CHAPTER 6C : Importance of above / below level calls

In our earlier chapters you learnt some of our trading strategies, wherein we discussed on why is it essential to put a stop-loss in every call and why is it necessary to invest with equal amount in each call. Our third trading strategy is to trade with “Buy Above and Sell Below” levels.

When a trader buys/sells particular scrip, that buy/sell order should be placed at certain levels based on the technicals. This is essentially important in case you are not a full-time trader.

‘Buy Above’ indicates that you have to buy scrip above the specified value. If the price reaches that value, then it will gain strength to go further up and reach your target level. Otherwise, if the scrip does not reach buy above level, the scrip may not have strength and hence may go down. Similar is true for ‘Sell Below’ levels, If the price goes down below that specified level, then it will move further in the downward direction. Otherwise, if the scrip does not reach the sell below level, it may not go down below the level and hence may move upward.

DreamGains as an advisory firm provides Buy Above / Sell Below trading tips only. The reason for this is if you are trading with an advisory firm and they give you a recommendation, you will need a certain amount of time to check your SMS/call and inform about the same to your broker, in case you trade offline. Giving recommendations at market price will lead to you missing out on the trading opportunity.

Also, since buy above and sell below have an advantage of setting the order in advance (either through broker or your terminal), you do not need to wait and watch the market till it reaches that price. Just inform your broker about your entry (buy above or sell below) level, target and stop-loss and you can get busy in your other work. Your broker will put the order in his terminal, and trade will automatically be executed when that price arrives in market and profit/loss will automatically be booked through your target and stop-loss orders.

Buy above and Sell below strategy thus not only indicates good buying/selling levels, but also gives you sufficient time to enter into your positions and the flexibility to trade as per your convenience.

Let’s take an example where we have given a recommendation to buy SBI above Rs. 300/-, with a target of Rs. 310/- and a stop-loss of Rs. 290/-. This means that we have to buy SBI at the rate of Rs. 300.05/- or slightly above only. The scrip should not be purchased at any rate lower than this. If you buy the scrip at Rs. 299.95/- also, there is a good chance that the scrip may fall down from there and hit a stop-loss, as it has not broken our given level of Rs. 300/-.

Let’s take another example where we have given a recommendation to sell SBI below Rs. 290/-, with a target of Rs. 280/- and a stop-loss of Rs. 300/-. This means that we have to sell SBI at the rate of Rs. 289.95/- or slightly below only. The scrip should not be sold at any rate lower than this. If you sell the scrip at Rs. 290.05/- also, there is a good chance that the scrip may go upward from there and hit a stop-loss, as it has not broken our given level of Rs. 290/-.

About DreamGains

DreamGains Financials India Private Limited formed in 2004 as an independent and privately owned company is build upon the principles of teamwork and partnership.It is a trusted name in the financial service arena and provides you with an entire gamut of services under one roof. It today has emerged as a premium Indian stock consultancy, with an absolute focus on business and a commitment to provide “Real value for money” to all its clients.