Why Price, Volume and Common Sense Matter Now

Life is really simple, but we insist on making it complicated.

Guest Post:Deepak Singh Market Analyst, State of the Market

"How many legs does a dog have if you call the tail a leg? Four! Calling a tail a leg doesn't make it a leg."....Abraham Lincoln

We see and hear this too often in markets. There are millions of technical indicators that have been developed to call a tail a leg. I am not painting all technical indicators with the same brush but most of them are no good. It only leads to poor trading experience and results. After going through number of indicators, I reached a conclusion - it is much better to stick to Price, Volume and Common Sense (the most difficult indicator). There is saying - "Price and Volume are fact, and everything else is a distorted version of the two".

The market requires you to be much more objective most of the times even if that means a long wait. It pays to wait for clear signals than interpret confusing signals. The moment we start looking at technical indicator that's what we attempt to do - fall in trap of confusing signals and make wrong trades. If the trade is successful, it's generally more luck than design, though we want to believe the other way.

Even common sense is very difficult to trust because emotions destroy common sense. Most of the times I have found - the common sense indicators tells - just keep quiet and do nothing. But the urge to trade and prove that I am smart - we make stupid mistakes.

Right now - Nifty is trading in a small band with no directional bias....period. We need to respect this and wait till Nifty gives a directional move. The key to trading is not to argue with it, but try to take advantage of the moves that it makes. Right now, there are plenty of reasons (event risks) to stay patient and let the market decide where it wants to go. Easier said than done

Read the complete State of the Market Trading Notes –

 Cartoon of the day – Market Sentiment

 Global Cues

 Nifty – Range Expansion probable

 State of the Sectors (NEW)

 Market Observations – on sector, stocks, my portfolio, and trading philosophy

All Charts have been published with permission from www.chartalert.com

Disclaimer - The trading notes is Deepak's perspective on the market. The stocks listed here have been selected based on recent performance, and have probability of success in near term. But remember, it's still a probability, and chances are that stock may still not perform as expected. The column is purely for educational purpose. Please use your own discretion in trading. Trading Futures and options involves significant risk. You must consult your own financial advisor before trading to determine if it is suitable for you. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers