Happy New Year

Wish you all a very happy and prosperous New Year

30122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Market was very choppy. Tried two trades one short and one long. Both the trades failed.I stayed with the first trade for a long time with the initial stop loss. But it moved after stopping me out above BRN. Second trade was into too much of traffic and could have avoided. Price was in a  wide BW during the second half

29122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty opened near PDH and went up 50 points without a pull back. could not get the move. Short on BOF of range high covered when price refused go go below NS RN. Tried a long and scratched as price did not move as expected. No other trades as price remained in a tight range

24122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Could not trade today and yesterday. My computer is having some memory problems pertaining to old age.The service person is on Xmas leave.So I will be back only on Monday. Today being expiry day market gave two opportunities . Breakdown below RN 8250 and later a BOF of the level. The analysis is on hind sight and is based on option strike levels.

High Low Range

Market volatility is an important factor that determines the profit potential of a day trader. You might have noticed that sometimes Nifty gaps up and spends the entire day in a tight trading range, making day trading very difficult. Further a volatility measure is very much required for knowing what kind of a move to expect and to decide where to book the profits ones you are in a trade..

Markets are cyclical and alternate between high volatility and low volatility. We are going through a high volatility phase. This is temporary and will pass.People generally use ATR as a proxy for volatility. But this measure includes gaps and is not a very true measure from a day trading point of view. High Low range or intraday range is a better proxy of intraday volatility.

Sunil Saranjame of Indian Market Monitor regularly tracks many Market Internals like H-L Range and relative strength. He has made a post on HL Range this week.Please do not ask me to explain more. SS will be the right person to do it Click here to read the post

22122014

 This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty opened within previous day range. IR formed. Long on BOF of IRL. It was trailing all the way to 8340.Glad  Nifty celebrated the successful GSLV launch. Sadly our media was busy discussing terrorism and conversions.

19122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty gaped up above PDH. Did not attempt the break of IRH as it was below RN. The next big bull candle acted as a MC and became range of the day. There were RN and NS RN in between. Tried a short trade but it did not move well. Scratched.Adapting to the volatility is the main issue with Day trading

18122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty gaped up above PDH on global cues. Went long on BPB of PDH. Trade failed. exited when it came below RN. I was looking to go long . Price gave a good BOF at PDL. Covered when price stalled at 6180 for a long time. No other trades today.

17122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty opened below PDL Tried to go up and got rejected from PDC. Shorted on break of IRL. Covered on FTC at 8020. Could not get the long trade. Tried a short on second test of BRN. Trade did not move as expected. Long on BOF of range Low. Covered when price failed to stay above BRN. Then it was a chop inside the range.Very difficult to manage trades within the risk level due to high volatility

16122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty gaped down below PDL against expectation. Went short on BPB of PDL. BRN was a concern. But after a while it gave way. Covered when price came back above RN. Then price got resisted at MSP. Another short when price failed to move above this high. Again covered above RN. Nifty gave another short signal at range high. BOF of range high. Covered when price bounced from BRN.Then tried a long and stopped out quickly

Disclaimer

This blog is for educational and general information purpose only. The information contained in the blog should not be construed as research report or financial advice.

 

I am not a research analyst registered under the SEBI( Research Analysts) regulation 2014 and not authorized to give any financial advice. Information contained in this blog should not be used, relied upon or treated as a substitute for specific or professional advice

 

Information on this site is general in nature only. The content is only general discussion on broad based index Nifty and technical analysis relating to the demand and supply factors. 

 

I do not make any buy /sell/hold recommendation or give any price target. Charts published in this blog are only illustrative examples of the concepts discussed here and are simulations on historical data in hindsight analysis

 

These simulated results do not represent actual trading and these trades have not been executed in live market with real money. They are identified with the benefit of hindsight and no representation is being made that real trading using these concepts will or likely to achieve results as shown

 

Any reliance you place on the information contained in this blog is therefore strictly at your own risk. I will not be liable for any damage or loss, direct or indirect incurred using the information contained in this blog

15122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty gaped down and refused to go below the first bar. Nifty Spot touched 8200 the earlier flip and bounced.I thought it may reverse today. But it did not happen. Last down impulse held as a range. Took two BOF shorts of PDC/PDL LOL levels. Covered them when it bounced from RN. Skipped the last one as I was not confident as price has started making higher lows

12122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty opened near PDC. First candle acted as IR. Short when second time price failed to move above IRH. Price got trapped between IRL and PDH for a long time. Covered on BOF of PDL. Strong BOF of PDL could not take price above IRL. I had a buy order above IRL which did not trigger. Shorted the break below PDL. Exited too early when price bounced from BRN and missed the last leg of the down move

11122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis

Nifty gaped down near PDL and sold. could not capture the down move. There was a FTC pattern at the bottom. Avoided it. Went long on TST of LOD. .It retraced the entire fluid. TP near PDL. Short on LOL BOF of PDL/HOD. TP at 8340.

