30092013

Nifty gaped down below PDL. IR formed. Shorted on break of IRL. My target was BRN. Waited for an hour and exited the trade. Next trade was a long above IRL. I expected the trade to move to DO-HOD. There was no follow up buying , just stop triggering Exited at a loss. when price fell back into the range

Learning to Fish

I was born and brought up in a small coastal village of Kerala. It was before the “Gulf Boom” and fishing was the major occupation of the village folk. I was always fascinated by the sea. I enjoyed sitting idle at the seashore watching the waves washing the shores, listening to the whisper of the sea.

I used to watch the fishermen repairing their nets and preparing for the next sail. I was really surprised about their respect for the Ocean. They referred the sea as “Kadalamma” which means the “Mother Ocean”. I could always hear them thank her for a great catch but never heard cursing when they return empty handed. Before leaving the shore, the boat men always prayed to the mother to protect them and bless them with great catch. The first thing they teach their children is to respect Mother Ocean.

Like the Ocean, Market is inviting and notoriously dangerous. As traders, the first thing we should learn is to respect the markets and surrender to her. If we think we can fight and beat the Market, we are totally wrong. Market is supreme and anything happens there is beyond our control.

Unfortunately, most of us do not practice this “Lesson No 1”.We constantly try to fight the market.  We try to go against the market trend. We try to dictate the Market. We expect the market to respect our calculated levels. We are foolish enough to believe that the Market will listen to us and go where we wanted it to go.

There are terra bytes of information available on the internet about trading. Believe me, 99% of these material is all about identifying the right location to initiate a trade. Almost all the studies, let it be MAs, EMAs, Pivots,Fibos,Gann,EW,Trend lines,MP etc, are all used to identify the trade location. Do we really need it? Market itself is always showing us the levels it is going to respect. We do not believe it and arrive at our own levels using complex calculations and expect the market to respect it. Funny

We are not stopping there. We try to dictate the market what it should do at these locations. We label locations as support and resistance. We expect the market to go up from a support and fall from a resistance. Who are we to dictate the market ? Trade locations are nothing but a level at which the market decides its future course of action.

Let us learn to respect the Market and explore the Ocean depths. There are treasure troves waiting to be found.

27092013

Nifty gaped up above PDH ( icharts is providing continuous current month charts. Gap is due to premium on new contract)IR formed.. Shorted below IRL with a target of PDH.. Break below PDH failed and nifty formed a range above PDH.. BOF of the range high gave a short signal. Again I was prepared for a bounce from PDH. Covered the trade at BRN 5900.Then a Cigarette pattern in the making between BRN and PDH for one and a half hour. Long on BPB of this tight trading range.I expected it to go to HOD but could not go much beyond the earlier range high. Then came trade of the day BOF of Range high. It broke PDH, BRN, PDC and bounced from PDL.Notice how the market is respecting its own price levels again again and again. Trade Markets own price  levels, Not your own levels or my levels

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26092013

Another expiry day. Previous day closing range continued. Took only one trade. BOF of IRL. TP at BRN. No trade in the afternoon session.

25092013

Nifty opened between PDC and BRN. Formed an IR as a MC. Tried to go long above IRH and immediately scratched the trade. I thought price may go to the high of previous day range. Short at BPB of of BRN. PDL was a concern .price broke it and went down further. Shorted one more lot on BPB of PDL.TP around 5840.BPB of range high gave a long signal. Trade into a fluid. Price went where it is expected to go BRN 5900.

24092013

Nifty opened near PDL. Went long above PDC on BOF of BRN/PDL. TST at HOD was a very nice opportunity to go short. I hesitated for a while and missed it Did not chase. Next trade was a BOF of BRN. But due to the consolidation above it , I decided to go long above the swing high and missed half of the move. I was expecting a target of HOD. I had to scratch it. There was another TST opportunity but I was not confident enough to short

23092013

Nifty gaped down below BRN 6000. IR formed. Went short below IRL as BPB of BRN. covered when nifty failed to extend below 5930. Next trade was a long on the BOF of BRN 5900. This trade did not move as expected. stopped out.

