31102013

Expiry day. Entered long on break of IRH. Exited at a small profit. Skipped the BOF of PDH and BOF of strike price. Both the trades worked well.I am not comfortable trading expiry especially the afternoon session Expiries are always manipulated.50's are slowly getting BRN status due to the new option strikes.

30102013

Nifty Opened a little above PDH. IR formed. Failed to continue above IRH. Made a Barbed wire around PDH for a long time. Long on the the BPB of Range high above IR high. I did not believe the up move with so many candles with upper tails. Covered at 20 point profit. Missed the down move as there were so many trouble areas on its way

29102013

Nifty opened inside previous day range. Broke PDC/PDL/BRN and pulled back. Skipped the BPB trade due to the RBI announcement. After the announcement, Market turned bullish and entered on the first breakout. After that it was only trailing all the way. Nifty coolly broke PDH and BRN 6200. TP around 6220. Nice 70 point move.

28102013

Nifty was in a channel almost all the day. The only opportunity was a BPB short which gave 20 points.TP around BRN

Pink Eye

Suffering from Viral Conjunctivitis. May not be able to update the blog regularly

I wonder how long it is going to get cured. 

Read

Breakout Blues

From the comments I received recently, I am afraid people are treating the method as a breakout trading method. Most of the traders are getting caught on the wrong foot trying to trade breakouts. This could be due to the higher percentage of breakout trades in my analysis due to the higher market volatility.

Breakout trades are least priority trades in my scheme. I assume the market is in a range all the time and the preferred trades are fading the range extremes. Range is a series of “Failure to break” and “Breakout Failures” of range extremes. These three trade setups are my bread and butter methods.

People find breakouts attractive because it is very easy to identify and it is extremely rewarding if they get it right. Predicting a successful breakout is one of the hardest tasks a trader can do. In an established range there could be multiple failures before one succeeds. Most of the breakouts do fail and it is better to wait for the breakout to fail or give a breakout pullback rather than making a direct entry.

I do attempt direct breaks. These trades are called PressurePlays. We must be well aware of the context in which the BO is taking place and ensure a higher probability of success. Be aware that trying to predict a BO is extremely risky and better to stay out if we are not confident. Then it is better to go for a Breakout Pullback.

What if the Market runs without a pullback?  Then let it go. Markets are for ever.

Further traders believe trends start when price break out of a range. I do not subscribe to this view. I think a trend always start from a range extreme and run further breaking the other extreme of the range. I prefer to enter at the beginning as against the middle 

25102013

Nifty gaped down below PDL and made a Barbed Wire around it  the whole day. Attempted two BOF trades. Range High and Range low. First trade did not move as expected. Second one broke the other extreme as expected. But there was no follow up buying. Price fell back in to the range again.

24102013

Nifty Opened at BRN and attempted to sell but got rejected . Missed the BOF trade. Waited for a pull back on BOF. IR formed but there was PDH above it.Could have gone long above PDH. Did not attempt the FTC at HOD as I was not comfortable shorting against a strong up move.Nifty drifted down and I suspected a Barbed Wire around PDH. Successfully did an SS trade here.Shorted the break of Range Low. First lot target was BRN. This made second lot trade free. Nifty gave a deep pull back to BRN. Shorted the BOF of BRN below the BO candle. Skipped the last BOF of LOD

23102013

Nifty opened near PDC. IR Formed. Missed the move down as I hesitated to short below IRL. I thought PDL/BRN level will stop the fall. Went short on BPB of BRN.( Or was it a BOF of BRN to the upside?).TP at the range low. Another short on BPB of Range low. TP around 6150. Long on the BOF of LOD on break of the range high. Expected the move to hit BRN. But this did not happen.Nice 40 point move

22102013

Nifty opened within previous day range and chopped around BRN 6200 of NS.Attempted a long trade on BOF of IRL but had to scratch it.In hind sight the TST of PDH was an opportunity to make 20 points

21102013

Nifty opened within previous day range IR formed. Long on break of PDH/IRH. BO failed. Stopped out. Did not short due to PDC/PRL and BRN. Nifty moved up to PDH and came back. Short on BPB of BRN. This trade also failed to move. Stopped out. Long on BOF of LOD. Went long above BRN and Master Candle to the fluid. Target was PDH. But it went to HOD

Sniper Shots

Snipers are highly trained marksmen who operate from concealed positions and target the most important enemy personnel to cause maximum disruption. The word sniper originated in 17th century British India referring a hunter skilled enough to hunt the elusive bird “Snipe” Hunting a Snipe is considered almost impossible due to its erratic flight pattern.

The key to Sniping is accuracy which applies to both the weapon and the shooter. The sniper must be skilled enough to accurately estimate various factors affecting the bullets trajectory. Mistakes in estimation may seriously impact the accuracy.

