31072012

I was not watching the market live today. My analysis is based on bar by bar analysis I follow to analyze historical charts. Being a major announcement day I will not trade till the announcement is over. First signal was a good long trade. . BOF of a MSP from where an impulse wave started yesterday. This move acted as a range today.  BOF of HOD stalled at PDH. A scratch trade. Today the Market ignored the BRN 5200.

" Defense is not only the best offense in this business,it is the only offense that works",  Mike Reed

30072012

Nifty gaped up within previous day range. Almost all the day it moved quietly in two different ranges. There were only two reliable signals. BPB of PDH and BPB of BRN.. The seconed signal came very late.

Feedback

I have received a few specific comments and suggestions as feedback Thank you very much for the response. I am reproducing these comments and my response to it in Red 

your analysis is very objective and factual. it is educative. over a period of time, we will be able to learn market well and get profits. Pl keep going. If possible, evlaute bank nifty as well atleast on a weekly basis.

I focus on Nifty Futures 3 M chart. There are reasons for that

coz i want to become rich before him.. heheheh

Liked your humor sense.( He is not willing to recommend this blog to his trader friends)

Excellent blog for new as well as matured traders. The daily updates are short and to the point. Please include the mail feed on your blog.

Thanks, will do that

Kindly do not let yourself down, even if you are not seeing any comments, blog is reflecting your ideology... I mean this as you want to share your ideas to the trading community..... Thanks for good work & sharing, All the best

Thanks. In the beginning I was upset with some comments. Now I don’t care.

Feel that there are lot more things to learn from you.

Thanks. I am happy that you find these rants useful

I have already recommended to my friends... and we use to discuss your commentry on charts...

Yes. That is the way to learn. If you are willing to take effort, you can tweak and make your own system.

Hi ST, I learnt a lot from your blog on DT. Keep up the great stuff. I dont comment much as i try to imbibe and action on it. thanks for sharing with us.

Thanks. I am happy that you find this method “Actionable”

Pls add a performance excel with the reason for trade abbv.

This is a discretionary method and the ultimate result will depend upon the market knowledge and experience of the trader.No point in performance evaluation

could you also share your experience with stock futures, and the difference in trading of stock futers vis-a-vis nifty future

Stock futures, barring a few are illiquid.Their movement is influenced by market as well as sector sentiment and is more difficult to trade.

A list of abbreviations visible on sidebar will help a lot.

I have designed the blog without the side bar so that readers can view bigger chart. I have removed all the rarely used ones. Now there are very few and there is no need to refer frequently.

definately for newbie it is a swarg

Thanks

More detail on BOF and BPB and how to distinguish between these two.

I will make a separate post on these patterns soon

Can you please mention the entry and exit points with some more clarity. For example, in BPB, whether you enter the trade near break out point while the pull back is still going on or after the price tested the break out area and reversing in the direction of the break out. Will you wait for the bar that tested the breakout point to be negated. Sometimes, the pull back may not come closer to the break out point. In this case will you skip the trade or any other criteria to follow for entry. Thanks in advance

Give me little time. I will make a separate post and clarify these points

Exit First

I am a short time frame" Discretionary Trader." I trade for income and not for capital appreciation and I am trying to earn my daily bread from the market.

Like "System Traders", I cannot bet on the probabilistic nature of a system and can’t afford draw down while waiting for the probability to work in my favor. My goal is to manage the day’s opportunities as good as I can. My edge is minor demand and supply imbalances that occurs in the market frequently and give  a 15-20 point move within the next 15 minutes. These moves could be just “NOISE” for many.

My trading revolves around Decision Points. Entries must happen at these levels where a demand and supply imbalance existed earlier. These are proven price levels and I expect the imbalance to be there again. My entry is mainly based on my “read” of the market and my “feel” for the price action at these Decision Points.

I always decide upon my exit before I enter the trade. When the price approaches and reacts to a Decision Point, I identify a point where price should not go if my expectation is correct. I will try to enter as close to this point as possible. Risk is reduced by making my entry close to the stop and not by placing the stop close to the entry.

In my scheme, unlike in the dictionary, “Exit” comes before  “Entry”

27072012

Nifty gaped up above PDH. and drifted down . I was expecting it to find support at PDH. It reversed earlier and did not give me a chance to go long. FTC at  HOD gave a short opportunity. TP at LOD/IR Low. I went long at the BOF of LOL(Layer Over Layer) . I expected it to break the FTA(First Trouble Area) , but reversed and stopped me out.BOF of BRN gave a long signal which gave little profit.

Reading :Kill the Market

Day trading in financial markets is posing regulatory challenges, and the capital market and commodity futures market regulators are considering a higher degree of rules on these.

