In confusing times, look at the bigger picture

This piece of wisdom works in trading as well !!

By a bigger picture in trading, I mean go to a bigger time frame. For example, look at the weekly Nifty chart.

As you can see, yesterday nifty already went below the low of the previous week.

Now, the low of the week previous to that is 4092 and the close was 4449. Nifty has already broken through 4449, but now we can make the working hypothesis that 4092 will hold.

The 5 Week EMA is at 4269. This could also provide strong support.

With these inputs, let us form a strategy to play it on the long side. Suppose your money management allows you to take a risk of 60 nifty points, then you can wait to buy nifty at 4329 with a stop loss at 4269 ( the 5 week EMA ). In other words you wait till Nifty falls further - of course there is no telling if it will fall to 4329, but if it does, you can execute the above long strategy.

What if Nifty comes down to 4340 and rebounds to 4370. Well, if you are really disciplined then you would say that is fine, the market did not reward me this time, may be some other time. Of course the other approach is to re-evaluate your strategy - but it is better to not shift strategies too frequently.

If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com


Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.