31052012

Nifty gaped down below PDL.. Market was in no mood to go below the GDP drama. HL gave a long signal. I was watching for a BOF of PDL which did not happen. Better to stay out during major announcements.

Practice.!!!

30052012

g

Nifty gaped down below the PDL. Bias bearish. First signal was a BOF  short at DT and IRH. Nifty gave a long signal when the breakout of IRL failed.Expectation was a LOL short at PDL/PDC, but BO of HOD failed and gave another short opportunity.. 70% of the time market will trade in a range. Look to buy low and sell high.of the range

 “There are no shortcuts: even those blessed with raw talent still need to stay on task. Practice is never optional.”

29052012

Nifty gaped up above  PDH. Next three candles were bear candles. Usually such initial move act as a range 50% of the time. Otherwise it may move in a channel.. Nifty got trapped in this range the entire day. If the price is in a range buy the range low and sell the range high.Nifty gave two good trade opportunities today at the extremes.

28052012

NIfty gaped up above PDH. Bias was slightly bullish. Test of the PDH gave a long signal.BOF of DT was a good short signal.. BOF of LOL PDH/PDC  was a good opportunity to go long..
Do not attempt to trade all the Support and Resistance. For example do not trade  the BPB at points marked A and B. Location is everything in trading.

Love the Process

Buy Low,Sell High

Money is made by buying low and selling high . It is a universal truth. Trading cannot be different.
The problem is  many traders do not know  where  exactly the lows and the highs are.You need a slight change in perspective to know this.

Markets move in short term ranges. A trend is a series of range breakouts.When the Markets break to new highs, it is always in the lower end of the range above.Once you become comfortable with this reality, you can always trade whether it is trending or ranging.

If you are not comfortable trading counter trend, stay with the trend. If the current price range is above the previous one, the trend is up, and try to  buy the range low.If we are in a lower price range only attempt to sell the range highs

Many "Gurus" advise to trade trends and stay out when markets range. I do not subscribe to this view.

Do not miss my earlier post. Click to read

Learn to trade sideways markets so that you can trade all the markets

Reading: One Trick Ponies

Jack Schwager’s new book "Hedge Fund Market Wizards"

Schwager:  You have seen a lot of traders.  What are the characteristics of traders who succeed?

Clark: They all work hard. Nearly all the successful traders I know are one-trick ponies.  They do one thing, and they do it very well.  When they stray from that single focus, it often ends in disaster.  In the hedge fund world, you will see traders who do one thing very well, make a lot of money at it, and then think, This one thing is very boring. I can do other things because I am a genius. So they start doing other things.


Schwager:  But successful traders who are one-trick ponies, when that trick stops, they learn another trick.

Clark: That is exactly what happens, but some traders will change while their one trick is still working and destroy it.  You need to be a bit obsessive to do the same thing 10 hours a day.  People who are obsessive can become very good traders.


Steve Clark: Do More of What Works and Less of What Doesn’t.

25052012

Nifty gaped down and remained within the last swing of the previous day. Last swing of the previous day acted as a range.FTC below the swing low gave a long signal. TP at BRN as there was no immediate follow through after the breakout..First BOF of PDH/PDC gave some profit. Second one was a scratch

24052012

Nifty opened just below PDH and failed to go above PDH , FTC at PDH gave a short which find support at PDC. A scratch trade.  BPB of PDH/IRH gave a buy signal which moved well. BOF of BRN 4900 gave an opportunity to short. BOF of IRH was a good long signal.Test of DT/BRN did not move and stopped out..

We may not be able to ride the whole move. Most of the time we will be exiting prematurely. Our aim is to control the risk and the Market will take care of the profit.There are no perfect trades. All the time we will be making some or other mistakes.Perfect entries and exits will  be known only on hind sight.

You are going to regret after each and every trade.Still you can make money.

