Namaste - My Learning of Trading in Nifty

namaste to all big brothers of this forum

Spl thanks and kind attention to

Rajput bhai
Nimish bhai
Rajeabc bhai
Raunak bhai
Praveen Bhai
Aditya Bhai

Brothers please help me in understanding how to trade for a living.

Note - In this thread, I would be posting my views on Nifty. I am not a trader right now, though I am trying to be. Therefore, please please do not trade on my views. Opened this thread to understand and learn trading becoz, here I can keep record of my learning and also the great and valuable advise of big brothers.

Jai mata dee

Weekly chart of Nifty

namaste
this is weekly chart of nifty. and I observed some very useful points in this chart. volume is decreasing while the price is going up. This is happening since August, 2009; and everytime when Nifty starts moving up from above 5000 levels, the volume start decreasing significantly.
Because of this, nifty falls from higher levels. These falls had been sharp and with volumes. On this basis, I can assume that Nifty is not likely to sustain on higher levels. The non-sustainable higher levels of Nifty are likely to around 5460. The chart is given below for reference.

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Weekly chart of Nifty continue

Therefore, in order to have a sufficient level to go short in Nifty, i have to watch weekly volumes, whether they are increasing or decreasing. Because, it is not necessary that nifty will surely go down from higher levels. Nifty going down from higher levels is subject to the corresponding levels of volume, as has been indicated in my previous post.

Week ending on 9th July 2010 has volumes of 69,24,75,000. Hence, if Nifty continues its current uptrend in coming week and the volumes remain below 69,24,75,000 we can continue expecting downside.

On an average, Nifty took around 3 weeks at higher levels (remaining in oversold zone and letting people believe that it will not turn around to go below) and then starts its journey towards downside. One more thing, until it breaches its previous resistance, it continues to go up and this can be seen in the chart. Therefore, after breaking the previous resistance of 5400, it may remain above this level for around 3 weeks. Observing its pace, it can be assumed that nifty may break the resistance level of 5400 in coming two weeks and then, it may take around 2-3 weeks around that level. Therefore, one should not enter short in Nifty during this month of July.

Daily chart of Nifty

previous posts were about weekly analysis of Nifty.

Now, I am trying to understand the daily chart of Nifty. I have put a lot of trend lines in Nifty daily chart and tried to understand what is happening on daily basis in Nifty with the aid of corresponding volumes in Nifty.

As can be seen in the chart, since last week of May 2010 (26-05-2010), the volumes remained steady and from 21 June 2010 onwards, the volumes started decreasing. Even the long positive bar of 21 June 2010 is not carrying sufficient volumes. Thereafter, volumes started reducing, giving an illusion that market might fall from these levels. But as has been discussed in weekly analysis, There are very less chances of Nifty falling below 5400 levels; and it everything goes accordingly i.e. nifty rising and volumes reducing on weekly basis we are very likely to see the levels of around 5460 in coming two weeks i.e by 23rd July 2010.

Now coming back to the daily analysis of Nifty chart, the last candle has around double volumes (21,66,60,000) than its previous candle of dated 8th July 2010 (12,72,97,000). This again creates doubt whether Nifty would be able to rise immediately from these levels or may take one or two days. The apparent reason, which I can think of now, is may be that many people are expecting Nifty to go down from these levels (and they can be correct too) and have shorted blindly against the bulls who are working hard to make the market move up. Therefore, the reason could be of short covering. 5333 have been said to be the current resistance levels and, therefore, many bears were shorting Nifty above 5300. And when on 9th July, Nifty maintained its level well above 5333, they have to cover their positions. Another reason adding to such huge increase in volumes may be bears turning bulls at these levels. Going long in Nifty at these levels is not having reasonable risk/reward ratio because the trend line support is at around 5230 while the parallel line support levels are between 5230-5200. Currently Nifty is at 5352 i.e. difference of around 120-150 points. While, the next and immediate level of resistance that Nifty is expected to face is at 5400 or if we consider the weekly expected level that is also at around 5460. Therefore, the reward is around 100-110 points; while the risk is more than reward. Therefore, the appropriate approach at this time can be of just watching Nifty levels along with volumes and only after confirmation of trend, one can enter suitably. That is, if nifty breaches the resistance levels with increased and suitable volumes, one can think of entering long above 5400; Or in contrary situation one can enter short above 5400 accordingly.

The chart is given below for reference.

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momentum is said to be giving indication about the current pace/strength of a trend and its reaction over the prices of a script.