The global body of regulators, The International Organisation of Securities Commissions (IOSCO), had recently conducted a survey of emerging economies’ financial market regulators. It had concluded there was a need for regulating day trading activity in a better way, as unregulated or loosely regulated day trading could pose several challenges

 IOSCO has said, in its recommendation note to regulators highlighting potential risks of day trading, that, “Day traders enter into short-term positions and are leveraged. They also use a variety of trading strategies like momentum strategy, contrarian investing, index arbitrage, statistical arbitrage, merger arbitrage, range trading, scalping, etc.” It further said day traders impart liquidity to the market but day trading combined with high frequency and algorithm trading might lead to market integrity concerns.

 When asked, a spokesperson of the Securities and Exchange Board of India said they were studying these recommendations.

Read More In Business Standard

SEBI, Now you can bring some dumb regulation and kill the liquidity starved Market

Thank You

Thank you very much for giving the feedback.I have also received around a dozen specific comments . I will try to implement some of them during this week end. Once again thanks for your overwhelming support.
           

26072012

Nifty opened within previous day closing range and sold. Cracked the Initial Range low and BRN 5100.The bias was clearly down. It made a Barbed Wire around the BRN .Went short when the second test of IR low failed. Covered the shorts on the BOF of Range Low.A scratch trade ( There was no need to exit here. Being expiry. I was too cautious and messed it).BPB of PDL gave another short on which I made some money.Final move was clearly a VWAP run .Being expiry day , I was expecting a lot of chop and drama. Nothing happened. A clear down trend day.

VFM Direct

I received a comment from Kamaleshji of VFM Direct

"I have just posted a link on vfmdirect site to your blog. The link will stay active till this weekend."

When I read this , I felt like winning an Oscar. I am extremely happy to get an appreciation from a seasoned trader like KPL Sir, who has ample experience and Market knowledge to critically evaluate a trading method.VFM Direct is very popular among Indian traders for the last so many years and the auto generated levels provided are much useful to all the traders.

KPL Sir, I am honored and grateful.It is really a privilege to have a link at VFM Direct. Thanks a lot.

25072012

Nifty gaped down a little within previous day range. Bias was bearish. Question is whether the PDL will hold or not. BPB of the PDL gave a short signal.( Same thing happened a few days back . Do you remember ?) BRN is a cause for concern, but breaking out of the previous day range is a major transition.and further strong down move can be expected. TP around 5080

My expectation was that the last impulsive wave will act as a range and TST or BOF of Range Low/LOD  is a very high probability long trade location.But market did something else.BPB of BRN gave a long signal.. There was no reliable signal after that.

24072012

Nifty opened within previous day range. Initial bias was bullish . I was expecting a drift down to PDC ( A gap closure) and a move up. But Market reversed before it . BOF of HOD gave a short opportunity. . This trade confused me a lot and  I took profit at the range low marked TP and missed 20 points of the down move. BOF of PDL was a fantastic trade which gave 30 points.Did not attempt the last BOF.
I will not be trading for a few days as I have to attend office. I will post my analysis based on bar by bar replay.

23072012

A Text book Spike and Channel to the downside.There was no Decision Points on the way and no trade setups.There is nothing I could do on these kind of days.If we can get an early entry we can ride the trend all the way down. Never trade counter trend.if price is channeling.

Feedback Please

Nifty Nirvana is six month old now. I would like to thank all of you for the overwhelming  support. I am getting good response as comments and I always try to acknowledge and reply them as soon as possible.

Still ,I feel many of the readers are reluctant to post the comments. So I have created a small survey to get the feedback. It will not take much time . Please do spare a little time for me.I hope this will help me to improve .Kindly type your specific suggestions in the text box given after the last question.

Now please spend a few minutes and give your valuable suggestions and feedback. Thank You.

Click here to go to the survey page. 

Quote of the Day

Strategies are not something you can pick out of thin air and just make your own. It takes time. You have to suffer defeats and you hopefully will have a few wins. Howard Lindzon

Reading : Idiot Waves

While rummaging through my attic, I discovered a collection of old manuscripts from Robert Nudnik Idiot, a physiologist and researcher into natural phenomena and the movements of stock markets. It was during Dr. Idiot's research that he made a surprising discovery: the recurrence of the number 10 in all human bodies he studied. With amazing regularity, each human body had ten fingers, divided into two groups of five. Not content to settle on this discovery, Dr. Idiot proceeded to study the feet of his subjects. He was amazed to find the same pattern of 10 repeated in two groups of five toes.

Gradually, the grouping of 10 into sets of five--the Idiot Wave--became the topic of the good Doctor's study of natural phenomena. In religion, Dr. Idiot found that the tablets of Moses contained 10 commandments, with five on each side. He also found that David Letterman invariably constructed his lists in groups of ten, with a commercial break in the middle. The Idiot Wave, it appears, is an organizing principle for all of nature.