23052012

Nifty gaped down below PDL. and 3 attempts to go above DO failed. A short signal. There were two BOF signals at PDL. First was a scratch and the second one a clear winner. Notice Layer Over Layer

Make it simple. Complex systems tend to die.  Simple systems survive

22052012

Nifty gaps up above the PDH but failed to sustain the level. BOF of PDH gave a short signal.. Second short signal was the BOF of PDC/PDL. Both trades gave good profits.Those who have seriously gone through the charts I posted during the last three months will understand the importance of Trader Decision Points


Once you gain experience . you can even attempt the CT BOF of DB at line marked A.  10 Point move in Nifty is enough , if you are trading multiple lots.

Read this if you really want to learn day trading ,

Scouting Party

During war, fortifications are built behind natural barriers such as hills. In open terrains battle tanks and other armored vehicles can move quickly and attack the deep defense. Impassable terrain could be used to the defenders' advantage.

For the attacking forces, there is no way to assess the strength of the other side as they are hiding behind the fortifications built around these barriers. One of the ways to do this is by sending a scouting party. A few troops are send to get information about the area and about the enemy’s movements and position.

If the scouting party find the defense is weak they signal other troops to launch an assault. If the defense is strong and cannot be broken they retreat and wait till the arrival of further reinforcement.

Trading is war. Fortifications are built behind trader decision points. You do not know what exists there. The only way to know this is to wait till a scouting party to cross the line and assess the situation. Listen to their signals and act accordingly.

BOF and BPB are much more reliable signals than TST and FTC

18052012

Nifty gaped down below PDL and BRN  4800. and started moving up. BOF of BRN was a good short. Avoided it because when the market start moving against the prevailing trend of the week on Fridays, position traders will start exiting and will add fuel to the CT move.BOF of DO and LOD gave a long signal . TP at PDL. BOF of the DB formed at PDC gave another long signal. A type 1 trend day.

17052012

Nifty gaped above the PDH. Generally after the morning spike there are two possibilities.1) break above the spike will fail and market will reverse.2) Price will move in a channel.
BPB of PDH gave a long signal. after which it channeled. Second opportunity was the BPB of BRN, FTC at PDC gave a CT signal but failed. TST of PDL moved well.

16052012

Nifty opened just above PDL. PDL did not hold. BPB of PDL gave a short signal. BOF of LOD gave a long signal.. Failed to cross above HOD . BOF of HOD was a shorting opportunity.

15052012

Nifty opened just below PDL and immediately went up. BPB of previous day swing high/11-05 low and BRN 4900 a long signal. BOF of PDH gave the second short trade. BOF of DB range low gave another long signal. All the three trades gave good moves

Doing without Thinking

There are no shortcuts in trading other than achieving “Automaticity”.This is especially true for  discretionary traders. Once you achieve Automaticity, you can perform the task without thinking.,like driving a car.

How often does it need to be performed before it no longer requires thinking ?

Dr Maxwell Maltz noticed that amputees took, on average, 21 days to adjust to the loss of a limb and he argued that people take 21 days to adjust to any major life changes.But recent research shows that it is not sufficient.

Studies conducted by Dr. Phillippa Lally shows that on an average a plateau in automaticity was reached after 66 days. Although the average was 66 days, there was marked variation in how long habits took to form, anywhere from 18 days up to 254 days

So if you are trying to trade a discretionary system, you may need to trade it at least a minimum  period of 66 days to be proficient in it.

11052012

Nifty gaped down below PDL . FTC of PDL gave the first short signal. But it moved so fast that I missed the entry. Supported at BRN and there was no reliable pattern for entry. BOF of PDL was a trade that stopped out. BOF of PDC gave a short signal which moved well..
Notice how the market is respecting and reacting to decision points

10052012

Nifty opened near PDC and spiked above PDH. BPB of PDH gave a long signal. TP at HOD. BOF of  TRH gave a short signal. which gave very good profit. BOF of PDL moved too fast. BOF of PDC gave another short signal. Usually when breakout of a trading range extreme fails you can expect the break of other extreme.

