Learn How To Fish

[chavanms]

 

[chavanms]

 

[chavanms]

 

[VJAY]

Good post about ERL by ST sir....

This weekend we take up ERL which I found to be most misunderstood and wrongly used part of this method.

ERL is Early Reversal Line and it serves a purpose of indicating early reversal of a trend. To give some theory on why is ERL necessary ?? ERL helps to avoid the false trades taken on pivots when the market does a flag type small correction or ABC type correction and gives a false impression of trend change. It has been onserved that most flags do not go above ERL and hence if the markets pivots above ERL in downtrend and then proceeds to break that pivot high ( point B in our hart) then there is a good probability that the downtrend is changing into uptrend.

Some cardinal rules about ERLs :

1) ERLs are horriontal lines ( in case of derl they are slanting up or down ) drawn from body pivot low in a downtrend and body pivot highs in an uptrend.

2) For ERLs make sure that at those points the market has atleast momentarily changed the direction . I have seen people drawing ERLs from inside bars or small sideways bars which is not a change of direction of the price move.

3) ERLs from the latest trend are to be considered. ERL lines need to be clean....these statements need more of observation and understanding from traders.When ERL lines are not clean then that ERL is from the previous trend which is not to be considered.

4) Once an ERL is drawn, the price has to close above the ERL in case of downtrend and below the ERL in case of uptrends.ERL is NOT operative till the price not only closes above it but also has gone visual distance above the ERL.....this is important. If the price just pierces ERL and comes down below it then it is a case of Rejection/failure and NOT ERL reversal.....

5) We are more strict in case of reversal from downtrend to uptrend. This is because uptrend has to travel against the gravity and owntrend travels with the gravity....so we need a mPH above ERL in case of downtrend reversing to uptrend. In case of uptrend reversing to downtrend we need only bar to close below ERL and have visual distance.....below that bar we go short assuming trend reversal from up to downtrend.

6) Area obove ERL in case of downtrend reversing to uptrend is called Definative Area.....market has to trade above definative area for trend change to uptrend.

7) ERLs are to be used in a trend...NOT to be used in a sideways market. In sideways, it will go on printing ERLs after ERLs and is meaningless.

8) ERLs are to be used after a price move has played out sufficiently.I have seen traders start looking for ERL reversal after the correction which comes after a first rally.....this is the source of most wrong trades.

9) A very important use of ERLs are in pivot upgradation....observe that point B is a mPH above ERL......then C comes down and closes below ERL...so point B gets upgraded to VPH ( earlier it was mPH) similarly point C when the market closed again above ERL , gets upgraded to VPL ( it was a mph earlier) ..so now we have VPH,VPL and price breaking VPH above definative area and that is strong possibility of trend reversal to UP.....
ERLs drwn from visual pivots are known as visual erls (VERLs) and ERLs drawn from minor pivots are known as minor ERLs,
For pivot upgradation, refer to few early pages where Subhdip has nicely explained the concept with charts.

I have posted a 3 min Bajaj Finance chart to illustrate the concepts we talked above. The chart is self explanatory...the red horrizontal line is an ERL, in a ongoing visual downtrend......

This concept needs chart observation and understanding.....it will take time to sink in.....but ERL is a very powerful concept in pivot method.

Smart_trade

 

[VJAY]

By ST sir

I have observed few traders trading pivot method think that for everyday you need a visual pivot to take a trade. This is incorrect. The method trades minor trends in the direction of visual trend. So when the visual trend gets defined, we have to trade each minor pivot in the direction of visual trade.

The chart shows that the visual trend changed to up on 24-5-2018. When we start trading on 25-5-2018, we know that the visual trend is up...so we look for place to buy based on following :

1) Minor uptrend....buy above minor pivot high...our initial stoploss is the immediate preceding minor pivot low.
2) Look for small consolidation and buy above the consolidation area.

Our first entry is above a small horrizontal consolidation......stoploss level is shown. In case one misses the first entry, we can have a second entry above a minor pivot high as shown...

The pivot method works best in trending markets. We need to have good trending moves in either direction. Most losses on this method ( like ny other trend following method ) are when traders trade this method in sideways markets. Here we are buying breakouts.....so in weak sideways markets, by the time we buy a breakout, the trend ends...so a trader has to first understand what is the market structure, is the market trending or sideways...how strong is the trend and then in sideways markets use support /resistances, VWAP bands previous days high/low, failures at important levels etc.....

How does one know the strength of the trend ? Traders can find that just looking at the chart but few pointers are as under :

1) Market making very small bars ,failing at breakouts/breakdowns.
2) Market remaining in 2 visual pivots for a long time .
3) Market making bars with long tails but small bodies.
4) Market barely going upto support/resistance levels and that too with great difficulty.
5) Market printing alternate red and green bars, both small bars....
6) ATR of the bar in your timeframe can give clues of the strength of the trend.

Traders by practice know how much move trending market gives in 5/10 or 15 min in nifty and bank nifty....so if the move is not strong, trade light in quantity and be quick to take profits......in strongly trending markets one can think of adds and holding till the end but in weak markets ( most of the times markets show weak trends these days) one has to grab the profits else it will disappear. If the market is staying in two visual pivots for a long time, then it is a danger sign that the trend is loosing strength.Trade the full quantity is a strong trend and lower qty in a sideways market....

We have seen that ERLs are not to be used in sideways markets but ERLs can be very effectively used in a trending market for catching a reversal at an early stage by pivot upgradation......we will discuss how to do it in the next weekend.

There is only one exception to what is said in the first para above. When the market closes strongly at the higher/lower end and next day it opens with a gap into the previous days afternoon range, here we need to wait till visual pivot is formed as the gap changes the supply/demand equation.

Smart_trade

 

[VJAY]

This month in daily looks like sideways ...so not much good trades came...but 2nd best trade of this month came today....Hope chart will give you the picture...

 

[VJAY]

Not got any opportunity in both way moves as per method ...still got 2 trades(scratched) at end of the move ....

 

[ashcom]

 

[ashcom]

Sir, can you advice on the queries, asked, which you will find it written in the chart. Sorry, for both charts being the same. # 199

 

[VJAY]

Sir, can you advice on the queries, asked, which you will find it written in the chart. Sorry, for both charts being the same. # 199

my views marked in chart...which TF i=this chart...looks like too much data diference with my chart....you have correct rule/view for identifying your minor pivots ....its very important in this method ...there is no IF's for minor pivots ...then all things comes automaticly...and please avoid 'SIR" please...