Trading Nifty in a Sideways market

As everyone has noticed, the market has been trading in a rather narrow range.

While, the trend has been up, and we should give the benefit of doubt to the existing trend, the fact is that there has been intra day fluctuations that are sharp.

How do we trade in such a range?

1. If you have an mechanical system that has a proven record, stick to that. Mechanical indicators may have a few loss making trades, but they will not become emotional, will not over trade and eventually will catch the trend when the big move takes place.

2. Reduce your volumes. Now, if you have been trading with only one nifty, you cannot do that, and you can refer to the next point that might help you. But if you have been trading with two or more lots ( I hope not too many lots ), then it will be very prudent to reduce the lot size to one now and increase it to two when the breakout or breakdown take place.

3. For day trading, trade only in one direction. Wait for the set up that makes sense for that direction ( long or short) and take only those trades. This will automatically cut down number of trades. Remember though to join the trend when the breakout or breakdown takes place.


For today, signals are confusing. Dow last night was up but the structure of the price movements does not suggest a lot of strength in that up move. SGX nifty is up this morning. So, we are likely to open near 4370. There is a big resistance at 4420. So, now it is your call whether you want to wait for that to be taken out or not. On the down side there is support at 4300-4320. A number of scenarios are possible. The right thing to do - but it is tough to do it - is to take a position on one scenario, if it plays out good, else stand aside and do paper trading.

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 Trading - To Trade or Not to Trade - That is the question

One of the most important things to learn in trading - particularly in day trading - is when not to trade.

I feel that for quite an extended period of time yesterday - roughly from 11.30 am to 1.30 pm - it was important to stay away, unless you are extremely good in scratch trades -- meaning you are good in getting in and out of trades - which is not my style.


Lets analyse the situation in a little more detail.

The day started on a positive note, all the 3 min, 13 min, 34 min EMAs were nicely arranged and moving up.

The first danger signal came around 11 - 11.15 am. Nifty failed to move up and cross beyond 4320, below the day's high of 4338. What this meant was that a potential resistance level was established at 4320 by 11.15 am.

And the late/mid morning session continued like that. Just when it appeared Nifty was heading south, it turned back having found support at 4285.

Now, why are we spending so much time on this? Because the chance of over trading is much higher in these situations and over trading typically accumulates many small losses, resulting in a net big loss.

Coming back to the price action, depending on which Moving Average Crossover system you use, chances are that several of them may have given false signals either long or short between 11.15 am and 1.30 pm.

The best way I know of avoiding this is to pay attention to the price action realities and not project which way it was going to go. In other words, accept 4285 and 4320 as support and resistance and wait for them to be broken rather than anticipating a breakdown or a breakout.

And equally important - do not trade between the support and resistance when the range is so short.

The market is cruel to impatient traders and rewards the patient traders. In this regard at least, investors and traders have something in common - they both need to be patient in the context of their respective trading time scales.

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.

Are you over trading?

Over trading is often mentioned as one of major mistakes in day trading.

Now I ask the question what is over trading in day trading context.

First of all I follow essentially a trend following system. Which means I must detect a trend before I trade.

Going over many days of nifty daily 5 min charts, I notice a pattern that most major trends last about an hour or an hour and a half. Sometimes a trend lasts through out the day.

Therefore, it would seem that on most days, I could aim to catch may be one major trend. This would mean one trade per day. If I allow for missed or misinterpreted trends, may be I should add 2-3 more trades.

Which means that I should not be placing more than 3-4 clean trades on any given day. I checked my trading record and discovered that typically any day I have traded more than 6 times I ended up losing money.

There you go, if you are putting more than 3/4/5 trades daily, you are probably guilty of over trading and are probably paying for it too.

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