Trying momentum over weekly nifty chart.

there are four conditions of CCI momentum indicator. these conditions may be similar or same with other momentum indicators, but I have been only able to understand CCI a bit.

condition 1 - momentum increases and price increases

condition 2 - momentum decreases and price decreases

condition 3 - momentum increases and price decreases

condition 4 - momentum decreases and price increases

condition 1 - when momentum increases and price also increases; this indicates a healthy upmove in the market.

condition 2 - when momentum decreases and price also decreases; this also indicates a genuine and healthy corrective move in the market.

condition 3 and 4 are opposite of their respective conditions 1 and 2. Such situations usually occur when price has crossed some importance support or resistance level; or the market has turned against the apparent expectations.


what momentum can do:

momentum can help in deciding, whether the trade being entered is corresponding to suitable momentum or otherwise. Momentum also helps in deciding the overbought and oversold conditions; but this differ from script to script. That is, one single setting of momentum is not supposed to work on all scripts equally. But where it works suitably, it can give very useful information of expected move in the future.

The very simple way of using momentum (CCI) is to match its current position with similar position in the recent past; and then compare the prices.

CCI can also help in taking an early entry into the trend being building or about to build, and help in minimizing the risk.

For example, the following weekly chart of Nifty can be taken into consideration.

As can be seen that Nifty had a triangle breakout which worked quite well. Now, because I can see it now as it happened in the past, it appears quite easy to trade it. But the point is, would I actually have traded it at that time. Well, I don't think so because of the following reasons:

Reason 1 - The support line of the triangle could only be drawn after seeing the next two-three candles of this breakout. The first support level of blue candle (31 Oct 20098, from where the support line has started; and the second support level (6 march 2009) has a huge time gap and it is only after the another support level (13 March 2009) near the second level of 6th March 2009 that one can think of putting a support line at these levels.

Reason 2 - The breakout candle has a high of 3123 and closed at 3108. Now, if we look at the starting point of resistance line (marked as E), it had a high of 3240. The second point of resistance level which is marked as F has a high of 3106. The difference of breakout candle is marginally close to the point F and low below the point E. When this breakout had actually occured and if I am not familiar with momentum indicator (here I am using CCI), it really would have been very very difficult for me to enter confidently into this trade.

Reason 3 - As has been suggested by all great traders, that never ever enter any trade without having any stoploss value. If I would have only traded this breakout I have to keep my stoploss below point D i.e. below 2555 which would rationally had been between 2550 - 2530. Hence, entering mere on the basis of trendline price pattern breakout, which occured at 3123 and having a stoploss of around 570 points (3123- 2550) would not have appeared a wise decision. And the chances are more that I would have missed this good opportunity, if I would have been trading only on the basis of trend line and price patterns.

Chart is given below for reference. and I will be trying to understand how momentum can help in dealing with this issue; and will post it later.

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Best of luck crown for your latest thread.

thanks Rajput bhai

But it is not the thread about which I am really worried and tensed and exhausted. It is the understanding and application of TA.

I have gone through as many books (5-6) as I could in the past couple of weeks. Tried to grasp and understand as much as I can about the trend, support and resistance, price patterns, moving averages, oscillators, momentum indicators, formations like double top, head and shoulder etc, scaling of charts (logarithmic and linear), candle sticks patterns, importance of volume, fibonacci etc. etc. etc.


but believe me, I am still not able to understand how to trade. The more I learn, more confusing it gets. I also tried to understand and apply your system of Turtle CCI, but it is also not giving good results. at least one out of two signals are failing. I am really hopeless and do not know what to do.

pata nahi kidhar galti kar raha hu.

Please help me bhai.

I beg all of you
please mujhe day trading sikha do

bas itna hee ki ho jaye ki kam se kam 1 trade to daily ka sahi jaye.


Everything seems easy, when I apply on the historical charts
but when I apply it in realtime trade, maximum of my trades are losing.

Like, in this thread, on the basis of weekly charts, I was able to conclude that Nifty is likely to go down after breach of 5400 and around the levels of 5460. Now, when I saw the daily charts, it is giving another picture which is totally contrary to the current situation. In daily chart, I see that Nifty has a flag break out, target of which is above 5500. Now, I really am pissed off what to do. Whether I should wait and go short above 5400 Or I should enter long now?

Kuchh samajh nahi aa raha
please help big brothers, my whole life depends upon this.

Try to take one stance on market initially, define logic for building position after reviewing risk and plan such a way that market does not through you out in few days. Then try to manage the position for a few days within your capacity as per market twist and turns. I am sure once you can do these successfully, it will give you lot of confidence. Currently, it is difficult to do day trading in the index!

Happy trading!

Try to use future+option, or option+option, or future+future for managing your risk with cool mind!