30062014

I was not trading today. There was no power since yesterday afternoon in our area. Some serious damage at the sub station due to heavy rains and lightning. There was a BPB entry at PDH which moved very well. The BOF of range low and high were difficult to trade signals.NS BRN 7600 was in between

Trend Traps

In my humble opinion, trading trends on smaller time frames is a recipe for disaster. I have lost a lot of money trying to day trade trends. Trend following strategies will only work when market trends the whole day without any consolidations. That is only on type 1 trend days. But this rarely happens.

Market moves in short term ranges. For me a trend is successive higher or lower ranges. This change in perspective totally changed the way I traded the Markets. I have written about this concept here, here and here.

I will try to explain this concept a little more. Do not expect the price action to be picture perfect. Hunting for the patterns may not work. But I feel the concept will be very helpful in your trading, especially if you are day trading.

Look at the picture. It is the day’s price action. Market trended from A to F and reversed. Now let us see how a trend trader might have traded it. Market was ranging between A and B. He enters on the breakout of B. Price goes up to D and consolidates between C and D. This trader brings his stop below C. A Complex pullback or a Breakout failure stops him out and market moves up. He again enters at D on breakout and gets stopped out at E. After this he will most probably miss the reversal entry at G.

As range traders we are trying to do it differently. We try to sell the range highs and buys range lows. In the above example we are trying to enter on the BOF of point A and ride it till point D where price move exhausts. We exit at D and allow the market to consolidate. Then we look for a with trend entry at C. Another BOF at C may take price to F where we again exit. Once price breaks below G we go short.

Trend/Breakout traders most probably end up capturing B to C and D to E, where as we attempt to capture A to D and C to F. If it work well we will end up capturing more than the whole trend, that is A to F. Further we try to fade the range extremes for small gains. Most of the time we will be able to catch the move down

Our success as a trader will depend on our ability to transform such ideas and concepts into actionable trading tactics and of course on our ability to efficiently execute such tactics. Unfortunately creativity and imagination is in short supply.

Hope I could convey the concept well. If you have any doubts feel free to ask.

27062014

Traded the July contract chart. The only trade attempted was the BPB of PDL. Scratched this trade as price did not move. Then it was a channel and chop rest of the day.

26062014

Neat and clean price action on an expiry day. Nifty opened below PDL .IR formed. Short below IRL as BPB of PDL. Exited when price came back above first pull back swing high. Nifty traded in a range till expiry action started. BOF of range high was a good signal to short. did not take it . Need to change this habit it seems. Expires are not that choppy lately.

Reading:Stock Bee

Work on procedure memory to improve your trading: Pradeep Bonde

Procedural memory is memory about how to perform procedures.
We have as an adult thousands of procedural memory. We perform these processes without thinking.
Driving a car is about procedural memory. We drive effortlessly without thinking. We are not even conscious of the process unless something happens.

Yesterday I dropped my neighbor to the airport in his car. Because I had never driven that kind of car before I was conscious of the process and paying close attention.

Shaving, brushing your teeth, washing dishes, cooking, and many other things are stored in brain as procedural memory where we can do them without thinking.

The day you realize trading success is about developing procedural memory specific to a setup or style of trading , you will be on path to success. You will do things that will enhance procedural memory.

Click to read more

25062014

Nifty traded the entire day in a 15 point range. Attempted three trades. A BO and two BOF trades. Nothing worked. Stopped out in the first trade and scratched the other two trades. BOF trades are safer on range days than the direct break plays.

24062014

Nifty gaped up above PDC and moved up. BPB of PDH gave a long. TP around BRN. Nifty traded in a tight range for a while. Long on BO of BRN. Did not move as expected. Scratched. Entered a short below BRN. Enty bar became a MC and it was fun watching the fight around BRN for 15 minutes. Finally it broke down. Price broke the range low but failed to touch RN/PDH. TP at 7570. Long on the BOF of range low. Final short covering helped to make 20 points.Easy move through the fluid. TP at BRN.

23062014

Nifty opened within previous day range. FTC above RN gave a short signal. Went short on PDC. expected a bounce from PDL. But price moved after a pull back. TP at BRN. Attempted two more shorts. TRAP at PDH. Entered below BRN. Then a BOF of BRN. Both the trades gave small profits. Missed the final short covering up move. Could have entered on BPB of BRN targeting PDL

TRADE-SCORE

Nifty Nirvana is almost two and a half years old. Over the period this has grown into a big community. On an average 450 people come and read the stuff every day. Average page views have crossed the thousand marks. I really wonder how many people trade the method. Anyway those who trade the trade are less than who read the trade.