“Sniper Shot” is a very short term trading technique which uses the accumulated orders at a certain point to make a quick profit. The only skill required is the ability to identify a location on a chart where there are enough orders once triggered can cause a quick move of 12-15 points. In other words the target is never beyond FTA.

This is a no brainer method. A do or die task. There is no time to think analyze or manage the trade. This method can be traded as a stand alone method or in combination with other methods. We skip many breakout trades as we do not find enough space for the trade to move. This method can be utilized in such situations

The tactic differs a little. Fist you have to identify your breakout entry and the target. Ensure a minimum space of 12 points so that you can make a minimum of 10 points after commission. Now you have to place two orders (For long trade). A stop loss limit buy order for your entry and a limit sell order at the target. Just wait for the breakout to happen. If there is enough order flow as you expected you will be in profit. If the breakout is not moving as you expected, get out

If you are not very sure about a normal trade moving and suspect some opposing order flow at FTA , try it in two parts. Treat one lot as Sniper Shot to FTA and leave the other to run eliminating your risk.  

But there are certain dangers. There is a very high probability of market jumping your entry order and triggering your exit. If an explosive move happens we will be in real trouble. We will end up holding a losing position.

We must be very careful to cancel the remaining orders. Otherwise these may execute at a later stage. Another problem in trading such methods is that we will end up taking these kinds of trades always. We will never let our winners run. Now regarding stops, as far as I know there is no way to place an early stop.

I have not traded the method live to assess other pros and cons. Please note that my intention is not to change the current method which works very well but to make use of this as something supportive. Think about it during the weekend and let me know your feed back

18102013

Another Rope trick. Nifty gaped up and moved up breaking BRN 6100 without a proper pull back. Long above previous days swing high level.Price broke PDH and went up. TP on consolidation. BOF of range low was a signal to go long. Finally entered on BPB of range high. BRN 6200 also could not stop the up trend. Ended as a type 1 trend day.

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17102013

Nifty opened near PDC . IR formed. Did not enter on the BOF of BRN as there were too many levels above. Went long when the consolidation below IRH broke to the up side. Exited at breakeven. Nifty got trapped within too many levels. Tried a long above MSP on BOF of PDL. Covered the trade at BRN.Missed the BOF of BRN.Never expected a move down to LOD.

Notice how the market respects its own levels which we call DPs. Now do some experiment. Mark some SMA/EMA like 5,13,21,34,55 etc.one by one.Note Fibo Levels of moves , Mark pivots and camerillas. You can see market respected many of these levels. You decide which is reality and which is illusion and act on it.

15102013

Nifty gaped up above PDH. An outside trend Gap IR formed. Price failed to continue the up move. Did not short below IRL due to PDH and PDC . BPB of PDH/PDC gave a short. Nice move down. TP at BRN. BOF of BRN/PDL gave a long signal. Long above MSP. covered the trade on TST of PDC. Went short below MSP. I thought it will touch BRN. TP at PDL. Done for the day.

14102013

Another announcement day. Could not find any trading opportunities during the day with adequate space and good RR.. There were no trades worth taking. After the initial move it was a Barbed wire around PDH.After the announcement Nifty channeled for a while.. Again a Barbed wire around PDH for rest of the day.

Drug Your Trading

Trading is a probability game. Right. I do not want to dispute that. I know very well that there are no certainties in Markets, only probabilities.

But I can’t agree with the way many traders approach these probabilities. For example, take the case of “Gap closure”. People research and conclude that during the past 70% of the time, morning gaps closed. They bet on this probability and act on it. They believe the probability will work in their favor and in the long run and they will emerge as winners.

Usually Traders focus on one important technical set up and start tracking it. They do back testing and forward analysis on this technical set up for a while and compute the basic probability ratios for this. When they find this ratio favorable, they conclude that the pattern has a lasting and significant edge in the Market.

I approach this problem differently. Rather than finding the basic probability of the set up and betting on it, I try to find out the factors that made the set up work. I have drawn my inspiration from the Pharmaceutical Industry.

For centuries people relied on traditional medicines like plant extracts. Many of them were found to be very effective. The problem is these botanicals and herbal preparations contain various bio active components and identifying the exact effective component is a challenge.

First step is the extraction, isolation and characterization of active components in these herbal preparations and finding the exact effective molecule. Toxic studies and clinical evaluation follows before the drug is released. Easier said than done

I feel this is the right way to go. Instead of betting on the basic probability, we must go deep and find out the patterns inside these patterns. Identifying and isolating these favorable conditions will give us the real trading edge, I believe.

