Intraday trading can be done in following ways :

1) Take all trades in the direction of the longer timeframe. So if we are trading on 5 min chart, see what is the trend on 30 min chart...if it is down, take all short trades on 5 min chart.....but your trade entry,stops and profit taking all has to be on 5 min chart.. This is relatively easy as we are trading in one direction generally unless the trend on larger timeframe reverses during the day..

2) Trade the intraday swings without any bias....trade as the price flow moves...trade from short and long both sides....this mode is bit difficult as we need to be fast in reversing our positions and we need to understand the market action well....and very rigid on stops....

Let us take the tougher part .....intraday swings. I am posting Telco 5 min chart for last 2 days with trades , adds,profit taking points marked on the chart....

Posting a chart showing how to daytrade 5 min timeframe chart in the direction of 30 min timeframe trend. The scrip is Bank Nifty Future .The chart on top is 30 min and the visual trend on 30 min has changed to DOWN at the red line marked. In 5 min chart, we take all short trades, add and take our profits......no long trade as long as 30 min visual trend does not become UP.....Both methods are baed on pure price action.....

Out of the two styles shown above which one is more profitable ?? Actually both are very profitable, the choice really depends on the mental set up of the trader....choose any style which you are comfortable with and you can handle with ease .....there should be no strain,tension while trading these charts...the moment there is strain , be sure that something is amiss.....

Hi ST ,

Have read a lot of posts by you ..,

Your explanation of De Marks method of Overbought ( 5 Bars) was very good ..., Do remember your post on the explanation of 60 minute flow & how it works ( Also remember your comparison to Spider and its Web.... )...,Have hard Bound copies of the same.

Now to My question on your 5 Minute Chart of BNF.., Why there are no long positions at the blue line(Horizontal) i have marked on Your Chart ...,

Moreover we see an aggressive pivot(Red bar) after the WRB ..., Is this NOT a confirmation that the trend is continuing...? OR was one suppsoed to expect a sideways movement after the WRB hence Long positions are not taken..

OR am i confused with my understanding of Pivots ..

Your reply for the above will be much appreciated.

Hi Nithin ,thanks for your kind words.

If one is trading intraday swings, the long trade shown by you is very much valid....I have posted a chart on this method ( one post before this chart post ) and we have taken the long trade .

This chart however is for the method in which we trade 5 min chart in the direction of 30 min visual trends and we dont take trades against 30 min trend. The visual trend on 30 min chart is yet to change to up and hence we have not taken any long trade at this place in this chart.We will take short trades only as long as 30 min visual trend is down

and liquidate the short trade at 5 min pivot highs....but not go long........just a question of a trade setup.....

But taking a long thrade in intraday swing method is correct....you identified it well.....keep it up....

Best wishes,

Smart_trade

The moneymanagement and position sizing is very important in trading...more important than entries and exits in the final success/failure of a trader. I will post some thoughts soon probably in a separate thread
I am starting this thread to put togather few of my recent posts on day trading. These posts were posted on some other thread and I thought it is only fair to keep that thread free from noise and hence shifted all the posts in this thread.

I will be posting my thoughts/views on day trading and the way I day trade. This is by no means a claim that this is the only way to trade....there will be 1000 ways to trade ...various methodologies, different traders with different mindsets ,only price,trendlines,oscillators ,scalping,quants and I respect all ....but there will always be a common thread which all successful traders have.....this is an attempt to bring out that common thread....

This thread will not be very well organised ...I am here to learn from interactions from other traders and I will be putting various ideas as and when they come.....I will also not be very regular in posting but will try to post a few posts every week......

Best wishes to all.....