I was seriously thinking about a small checklist to trade the method. Luckily, U R Dave Sent me a small check list he prepared and I found it surprisingly simple and contained all the relevant information. The booklet titled “TRADE-SCORE” is available for download at his blog for free. On the first read you may feel it is way too complicated and difficult to process. But  with few days of practice, everything will become a routine

When I started writing the blog, I was not sure whether I will be able to teach the method as everything is very discretionary. But U R Dave proved that this can be learned and traded well even though he is not a full timer. I encourage all of you to visit his trade journal on a daily basis

Go ahead and download this small booklet. I am sure this will be a worthy weekend read for you. Please do not forget to thank him and give him your valuable feedback. Kindly share through your social networks.

        DOWNLOAD

20062014

Nifty opened within previous day range.IR formed. Did not go long on break of IRH as it was aroung NS RN. Price fell and tested IRL. Went long above the then HOD. Scratched it. went short below PDC on the way down. Price failed to cross IRL.TP at IRL. Tried another short on BPB of PDL. Thought it may break NS BRN. Stopped out above PDL

19062014

After giving good moves for two days, Nifty chopped around.Nifty gaped up and failed to move above previous day closing range high which was also NS BRN. Short on BOF of BRN on break of initial low. Covered the trade at PDC the range low.Did not attempt any other trade as there was too many levels in between.

18062014

Nifty opened within previous days closing tight range. Break below this range failed. Went long on BPB of PDH. I was not confident about it . Covered when price fell back. Short below IRL. TP at RN. Another long on break of Range high. TP around BRN.Missed the last down move of FTC/BOF of BRN. It was a cool 40 point.

17062014

Nfty opened within previous day range. IR formed within the first MC. Long above IRH/RN/PDC. Expected a move to PDH. But NS RN resisted . Scratched the trade. Nifty made a Barbed wire around PDC/RN/IRH. Went long above HOD. I expected some stops above HOD which can take the price above PDH. But Nifty suddenly reversed and stopped me out.My sell  order was the last one got executed ,it seems. Hesitated for a while to go long. I could enter the move only when it paused at 7609 with SL below BRN. TP at RN 7650.
If you happened to short the BOF of HOD, never keep your SL above PDH especially limit orders. That is at the second level of LOL.Exit above the breakdown bar. Price may jump your stop and you will be in heavy loss within no time

16062014

Nifty opened near PDC. Broke below PDL and pulled back. Shorted on break of IRL. Trade did not move scratched. Price traded within the range , a barbed wire around PDL. Attempted another short on BOF of Range high when price broke below PDL. This one also failed to move. scratched. Did not attempt any other trade.

13062014

Nifty opened near PDC. Traded within IR created by the first two candles for a long time. PDC and NS RN were within the range. Finally a BOF of  PDH gave a short signal. Waited for the price to escape out of the congestion. Short below RN. TP at BRN. Another short on break of BRN. This one was a TRAP pattern and BPB of BRN/PDH. TP when price failed to go below RN 7550. Expected a short covering long trade at the end. This did not happen

Awesome People

12062014

Nifty opened within previous day range. BOF of PDC and PDL gave a long signal. Hesitated to enter above IRH as RN and NS RN on top of it. Rest of the day it was a Barbed wire around RN. Attempted a PP long above range high which failed. BOF of range high short moved to IRH but I exited when second attempt at RN failed.Last trade BOF of RN/IRH moved to the range high as expected. PDC line is drawn from the last candle of previous day.If you closely observe the chop, you can see patterns.