11102013

Nifty gaped up well above PDH and sold without giving an opportunity to enter. Found support at PDH/PDC. Went long on the BPB of BRN. Price went where it was supposed to go DO/IRH. Shorted on second TST of DO/IRH. Covered the trade at BRN. Did not go  long on the BOF of BRN. Expected a BOF of HOD at the last hour, but trade did not trigger.Notice the point A. Such levels may create trouble for breakout as well as BOF trades. Trade BOF only on break of level "B" and do not exit BO trades till the crack of point A ( Refer Pic 9 of Initial Stops)

10102013

Nifty spend the whole day inside the previous day closing range. Opened below PDH/PDC and effort to breakout failed. Got trapped within Initial range and finally broke below IRL. Shorted with a target of BRN. But Nifty reversed before hitting the target, Scratched the trade. Another short BOF of PDH/HOD also ended as a scratch.Nifty channeled without giving any other opportunity.Choppy day.

09102013

Nifty gaped down and almost touched BRN 5900. IR formed. Long above IRH . TP at PDL gap closure. Went long again on BPB of PDL/PDC. TP at BRN. Tried a short on BOF of BRN. Scratched when price failed to move below MSP. Dod not attempt the BPB of PDH as Nifty has already moved more than 120 points. Missed the final 30 point move.

08102013

Got chopped today. Three losers.. After the gap up IR formed. Bias was bullish. Long on the break of BRN/IRH. Stopped out. BOF of BRN gave a short signal. . short below IRL. Covered when price bounced back from PDL. Skipped the long on BOF of PDH (wrongly marked as PDL) as I could not get a proper entry. Tried a BO trade above the range high expecting a move at least till  BRN. Stopped out. I thought BOF of Range high will trigger a move down. Ended as a scratch

07102013

Nifty opened above PDL and sold without giving an opportunity to short. Traded in a tight trading range. BOF of Range low did not move as expected. Finally went long on the break of the tight trading range. BRN was a concern but other factors like critical mass, order flow, fluid etc were favourable.Exited at a 20 point gain. Skipped BOF of BRN as there was not enough space with PDL , HOD and PDC above.

Initial Stops

Initial stop placement is always a problem area for traders, especially if you are a single lot BPL trader like me. Many times Market will take away our stop before going in our direction. Nothing is more frustrating than this. We can’t help. It is all in the game. How can we place more effective stops? Let me share some thoughts.

I always trade away from DP so that I can hide my initial stop behind a DP. But it may not be possible always due to RR considerations. So we have to think about alternatives. We will have a look at some scenarios

Look at Pic 1. Price breaks a DP and pullback forming a swing high. Now there are three ways to enter into this pullback.1.At DP on pull back with stop below DP .2.Entry on a formation say a pin bar with a stop below it. 3. On break of swing high with a stop below the pull back low. Mostly I go for the third type.  I expect this broken swing high to act as Flip and give support on the way down. If the swing low is very far I scratch on break of the Flip. If RR permits ideal stop is always below the DP

Pic.2. deals with a TST. Ideal stop is above DP only. But I wait for a swing low formation and short below it to have two layers of defense, a Flip and a swing point. Stop can be placed above second push swing high if DP is too far. If the bar which triggered the entry is a WRB we can place the stop above this bar also.

Pics 3,4,5, refers to a BOF. For a BOF the best stop is always above the extreme. There is no point in keeping stops much above the extreme because once price moves above the extremes, stops will start triggering and price may move up causing more loss to you. As per the situation keep stop losses above DP, swing High or WRB high.

Pics 6,7 &8 relates to a BPB. As you know the ideal stop is below the DP. Alternatively it could be below a swing low. But there is always a danger of a complex pull back happening. Only way to avoid it is to have stop below the DP or exit the trade on break of the Flip as a scratch.

Pic . 9. While trading a direct breakout always be well aware of this trap. Price attempts to break a range high many times creating a lot of stops above this area. Before the breakout ,price consolidates just below the range high forming another narrow range high. After the breakout price will pull back to this consolidation high breaking the range high to the down side. We will think it as a BOF and exit. Others will short the BOF. Price will reverse from the consolidation high with a vengeance trapping the majority.

There are no hard and fast rules for price action trading. Price action will unfold in million ways. The ability to think and adapt to the changing market conditions is very critical in trading.

04102013

Nifty opened below PDC and spiked. Broke PDC and PDH. Skipped the BPB of PDH as BRN was very near. Price tested BRN and fell. Shorted below the MSP. TP when break below DO failed to continue. Long on the BOF of DO. TP on fall below PDH. Last trade was the DT BOF of BRN/HOD. Nice 50 point move down.

03102013

Nifty gaped up above PDH. BPB of PDC-PDH gave a long signal. Long above IRH. BRN did not resist.Exited the trade when Nifty started to trade in a range. There was another long on BPB of Range high. This did not move as expected.

01102013

I was not trading live today. Nifty was trapped within the previous day closing range.In hind sight there were two opportunities BOF of PDL and Break of IRH. Today also Market was choppy and undecided. May be due to the holiday.