10122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Most of the time price traded within yesterdays closing BW range. All the attempts to break this range failed. No trades today. Did not take the BO PP of range high

09122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty gaped down below PDC/PDL. Price did not pullback to PDL at all. Shorted the TST of range high. Covered when a BOF happened at range low which was also RN. Short below range as PP which was already tested 4 times earlier. Even earlier BOF failed to move price more than 10 points to the upside.Covered on FTC below 8420.Immediately there was a TRAP to go short again. Hesitated to take it and missed.Rest of the day it was a BW around BRN. Can we expect a fall to 8200?

08122014

 This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
I was not trading today. Nifty opened near PDC/PDL and bounced. There was no follow up buying and fell below PDL. One can short this breakdown. Market gave another TST also. Finally gave a PP. 4 touches at the range low and each rejection made a lower high. Last bounce was a minor TRAP. BOF of BRN did not work

05122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty opened within previous day range and sold.The first candle was wide and this MC acted as IR. There were BRN and PDC in between and made it a Barbed wire. I ws looking for a signal at PDH and price turned from DO. Went long on BOF of IRL/LOD. I was waiting for a TRAP and up move like yesterday.The opposite happened.Covered when the break above the early swing highs failed. Missed the short trade. It was a good short below BRN. There was 10 point space below it to FTA ,LOD and a 10 point fluid below that.Many of the positional longs created yesterday covered due to weekend.Yesterdays entire up move retraced

04122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Nifty gaped up above PDH. There was too much of volatility. Could not go short as there were many levels like PDH BRN and PDC. Long on the second test of LOD after BOF. Covered when price failed to move above PDC. then there was a TRAP pattern. Entered above PDH as PP. Covered at HOD

03122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Another choppy day. Nifty opened near PDC and sold. Went long on BOF of PDL/RN. It was an entry without confirmation on retest. Covered when price failed to move above PDC. Went long again on the BPB of PDC and DO. Expected a move to PDH. Covered on FTC at 8590. Price fell and found support at the strong flip at 8570. Shorted the break as PP. trade failed to move. Stopped out. No more trades. Nifty within 8550-8600 range for two days. Ripe for a break.

02122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Announcement day. No trades till it is over. Short on BOF of PDL/PDC and BRN. Covered around 8560 as price bounced from RN. Long when second test of RN held. Expected a move to PDL. Covered when price bounced from the flip @ 8580. Hesitated to take the TST of Range low. No more trades

01122014

This is an illustrative example of the concepts being discussed.Markings are just visualizations on historical data in hindsight analysis
Market was too choppy and did not respect any levels well. Got stopped out in all the three trades. First one was a BO of IRL into a fluid. Stopped out. Later attempted a long and short . both the trades immediately failed

More on Structure

Markets cannot be traded without defining a structure, a frame work within which prices move. Nobody knows and will never know the exact structure of the market. It is an approximation, just a thumb rule

We need a directional price move to make money from market. So most of the people define a simple structure like HH/HL  LL/LH  for a trend and try to trade this frame work.( Pic 2). Trade tactics is an entry either on BO or on a pull back. Most of the time pull backs are not that simple. We rarely find single leg pull backs in text book fashion. When the trend is not very strong pull backs become complex and become ranges ( Pic 3)

Later, traders understand this structure is inadequate as markets do not trend most of the time and in between it ranges. Solution is either to stay out or learn to sell the highs and buy the lows of Ranges (Pic 1)

We consider ranges as the building blocks of trends. Successive higher or lower ranges are considered as trend. We try to buy the lows and sell the highs of these ranges. In a higher range we prefer to buy the lows to stay with the trend. Selling highs are preferred when price is trading in a lower range. If you plot ranges in a time, price graph it will look like Pic no 4. Ranges may overlap and can gap up also.

