My daytrading

[Raghavacc]

Dear Friends,

Extremely sorry for messing up with figures in post no 488.I did mention 5000 in place of 5500 in several places. Now got it corrected. Please re read the post.

Once again sorry for the confusion.

 

[Raghavacc]

We shall try to understand the term called "spread" and how it results in big moves.

Lets not try to deal in high language.We shall keep it simple.According to me a spread is a length of a particular order/collective orders.

Lets take an example. Say Market is making down move and say Nifty is at 5475 .Now say we want to buy 100 lots of Nifty between 5500 -5550. Now what I do is like this.

I place my order like this:
Quantity - 100 lots
Trigger price :5500
Limit price : 5550

A trigger price refers to a price if triggered or reached results in execution of our orders.So that means If Nifty reaches 5500 level our orders start executing.

What about limit price.It is a price beyond which we don't want to buy. Its a Max limit,seal,cap.Why limit? because we don't want to be buying too high as we want market to move up. Rule: buy low sell high. So in this case we don't want to buy over and above 5550.
So the difference between A Limit price i.e:5550 and the trigger price i.e:5500 i.e:50 points is called as spread in this case.

Another question :Why 50 points spread?Answer is :I want to buy 100 lots and I may not have 100 lots of sell orders ( To match my buy orders ) at 5500.Hence I am putting a spread or net.Its like a fisher man spreading across his net across a diameter of the sea.He knows if he puts his net at a single place he won't get enough fishes or he may not get the fish at all.

Now what? The 100 orders may get executed like this.

20 Orders executed @ 5500
12 Orders executed @ 5510
15 Orders executed @ 5515
10 Orders executed @ 5528
5 Orders executed @ 5535
6 Orders executed @ 5540
12 Orders executed @ 5547
20 Orders executed @ 5550
Total = 100 Lots of Nifty bought starting from 5500 to 5550.Thats how spread works. Reverse it for selling orders.

Once you have grasped the above concept ,now see how a big pocket can bulldoze the market.

A Big pocket trader always looks for a good location to enter the market. It can be a Big round Number or a particular FIB retracement (31.8% or 61%) or a touch and bounce of trendline.

In this example assume that its 5500.His Trigger price is 5500 and limit price is 5600 means he is laying a net between 5500 - 5600 for 5000 lots of Nifty.

Now lets say he places his buying orders at 10 AM. now its like this.

1000 orders executed @5500
800 orders executed @5510
200 orders executed @5520
400 orders executed @5525
200 orders executed @5540
600 orders executed @5550
400 orders executed @5560
500 orders executed @5570
200 orders executed @5575
200 orders executed @5580
500 orders executed @5600

Say by 10.30 all these orders got executed. Now the result will be a bullish candle on the 30 Min chart as shown below.

The essential point here is to show how a candle opens and how it closes. Different people interpret spread in different terms.Here we are trying to understand how a buyers or sellers spread of orders can affect a movement of market and formation of candles. Here the transaction time was in between 10 am to 10.30 AM and the candle opened at 5500 and closed at 5600.So a bullish 30 Minute candle made a movement of 100 points in half an hour. Bid/ask etc we shall try to understand later.

 

[balasoft80]

Hello Raghav,
After a long down trend today nifty has moved in positive way. Could you please share your entry and exit with screen shot? This will help to understand bit better.

Also I didn't get any clue in the attached SBIN chart. Could you please exlain me your observation on this?

http://imageshack.us/photo/my-images/38/sbi6may.jpg/


Thanks a lot

Bala

 

[Raghavacc]

Hello Raghav,
After a long down trend today nifty has moved in positive way. Could you please share your entry and exit with screen shot? This will help to understand bit better.

Also I didn't get any clue in the attached SBIN chart. Could you please exlain me your observation on this?

http://imageshack.us/photo/my-images/38/sbi6may.jpg/


Thanks a lot

Bala

Bala,

I did a small TELCO for a 13 Rs. move.I will no be able to post the chart now.

As far as SBIN is concerned ,What all I can say is that SBI had a small gap and it sustained the gap for more than 2 hours which means it has a bit of strength to make upmove.

Then it tested the low of the day and that was the best entry point to go long with small risk.It is one of such days when a traders skill is tested and market played hide and seek game.

Do note that I do not trade SBIN as my style and method works best for Nifty,ICICI Bank,Telco and Tisco .

Price action is universal and you can apply it to any instrument.

 

[Raghavacc]

Friends,

I might not have answered many of your PM's/ posts. It's not that I am ignoring them .I do have concerns for you all and I am not the one who backs up when one asks for sharing what I have.I will address each one. Need not worry.We need to have patience till then.Do remember - BOTH LIFE AND TRADING ARE MARATHON NOT A 100 METER RUNNING

The fact is I am over occupied with my work ,infrequent daytrading/swing trading and personal life.

Let the things get settled. I will address each one of the concerns.

What all you have seen so far is a trailor.Real movie is yet to start...

 

[balasoft80]

Thanks Raghav. As you said i had terrible day as a beginer

 

[Raghavacc]

Every beginner should learn this first. Trading small quantity.

I do this every now and then intentionally to train the mind to be away from herd mentality,feeling of missing something, fear of loss and more than that greediness.

I will be knowing that it will make 25 Rs. move. I intentionally position myself with only 4 shares.Then I cut my position for 13-15 Rs. move though its certain that its going to make 25-30Rs. move.Market existed 100 years before and it will exist for 100 more years. This move is not the last move!!!.

Trading is a big subject.Unless we adopt discipline, rules,Mind controlling techniques - one fine day greediness or panic will rule over and destroy the trader.

This one is from yesterday.

 

[Raghavacc]

More Ideas....

 

[Raghavacc]

 

[balasoft80]

Thanks Raghav for wonderful explanation. This really help us in understanding much on price actions. But if you able to explain with volume that would be really great. I couldn't find any good materials to understand price actions with volume... Anyway thank you for the all your countless effort.

Bala