In an earth-shattering discovery, Dr. Idiot found that many important market turning points have occurred 10 years apart, such as the market lows of 1977 and 1987, with a "dividing low" at 1982, five years between. This relationship of 10 also appears to be fractal, occurring across time frames. Last week, for instance, we saw an important market turning point at 10 AM in New York and another one at 10 AM in Los Angeles and 5 PM in London.

With considerable study of Dr. Idiot's manuscripts, it is now possible to unravel the secrets of the stock market and apply Idiot Wave principles to all forms of trading and investment. The home study course I'm developing will teach you everything you need to know to trade Idiot style. It will be available for $10,000, which you'll be able to pay in two evenly-spaced installments of $5000. It's amazing how often that pattern shows up...

Dr. Brett Steenbarger 
To read the original blog post click here
 

Initial Range

Initial Range is a slightly different approach of the Opening Range.The concept of opening range was popularized by Toby Crabel. He has explained many ways to trade the OR effectively.in his articles.It really is a wonderful concept.

So , What is OR?. In practice,Traders consider it as a range between the High and Low made during a specific time interval from the open.Traders set specific time interval such as 5M,10M,15M and 30Minutes.So , if we are using a 5-minute OR. The highest high and lowest low reached during the first 5-minutes of trading after the open gives us two price levels. This is OR. ( I still doubt Toby Crabel really meant this),

Anyway, I do not like this practice. Who are we to dictate the market to respect our own levels ? So let the market trade after open and show us its own levels and market is for sure going to respect its own levels.Do not try to impose a time limit on the market. It will show you the real OR which I prefer to call Initial Range

As in any other market concept , don't be too rigid in your definitions.If it looks like a range and acts like a range it is Initial Range.You can trade the IR as any other range. Fading the extremes and buying or selling breakout pullbacks of range extremes.

The problem with many new traders are they want everything to be defined.and set rules for everything to be done.This is simply not possible. There is no other way but learn to operate in an uncertain environment.

Embrace Subjectivity, Embrace Ambiguity

Thank You, SS

Today , I have some urgent domestic work and decided not to trade. But in the morning I had a look at the chart and found this .Nifty opened just above PDL and broke down. Then it gave an orderly BPB. It was mouth watering setup. 10 point risk trade with two shields to protect PDL and HOD. I remembered the post written by SS yesterday.(Read it here). Now the upside is capped, range expansion is possible only to the down side. Went short with 4x my normal position.Covered at 5210.
Thank You SS.

19072012

18072012

Nifty opened within previous day evening range and failed to go above it. FTC at the range high gave a short signal . I was expecting it to go to the range low (PDL) but fell further. BOF of PDL gave a long. TP at HOD.Nifty made a barbed wire around HOD for nearly two hours.Finally gave a BOF at the Range Low/BRN. This trade moved very well. BOF of the last range came too late to trade.
Compare  today's first half price action with Mondays (16072012)  first half.What did you notice ?

17072012

Nifty gaped up above PDC and failed to follow through. Buying was getting absorbed . FTC gave a short signal. This trade moved well.Second short signal was TST of the range high.I was expecting a LOL trade at BRN /PDL which came too late and did not succeed.

16072012

Nifty opened within previous day evening range. I failed to notice this and missed the BOF trade at E. Missed the BOF  of PDL at A also.Price spent too much time under PDL. Price action after the BOF was not comfortable to initiate a trade. BOF of HOD was a signal to short which moved well after giving some chop in the middle of the range.
Do not try to trade point B as a BOF of PDL. because PDL lost its relevence after breaking from both sides.It is just a normal pullback in the trend.Never go long at point C as TST of  LOD. After an  accelerated move always wait for a second test as happened at point D

Critical Mass

" Critical Mass" is a widely used term in Nuclear Science.It refers to the minimum mass of fissionable radio active material required to sustain a nuclear fission reaction. In a fission bomb, the fuel must be kept in separate sub critical masses, which will not support fission, to prevent premature detonation.Bringing the sub critical masses together to form a super critical mass  to sustain a fission reaction at the time of detonation is a major design challenge

All the three patterns I trade are reversals. While BOF and TST are directional reversals  BPB is a minor reversal of a pull back or counter trend move.For a reversal to succeed there are three conditions.

1.Those who entered earlier in the move are in profit now. They fear the reduction in their profit and start booking profits causing a pullback

2.Now those who entered late start to panic and starts exiting their position in order to prevent loss. .Physical stop loss orders of many traders start triggering. This further fuels the reversal move.

3.A new group of traders expects a reversal and enter. This momentum traders will strengthen the reversal.

This is a chain reaction like the nuclear fission.The greater the number of traders that are positioned in a particular direction , greater the force of reversal.We must ensure that sufficient  number of positions are created in the current direction before attempting to trade a reversal.

 Ensure Critical Mass.