When price escapes and move over to a new area nobody knows where it can range later. Ranges form when price get trapped between demand supply areas. The concept of DPs and Flips helps us in this regard. Most of the time Decision Points and Flips act as range extremes. ( Pic5)

Pic 6 represents a typical range. A range forms when price gets trapped between demand and supply zones. Sellers are aggressive when price moves to the higher area. Buyers dominate the lower area as represented by shaded side bar. There will be a mid point for all the ranges where price simply drifts as neither the buyers nor the sellers are aggressive there.

Price move inside the range itself is mostly random and most of the time just noise. It is extremely important to have the entry and exits as close as possible to the range extremes for a good RR. Average range of NF in 3M time frame is within 20-25 points. Waiting for confirmation reduces the profit and increases the psychological pressure.

I feel, we need to take more TST and TT entries. I will try to write more about these types of entries in next week.

28112014

Gap and initial spike consumed 100 points. Did not get any good chance to long. It was channeling all the day. Channel breakdown came very late. So avoided. no trades today

27112014

Nifty opened near PDC and moved up.IR formed. My expectation was a move up to BRN or at least to IRH. Entered a TT at 8475 with SL 8465,  Trade moved favorably a little  and stayed above PDC for long . SL shifted to 8469. Stopped out. Could have shifted to then LOD. I did not find any good signals later. Expected chop for expiry and stayed out

26112014

Nifty opened within Previous day last move and moved down. Expected PDL to hold on the first test. Thought of doing a TT ( Touch Trade) Buy at 8440 with stop at 8430. Entered the order and waited. Nifty fooled me and went up. Tried a TT at range high. Sell at 8472 with SL 8482. This one got filled. Brought down SL to 8475 with 3 point risk. I was targeting PDL . But price bounced from then LOD covered at RN. Again I expected a test of PDL.Did not get a fill. Price again went up a little tested range low again. Bought at 8451 with SL at 8443 . 8 Point risk. I strongly felt price is not interested to go below RN and the expiry game has started. There was a little chop around NS RN which was also IRH. Did not micro manage. Price moved up after a TRAP. Usually I used to get stopped out here. Price went up vertical and moved above BRN. Long covered. My short order below the swing low did not trigger. Missed the final short.In hind sight I feel it was a good blind short above BRN

25112014

Nifty opened near PDC/PDH and sold. IR formed. Shorted below IRL. Covered at BRN as I suspected a bounce from the LOL level. But PDL held. Again shorted below BRN as BPB of BRN/PDL. Covered at 8073 when the down impulse failed. Pulled back to 8490 level. Hesitated and missed the TST there. Missed the down move as I did not want to enter the extended move. A long on BOF of LOD above RN. covered at 20 point profit. Expected a move to 8490 due to the fluid and short covering. but did not work

24112014

Nifty gaped up above PDH and moved up. An outside trend gap. Hesitated to short below the pin bar and missed FTC trade. Price did not give a good location to short later. Went long on BOF of PDH. Covered when price bounced from HOD. Then it was a choppy channel move rest of the day.

More on Critical Mass

The concept of Critical Mass is one of the Seven Pillars of Decision Point trading. I had written an earlier post on this concept earlier.Read it here, just to refresh your memory.

The concept is very valid on Futures market. As there are no delivery based trades, every position can be cancelled only by executing an order against our own position. In other words every position guarantees a future order in the opposite direction.

For the purpose of analysis, we assume there are two types of traders in the market, Day Traders and Positional Traders. The concept is applicable to both the groups, but we are more concerned about the Day Trading brigade.

Market is a place where countless people execute different strategies at the same time. They have their own methods and tactics to enter and exit. Everybody is attempting to capture a directional move and more people joining the move means more people need to exit on reversal.

Please do refer to the above picture. Price is moving down. People are shorting different signals such as Swing point break, MA break, Fibo levels etc. Finally price hits a demand area and start moving up. As it moves up, earlier shorts start exiting on their signals and create a lot of buy orders on the way up. Momentum traders also join and fuel the up move. DP traders enter early on the BOF to take advantage of Critical Mass exiting

Look at the second part of the picture. In situation A, Price gaps up and nobody was able to participate in the up move. Critical Mass will not help you on the reversal. Situation B is a vertical move. Very few could take a long position. Situation C is a gradual up move with orderly pull back and might have attracted a lot of longs. The possibility of a reversal is higher in situation C

In case of a reversal, Move from A an B can be faster due to the Fluid created. Fluid moves happen not because of Critical Mass selling but lack of buying on the way down.Do not skip a trade into a fluid thinking about Critical Mass. Moves can happen even if Critical Mass is not trapped.  

