context
the bullish trend reversal pattern means the trend is going to change from bearish to bullish.
Bearish trend reversal pattern means the trend is going to change from bullish to bearish. 2.
Bearish engulfing pattern:- the first candle is a white body with low volume and the
second candle is a black body with high volume totally engulf the first

body
- See more at:
http://www.smartfinancein.com/day-trade-using-technical-analysis-page2.php#sthash.WwylFpP0.dpuf
This is also a common pattern in price time chart and strongest bearish reversal pattern. The
success rate of this pattern formation is more than 80 %( i.e. in more than 80% cases the
pattern use to give break out). Once the pattern is identified the next job is to find out the break
out point, throwaway price, entry and exit point, pattern failure price point and target. In all
candles stick reversal patterns the price target is unlimited until and unless any contradictory
reversal pattern is not formed in the price time chart in the breakout direction. Example: I
have identified the formation of bearish engulfing pattern in SBI on 06th June 2007. Find out the
break out point, target, pattern failure point, entry and exit point? Below the price time chart and
the OHLC data is given for reference. - See more at: http://www.smartfinancein.com/day-tradeusing-technical-analysis-page-3.php#sthash.0mFHfs14.dpuf

Date
Open
High
Low
Close
Total Trd Qty
01-Jun-07
1364
1385
1356
1378.9
1908666
04-Jun-07
1400
1418.4
1390
1406.4
2182423
05-Jun-07
1400
1444.85
1393
1436.5
1808672
06-Jun-07
1445
1454
1381
1389.5
1857287
07-Jun-07
1382
1401.9
1353.25
1360.65
2148431
08-Jun-07
1331.3
1387
1321.3
1356.6
2037482
Analysis: Bearish engulfing pattern forms in a bull trend and indicates reversal of the
bull trend. From the OHLC data it is being observed that the 6th June 2007 high is
higher than the 5th June 2007 high, the 6th June 2007 low is lower than the 5th June
2007 low. The closing of the 6th June 2007 is lower than the opening. Hence it confirms
the formation of bearish engulfing pattern. Pattern break out: on 6th June 2007 the
high to low price range is 1454-1381=73. The 78.6% (i.e. the Fibonacci retracement
ratio) of the price range is 57.37. The pattern break out will happen at a price of 1381
57.37= 1323.63 . As long as the price maintains above this level one can assume that
the throwaway can happen at any stage. Target: Engulfing pattern target is unlimited
until and unless the price does not form any bullish reversal candle pattern in the chart.
In more than 50% cases the throwaway happens before giving a break out in this
pattern. Volume:volume use to be moderate in the engulfing day. Sudden rise in volume
you can observe in the pattern break out day. Pattern failure: if the price moves above
1454+57.37 = 1511.37 then we say the bearish engulfing pattern is a failure.

What will be entry and exit point? It is advisable to enter a short trade on the day
following the engulfing day with a price above the break out point having stop loss at the
pattern failure price point. The target will be unlimited until and unless it has not formed
any contradictory reversal pattern. It is also advisable to make an entry after you
encounter a break has happened for better result. In our case the pattern has failed to
give a break out and became a failure in the future days. - See more at:
http://www.smartfinancein.com/day-trade-using-technical-analysis-page4.php#sthash.kLl57X7m.dpuf
Introduction To Decoupling Method
Intraday day trading is devised into three types. 1.Stop loss Trading Technique : In this
technique trader initiate one position keeping some stop loss and exit out of the position
upon getting the stop loss triggered. 2.Swing Trading Technique: In this method trader
initiate one position keeping some stop loss and at the point of stop loss reverse the
trade keeping opposite view. 3.Decoupling Method: In this method trader identify the
indices, stocks those are showing opposite behavior and assuming this behavior will
continue or vanish after some time in a day then took the position. The method of
decoupling trading strategy is complex in its structure and bit complex in implementation
too. However the success ratio is quite impressive. Since Decupling method is my own
invention I will give some idea about this method in this article. When we talk about the
decoupling the exact meaning is deviation or detachment.. for example if I choose two
public sector bank stocks for my study assuming they have similar business vertical and
market penetration ,I will conclude their stock price will exhibit similar behavior in a day.
Provided no bad news, good news, result or any other external factors influence them.
At this junction if I want to study their pricing patterns in a day in order to identify
existence of the decoupling then I can take the help of followings. A. if any one technical
indicator is giving buy signal for one stock and sell for the other stock then I will say
decoupling exists. This phenomenon is due to the run up or sharp correction in any one
of these stock. B.I can take the help of past 10 trading days beta value to know the
sensitivity of both the counters and study their intraday movement. C.I can take the help
of Fibonacci Retracement to identify if it suggest buying in one counter and sell in the
other. D.I can take the help of Gann method to identify the opposite trading view. E.I can
take the implied volatility of at the money options of the stocks to find the decoupling in
volatility. - See more at: http://www.smartfinancein.com/introduction-to-decouplingmethod.php#sthash.EocGP7Rd.dpuf
After analyzing this phenomenon I will initiate trade in both the counters assuming this
decoupling phenomenon will vanish at some point of the day. Similar argument can be drawn for
index and stock in that perticular index segment. For example if by the mean of some
mathematical simulation if I will identify X % change in any of the stock brings Y% change in any
of the index then the deviation in any of the day can be called as decupling. Once we identify
the decoupling then we need to investigate the cause of the decupling. If the cause is due to the

traders temporary behavior or local in nature then we will use this opportunity as a trading
opportunity. But keep in mind we are using this opportunity as a trading opportunity same time
we are honoring the cause. Using the beta as the mathematical factors I have simulated
hundreds of trades in the stock futures and found the success of this method even in the critical
days of sharp fall and raise. All about this method you can find on my book on masters key to
future and options.some of my experiments on the future trade useing the beta decoupling
strategy in the month of september and october 2009 25th sept 2009 1.sell sbi fut 1 lot at 2142
and buy icici fut 1 lt at 850 max loss Rs2k profit Rs3.5k beta hedge call- closed 1st october at
Rs16000 profit 29th sept 2009 2.buy sbi fut 1 lt at 2149, sell icici bank fut 1 lt at 858 max loss
Rs4.5k profit Rs4.5k intraday beta hedge call-lOSS TRIGGERED 30th sept 2009 3.buy hdfc
bank 1 lt at 1606 and sell icici bk 1 lt at 868 max loss Rs4k profit Rs4k intrday beta hedge callGIVEN PROFIT buy hdfc bank fut at 1630 and sell icici bk fut at 894 max loss Rs7k profit Rs11k
intraday beta hedge call -GIVEN PROFIT You can make use of our beta hedge online calculator
available under the calculator section of our web site to derive many interesting trade
decission.This Calculator works all kind of World market. Do read the manual associated with
the calculator to know more about the beta coefficient. - See more at:
http://www.smartfinancein.com/introduction-to-decoupling-method-page1.php#sthash.SJkHlxdH.dpuf