09052012

Nifty gaped down little below PDL, BPB of the IRH gave a long signal. As the price entered the previous day range, I was expecting the price to go up till the area marked Target.But the BOF changed the bias and exited the long trade . Next two FTC trades moved well. In between I missed the LOD reversal.Did not attempt the last BOF as there was not much time left

Reading: Chasing Success

Here is a blog post by Trader X. This post was written in 2006 and influenced my trading a lot


I talk to numerous people through email every week who are struggling to be successful at trading. And, I find two common traits in most of them:

1.) They trade too much - most of the people struggling make multiple trades daily, some as many as 10+ round trips.
2.) They have a lack of focus.

I will start with #2. I have discussed this in the past - most people jump from indicator to indicator, time frame to time frame, method to method. They will use something for a few days, hit a bump, and move on to something different all together. One day the holy grail is a XX period moving average, the next day it is MACD or an oscillator. One day it is a 30-minute chart, the next day it is a 5-minute chart. One day it is buying the break of the first inside bar, the next day it is a pullback from the high.

I call this "chasing success". The bottom line is the person does not spend enough time on any one method to really understand and execute it properly. They bounce around, and before they know it a lot of time has passed and they are still struggling.

If you pick something and stick to it, you get good at it. Once you get good at it - once you perfect it, THEN you can add something else to your arsenal.

 A final thought on #1 - why do you want to make 20-30 (or more!) trades a week when you are losing money? Stop trading so much! And a way to "force" yourself to do that is to FOCUS on one thing. Pick a timeframe. Pick a moving average. Pick a set-up. And wait for it to happen. What do you do while you wait? Study charts!!! And if a day passes and you do not make a trade, so be it. Look at it as a positive - you did not lose any money!

Click here to read the original blog post

08052012

Nifty opened just below PDH and drifted down and made an initial range. I was not confident to go long when a HL was made as it was CT.. I was expecting a down move either from HOD, IRH or PDH/PDC. BOF of IRH gave a short signal.. BOF of IRL gave a CT long signal which failed. BPB of IRL gave another short which moved well.
IR (Initial Range) is a variation of Opening Range concept. Will make a separate post soon.

07052012

Nifty gaped down. BRN 5000 gave support. BOF of  the range high gave a with the trend short signal. FTC at DB, LOD gave a CT long signal. TP at PDL.Missed the 60 point move beyond PDL

Feedback

Nifty Nirvana is now three months old .It is  time to take stock and get some feedback.

I was an active blogger for many years till the end of 2008.I never wanted to start blogging again. This was an accident.Anyway I would like to continue this for the time being.I do not spend much time on this.Annotating charts  is a daily routine I follow for the last two years.Write ups are nothing but the modification of the notes I have made over the years.

The blog is getting a lot of hits, much much more than a three month old can get.Majority of the visits are coming from timamo. I would like to thank Sri Sunil Saranjame for sending people here.

Thank You very much, Sir

I do get a lot of comments. But unfortunately most of them are asking for the expansion of the abbreviations I use.  Frankly ,I am not interested to have such persons as my readers and their comments get deleted promptly.


I believe my method is price action trading in its purest form. In fact this is a cocktail. I have borrowed and stolen many ingredients from many people and mixed my own thing.It works well for me. Sometimes you may need to add a dash of "You" to make it to your liking. I have always tried not to over complicate and make things as simple as possible.My future plan is to set up a private video chat room and broadcast my desktop live during market hours.If you thought this is going to be a paid service,you are wrong.

Please do give your valuable suggestions and feed back.Let me know what you think about the design, content, charts etc and also other features you would  like to have.I always welcome constructive criticism.

I am  more interested to know what you do not like.than what you like.

Automaticity

Many studies have been conducted on expertise development and experts in various fields and today psychologists have a very good understanding about what makes an expert an expert.

