Nifty Levels - Watch out for Triangles ... Watch out for Rectangles ...

Nifty made a spectacular down and up trip last Friday. It opened gap DOWN but then arrested the down move and began a steady climb UP that decisively broke the 4500 barriier.

Only trouble is that there are resistance levels sitting at 4600 and 4700.

In fact the daily charts - not shown here - suggests that the last swing high was at 4600 - therefore, there is a possibility that Nifty may turn back and reenter the trading range.

At range bound times like this a weekly picture is helpful. The we months weekly chart is shown here ( click on it to get a bigger view).


Several things marked on the chart are clear:

1 There are two rectangle box formations - the one at the bottom lasted 6 months. The one at the top is still forming and is about 4 months old - and may have another month or so to go. Notice the phrase MAY HAVE - this implies it can break out this week also.

However, if Nifty does reverse from 4600, then clearly the box may stretch out. The bottom line is that the rectangle box formation at the top is not complete yet and is worth watching out.

2. Equally important - the rectangular box at the top is actually not yet a rectangle in price formation but is an ascending TRIANGLE. If it breaks out above its range, it will be explosive, but that is a BIG IF. I also think that reversing from 4600 might negate the triangle - so this and the next week may be a decider on the triangle.

3. What if the market reverses from 4600 / 4700 renteres the rectangle? What if after another two months, price actions falls below the bottom of the rectangle? Two months is a long way - but if it does happens, it will probably mean that the up move is over for the next six months!!!! It might mean moving into cash at that time. Mind you, this is just a scenario planning and no action needed now except to keep this possibility in mind and keep observing.

All this confusion seems to be affecting swing and positional traders. Overall for day traders, despite a bit of volatility, reasonable amount of daytrading set ups have been available so far. and even in the days price actions, watch out for the resistatance and support. Stay away from initiating position if you are unsure - and in fact assume that you are wrong and enter into the trader only if you can tolerate the loss in case your are wrong.

Happy trading and watch out for these traingles and rectangles .....


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

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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

Nifty Rangebound .... What is the BIG Fuss?

A number of blogs are lamenting the fact that Nifty has been rangebound - a fact that I had discussed more than two weeks ago in my blog Nifty Trading - Range bound ... For how long? . It is worthwhile to quote from that posting as it continues to be relevant two weeks later!!!

"
Whichever way you look at it, whether it is the daily chart or the weekly chart, Nifty has been trading in a 15% range (4000-4600) since the big gap up post election.

Thrice it has tried to breakdown below 4200/4100/4000 and thrice it bounced back - the last time it bounced back it made a fool of people - including me - who had discovered the head and shoulder and thought that the market was about to go down and close the gap.

On the upside it tried to take out 4700 and failed; again in the last week and this week it is trying to breakthrough 4600, and right now it is faltering a bit ( who knows what will happens today and tomorrow and next week ..... ).

Clearly, one possibility is that it will breakout above 4700.

The other possibility is that it will be range bound between 4000-4600 for another 10 weeks!!!

"
However I do not understand what the big fuss is about. In the last two weeks, there has been plenty of good intra-day set ups. So day trading is un affected by this. The interesting fact is that day trading ( or any trading ) requires just the right amount of volatility appropriate for that time scale.

The real difficulty caused by the rangebound Nifty is being faced by positional trader and swing trader. Because every time they think that Nifty is breaking down or breaking out, it reenters the range.

But such is life, the market is not going to oblige your style all the time. However, I strongly beleive that trading opportunities are still there IF YOU LISTEN TO THE RANGEBOUND MARKET.

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

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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

Easy ways to make money? ... Just subscribe to sms service?

I have been somewhat irregular in the last ten days. Several distractions on the family front, professional fronts etc. etc.

In the mean while, I have been catching up with my reading.

One of the things that strike me is the number of "sms" "yahoo messenger" and "email" services that has come up for intraday trading. Here is a partial list:

• www.SnpNifty.com
• www.calloptionputoption.com
• www.technicaltrends.com
• www.investinshare.com
• www.onlyprofitsnoloss.in
• www.eqwise.in
• stockmaniacs.blogspot.com
• www.kalpataru.org
• www.buzzingstreet.com

At the very outset, I am recommending neither for nor against any of the above. However, nothing wrong in trying to understand these offerings in greater detail.

Now most of these claim to have a success rate of 85-90%. And the ads are very inviting, and go something along the following lines: " earn 5000 per day" !! or "10,000 to 250,000 in a few moths!!!!" Then there are a few who do not claim such outlandish claim and are quite sober in the offering of their service.

