Market Cycle Dates

[aaru]

nicely put across.. and traded too:thumb:

 

[Contra]

Part (A) - Nifty Futures Intraday Trading Idea (6 May 2016)

Today's trade faced some of the same volatility as yesterday but didn't go to those extreme levels.

All the more, it reinforced the rule of having multiple stop losses so that you're not taken out of an otherwise legitimate trade. The trade itself comes into play only if the prior rules are met. If these rules are not met then there is no trade at all. Those prior rules are:

• Testing potential area of support or resistance
• Pullup or pullback from that level between 10.30-11.30 am (i.e., before 12 pm) confirming that the S/R is indeed valid
• Reversal after pullup / pullback and entry when that level is broken

These are conservative, fixed rules which help me trade in a non-traditional way (best of both worlds).

Once these rules are met, I'm willing to take more risk and let the trade move within a wider range, if required. This is critical if you want to trade Nifty on volatile days without your "too close" stop loss taking it out.

For that reason, I'm introducing 3 stop losses now (SL1, SL2 and SL3). As before, SL1 and SL2 are mental stop losses. I don't exit trade based on them but become more alert and monitor price movement more closely. SL3 is the real stop loss where I pull the plug. This is my drawdown stop loss beyond which I'm not willing to hold the trade.

• SL1 is placed at 50% distance from your entry target. This means, if your trade TP target is 14 points, SL1 will be at 7 points. This is a mental stop loss.
  
• SL2 is placed at a point of support or resistance (e.g., BRN or other visual S/R). This too is a mental stop loss.
  
• SL3 is my drawdown stop loss, an actual 'pull-the-plug' stop loss. If price goes below this, I exit with a loss and a lesson. This level is at 40% of Daily ATR and an important retracement level that comes handy during volatile days.

Today's trade

Nifty tested the resistance first at 7720, so bias for the day was to go Long

Target for the trade was 13 points (adjusted to reflect decline in ATR)

Long entry was at 7722
SL1 was at 7715 (mental SL / 7722 - 7)
SL2 was at 7700 (mental SL / Big Round Number)
SL3 was at 7681 (drawdown SL / 7722 - 40% of Daily ATR)

Trade entry was at 7722 but it reversed just 2 points away from the TP target.

Price continued reversing and went to SL1. This was expected as algo traders know where your SL is. Hence we do not exit here and stay in trade.

Price next dropped close to SL2 but stayed above it. SL3 never came into the picture, so an extreme adverse movement was avoided.

From the SL1-SL2 range, Nifty reversed and rallied rapidly (similar to yesterday). It re-entered the original Long entry at 7722 and exited at 7735 for 13 points profit.

Today's trade was over by 1pm


Part (B) - Nifty Spot Market Level (6 May 2016)

Refer to this chart from 4 days ago

Nifty's high today was 7739
Nifty's low today was 7678

Today's close at 7733 puts it within striking distance of re-entering the bearish zone.


Short-term weekly view (frontloading)

Nifty's mean is now at 7857 (this number might be familiar to those who are following this thread)

This means, for the bulls to take over, spot price has to cross 7857

I'm also seeing these bearish levels: 7700, 7582, 7423

 

[Contra]

Part (A) - Nifty Futures Intraday (9 May 2016)

No trade today since rules weren't met. Prices stayed elevated and there was no pullback. So I stayed out.

This may well be a sign of things to come since tomorrow and the day after are market cycles dates (May 10 & 11).

Posted on 28 April:

Here are the main market cycle dates for Nifty for the rest of this year.

• May 10, 11, 25
• June 1, 4
• July 1, 5
• August 5, 8
• September 28
• October 19
• November 26, 28, 29
• December 28

I see these as transitional dates as the market moves gradually from one level to another. While I don't expect anything big to happen, it would be interesting to watch nonetheless (think: phases of the moon, or a transition from mid-summer to late summer).

It helps to bear these dates in mind so that we trade keeping them in perspective and be aware of how these might affect our rules of trading.

Part (B) - Nifty Spot Market Level (9 May 2016)

Notice how Nifty reverted back to the mean today as per the chart posted on Friday.

It was almost primed to go that way.

 

[gemat]

contra, what could be the next resistance level? from historical chart and Options chain data OI is building up at 8000 and 8100. any valuable suggestions?

 

[Contra]

contra, what could be the next resistance level? from historical chart and Options chain data OI is building up at 8000 and 8100. any valuable suggestions?

The closest bullish resistance I'm seeing on Nifty Spot (not futures) is at 7870 which is just 4 points away today's close but below today's high on Nifty spot. Does this mean a reversal is coming? I don't know. Can't say for sure.

But looking at the gap up opening, bullish momentum can very well continue into tomorrow, so if 7870 and 7891 are broken, then the next resistance is at 7948. If Nifty crosses 7971 then it's clear path up to 8021

So the upper levels look like this: 7870 - 7891 - 7948 - 7971 - 8021

But don't forget the lower level at 7678. Best to cover all possibilities however remote they might seem at the moment.

 

[gemat]

thanks for the input. today's reversal suggests nifty has a strong support at 7700. :thumb:

 

[Contra]

Part (A) - Nifty Futures Intraday Trading Idea (10 May 2016)

First test of the resistance zone at 7875 to 7880 lead to a pullback after 10.30 am. So the trading bias for the day was to go Long.

When prices reversed and rallied, went long at 7877 and exited at 7889 for 12 points profit.

Neither of the stop losses came into the picture, and the trade itself was over by 12.30pm.