The difference between an expert and a novice is that a novice has not acquired the “Schemas” of an expert. Novices are highly conscious of the process and the rules involved in performing the task Experts rely much more on their accumulated experience or Schemas. Once you build a Schema, any error-prone, slow and difficult task can be made smooth and effortless

The short term memory of the human brain is limited. The complex skills we learn are stored in the long term memory as “Schemas”. Schemas permit us to treat complex processes as a single element. They are the cognitive structures that make up the knowledge base.

As novice traders we are trying to remember steps or sequence or method rules. This creates additional load on our cognitive processing. That is why we become frustrated and lose confidence. With experience, once you build a schema, performance of the task becomes automatic. This cognitive phenomenon is called "automaticity”

There are no shortcuts in trading other than achieving “Automaticity”.

04052012

A soft trend day . From opening it was slowly going down and down.These kind of days are very difficult to trade for me. It is a very slow grind with mostly overlapping bars and there wont be any reliable pattens. Pull backs and breakouts do not go far for each swing.

Focus

Candle Patterns

Above pictures are 3M chart of Nifty futures on May 2. The above one is from Invest Bulls and the lower one from I Charts. You can notice slight difference in candle formation. The very same data will appear as different candle patterns depending upon how they cut and package the streaming data.

Notice the swing high just before 3 PM.  2 doji bars on Investbulls where you may hesitate to take a short, where  as a it is a beautiful pin bar in Icharts.where you may enter confidently.
 
Are candle patterns just illusions ?  Is it wise to base your trading decisions on candle patterns ?

Draw your own conclusions.

03052012

Nifty gaped down below PDL. The first bar with a long lower shadow gave some clue that Nifty is in no mood to go down. BOF of DB gave a long signal. BOF of LOD and BRN gave another long which did not move as expected..Watch the volume of BO bar. I thought it will move up to PDL.Unfortunately market is not listening to me. Notice how the first bar extreme and PDL acted as a range.

02052012

Nifty gaped up and moved above PDH. Bullish bias. But move paused at BRN 5300. PDH gave support to the down move. Did not attempt to go long as the FTA was too close.BOF of DT and BRN gave a short signal.Pin bar at DO scared me.BPB and RT of PDH gave another short. Third short at the BOF of PDC did not move well and I missed the next BOF

Trading the Ranges

Theoretically 70% of the time  markets will be trading in a range. They are in a  trend only at the remaining 30% of the time.It is very difficult to know exactly where the trend will start and where it is going to end.By the time we know a trend has started it is too late to enter and we are not able to capture a major portion of it.

So I thought it is better to trade the markets as if it is in a range 100 % of the time . Then I am going to  be correct 70 % of the time.I assume the market is in a range all the time and for me a trend is a breakout of a range extreme. A prolonged trend is a series of range breakouts where as the range is a series of range breakout failures.

The first task was how to define a range. Markets move in waves.There are two types of moves impulsive and corrective. Impulsive moves are momentum moves in the direction of trend and corrective moves are weak counter trend moves. Every wave is a probable range.Generally during trend periods corrective waves become ranges. Impulse waves too can become ranges especially during sideways market periods.Ranges can overlap and there could be ranges inside a range.I try to buy the range lows and sell the range highs.

Every range extreme is not tradable in my scheme of things. I would like the range extreme to match with trader decision points, in other words a confluence.A slight change in perspective can make a lot of difference. Many people struggle with the concept of trend in multiple time frames and get whip sawed left and right.

I hope I could convey what I wanted to say.. Otherwise please let me know

Thrissur Pooram

Today my home town Thrissur is celebrating its annual temple festival called "Pooram".Thrissur Pooram is the biggest and the most colourful temple festival of Kerala. It is a stunning mixture of magnificence and spectacle. celebrated every year in the month of Medam (mid-April to mid-may). The festival is a grand assembly of Gods and Goddesses who make their visit to the Vadakumnathan Temple premises on decorated elephants