Determining direction of Markets?

[AW10]

Can one rely on VIX to get direction of markets?

Another one more of the least useful tool to use for knowing the direction of market.
It is even more ambiguous then PCR. These are tools to understand markets undercurrent .. the hidden signals that mkt is generating..

In my view, they can't be used to decide the direction.

Look for yourself..
- download the VIX data from NSE site,
- download NIFTY data..
- draw both chart,
- keep them next to each other and see if VIX gives any clue about trend on regular basis.

VIX is useful as contrarian indicator.. i.e Low VIX mean more complecency in market..hence down trend can come at any time... But VIX can remain low for long time..and market keeps going up and up.

IMO, in real trading, you have to trade the price of stock / nifty future.. Farther u go from the price in calculation of some indicator and using that to take trading decision, more delayed you will be in the market.

Happy Trading

 

[prasham]

Check the enclosed image that has the equation of Pivot Point Calculations. Is the equation right? Can one simply trade in Options (naked) using Pivot Points of the Index? I mean Say I buy CA 1100 of RIL at 100 can I keep stoploss at the S1/S2 levels of the price of RIL in equity/cash market?

 

[DanPickUp]

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[prasham]

Hy

Yes, you can if you wish and be careful when trading naked options.

Thanks for the quick reply Dan. I see a BIG "IF" in you reply which is quite scary :rofl:

But anyways let me try this thing myself, just as you prefer

 

[DanPickUp]

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[trader.trends]

Check the enclosed image that has the equation of Pivot Point Calculations. Is the equation right? Can one simply trade in Options (naked) using Pivot Points of the Index? I mean Say I buy CA 1100 of RIL at 100 can I keep stoploss at the S1/S2 levels of the price of RIL in equity/cash market?

Prasham

Are you planning to do intraday trade in options based on pivots? OR is it weekly pivots? I have never traded options intra day based on pivots. I prefer a higher TF than intra day to trade options. You have to remember the time decay in options. You can buy at the pivot but suppose it does not go to R1 for you to sell in a couple of days, then the time decay will kill the profit.

If you are looking at intraday, look at how far the R1 is when you are buying at pivot. The distance should be large enough for the deal to be beneficial. And you essentially have to choose the ITM options. For every two point move in the underlying you will get one point move if it is ITM options.

If you do trade intraday using pivots will look forward to your trades.

 

[prasham]

Thanks for your inputs TT. I am not an intraday trader. Actually I haven't traded much in Options yet. I am learning various things here and there. I like buying calls of next month so that time decay doesn't hurt much.

BTW I understand your concern about Time Decay can you think of clubbing Pivot Points with Time Decay to find more effective Supports and Resistances?

 

[Placebo]

Hi Prasham

Its a good idea to experiment with some tool and get started in trading. But using only pivot points just to make trading decisions sounds very dicey to me. If used in conjunction with something else it might just give you an edge.

Cheers And Happy Trading

 

[DanPickUp]

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[DanPickUp]

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