The concept is applicable for Positional Trades also. When price reverses after a multi day move, it can trigger a fast and furious move in the opposite direction. A Counter trend outside gap is an example of Positional Traders getting trapped

Hope I could convey the idea clearly. Please feel free to ask if you have any doubts.

21112014

Nifty opened near PDC. Shot up after a small pull back to NS BRN. Consolidated within a 10 point range. I was expecting a TRAP like pattern there. Did not attempt the BO which went to 8499.75. Missed a short there also. There was no reliable pattern. Finally went long on the TST of Range low and bagged  20 odd points. Did not attempt the BOF of BRN as it came very late

20112014

Totally messed up the trades.Missed the BOF of PDC in the morning session. Then took three trades at the same DP, PDL and got stopped out in all. Finally Hesitated to take the PP and missed that one also. All the three trades were attempted within a Barbed Wire around PDL. Violated the rules and got chopped.

19112014

Nifty opened near PDC and fell. Tried a long on BOF of PDL. I was not confident with the trade as it did not break the extreme. Managed a scratch. Short on BPB of PDL moved well.Ignored the NS RN as it was a fluid below. TP at 8390 when price failed to move beyond the early extreme.There was an opportunity long on third test of LOD. Did not take it

18112014

Range day as expected. Nifty opened within previous day closing range and traded within it most of the day. There were too many levels inside the range. Attempted only one trade which ended up as a scratch. BPB of PDC and IRL

17112014

Nifty gaped down below PDC. IR formed. Price broke IRL and found support at PDL. There was a BOF at PDL. Avoided lond as it was a minor one and IRL was very near. Went long on BPB of IRL. Then it was just trailing till 8460. Both Nifty and NaMo were firing on all cylinders.

14112014

Nifty opened near PDC. IR formed. Avoided long above IRH as BRN was near. Price struggled a lot to move above BRN. A long trade above BRN, BPB failed. Stopped out below BRN. Then it was a BW around BRN. Finally went long on the BOF of range low. Trade moved well . But after stopping me out.

13112014

Nifty opened near PDC. IR formed. Never expected such a fall and missed the bus. There were too many supports to break. Did not traded the up move also. Looked for a short at BRN . But price was making a BW for a while. Finally shorted below BRN when price fell below all the major levels. Target was LOD. But it moved further to RN. Covered above the pin bar

12112014

Nifty gaped up above PDH and BRN. long on the BPB of PDH. Expected an explosive up move as Nifty was breaking out of a very long period range. TP when price failed to move above RN 8450. Expected a range within the last impulse. Long trade of range low BOF ended as a scratch. No other trades.

Webinar

Mr. Ziad Misri of opentrader.com is giving access to his 2 hour webinar for free. You can register for the event in advance. I strongly recommend this. Worth attending.  Click here to register

11112014

Nifty opened within previous day range. Went short when price got rejected from BRN for the second time. Stopped out.Short on BPB of IRL. Price did not reach RN as expected. Covered at 8367. A long PP trade above IRL also failed.Price went to the target BRN only after stop out . Price action was very choppy.Price trading within 8350-8400 range during the month. An explosive move likely soon

10112014

Nifty gaped up above PDH and BRN. Tried to go below them and got rejected. Went long on BPB of BRN/PDC/PDH on break of IRH. Price got rejected from ATH. covered on break entry bar low.Short below IRL. Covered when price refused to go beyond RN. Long on BOF of LOD which was also NS BRN 8300 area.Entry was above RN 8350.  Exited on price getting rejected from PDH/PDC

03112014

Nifty gaped up above PDH. Failed to go beyond the first bar. Attempted two BOF longs and a short at range high. Nothing worked well .Managed without loss as all the trades were at the extremes. Daily still in rally mode and price within a higher range. NSE is conducting trading from their DR site on Nov 5,7. Data vendors are not equipped to connect to DR server so do not expect live charts.

31102014

Nifty gaped up above PDH.Failed to go below NS BRN 8200 level which was day open. Long on BPB PDH on break of RN. It was just trailing afterwards. Price stalled at BRN and there was a TRAP pattern there. Then it was a 20 point range for a long time. TP on BOF of range high. Skipped BOF of range low as there was NS BRN, RN and Range high above.

