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GENERAL FAQ
Question: What is this book about? How does
it contain?
Answer: This is a book about stock market trading. It contains
simple but powerful methods to help to decide which stock to buy and when
and most of the methods are unique. You will not find them anywhere else.
This book extensively talks about how to find best trading opportunities-
which stock to buy or sell and when. It is very logically written and
hardly ever loses its focus to help you improve your trading skills. It
is devided into following sections:
- TRADING BASICS: What is required for trading stocks and some
common mistakes most of the traders make ( around 5 pages.)
- CONTROLLING RISK: Importance of planning in trading: Plan your
trading and trade as per your planning. It shows how to approach trading
for beginner traders. (8 pages)
- PROFIT FROM PRICES METHODOLOGY: Trends, prices, tops, bottoms,
stock prices charts and introduction to Profit from Prices signals.
It also talks about how track prices and how to use these signals in
real life. (around 25 pages.)
- STOPLOSS: Stop-loss- everything you need to know about stop-loss
in trading (6 pages)
- SIGNALS: Profit from Prices Trend Reversal signals (50 pages)
- SIGNALS: Trend Continuation and Miscellaneous signals (40 pages)
- SIGNALS: Chart based signals (15 pages)
I am sure you will enjoy this book and find very useful like many others
have done so far. Most of the readers have rated this book as EXCELLENT
and very USEFUL.
Question: What is "Profit From Prices"?
Answer: By "Profit from Prices", we mean that it is possible
to trade stocks just by using four daily stock prices- Open price, High,
Low and the Close price. In other words, we strongly believe that all
that is needed for profit in stock trading are just stock prices.
There are hundreds of theories, strategies and books to
help traders in their trading of stocks. Some of them use fancy computer
programs and complicated mathematical models while some others use various
technical indicators and stock charts. While some traders use economic
or company specific data/news/analysis in their trading decisions, many
others use Options, Volatility or RSI and ROC type momentum indicators.
Such a list is endless. However we at Profit From Prices believe that
for trading stocks, all that is required is just four daily prices: Open
price, High price, Low price and the Close price. With understanding of
Profit From Prices' simple yet powerful signals, one can identify which
stocks to buy or sell and when just by paying attention
to daily stock prices. Hence the name "Profit from Prices".
As you will find in few moments, "Profit From Prices" is probably
one of most logical, simple but effective and timely method
for identifying which stocks to trade and when.
Question: Have you back-tested your signals?
How did they do?
Back testing these signals is too much for my one-man mission!. However
on April 15, 2005, I backtested two of my favorite signals for the period
from Dec 31, 2003 to 29-JUN-2004. Here is what I found:
For the U TURN (BUY) signal:
Annualized Return on
Investment (ROI): 22.82% versus the ROI of ^SPX was: 4.81%.
(Click here for an EXCEL file with all details
about his back-testing.)
For the U TURN (SELL) signal:
Annualized Return on
Investment (ROI): 24.60% versus the ROI of ^SPX was: 4.81%.
(Click here for an EXCEL file with all details
about his back-testing)
Question: What makes you believe
that your seemingly easy theory is powerful enough to generate profit
in stock trading?
Answer: During my investing and trading career, I read lot of books
and talked with variety of traders in order to find out something that
could help me make consistent profit in stock trading. I had learnt about
various technical indicators and different approaches to stock trading
but none of them seemed to work consistently and accurately. Then I came
across this approach that showed me how to unleash tremendously useful
information for trading stocks just by looking at four daily prices, Open,
High, Low and Close. This changed my fortune and since then I have been
consistently able to trade stocks profitably. In a few minutes, you will
see yourself that this approach is not only very simple and logical but
is also one of the most effective and timely.