Smart_trade hi ST

I have found ur posts to be very informative for the simple reason that even I trade in a somewhat similar manner, although I do not look at pivots and charts while trading, the basic essence is the same. ie. I trade on volatility based Sar with adds if the positon goes in favour.the basic principles... trade what u see... no prediction as to where the price would go, tade with the trend, add to a winning position and cut ur losses short.... remain the same. I have always wanted to try ur system, but could not do so because of lack of time as I follow several different instruments and mkts. simultaneously... added with the jobbing/scalping bug that keeps on biting me frm time to time. I have a query..... obiviously the mkts off late have been quite good fr both these systems... but an extended range bound mkt will definitely result in losses fr ur system as well as mine.. as of now I just treat those times as a normal 'business loss' and move on..

what do u do when the mkt goes range bound...do u cut back on size, or do u switch to a different instrument and if so do u have a set criteria for entering a new instrument. do u have any criteria to decide which instrument would have a higher probability of trending.....or do u also treat it as a 'normal occurance' and live with it....

I hope I am not asking fr too much... but since u have always been forthcoming with the way u trade.... hence also added a small discription of the way I trade.

regards regards Thanks for the kind words, Anurag.

Very important question for every trader...let me share my views here .

1) Trends and rangebound markets are cyclical....after the strong trend expect the market to be rangebound before the trend resumes or the reversal takes place....excepion is V shape reversal which is rare in any case. So after trend move, be ready for a sideways move and after sideways move be ready for a trend move.

2) Volatility is also cyclical and mean reversing...so after volatile markets expect calm markets and after calm markets the volatility is waiting to return...this is much more predictable than the price direction.

3) For we intraday and swing traders 3 trends exist on every timeframe....they are a) Major Trend b) Visual Trend and 3) Short term trend....these 3 trends at any point are influencing the markets and when all 3 trends are in phase, we get a trend move......once 1 or 2 of them get out of phase, we get sideways moves.....

4) First indication that sideways move is a about to come is when one higher degree trend fails to make new high/ low....we in daytrades trade short term trend...so when we see market is not making new high/low in visual trend, we should expect sideways phase to set in.

5) In the initial period of sideways move the maket still trends ok.....but at later stage the market goes flat....but by that time we know that it is entering a sideways phase....here too you will get a trend on smaller timeframes....so in sideways move find out which timeframe gives us trends and trade that timeframe.....market may not be trending on 15 min timeframe but it may be trending on 1 or 3 min timeframes.But trading becomes tough in this period and the moves smaller...

6) In sideways markets the quantity automatically goes down as the supports/resistance do not get broken and our adds are restricted.

7) In sideways market we need to trade on selling near the resistance and buying near the supports....I have a few methods which I monitor in such phase.....

Problem of sideways phase can be tackled in the above manner.....we cannot totally eliminate this problem.....we have to live with it....that is the reason we should add and make maximum in trends so that we can take these sideways periods in our strides.

Hope I am able to add some value to your thought process....

Smart_trade Dear SM Ji,

Thanks a ton for this wonderful thread. Seconding Anurag ji's opinion with an additional

Request to take few charts of range bound day as a case study and please explain

1. How to Trade on that day or Not to take those trades ? 2. What is a counter trend trading ? Pls explain us with few chart set ups.

TIA.

Best regards, JKThere are some methods which trade only if the higher timeframe is trending. They dont trade when higher timeframe is in sideways mode.

On sideways move days we have to be happy with small moves and we need to trade very fast for smaller moves

For countertrend trading one either needs to identify the exhaustion of the move and take a countertrend position or the market has to be in sideways mode so we buy near support and sell near resistance. There are ways of identifying move exhaustion.

We will take some range days and see how to trade on those days...

Smart_trade Dear Smart Trade,

I've been looking at your posts, and I have same kind of mindset as yours, quick entries and exits on breakouts. Many a times, it doesn't materialize, and I lack disciplined approach, hence my losses have deepened to the level of making me literally go broke.

I request you to post the proper methods one must have to achieve desired goals with such outlook. Even a strategy perhaps would be really give me some hope toward realizing at least a 1/4 of capital I've lost.

Expecting your kind reply.