Part (B) - Nifty Spot Market Level (10 May 2016)

If you watched the price action today, you would have noticed the clear effects of the market cycle date. In fact, this has been in effect since yesterday itself and this whole week (9-13 May) can be considered a market cycle week. A transition period of sorts.

After yesterday's aggressive gap up and bullish close, there were expectations that the move would continue unabated today. Normally, when you have a move like that, Nifty effortlessly zooms to the next level without much obstacle. However, it was obvious that bears had emerged and were putting up a stiff resistance to the fierce bulls. The effect was a flat market and a flat close.

The only reason Nifty didn't close in the red today was because of the momentum generated by the bulls yesterday.

Brief analysis of today's Nifty levels

The most pivotal level right now is 7890

Just look horizontally to the left across all the price action that has transpired through that level, and its significance should be clear.

There are 3 bullish levels: 7906, 7920 and 7948

There are 2 bearish levels: 7838 and 7802


Part (C) - Options Chain vs Order Flow Trading

The method I currently follow has nothing to do with either options chain or order flow. It's a purely visual method based on S/R, pullbacks & pullups, and a conservative profit target. However, I see that other traders follow these techniques, so I'd like to comment a bit on how I view them and how one of these could be used for secondary confirmation of trade direction.

Options chain looks interesting but since I don't understand options beyond the basics, I don't see it becoming part of my secondary confirmation mechanism. Also, I see some flaws...

• The information on options chain is publicly visible to all. It is visible to you and me, to large traders, and also algos and HFTs. That's a problem because it will lead you to believe one thing but materialize results in another way.
  
• One more flaw I see is that these options reflect intent and not necessarily execution (there's a key difference between the two). The nature of this intent is forever in ebb-and-flow. That's where order flow scores because it shows actual execution, actual orders passing into and out of the market. Plus, it's visual, which suits my style.

So if I want to bring in a secondary confirmation to my primary system, then I would go with order flow analysis rather than options chain. For now, I'm still trying to learn more about the tools and methods of order flow (mt4trader's thread is good), so it's going to be some time before I integrate it with my system. Till then, I'll follow manual (visual) rules which, so far, are working well.

Part (D) - Market Cycle Date

Like today, tomorrow (11 May) is a market cycle date as well.

There's a date on May 25 as well, but I probably won't be around to monitor that.

 

[Contra]

Part (A) - Nifty Futures Intraday (11 May 2016)

No trade today since pre-trade rules were not met.

As I've said several times before, my main rule is that I'm looking for a pullback from resistance between 10.30 to 11.30 am (ideally before 12pm). If a pullback happens later, I avoid trading, which was the case today as well.

Just to demonstrate the hazard of a late pullback, here's today's futures chart

I was tracking the resistance level at 7875.
No pullback happened before 12pm.
Pullback materialize a while after that.

If you had traded this later pullback and went long, the trade would not have worked.

The scope for your trade to work as per rules is higher when you have time on your side. Hence the rules.


Part (B) - Nifty Spot Market Level (11 May 2016)

I have traced today's Nifty movement onto the chart that I had posted yesterday. This shows how the different bullish / bearish / pivotal levels came into play today in line with the levels on yesterday's chart.

 

[Contra]

Part (A) - Nifty Futures Intraday Trading Idea (12 May 2016)

Today ended up as a no-profit, no-loss kind of day. Idea was to go long at 7921 and exit at 7938 (target of 17 points based on an increase in ATR).

Even though long triggered after a pullback as per rules, the market became flat. Since the close was approaching, I cut off the trade at 7922


Part (B) - Bank Nifty Intraday Trading Idea (11-12 May 2016)

Trading is a hard profession with lots of dead ends in your search for a system that works. Sometimes, we have to retrace back after going 40 miles in the wrong direction, only to realize that we missed a turn some 18 miles before. We often wish we had a map or a GPS for the market that showed us the right direction, but where's the fun in that? Just like a spiritual quest for enlightenment, trading your way through the jungle of algorithms and manipulation is our tuition for something great.

That said, I normally don't track Bank Nifty because of the volatility and also the fact that monitoring Nifty takes up most of my time. However, this week, there weren't many trades in Nifty, so I looked up BNF.

The difference between Nifty and Bank Nifty is that:

• Nifty works on the principle of acceptance and patience
• Bank Nifty works on the principle of rejection and momentum

When Nifty tests a level, it pulls back, but returns back to that level, signalling acceptance.
It requires some patience on part of the trader but at the end of the day, it tends to work.

Bank Nifty, on the other hand, tests a level and rejects it by moving aggressively in the opposite direction.
As it does so, it gains momentum.
We can use this characteristic to trade this instrument.

Below are two examples of trades on 11 & 12 May, on the 1Hr TF.

In the first case, Bank Nifty was moving up aggressively, but reached a point where the 'Buy' momentum was rejected. This quickly translated to 'Sell' momentum, which is what we latch on to. So, at the close of that red candle, we place a market order to sell at 16815 and exit at 16755.

A similar thing happened today (12 May). There was immediate rejection of 'Sell' momentum because of the gap up opening. So we latch on to the momentum and go long at 16293 and exit at 16983.

Each of these trades netted 60 points (total of 120 points). The reason for 60 points per trade is that, when I calculated all the daily range figures for BNF, an average target of 60 points tends to have a good probability of working out.

 

[gemat]

bankruptcy bill being passed, it had a positive impact on banking stocks. there was a good bounce back from today's low.