The Gentleman from Ireland : Saturday, April 15, 2006

A Gentleman from Ireland asked me the following question :

Can your software be used for trading the Dow30, FTSE100 indices ? I like the built in risk control features in your software.
I think a good strategy when swing trading would be to hedge any shortterm retracement of the futures market by countertrading the same indice with a slightly larger stake as a day trade, resulting, hopefully in a win/win situation. How would that strategy appeal to you Sanjoy ? All the best,


Dear Sir,

Attached are the two charts of Dow Jones Index and FTSE index showing buying and shorting signals using DreamTai.

The charts are daily charts.

However, for daytrading, they can be used to know when it is safe to be long . You can be more confident when the price bar is green, that the trend is up.

The rule for going long are that the price bar should be green and should be ABOVE the blue dotted line.

The rule for going short is that the price bar should be red and should be below the blue dotted line.

So, if the price has turned green and gone above the moving average, you can day trade with a positive bias.


About the strategy of trading counter trend when the market retraces, it depends on your experience and expertise trading the futures market.

If you are new to trading and have just begun, I would not recommend it.
In US, we call it "Catching the falling Knives"

The reason we have rule in DreamTai that the price must be above the moving average and must be green is that we are trading in the direction of the natural market flow or momentum. so, there is very little resistance.

When you trade counter trend, there is chance that the prices may suddenly move against you in direction of the trend.

But, if you have traded counter trend before and have experience, there is no problem.You can go ahead with the same as long as you maintain proper risk control.


By the way, we also have a blog at http://dreamtai.blogspot.com
Please feel free to ask any questions.

Sincerely,
Sanjoy
Dreamtai. com Inc.

Lost in Translation : Saturday, April 15, 2006

Would you like a translation of the products you have listed in italian? I am sure that the italian citizen do not understand what you're selling!


Dear Sir/Madam,
Ebay automatically translates Dreamtai listing when it lists it in ebay Italy.

It will be difficult for me to handle different languages individually because Dreamtai is being used by people living in many different countries.

Here is a list of countries and exchanges supported by DreamTai

http://finance.yahoo.com/exchanges

Trying to translate web pages and keep them updated in so many languages will be difficult.

Besides, we have a blog also at http://dreamtai.blogspot.com

If you have any questions about Dreamtai, please feel free to contact me.( in English..please:-)))

sanjoy

Options Stops: Friday, April 14, 2006

Dear Sanjoy
I have been using DreamTai for a couple months with good success. You have developed a powerful and predictive program. Thank you for an excellent product!

I am primarily a trader of options (calls and puts) on high-volume Nasdaq stocks. I read on the Blog your answer to another option trader, and think your recommendation of 3-month-out options is correct. Regarding stops, do you think option traders should tighten stops on the underlying stock? As you know, the typical at-the-money option will become worthless by the time the DreamTai stop level is hit.
Thank you for DreamTai and for your answers to my questions.



Dear Sir/Madam,
Thank you for your kind words !!
DreamTai is just a tool to help you. I should congratulate you on your investment success, because you had the discipline and determination to manage your risks., which is the most important part of any investment strategy.


The stops in DreamTai are based on the volatility of the stock. We can not tighten the stops because we have to let the stock some room to move around.

What we can do to reduce risk is to buy fewer options.

The total amount to risk in any trade is two percent of the capital.

If you have $100,000 then you risk only $2000 on a single trade.

Assume the worst case senario that the options expire worthless. You should not lose more than 2 percent on this trade.So, if you buy options, buy options worth $2000 ONLY for $100,000 capital.

Keep track of the stop loss price suggested on the day of the trade. If the stock moves below the stop loss price or if the trend changes, sell the options.

We buy at least three months period far away options, because we want to give the stocks some time to move around before the options expire.

Please remember that options are a double edged sword. on one hand, they give you leverage to magnify your profits. On the other had, they decay with time.

Sanjoy

Buying and Selling through Dreamtai: Friday April 14, 2006

In the New Sell box ( New Buy/Sell Tab ) should I sell every time my stock shows there or sell some stock for a profit?
Under Analyse Stocks tab, does sell mean to "sell short". What is the
purpose of the high limit stop when you sell a stock.

Please advise


Here is my answer.
Dear Sir/madam,

The New Buy and New Sell Section is there for your convenience. it just tells you AT AGLANCE which stocks have turned from Red to Green in the most current bar or from Green to Red in the most current bar.

It is there so that if you do not have time to look at all the charts, you can see at a glance which positions have turned bullish and which positions have turned bearish.


Just because a stock is there in the New Buy or New Sell does not mean that you have to make a trade.


Here are the steps for making a trade


CHECK THE STOCK TREND

First, for those stocks, you have to see if it is in a strong upwards trend.
If the dotted moving average is slanting upwards (30 to 45 degrees ) or downwards, then the stock is in a strong trend.


NEXT CHECK THE STOCK SIGNAL

This requires that you note the latest stock price bar's color and whether it is above or below the dotted line.