Before we get carried away, lets us revisit the old saying that if something is too good to be true, it probably is!!!! For example, here is a fallacy with the claim of upto market calls with 90% accuracy. It does not talk about what the average profit and average loss amounts. And here is the eye opener: Suppose you have 80% success rate with average profit of 1% ( this is quite a high percentage for day trading, I think becuase this impliues that your average nifty point earnings are 40 points or so !!!). and you have just 5% average loss for the 20% loss making trades. Then your expectancy is 1x.8-5x.2= -.2 which means that you are going to go bankrupt!!!

I had tried afew of the services myself. I have not found it easy to follow them. For one thing, there is always a lag between the "call" and the market price - this is inevitable as the market moves very fast and most of these services are trying to cash in on these fast breakouts - and this puts me personally in a qaundary whether to trade on that call or not.

And here is another sobering thought. Money making is not easy. If the day comes when instead of 97% losing money, 97% makes money, it will no longer be the avenue to make quick bucks out of thin air. Fortunately, the day is still not near when that will happen. In the mean while, 97% will keep losing money - unfortunately I am still in that group.

So, why am I still in the loss making category? Several reasons, poor disciipline being one of them. However, right now I am paying tution to the market rather than to a call maker and I hope I will come out having learnt something rather than the lesson of how to execute a trade after receiving a sms.

However, to each his own. If you do not have the time to learn, then by all means, use such a service but take them with a great pinch of salt.

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

Like this post? You can receive it free by subscribing. Just click on this link

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

Trading Discipline - Self Review - Walking the Talk ...

Ok, in my last posting I talked about the importance of record keeping and the importance of looking yourself in the mirror.

How am I doing it myself?

I must say, that even though I have been trading for about a year now, it is only in the last three months that I am keeping these records.

So without further fuss, here is a sample of the records of ACTUAL TRADES in the last four trading days in July. Please click on the image at the left to get a better view. Please keep in mind that I predominantly trade in mininifty. Each trade represents buying or selling 0ne lot of mininifty.

The data is kept in a excel workbook. I think most of the fields are straightforward and self explanatory.

As you can see, in the last four days of trading, I had a positive expectancy.

For the whole month of July 2009, my numbers are as follows:

1. Percentage of winning trades: 41%.
2. Average Profit per winning trade: 24.04
3. Average Loss per losing trade: 13.73
4. Expectancy value for July: +1.78

which makes July a positive month.

I hope you are using a similar or better method to track. Please do share if you have a better and simpler method, I will appreciate it.


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

Like this post? You can receive it free by subscribing. Just click on this link

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

Trading Discipline - Self Review - Are you upto it? ...

We hear so often that discipline is one of the most important success factors in trading. Now there are two types of disciplines involved here - one is discipline in execution and the other one is discipline in planning and tracking trading performance.

It is obvious that the second type of discipline is far easier than the first one. Lets face it, if you do not have the discipline to track your performance it is hardly likely that you will have to discipline to trade without emotion. In fact the reverse it also somewhat true: If you track yourself with discipline you are more likely to trade with discipline.

What will demonstrate that your are disciplined in tracking and reviewing your own performance? Try to answer the following questions:

• How many trades did you execute in July 2009?
• What is the percentage of winning trade?
• What is the average profit for winning trades?
• What is the average loss for the losers?
• What is your expectancy value?

It is critical for your success that you are able to answer these in less than a minute. Which means you need to collect the data and maintain it without fuss. By the way, if you do not know what the expectancy value is, it is defined as follows:

expectancy = (average profit per winning trade) x (winning trade percentage) - (average loss per losing trade) x (losing trade percentage)

For example, if your winning percentage is 60% with average profit 10 and average loss 16, your expectancy = 10 x 0.6 - 16 x 0.4 = -.4. This means that on the average you are losing money per trade, and unless something is done to turn the above number +ve, you will go out of business.

On the other hand, suppose you winning percentage is 40% with average profit 30 and average loss 10, your expectancy = 30 x 0.4 - 10 x 0.6 = +6. Which means that on the average you are making money per trade.

Why do we shy away from keeping these records? It is always hard to look yourself in the mirror especially if the mirror says you are losing money. But it is even more important to keep these record in case you are losing money; how else will you change a loss making strategy
into a profit making strategy?

In my next posting, I shall walk the talk and share with you a template I keep and my July numbers.

Good luck and please keep a record of your trades.


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

Like this post? You can receive it free by subscribing. Just click on this link

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