Swiss Haircut

Last week, we were celebrating Onam in Kerala.We had a nice time with friends and family. Many “Mallus” living outside the state prefer to have their vacation in Kerala during Onam season so that they can meet their old friends and relatives

This season I could meet a class mate of mine after a long period. First I could not recognize him as he had shaven his head. I thought he might have gone to Palani or Tirupati and did it as an offering. That was not the reason

He told me that he is on a project in Zurich, Switzerland for a year. A hair cut there is quite expensive at 95 Swiss Fracs which will be INR 10000. The new hair style is going to save him at least one Lakh during the year.

 This always happen once you are abroad. We convert the price into Indian currency and find everything prohibitively expensive.

Trading is not different. The thought of money can really mess up our mind especially when we are trading big. As far as money management is concerned taking a trade risking 1% on a capital of 1 lakh and 25 lakh are same. But losing Rs 1000 and Rs25000 are not the same. This will work both ways and will spoil the trade management and exits. A slight adverse movement will scare us whether we are in profit zone or not ,always causing premature exits.

Is there a solution for this? Only way is to focus on the points rather than on money. This will help us to see the market more objectively. If we are watching the market in terms of money we will not be able to scale up and trade big.

Cultivate the habit of watching Nifty points early and make your decisions based on that. Try to manage your money in terms of % value. You can remove a lot of emotions from your trading for sure.

20092013

Nifty opened just below PDC. First candle was a MC . It acted as IR. Market was expecting too much from the new RBI governor.and got sold immediately after announcement  BOF of IRH/PDC gave a short signal. Short below IRL. TP on gap closure. BOF of LOD gave another trade. TP at BRN 6000. did not attempt any other trade.

19092013

Nifty gaped up above PDH and got resisted at BRN. IR low formed. TST of IR low was a signal to go long as the market bias was up. Did not take it as I suspected a Barbed Wire around BRN. Finally went long on BPB of IR high. It moved well. It is too late for another trade.

18092013

Nifty opened near PDC. Broke above PDH and BRN. Short on BOF of PDH below PDC. Covered when price failed to extend below IRL the MC Low. Then till evening Nifty was channeling and in a Barbed Wire around PDH. Finally a BO above HOD gave a nice move. It was a classic VWAP run during the fag end.There was a 50 point difference between VWAP and traded price.

17092013

Lucky that I did not trade today. I would have lost money except the first one. Nifty was in a broad channel till 01.30. In live market it is almost impossible to identify it. I am really scared of Channels and Barbed Wires.

16092013

I was not trading today. We are celebrating "Onam" here in Kerala. This is only hindsight analysis. Missed a great trade today. Let it go.We are having a nice time with family and friends. All the trade opportunities gave good profit today.I will be posting the trades in hindsight for the next two days

Own Your System

There is only one trading system that can make us consistent profit. That is “Our Own System.” People get caught up in trading a particular method that makes money for somebody else. There are so many methods in public domain that can be traded profitably. But this may not be suitable for our personality.

First of all we need a method with an edge. In other words the method should have a positive expectancy. Then we must have the ability or confidence to trade the method through good and bad times. The real problem with trading is that without a taste of success we are not going to have this trust and confidence to implement the method consistently.

Unfortunately, trading is a skill that cannot be taught. We can only be guided. It is just like learning to ride a bicycle. How can one be taught to balance on a bicycle? No way. We have to teach ourselves to do that persisting despite failing and falling down again and again.

This blog “Nifty Nirvana” is an effort to show a path which I believe will lead to trading mastery. Naturally, I can share what I have seen and what I have experienced .I know there will be much better and much easier paths leading to the same destination which I am not aware of.

Select a structure and framework that you believe you can trade profitably, tweak it to your own comfort level, trust it and trade it with absolute faith. I am sure the Decision Point method is a very practical and actionable template on which you can build on.

Customize, and make it your own.

13092013

Nifty opened near PDL and rallied. IR formed PDC as the range high. Went long on the break of IRH. TP at BRN. Price moved in a range for a while. short on the break of range low. IRH was an area of concern on this trade. Hesitated to go long above IRH as I suspected the price to bounce back from earlier range low.. Then it was all chop chop.13th the Friday was not a bad day as far as trading is concerned.

12092013

Nifty opened near PDH and tried to breakout. BOF of PDH gave a short. Sold below PDC. TP at BRN 5900. Tried a long trade on BOF of BRN.This trade did not move. Scratched.Nifty moved in a range just below BRN for a while. BOF of BRN gave another short signal. My target was PDL. But Nifty moved beyond that. Did not go long on BOF of PDL as it was too late.