30102014

Did not trade yesterday. Today Nifty opened within previous day range. Broke PDH and BRN. Long on BPB of BRN. Trailed and stopped out at RN 8150. Did not take any trade in the afternoon as today is contract expiry. From tomorrow Nifty Futures lot size changes to 25

29102014

Not traded. Nifty was within IR, the opening MC candle the whole day. There were possibilities for getting trapped in BO/BPB  at  IRL and IRH in the morning session

28102014

Nifty gaped up within previous day range. IR formed. Short of FTC above 8030 from where yesterday Nifty  sold off. TP when price failed to go below DO/Range Low. Long on BOF of Range Low. Stopped out . Another long on BPB of Range High. TP when price reversed from RN 8050. Done for the day as I have some other work

27102014

Market was choppy with too many levels in between. Attempted a long on BOF of PDH/PDC. Stopped out below the entry bar. Did not attempt any other trade.

Seven Pillars

Working Memory of  human brain is a concept that always attracted researchers of Cognitive Psychology and Neuroscience. Working memory which is also called short term memory is the system that holds multiple pieces of information in the mind. Short term memory is responsible for the retrieval, processing, integration and disposal of information during a decision making process.

George A Miller of the Princeton University has done extensive research on this subject. His research is one of the most quoted papers in Psychology. This is frequently referred as Miller’s Law. He argues that the number of variables an average human can hold in working memory is Seven, Plus or minus to two.

Trading, especially a discretionary method is always a decision making process. It is very important to limit the number of information variables within the capacity of our short term memory for its effectiveness. Earlier I was using a lot more and was not able to cope with that. I had to eliminate and discard a lot and now the structure rests on just seven pillars.

Trend, Range, Decision Points, Space, Critical Mass, Order flow and Risk

If you are trading a discretionary method, please do a system audit. I am sure you will find too many variable that are not contributing anything but only overloads your working memory. Ensure that you are not using too many variables which are beyond the capacity of your short term memory.

The thousand pillar mandapas of South Indian temples are architectural marvels and they weathered natural calamities, wars and invasions for centuries. But your thousand pillar trading method will crumble like a pack of cards in no time.

Trading Journey

22102014

A 15 point Barbed Wire around BRN the whole day. Or we may call it a Cigarette. No trades today

Ache Din Aane Wale Hain

Here is some good news for Diwali. A price war is set to break out in the stock broking industry. India Infoline is all set to enter discount broking soon.They are ready for a price war too. Let us hope ICICIdirect , Karvy, Sharkhan and other biggies to follow suit. Read the News

IIFL will launch a new trading portal with the lowest brokerage rate in the industry yet.

Read more at:
http://economictimes.indiatimes.com/articleshow/44892805.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

21102014

Nifty opened above previous day closing range. IR formed. Went long on break of IRH. PDH was FTA. But price managed to break it and moved up. TP when price failed to stay above RN. Short on FTC above RN. Three attempts to move above RN failed. Price fell more than expected. TP at IRL, then HOD.Long on BOF of BRN. test of PDC. Quick move up . Again covered below RN. Another FTC short on TST of HOD. Allowed a deep pullback at PDH. Covered when second push failed.

WISH YOU ALL A VERY VERY HAPPY DIWALI.

20102014

Nifty gaped up above PDH. Did not expect further up move. IR formed. Went short as FTC when price broke IRH. Covered when price bounced from BRN. Next two trades were within a BW around BRN. First one scratched and second stopped out.

17102014

Nifty opened within previous day range. IR formed. Went long on BOF of PDL/PDC on break of IRL. Covered when price failed to stay above BRN. Skipped BPB of BRN as there was no momentum or stop triggering on break of IRH, Then HOD. Went short on Break below BRN. I expected this to run as it was a pattern failure also. But break below MSP failed and gave a TRAP signal.Exited above BRN. Did not enter long and  skipped the TRAP as I was suspecting a BW around BRN. But it moved well and hit RN 7850. Took a FTC trade here below NS BRN. It quickly moved down. Covered at FTA, a major flip

16102014

Nifty gaped down below PDC and went up. Short on BOF of PDC/BRN. Refused to go beyond IRL. Covered at 10 point profit. Price broke down below IRL and made another range between DO and PDL. There was a BOF of PDL. There was no momentum and space to move. So  skipped. Shorted the break below PDL and it was just trailing rest of the day. Price has broken below the major flip in daily chart.