Regards ,Hello Nihilistic,

Try the following...they might help you to improve your success rate and profitability :

1) Use a higher timeframe which should be about 5-6 times your trade timeframe for deciding the direction in which you will take the trades. So if you are trading on 3 min bars, use 15-20 min bar as higher timeframe to give you a trade setup. For 5 min bars the higher timeframe will be 20 or 30 min bar. If higher timeframe is trending down, take all short trades...and vice versa

2) If the breakout/breakdown fails and the market closes in the range which it broke then it is a breakout failure and better to get out of your position without waiting for stoploss to hit ......

Wait for clearly set up trades....that will help. Trading bothways requires good understanding of market action...dont attempt that initially.

HI S_T

I'm posting suzlon intraday chart 1min TF. Can u suggest me what days moving avg to use and also what TF MCAD to be used. I'm using 1min TF mainly for scalping.

Prashant,

I dont trade on moving average or any other oscillator though I have earlier traded on both MA and oscillators.I trade purely o price.

If you are trading 1 min bar ....you can try 60 bars MA...but use this as trade direction decider.....if 60 bars MA is coming down the price is below the MA...take all short trades based on crack of pivot lows....you may buy to close your short position but n long trades below 60 bars MA...

Hope it will help...

The entire trading is based on two very important concepts.....1) Reward/Risk ratio or R/R and 2) Money Management ( MM ) Position sizing. Both these concepts are more important than which of our trade is successful and which is not.

I read a book called " Mathematics of Money Management " by Ralph Vince. This is one of the three finest books on MM by th author and some of the concepts in that book opened my eyes to what trading really is... I am giving below a small excercise f this book to stress a point that in final results, which of your trade made money and which lost money makes NO difference a all.....

THE POSITION SIZING AND MM GAME

Make 40 small pieces of paper,on 20 write SUCCESS and on 20 write "FAIL" and fold them and put them in a glass bowl. Then a small child in the family to pick up each slip from the bowl and you read whether success or fail.

The sttarting capital is Rs 1,00,000/- and At each trade you will risk 25 % of the capital. If the trade is success,you make double amount of money risked on a trade and if it is failure,you loose the amount risked on that trade. So for first trade your cum eq balance is Rs 1,00,000/- and the amount risked is 25000/- so if the slip says success,you make 25000*2 =50,000/- and your cum equity is 1,50,000/- now and on next trade you bet 25 % of 1,50,000/-. so go on like this till 40 trades are over.

The final amount you will have is not dependent on the sequence of your winning/loosing trades,consecutuve looses,wins etc final amount is over Rs 10,50,000/- Dont believe me ? Try it out. I have spent 3 hrs on this game early in my career and tried c

toss,various sequence of alternate win/loss,10 losses and 10 wins in sequence etcBut the final wealth is same not even a rup more or rupee less.

What does this prove ? Have a competent system,backtest,have a good mm and trade with confidence. Your sequence of loss and gains make no difference in ultimate results of building your wealth as long as your method has a positive expectancy and edge. Hope you enjoyed the game and learnt something from it..About expectancy, we will discuss later...

I am no way advocating risking 25% on every trade. This is just illustration because optimal f for this system is 25 %. But 25 % i way tooo high. Start with 1-2 % and put your profits to work for you.

Smart_trade (

I request all of you to plz do this exercise as it will benefit you very much)

EXPECTANCY OF TRADING METHOD :

The traders have a misconception that if they follow any method /system they will make money....nothing is further from trut They will make money only if the method has positive expectancy...if it has negative expectancy, traders if they trade that system , they will loose "systematically"

Let us see what this expectancy is and how we can find out expectancy of the method we trade. I will explain the concept in practical terms and also give example of a real trading method, its parameters and how to find expectancy of this method.

The expectancy is the amount youll make on the average on every trade per rupee risked on your trading method . Expectanc can be mathematically expressed as :

Expectancy = ( Probability of win X Average win ) - ( Probability of loss x average loss )

In our MM game posted some posts earlier, we had our winners making 2 times our loosers and we had 20 winning and 20 loosing trades so the probability of win/loss both are 50 % or 0.5 So let us solve this equation :

E = ( 0.5 X 2) - ( 0.5 X1)

= 1- 0.5

= 0.5

This expextancy is a positive figure....so the method will make money...and it will make more money if we take more trades on the same.