11092013

I was simply watching the market  the whole day. I could not find any confident entries to trade. It was very choppy with so many levels to watch for. In hind sight I find all the signals worked and made money.FTC below previous days strong resistance zone, BOF of PDH and BOF of IRL/LOD.All the trades went where they were supposed to go without me.Anyway I proved to me that I have patience and I am not violating my own rules.

10092013

Nifty gaped up above PDH and broke BRN. BPB of BRN gave a long signal. Long above IRH which acted as a MC. TP when Nifty refused to go above 5850. Next long signal was the BOF of range low. Good trade TP at BRN 5900. Skipped the BOF of BRN as there was not much space for the trade to move. Further the trade was against the bias. Earlier range high is a very strong flip zone.

Trading is Hard

Trading is simple. No doubt. But learning to trade is really hard. People want to make trading simple. They want to reduce it to a few simple setups that can be traded mechanically with discipline. I warn you, this is not going to work.

The reason is Markets are not simple. It is all about ambiguity, complexity and uncertainty. Simple setups that can be traded mechanically will never succeed consistently. It is not going to give you an enduring edge.

Traders want everything clear cut, rule based and mechanical. But every moment in the Market is unique and mechanical methods are not going to capture it. If you are approaching price action trading this way, I am afraid you are practicing a useless skill.

Try to develop a contextual view. This involves synthesizing different elements like location, space, order flow etc and much more. Learn to execute the trades in this context. I would like to remind you that learning all this is complex and will take time.

Don’t be afraid and disheartened. This is not an impossible task. Many traders have done it and achieved trading consistency. If they can do it, we can also. We are also made of the same stuff as they are.

06092013

Nifty opened just above PDH but fell back into the Barbed Wire range. First trade was the BPB of PDH. TP when price stalled at 5680 level. Rest of the day it traded in a range.I expected a sell off due to positional longs unwinding because of week end and holiday. But the BOF of range high came too late

05092013

Nifty gaped above PDH and spiked. Went short on FTC above the spike high. I was expecting  a move till DO. But got stopped out.. Rest of the day Nifty made a Barbed Wire around BRN 5600. Even the BOF of range low failed to trigger a momentum move.

04092013

Nifty opened above PDL and and attempted to break below it.. First trade was a long on BOF of PDL above the pin bar. Covered when it fell back below BRN. Another long trade on BPB of BRN and IRH. TP at 5450. Shorted below the range low as FTC above HOD. TP at IRH. Skipped the BOF long of BRN. as I was expecting another leg down. I wonder what caused a sudden fall from the range low to BRN. Did not find any other reliable trade signal later

03092013

Nifty opened within previous day closing range. Attempted to break above PDH, but failed. Shorted the range low. TP at BRN. Formed a barbed wire around BRN. Shorted on the BOF of range high. TP at the next  BRN. 5400. Missed the further move down. Noticed the  VWAP ?  First time I am noticing this much difference.

02092013

Nifty opened above PDH and pulled back. Skipped the BPB of PDH as BRN was very close. Nifty made a Cigarette pattern above BRN. Went long on its break. TP when second attempt to go above the swing high failed. Another range move till the end of the day.

Lion Taming

Clyde Beatty was a famous animal trainer and a Circus owner. He appeared in many films during 1930s to the 1950s and in many television shows until the 1960s. Beatty used a whip and a chair to command the deadly cats. Once he told in an interview that the whip is not that important at all and in reality the chair did the trick.

You might be wondering how one can control an animal as powerful as a Lion with a four legged chair. It is not because the Lion is afraid of the chair. It is that the beast is confused by the chair. Cats are single minded and the points of the chairs four legs bobbing around confuses them. Simply, the chairs legs distract the beast’s attention so that it confuses itself into inactivity.

The animal is biologically programmed to focus on one thing and then attack it. When the tamer holds up a chair the animal loses its thought process and gets distracted as it is confused where to focus. It is basically animal psychology in action. The problem here is a Lion fails to identify a chair as a chair and try to focus on its legs, confusing itself.

As traders, we are also not immune to this psychological phenomenon. Price action trading is purely discretionary and we may need to process a lot of information during the decision making process. We get confused and fail to see the big picture and get distracted by the different individual elements.

Don’t be like the Lion. Learn to see a chair as a chair.