Hi AW10 Sir,
I am a new trader .
Yesterday I bough 5000 put at 98 and then sold it at 160.
At the end of trading day that is at around 2:45 to 3:30 I was confused as to whether keep the put or sell it.
The support was at 5000 and it was broken yesterday but still nifty managed to close around 5000.The 5000 put is at 227 today.
I thought the market will start buying at this level so we will see some green today but the market opened flat 100points down
Sometimes before it also happened that market lost 100 points and started up the next day and vice versa
My question is how to predict the market will open gap down or gap up tomorrow
I mean what all things one should consider for that whether to carry the position or book the profits
Chetan, many people have gone wrong predicting the market. We all make this mistake in start of trading life (and some keep continuing with this for long long time just to hurt their account balance). In my opinion, we are better off listening to mkt and following it.. rather then showing our smartness that we can predict what it is going to do next..
As you are new trader, it is fine.. but sooner u get over this approach of predicting the next move.. better it will be. Market throws many signals to us and a smart trader will pick up those signals and take action..knowing very well that he/she might get wrong. So when we are wrong, cut the losses and move to next trade. When we are right.. follow the rule and keep trailing our profits.
Regarding opening gaps - we see them almost everyday. On some days it is small and on other days it is big. When there is big gap, it is because on some post market event in the world which no-one can predict. So IMO, it is almost impossible to predict exact size of gap open tomorrow.
Regarding carrying position to next day - it boils down to your trading rules for this. There is no universal answer for it. For example - I look at 90-10 signal at 3.15 / 3.25 pm i.e. if market is trading in top 90% of todays range and I am long then I carry full or partial position to next day. Similarly bottom 10% for carrying short positions to next day (knowing very well that Gaps might go against me.. hence I cut the position down so that gaps don't hit me too hard). Generally 90-10 days give trend continuation in first half on next day and then might follow with reversal or atleast retracement. So, plz spend time and draw your own rules to carry position overnight.
You did well with your put trade. Now move on to next trade. Stick to proper money management and protect your account balance. Market is known to take back your profits if we don't adopt right trading practice.
All the best.
Happy Trading