You can go long only if the green bar is above the dotted moving average.

You go short only if the Red bar is below the dotted average.
This helps you to place order in the direction of the trend.



If the price bar is GREEN and it is above the dotted moving average, it is bullish trend and you should buy the stock.

After you buy the stock, you hold it till the charts turn red.



If the price bar is RED and it is below the dotted average line, the trend is bearish and you should short sell the stock
After you short the stock, you hold the position till the charts turn green.


NEXT CHECK THE POWER RANKINGS TO SELECT THE BEST CANDIDATES

Out of all the stocks with a buy/sell signal, select stocks with higher power ranking


Have a look at the sample trade charts at

http://www.dreamtai.com/trial/ebayvdo.html



NEXT AS SOON AS A BUY OR SHORT SELL ORDER IS FILLED, SET THE STOP LOSS ORDER TO PROTECT YOUR POSITION


If you short sell a stock, you have to place a stop buy order ABOVE the stock price to cover your positions if the stock suddenly moves up.


If you buy a stock, you have to place a stop sell order BELOW the stock price to cover your positions if the stock suddenly moves down.


NEXT MONITOR YOUR POSITION EVERY DAY TO SEE THAT THE STOCK DOES NOT GO FROM BUY TO SELL OR VICE VERSA

If a stock in which you are long has turned Red, then sell the stock.

If a stock in which you are short has turned Green, then cover the short position by buying the stock.


Hope that you found these steps useful.
Please feel free to add your comments, feedbacks.

Confusion: Too Many Transactions: Friday April 14, 2006

Here is a letter from one of our members :

I am somewhat confused as to what sell really means - it seems that I am
making too many transactions which is expensive.


Here is my answer. Please feel free to add your own opinions, views, suggestions, feedback .


Dear Sir,

You said that you are making too many transactions. It appears that your stocks are being whipsawed around and so you have to buy them and then sell them again and then buy them again.

The whip saw happens when the stock is moving in a flat range and is not trending.


Dreamtai works best with strongly trending stocks.

You have to select strongly trending stocks, that is stocks which are in a strong uptrend or downtrend.

How do you detect a strongly trending stocks ?


Just because a stock is there in the New Buy or New Sell does not mean that you have to make a trade.


CHECK THE STOCK TREND

For those stocks, you have to see if it is in a strong upwards trend.

If the DOTTED MOVING AVERAGE LINE is slanting upwards (30 to 45 degrees ) or downwards, then the stock is in a strong trend.



See the sample stock picks here in this blog http://dreamtai.blogspot.com


Also, whipsaw also happens when the market is in a flat zone and is not going anywhere. You just have to wait them out.

It is just like fishing. Some days, you will not catch any fish and some days, you will have a huge catch.

The most important thing to do during this flat period is not to lose lots of money.

Being stopped out is not bad but losing a fortune on your stock positions is bad.


Let me give you a very interesting example:

Have a look at NAVI chart at the following web link

http://finance.yahoo.com/q/bc?s=NAVI&t=3m&l=on&z=l&q=b&c=


In the past 3 months the maximum it has gone is from $1.5 to $4.5


Then have a look at the two year chart

http://finance.yahoo.com/q/bc?s=NAVI&t=2y&l=on&z=l&q=b&c=

Here, the stock has been in the $ 1 to $ 5 range


Wait, now PREPARE YOURSELF for a SURPRISE !!!

OK, are you Ready ??


Now look at the 10 year chart.


http://finance.yahoo.com/q/bc?s=NAVI&t=my&l=on&z=l&q=b&c=

It is SHOCKING. I know you would not believe it if you look at the above chart.

Can you imagine the investor who had just held to this loser stock all these years hoping that one day it will go up again ?

I can assure you that it is much better suffering a tiny loss and getting rid of the stock than being sentimental, believing the analysts on TV and holding on to the stocks.

In th next question, I will address how to buy or sell stocks using Dreamtai.

Trending Stocks :Thursday April 13,2006

Have a look at the following trending stocks

They are volatile. Have suitable risk control in place.

1) CC
2) ROLL

Trending Stocks : Wednesday April 12,2006

Wednesday April 12,2006
Have a look at the following
trending stocks

1) AW

Keep an eye on BEAS

Trending stocks: Sunday April 9,2006

Sunday April 9,2006
Have a look at the following
trending stocks
1) ZEUS
2) CME
3) AOS
4) NEU
5) LFC
6) FUL
Keep an eye on NAVI

Thursday April 6,2006 : Some Stock Picks

Thursday April 6,2006

Have a look at the following
trending stocks
1) CHL
2) FSL
3) HC
4) ICON
5) PALM
6) PMCS
7) PWR

Uptrending Stocks ; April 5, 2006

Wednesday April 5, 2006
Have a look at the following
up trending stocks

1) AAUK $21.25

2) FIZ $14.24

3) HLT $ 27.16

4) KNOT $19.81