13072012

Nifty opened a little above PDC and PDH acted as resistance. TST of IR high gave a short signal which moved to IR low . I was looking to go long at point A , BOF of IR Low. But there was no follow through. Went long on the TST . Scratched the trade and missed the down move, Second test of PDL gave a long signal. This one also did not move well.

12072012

Nifty gaped down below PDL.Bias was bearish. TST of the IR high gave a short signal. This trade moved well,Second signal was the long at LOD. FTC at LOD was also a good trade which gave 20 odd points.Rest of the day Nifty made a Barbed Wire around IR Low.

11072012

Nifty gaped down below PDC and traded within the IR almost all the day.BOF of IR high was a good trade which moved well. BOF of IR low did not move as expected. scratched it.

Mindset

10072012

Nifty opened within previous day range. BPB of BRN gave a long signal. FTA was PDH and it resisted the move for a long time.Went long because bias was bullish ( Price was above DO and PDC). Gave good profit finally.

09072012

Nifty gaped down and went below PDL and then attempted a bounce back. This attempt failed and gave a BPB signal at DO-PDL-BRN. TST of the Range high gave a short signal which moved down to LOD as expected. I was expecting a BOF at LOD. TST of  LOD gave a long signal which did not move as expected.

Fantasies

Close your eyes. Relax

Imagine yourself as a successful trader. You are proudly posing in front of your new private jet. You are enjoying the cruise on board of a luxury liner with your family. Now think about the fleet of expensive cars and gadgets your money can buy. Imagine and dream everything you can do with your wealth. They say that if you can believe it and dream it, then you can make it come true

Nonsense. It will not work .

These are all wishful thinking and fantasies. In reality fantasies can do more harm than good. They do not alert us to the problems we are likely to face along the way. This will lead to poor decisions and create a preference for information about pros rather than cons. We are more likely to get greedy and start trading recklessly to blow accounts after accounts,

There is no harm in thinking positively but indulging in your fantasies too much is dangerous. Thinking about the obstacles, problems and setbacks you are likely to face on the way is much more beneficial

Simply dreaming it, is not the key to make dreams come true.

Reading: Discipline

You do not need discipline to trade successfully.Discipline is a negative word.Discipline implies ability to refrain from doing something. Attempts at self discipline and self denial often fail. Yet you will find hundreds of books, trading coaches, trading mentors , who keep harping about discipline as the key to trading profits.

Any attempt at discipline has high probability of failure. Discipline works only in highly structured and hierarchical system where there is a highly regimented approach to controlling behavior. Armies are very good at discipline. Fear of punishment drives discipline. Even in such settings from time to time discipline breaks down. Discipline requires continuous negative reinforcement, if you don't do this you will be punished.

So if discipline is not the key, what is the key. The key is passion, perseverance, tenaciousness, persistence and grittiness. If you are determined to achieve longer term goals despite obstacle then the passion takes over and self discipline is not an issue. What others call or see as discipline is persistence to most successful people.The essential thing is do you have the inner drive to be the most successful trader you can be. If that is in place all the effort required to get there are driven by that passion.

Grittiness is most important if you want to achieve anything major in life. Grittiness involves ability to keep at it despite setbacks, it involves ability to overcome obstacles by going around them or finding creative solutions to it. It is an inner drive which propels you forward., for long duration, often years, till you get what you set out to get or achieve

 All successful people who achieve something meaningful in life have an inner passion or an overarching goal. The pursuit of that goal consumes their life. Once you find that goal all activity performed to achieve it is pleasurable activity

If you find your inner passion, you will have no discipline problems. So when you say I have discipline problem, probably you mean you have a passion problem. May be trading is not your passion.

Pradeep Bonde

06072012

Nifty gaped down within previous day range. BPB of IR low was a tradeable signal. Skipped it as PDL was very close.BOF of BRN was a long . Again PDL scared me. Went long at BPB of PDL. A scratch. TST at PDL gave another long which moved well. LOL at PDC was also a good trade.

Yesterday I was out of station and could not watch the market. There were no reliable signals. If I traded I would have ended in deep red.

04072012

Nifty opened within previous day range, Entire day it was trading within three different ranges. BOF of LOD-DB was the only reliable trade signal.Recently I am focusing more on BOF BOF is much more reliable than TST and BPB, I think.Less is more in trading.Am I becoming a one trick pony ? Don't know.

03072012

Nifty gaped up and crossed the PDH., but failed to continue.BOF of PDH gave a short signal.. As expected found support at BRN. Next signal was the LOL , BOF of PDC and PDL which moved well.Missed the big down move candle as there was no reliable signal before it happened.Note point "B" .We will be tempted to go long here as BPB. Notice the topping tails of the candles. There was weakness.

02072012

Nifty opened near PDH and sold. Initial range formed. BOF of BRN gave a short signal which did not move well. Scratch trade. BOF of IR low gave a long signal which was profitable.