11062014

Nifty opened within previous day range. Went long on the break of PDH. TP at BRN. Nifty again moved up above BRN and almost touched NS BRN. Short on BOF of BRN. Target was PDH. But it touched IRL and RN where I exited. I was looking to go long after the selling climax. But nifty fell suddenly below RN. Tried a long on BOF of RN/IRL above MC. Stopped out. Shorted below the then LOD as it was a TRAP. TP when second push down failed around NS BRN 7600 area.Market is going to correct it seems. Selling is evident on every rise. But daily chart is still in rally mode. Today also Nifty made HH and HL

10062014

Nifty opened above PDC and sold. Went short on BPB of PDL. TP at BRN. Entered long after the selling climax at BRN. Nifty tested the patience and finally went up. TP when it failed to go above PDL which was my target. Went long on the BO of PDL. TP at RN. Tried a short on BPB of PDL and stopped out. Price started making a Barbed Wire around PDL. Stayed out. Missed the  final BO up move of Range high as I hesitated due to PDC and RN above it. Good example of WoW pattern discussed a few days ago

09062014

Nifty gaped up above PDH. First  MC acted as IR. Avoided long above IRH as RN/NS RN were very close. Went long on break of NS RN. trade did not move scratched. Short on BOF of range high. TP at IRH/Range Low.Long on BOF of range low on break of RN. TP when price rejected from HOD. Attempted a BPB of HOD long. Stopped out.

Daily Dose

I am not a fan of multiple time frame analysis. Markets have no time frames. It produces a continuous stream of data from open to close. We chop it and chart it as per our own convenience. Candles and resultant patterns will differ as per the charting method.

This logic is not applicable to ‘Daily’ charts in respect of a day market. Here there is no question of chopping. They are for real and all the traders watch the very same levels.That is why levels like PDL,PDH and PDC attracts a lot of order flow. These are simply the High Low and Close of the previous day candle.

Every ‘Day candle’ is considered as a range. Price breaking out of this range is a major transition. Price moving above PDH and falling below PDL are important events. Breaking the PDH is a bullish event and a break down below PDL is very bearish.

Decision Point method works well when the day traders are in control of the market and fortunately most of the days they do. But it is important to know what the positional and investor side of the market is doing and its impact on our trades. The easier way is to have a look at the daily and see whether it is in a rally mode or in a decline mode. In other words look at the micro trend in Daily chart. (Read More)

When market is in a rally mode, buying range lows can be more rewarding and in a decline mode selling range highs are preferred trades. Be very careful while shorting rallies and buying on declines. Focus on PDL on rallies and monitor PDH on declines. Break of these levels will change the trading mode.

If market trades within a candle for the next few days this will create a Master Candle and this MC may act as a range. Pay attention to the MC extremes also.

Do not forget to take your daily dose. It is very important for your financial health

06062014

Nifty gaped up above PDH. IR formed. Skipped the BOF of IRH.as it was not convincing one to go counter trend. But it hit the target IRL. BOF of IRL gave a long signal. Exited when price failed to stay above RN. Tried a short when price fell back into the old range. Exited immediately. BPB of  range high gave a long signal. TP at BRN.Stay with the trend . Be careful with CT short trades when market is in a bullish  orbit

05062014

Nifty opened near PDC . IR formed. Went short below BRN and had to scratch the trade when price was not able to go down. Long on BPB of BRN/PDL on break of IRL. TP when price broke below IRH. Tried another long on break of  PDH and exited when it failed to hold above RN. Did not attempt any other trades.Shaken out by the deep pull backs at IRH and RN. If I had not raised the stop below RN, I could have captured the entire 50 point up move

04062014

Nifty opened within previous day range. IR formed. Went long on break of IRH/PDH. Trade failed immediately on the very next bar.Exited at a small loss. Rest of the day Nifty spent within a 20 point range which was also a barbed wire around PDC. Went long on the BOF of IR low.Exited on BOF of PDH
Did not take any other trade as I had some other work

03062014

Nifty gaped up above PDH and made a Barbed wire around it BRN and PDC as boundaries. Stayed out during the announcement chop. Nifty made two BOF of Range low during the chop and tested the RN. Waited till the break of PDC and PDH to go long as I was not very confident . Long on BPB of PDH. Price broke BRN and got resisted at 7425. TP when second test failed. Short on BOF of HOD. TP when the second test at PDH failed. There was another signal to go long into the fluid on BPB of BRN with HOD as target. Hesitated and missed it.

02062014

Nifty opened within previous day range. IR formed. Did not enter on the break of IRH as I was not very confident to long.Went long on the break of PDH. Ignored BRN as I expected a lot of stops above PDH because it consolidated near PDH for half an hour. TP at RN 7350.Tried a short on BOF of HOD. Trade did not move. Stopped out above HOD