Profit From Prices trading approach
Is very logical: Do you know what causes the price
of any stock to goes up or goes down? As we all know there are various
factors that affect stock prices. They are press releases, industry and
economic news, mergers, earnings announcements, analysts' upgrades, Fed
interest rate decisions, new jobs data, currency values, gold and oil
price, etc. This list is endless. However if you think for a moment,
it is not difficult to see that it is the change in the demand and/or
supply that is really causing any stock price to move. Price of a
stock will go up when demand (buying) for it is going up and/or when supply
(selling pressure) is becoming weak. Similarly the stock price will tend
to go down if the demand (buying) becomes weaker and/or when supply (selling)
intensifies. No magic here. Instead of getting into individual factors
that could affect stock prices, Profit From Prices approach looks
directly at this very basic Demand and Supply dynamics in the marketplace
and this is what makes it one of the most logical methods for trading
stocks..
It is very simple: As mentioned above,
there are thousands of individual factors that affect stock prices. However
if you are using one or few of those factors in your trading decisions,
you are missing out on remaining factors that also impact stock prices.
However with ProfitFromPrices method, we look directly at the changes
in underlying demand and/or supply which reflects impact of every new
development and every decision of every individual market participant.
And to identify such changes in demand and supply, all we need is just
four daily prices, Open, High, Low and Close prices for the stock, and
there isn't any complex math or formulas involved. Just some simple basic
comparisons. Nothing could be simpler than that!
It is very effective: Profit From
Prices signals give you very nice payoff. For success in trading, we need
to have more trades in profit than in loss and also more average profit
per trade than average loss. PFP (Profit From Prices) signals have both
these components. They usually result into more trades in profit than
in losses. Not only that, they usually have a narrow margin for loss and
a high margin for profit. We have found them to offer up to three times
the profit than the size of risk undertaken. In other words, for a 500$
risk, one can expect to get profit of around 1000 to 1500$. This makes
PFP one of the most effective trading approaches.
It is very timely: Most other systems
have lousy timing. If you are looking at earnings announcements, you would
find that quite often stock has already appreciated prior to the fantastic
earnings release. If you are using ROC, RSI or other overbought/oversold
indicators, I am sure you have seen a stock spend weeks and months in
overbought or oversold territory before it changes its course. On the
other hand, if you are using Moving Average or MACD type of indicators,
you probably have seen stocks already appreciated prior to the Buy signal
given by the system or you might see the stock price going down after
you act on the Buy signal. I don't mean to criticize any system. They
don't do a good job because they are too mechanical and they fail to look
at many other factors that are also simultaneously influencing the stock's
price. On the other hand, Profit From Prices system gives you a Buy signal
on the day (or on the second day) the stock touched a new low price. If
the signal is successful, your purchase of the stock could have taken
place on the very day it formed its bottom. This is possible because ProfitFromPrices
system is always looking for powerful shifts in demand and/or supply of
the stock and hence they have a very impressive timing.
Thus PFP trading approach is one of the most logical and
simple yet very effective and timely.
Question: Sounds interesting.
Can you tell us more about how Profit From Prices system attempts to determine
changes in demand and/or supply of any stock?
Answer: Sure, let me try. In a paragraph or two,
I can not tell you everything but let me try to tell you two important
things I try to unleash from prices: Emotions and Actions. For
measuring emotions, I compare any day's Open price to the previous day's
Close price. For Actions, I simply compare a day's Close price to that
day's Open price. Sounds simple. It is but this is also very powerful
with regard to capturing immediate stock price trends.
In order to assess the near-future price movement for any
stock, we have to see how the market (all individual and institutions
together) is thinking and acting about it. I call thinking part Emotions
and the acting part Actions. Changes in Emotions can be classified
as Positive, Negative or no change. Similarly we will classify changes
in aggregate Actions as Selling, Buying or no change. Now when Emotions
and Actions both align in the same direction, we can very well predict
in which direction the stock price is heading and we can take appropriate
trading position to benefit from it. Now the question is: how can we find
changes in Emotions and Actions? Sounds like a tough question but luckily,
with prices, this becomes pretty simple. As I keep telling, keep looking
at the prices and they will tell you everything we need to know for trading
stocks.
