Nifty trading or perhaps time not to trade?

Nifty did breakout above 5000 on March 2, but upon quickly reaching 5100 it has lost some of its momentum.

One can say that the reason for this is that having broken out of 5000 , Nifty has quickly entered into a congestion zone of 5150-5300.

Now entering into a congestion and trading in a congestion zone are situations that are toughest for traders to trade in. Sudarshan Sukhani discusses this in this post and the previous post, where he says that

"
The trades that I have never found to be profitable for me are:
a. Entrance into congestion
b. A trade within a congestion
e. Trend reversal

"

When a master like SS has difficulty in this market set up, it is important to listen.

Should we then not trade at all? That is a personal decision. But here is one approach that suggests caution and it tries to preserve capital.

1. Trade only long.
2. As long as Nifty is between 5150 and 5330, trade only on major dips that take the market to its support around 4980 to 4930. A major dip could be Slow stochastic showing oversold in 15 minutes or 20 minute chart.


Now this kind of trading is difficult as it takes a lot of patience. You can ask what about going long between 5150 and 5350? The answer is it depends on your risk appetite. Given that it is a major congestion area, you are likely to get whipsawed many times trading long in this zone even though you are trading in the direction of the trend. Many mini losses will accumulate to generate a large loss. And going short is too difficult - at least for me.

So, for myself I am willing to let go of making money between 5150 and 5330 unless there is a set up that provides a great risk reward ratio - which is a major dip.

This also means that I may not be able to trade everyday. That is good - it will help me to develop patience.

And also, if I trade I will trade only one to two times a day and if unsuccessful, will escape with small loss.

Sounds boring? Well. it will protect my capital - think about it. And best of luck.

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