Nifty - 14-02-2017 Price Action

Identifying Strength and weakness for price action trading:

Why is this important for price action trader? It is simply because price action trader is trying to trade in the direction of strength or trading in the direction of fading the weakness.

A simple trick that we will use for identifying strength and weakness is to draw a line from the starting of the swing to the end of the swing. Do the same for the move in the opposite direction as well. Now observe the slope of the line in both directions. The steeper the line stronger the trend. Low gradient of the line indicates the weakness in price in that direction.

One may be wondering how to find out the slope or gradient. It is done with the naked eye and using best judgement. No specific tools are required for this activity.

Let us consider the price action of Nifty 50 index for 14-02-2017 in HTF (30 min chart) & LTF (3 min chart) respectively:

30 min chart:

3 min chart:

 

I have color coded the strength using green line and weakness using red line.

We will use the HTF for reference and TTF for trading decisions. Based on this we will identify the trading opportunities.

How can we use this information for preparing for tomorrow?

Well we will use the currently available information to anticipate future moves and prepare for an eventuality where

1.        Market moves as anticipated
2.        Market moves in opposite direction

In both the case we will be ready with our S/R levels. Further during the live market we will again observe the developing strength and weakness. Also using the S/R and swing high/low we will be ready to take the trade.

Nifty 13-02-2017 price action

Nifty in the early morning move was a strong down move. Followed by weak up move which had multiple bounces.

Goal of the trade is to trade in the direction of the strength or fade the weakness.

So in this case  the ideal thing to do was to sell near 8813 NS around 10:18 am.

Price action - Nifty - 23-01-2017

Today Nifty gave an opportunity to go long at the opening as shown by the green arrow.
An opportunity to short as shown by the red arrow.
Again an opportunity to go long as shown by the second green arrow.

Some questions to consider as you review your last years trading results and plan for the upcoming year

I fond the following questions posted by YTC are very helpful while reviewing.

Nifty 22-11-2016 EOD analysis

Nifty opened above the resistance zone 7960 and moved swiftly towards the next resistance zone 8020  -(1). There it found selling pressure and reversed downwards - (2). It moved through the support zone 7860 and moved to 7948 where there is another support zone -(3). Moved up to the support turned resistance zone 7960 -(4) and again moved down. Again found support near 7940 and moved up. - (5)

All the (no.) are the possible trade signals. I could make use of only (1) , (3) & (5). However due to poor trade management (3) & (5) resulted in scrapping of the trades. Slightly better than yesterday!

Nifty 3 min chart:

Golden rule for trading

Golden rule for trading is:
Feed the stop loss order into the system immediately when the initial trade is made. This help to take away the emotionally driven subjectivity in analysis.

This will prevent any major capital erosion from the losses. As far as I have seen this is one of the best money management aspect in any trading. Before entering the trading itself one will know the maximum loss from that trade. If you are not comfortable with  such a loss either reduce the quantity or skip that trade.

Nifty 22-11-2016 Intra day

Nifty opened above the resistance levels created in yesterdays trade. There were no other reliable resistance levels until 8020, hence it gave a comfortable long entry at the opening.

Nifty 1 min chart:

Watch out for the resistance near 8020 zone. It may retrace back to 7980 again. That is a support zone, if supports then again it will go up at least towards 8020.