How does DreamTai Trading Software work?
When you make a trade, that is buy a stock and then sell it later, or short a stock and cover it, there are only four possible outcomes:
- You make a small amount of profit on the trade
- You make a large profit on the trade
- You make a small amount of loss on the trade
- You make a large loss on the trade
Of all the four outcomes, the first three are acceptable.
The fourth one..that is..making a large loss on a trade is unacceptable from a risk control point of view.
DreamTai forces you to trade in such a way that the trade goes as much as possible in your favor and you have more chances of winning than losing.
DreamTai can not predict the outcome on a single trade, but if you use DreamTai with risk control, you have more chances of winning.
Let me give an example.
Suppose you toss a coin many times. The chance that you will get a head or a tail is 50 percent. However, you can not predict the outcome of a single toss of coin.
If you toss the coin many times, in the long run, around 50 percent of the tosses will be head and the rest of the tosses will be tails.
Our aim should be to stack as many things in our favor before taking any trade.
There are six checks that should be done by you when using DreamTai to stack a trade in your favor.
STEP 1. CHECK IF MARKET TREND IS ON YOUR SIDE
If the over all market is trending upwards, then you should only focus on buying stocks.
If the overall market is trending downwards, you should only focus on shorting stocks.
The overall market is represented by the market indices. For US market, use Dow Jones Industrial average (Symbol= ^DJI)
For UK market, use FTSE index. For any other country, use your local market index. Look up the symbol for that index in Yahoo Finance and enter that symbol in DreamTai.
Here is how to find the trend:
If the 20 days moving average line is above the 50 days moving average line, then the stock or index is in an uptrend.
If the 20 days moving average line is below the 50 days moving average line, then the stock is in a downtrend.
It is as simple as that.
DreamTai displays a big red arrow as soon as the 20 days moving average crosses below the 50 days moving average and the downtrend begins.
Similarly, DreamTai displays a big green arrow as soon as the 20 days moving average crosses above the 50 days moving average and the uptrend begins.
STEP 2. CHECK IF THE STOCK TREND IS IN YOUR FAVOR
You should only buy a stock if it is in an uptrend. If the stock is in a downtrend, you should only think of shorting it.
Here is how to find the trend:
If the 20 days moving average line is above the 50 days moving average line, then the stock or index is in an uptrend.
If the 20 days moving average line is below the 50 days moving average line, then the stock is in a downtrend.
It is as simple as that.
DreamTai displays a big red arrow as soon as the 20 days moving average crosses below the 50 days moving average and the downtrend begins.
Similarly, DreamTai displays a big green arrow as soon as the 20 days moving average crosses above the 50 days moving average and the uptrend begins.
STEP 3. CHECK IF THE BUYING VOLUME OR SELLING VOLUME IS IN YOUR FAVOUR USING POWER RANKINGS
DreamTai also checks the buying volume and the selling volume. It calculates how many users are buying the stock and how many users are selling the stock and calculates the Power Ranking.
This number represents the total buying volume or selling volume of a stock.
If the Power Ranking of a stock is above 3, that stock has high buying volume and so has chances of trending instead of chopping about.
Similarly, if the Power Ranking of a stock is below -3, that stock has high selling volume and so has chances of trending downwards instead of chopping about.
It is best to avoid a stock if the Power Ranking is between -3 and 3 as it indicates a lack of trend.
Also, you can compare all the stocks in your watch list by their Power Ranking and find out which stocks have the highest Power Ranking and which stocks have the lowest Power Ranking.
4. CHECK IF THE STOCK PRICE MOMENTUM IS IN YOUR FAVOUR.
The stocks do not go up or down in a straight line. They go up, retrace back a little bit and then go higher again after a few days.
DreamTai calculates and displays the stock momentum to pinpoint the correct entry. As soon as the speed increases, the stock bar color turns green.
As soon as the speed decreases, the stock bar color turn red.
You should only buy if the stock bar color is green and continue to hold that position till the bar color turns red.
You should only short if the stock bar color is red and continue to hold that position till the bar color turns green.
5. CHECK IF THE TOTAL RISK UNDERTAKEN IS IN YOUR FAVOUR. (RISK CONTROL AND PORTFOLIO SIZE)
Since it is impossible to predict the outcome of any trade with hundred percent certainty, we risk maximum of two percent of total investments in any trade.
DreamTai assumes that you are having $10,000 and automatically calculates the trade size and stop loss so that you lose maximum two percent of your total investment in any trade.
Remember, you do not have to risk exactly two percent of your total capital. You can risk lower amount ..say one percent or 0.5 percent of total capital.
6. HAVE A STOP LOSS TO GET OUT OF A TRADE IF IT GOES AGAINST YOU.
DreamTai displays a stop loss to set while placing a trade. This ensures that if a trade goes against you, you are stopped out of the trade.
All the above six factors work together to increase your chances of winning and reduce the risk of losing money.
