Daily Trading Patterns

Learn to recognize the daily trading patterns. There are four types of trading days

1.Type 1 days are trend days. market trends either up or down during the trading hours. This can happen after a reversal day or any significant news shifts the sentiment to bullish or bearish.More than two trend days in the markets in a row  are very rare. Trend days are generally followed by  a reversal or consolidation.

2.Type 2 days are reversal days.This happens when a price hits a strong higher time frame decision point during the day and reverses, This will show as hammers or shooting stars on a daily chart.We can expect a trend day after a reversal day

3.Type 3 and 4 days are consolidation or range days.This usually happens after a trend day when the effect of an earlier news dries up and there is no significant events to shift the market sentiment.

More than four swings very rarely happens on a day . try to catch these swings and limit your trades to a maximum of four. Do not over trade.

Basic Structure

Look at the chart below , What is happening ?

This is the basic structure of the market. Market will do this again and again in all time frames.But the price action will unfold differently each time.

03022012

Very difficult to trade type of market today.Nifty opened within yesterdays afternoon range and tested the patience till 2' o clock.Market was making slight higher lows and it showed the higher probability breakout is to the new highs. In such situations one can attempt a breakout trade as there will be a lot of stop orders above this.First pull back after the breakout also can be taken
 Wedge pattern shows accumulation and likely breakout to new highs
 Triple tops and triple bottoms will normally break out on the 4th attempt.

02022012

Entire day nifty was trading in a range. Better to concentrate on breakout failures on such days.A high volume breakout failure is a very safe trading setup.Watch for failures

Disclaimer

This blog is for educational and general information purpose only. The information contained in the blog should not be construed as research report or financial advice.

I am not a research analyst registered under the SEBI( Research Analysts) regulation 2014 and not authorized to give any financial advice. Information contained in this blog should not be used, relied upon or treated as a substitute for specific or professional advice

Information on this site is general in nature only. The content is only general discussion on broad based index Nifty and technical analysis relating to the demand and supply factors.

I do not make any buy /sell/hold recommendation or give any price target. Charts published in this blog are only illustrative examples of the concepts discussed here and are simulations on historical data in hindsight analysis

These simulated results do not represent actual trading and these trades have not been executed in live market with real money. They are identified with the benefit of hindsight and no representation is being made that real trading using these concepts will or likely to achieve results as shown

Any reliance you place on the information contained in this blog is therefore strictly at your own risk. I will not be liable for any damage or loss, direct or indirect incurred using the information contained in this blog

01022012

1.Market gaps down slightly and remains within the range of the previous day.Down move stopped after a small hammer and retest of the low.
2.For the next three hours market traded within a range. Once the breakout to the downside failed, it broke the opposite side of the range and rallied.
3.Rally gave a very handsome return to the patient trader.

Lesson: If the breakout of a tight trading range fails market will successfully break the other extreme of the range