Emotions: For this, compare
today's Open price to yesterday's Close price. Most of the time, there
is no significant change between them and hence no change in overall Emotions.
However a stock that has been going down for quite some time due to "negative"
Emotions and "selling" Actions if opens today at a price significantly
higher than yesterday's Close price, we can take this as a positive change
in Emotions. Something must have happened since yesterday's market close
causing many market participants to demand it at a higher price today.
(If it had opened lower, I would take as continuation of the negative
Emotions and hence creating or maintaining a Sell position).
Actions: However a positive
change in Emotions is not a complete story to buy any stock! Emotions
have to result in positive Actions too for this stock's price to really
change its downward course. It has to cause lower supply or higher demand!
How do we take account of the aggregate Actions in the marketplace? We
can do this by comparing today's Close price to today's Open price. If
the stock closed higher than the Open price for the day, it just means
that the demand/buying for the stock was more powerful than the supply/selling
in the stock. This means Action was also positive.
Just to give you an example, we can use this information
as mentioned in the table below.
| Emotions |
Actions |
What it means? |
Trading implications |
| from negative to positive |
from Selling to Buying |
The demand is going up and/or supply is going down |
Buy |
| from negative to positive |
no change |
Emotions are getting better but there is no significant
buying happening yet |
Wait. Chances are reversal is close so wait for
new signals. |
| From negative to positive |
Selling continues |
People are still selling despite some positive
development |
Avoid. |
| None |
from Selling to Buying |
The demand seems to be going up and/or supply is going
down |
Watch out for additional confirmations/ buy signals |
| |
|
|
|
As you will see in Profit From Prices eBook, these two tests
(on Open and Close Prices) are combined with some other tests on prices
and volume data to create individual PFP signals. Every signal has a specific
set of tests and guideline about how to act on it, what stop-loss to use
and when to book profit.
Here is an example:
| U TURN (BUY) signal |
|
Short Description: U- TURN (BUY) signal
takes place when a stock in a downtrend, opens lower than previous
day's Low price but manages to close higher than previous day's
Open as well as Close prices with noticeable jump in volume.
|
|
CONDITIONS:
- The stock has to be in a continued downtrend.
- Today's Low price (TDL) has to be the LOWEST price for the
stock over the last few days.
(If it is the lowest for the last few weeks, we are likely to
have a strong major trend reversal signal- a strong form of U-TURN.
However if Previous Day's Low price is the lowest for only the
last three to ten days, we have a signal that is more likely to
mark the beginning of a Correction or the end of a Reaction -
a weak form of U-TURN).
- Today's Open price (TDO) has to be LOWER than Previous Day's
Low price (PDL).
TDO < PDL (The more the difference between TDO and PDL, the more
powerful the signal is going to be)
- Today's Close price (TDC) has to be HIGHER than Previous Day's
Close price (PDC).
TDC > PDC
- Today's Close price (TDC) has to be HIGHER than Previous Day's
Open price
(PDO). TDC > PDO
- Today's Volume has to be decisively HIGHER than the normal
volume over the last few days or Previous Day's volume. If the
above conditions were fulfilled, you would most likely see a decisive
jump in stock volume today. If you don't see a jump in the volume
today, the signal loses some of its strength.
|
|
ACTION:
There are two primary variations of this signal as regards to Condition
2. The signal can take place at the end of a major trend Here you
can expect the stock price or index to go up to the tune of 20%!
So as soon as you have a U-TURN (BUY) in a major trend, you should
close short positions and you can also initiate fresh long positions
to take advantage of this new emerging up-trend.
