I think it is not my style to blab and writing about trading psychology, maybe it is the most important thing in trading, but I believe it is homework for each of you. Trading psychology really close with your trait, your habit, your thinking, to change all of them you need to create the new “YOU” and I don’t have confident to change the “YOU” who read my article.

Today I want to discuss about IHSG chart, I will tell you how I make plan for IHSG and going deeper into stock selection or if I am really lazy, I will choose mutual fund (reksa dana), from my research reksa dana NAV movement 90% similar to IHSG movement. Last month when IHSG reaching 3200 I bought average at 3300 and sell at 3600-3700 bagging around 9% – 10% ROI. Pretty nice for period of 2-3 weeks and I only need to pay the redemption fee of 0.5% as there is no subscription fee, not bad because if we trade using brokerage service, they’ll charge you 0.15% for buy and 0.25% for sell total of 0.4% plus tax and the worst thing that could happen is your stock underperforming the market.

Enough of the blab and forgive me for the blab, let’s get into trading, here is IHSG chart below.

 

From the chart above, I assume IHSG currently challenging strong resistance around 3800 and if this cluster of resistance broken IHSG will easily reach 4000 in no time. But if things not working as we want, there is room to test support around 3600 (this place I call head of W / double bottom pattern – see the green line). For the sake of reader who don’t know double bottom pattern, I will explain. This pattern is really famous, because when it appear at bottom (as its name), it usually mark the end of downtrend. You might already heard the other version of this pattern, if you haven’t, that is infamous “double dip”, the name feared by every buy-side analyst.

Logic behind double bottom is – the market making second test to the very strong fortress protected by buyer and finally the buyer come out of the fortress forcing the seller uncover their short position resulting in very strong bullish movement. When you see the pattern, the confirmation to buy is when the head broken, the safest time to buy is when price making correction to the head (For this chart the safest price around 3600).

Now, let’s talk about the price objective (target), every pattern have their price objective, for this pattern you can get it by subtracting the head with lowest low made. After that add the result to the head. Here is the formula:

price objective = Head + (Head – lowest low)

my calculation (rounded up)

price objective = 3600 + (3600 – 3200) = 4000

Voila, that means 4000 is our target. I suggest:

1. if you already have position, hold it, as long as 3800 give way, you are safe.
2. For you who don’t have position, too bad, the train already take off, your choice only making short term trade or if you are brave, jump the train. (I will never do that, because I already collect some position), so my suggestion is learn and write to your journal so the next time opportunity available you can join.