In the second variation, U-TURN takes place somewhere in the middle
but not after a sustained trend. So Today's Low price may be the
lowest price for only the last three to ten days, but not for the
last few weeks! So the signal here may just mean the beginning or
end of a Reaction/Correction. So you can make new trades to take
advantage of the price movement over the next three to ten days.
|
STOP-LOSS
Keep a Stop-loss at Signal Day's Low prices (minus 1%). |
|
TARGET:
The strong form of this signal indicates around 20 percent appreciation
in the stock price from the low price on the Signal day.
|
Read about Profit From Prices signals and that would be
one of the greatest favors you would be doing to your trading career.
Question: What types of signals are discussed in PFP
eBook?
Answer: I have grouped various signals into following
categories:
- Trend Reversal signals: there around around 8 to 10 of these
different signals that help you capture most of the trend reversals
for primary as well as secondary trend reversals. Some signals are very
powerful and they tell on the very day a months old downtrend is ending
with a very close stoploss. If the signal is right, you might have bought
the stock on the day it touched its low price. If the signal turns out
to be wrong, you will be out with a small loss.
These signals also help you find start and end of smaller trends which
I call reactions and corrections.
- Short Term trading signals: These signals are useful for trading
positions that can be carried out from one day to up to 10/15 trading
days.
- Event based signals: This signals are applied on significant
days for the stock like when Earnings numbers are released or when split
occurs or when its Options expire or even on the beginning of the week
(Mondays). These signals are very useful for positions over next 1 to
3/5 days.
- Chart based signals: There are some signals for which you need
to look at the charts to identify them.
Question:How ProfitFromPrices differ from regular technical
analysis of stocks? Both seem to be using price and volume data.
Answer: That is true. However most technical analysts use charts,
patterns or some type of statistical indicator to determine what to buy
and when. However most PFP signals do not require you to use chart or
even a calculator. Here is an example of how one PFP signal can be identified
in any stock.
| U TURN (BUY) signal |
|
Conditions:
- The stock has to be in a continued downtrend.
- Today's Low price (TDL) has to be the LOWEST price for the
stock over the last few days.
(If it is the lowest for the last few weeks, we are likely to
have a strong major trend reversal signal- a strong form of U-TURN.
However if Previous Day's Low price is the lowest for only the
last three to ten days, we have a signal that is more likely to
mark the beginning of a Correction or the end of a Reaction -
a weak form of U-TURN).
- Today's Open price (TDO) has to be LOWER than Previous Day's
Low price (PDL).
TDO < PDL (The more the difference between TDO and PDL, the more
powerful the signal is going to be)
- Today's Close price (TDC) has to be HIGHER than Previous Day's
Close price (PDC).
TDC > PDC
- Today's Close price (TDC) has to be HIGHER than Previous Day's
Open price
(PDO). TDC > PDO
- Today's Volume has to be decisively HIGHER than the normal
volume over the last few days or Previous Day's volume. If the
above conditions were fulfilled, you would most likely see a decisive
jump in stock volume today. If you don't see a jump in the volume
today, the signal loses some of its strength.
|
Question: I have heard about lot of scams
on Internet. Why should I trust you?
Answer:
First, your credit card will be processed through one of the largest
eCommerce provider eBay. We use eBay's PayPal payment system to process
your payment so you can be sure that your credit card is not going to
be misused. As a vendor with PayPal/eBay, we don't have any access to
the Credit Card information of our buyers. As you know millions of people
use eBay and Paypal payment system everyday.
Second, after reading this eBook, if you feel like cheated or are not
satisfied with its content, simply let us know within 14 days and we will
gladly give you full refund. I think this is the only or maybe one of
the very few Books out there which offer its buyer sSatisfaction Guarantee.
Third, some of the signals are already discussed on this website. So
test drive them yourself before you buy.
Question: Well, I am ready to buy Profit From Prices eBook. How
do I make my purchase?
Answer: You have made probably one of the most significant decisions
in your trading career. Congratulations. Click here to go to the instructions
on how to order Profit From Prices eBook.
|
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