But if the loosers were two times the winners......then this equation will give expectancy as -0.5 ......so that method will loose money no matter how faithfully you follow it......

Readers can get more information about expectancy in a fine book titled " 'Trade Your Way to Financial Freedom by Dr. Van K Tharp

The method will have more expectancy if it has either higher hit rate ie higher percentage of winners or higher average amou made on a winning trade....this is where importance of staying with your winning trades ,adding to your winners and cutting y loosers early comes into play.....

In next post we will apply this concept to a real swing trade method, list the method parameters to understand the expectanc the method based on actual trades generated by the method ......

Smart_trade

I am giving below system parameters of a real swing trading method based on trades generated by this method. I have random picked a 2 months period about a year back...I know that 2 months is a small sample size....but this is just an illustration......( a figures are after considering brokerage,STT and all other charges )

SWING TRADE METHOD SYSTEM PARAMETERS

1) Total no of trades ........ 20

2) No of winning trades ........ 13 ( 65 % of total )

3) No of loosing trades ........ 7

4) Max consecutive loosers ...... 2

5) Max consecutive winners ...... 4

6) Average profit on a winning trade Rs 21,696

7) Average loss on a loosing trade Rs 6,265

8) Profit factor ........ 3.46 :1 ( Ratio of Av amount won on a winning trade / Av amt lost on a loosing trade )

9) Max Peak to valley drawdown Rs 12,500

Expectancy of this method = ( 0.65 X 3.46 ) - ( 0.35 X 1 )

= 2.249 - 0.35

= 1.899

This method will definately make money as the expectancy is very high ....

Everyone can find the expectancy of his method based on his trades generated by the method....

The above is only an illustration to explain how a good system has its system parameters and expectancy... I will not be able to disclose specifics of the method for obvious reasons.....but with the ideas which will be presented in this thread, people themselves can build such methods and trade them....

Smart_trade

__________________I am giving below system parameters of a real swing trading method based on trades generated by this method. I have randomly picked a 2 months period about a year back...I know that 2 months is a small sample size....but this i just an illustration......( all figures are after considering brokerage,STT and all other charges )

SWING TRADE METHOD SYSTEM PARAMETERS

1) Total no of trades ........ 20

2) No of winning trades ........ 13 ( 65 % of total )

3) No of loosing trades ........ 7

4) Max consecutive loosers ...... 2

5) Max consecutive winners ...... 4

6) Average profit on a winning trade Rs 21,696

7) Average loss on a loosing trade Rs 6,265

8) Profit factor ........ 3.46 :1 ( Ratio of Av amount won on a winning trade / Av amt lost on a loosing trade )

9) Max Peak to valley drawdown Rs 12,500

Expectancy of this method = ( 0.65 X 3.46 ) - ( 0.35 X 1 )

= 2.249 - 0.35

= 1.899

This method will definately make money as the expectancy is very high ....

Everyone can find the expectancy of his method based on his trades generated by the method....

The above is only an illustration to explain how a good system has its system parameters and expectancy... I will not be able to disclose specifics of the method for obvious reasons.....but with the ideas which will be presented in this thread, people themselves can build such methods and trade them....

Smart_trade

__________________I am giving below system parameters of a real swing trading method based on trades generated by this method. I have randomly picked a 2 months period about a year back...I know that 2 months is a small sample size....but this i

just an illustration......( all figures are after considering brokerage,STT and all other charges )

SWING TRADE METHOD SYSTEM PARAMETERS

1) Total no of trades ........ 20

2) No of winning trades ........ 13 ( 65 % of total )

3) No of loosing trades ........ 7

4) Max consecutive loosers ...... 2

5) Max consecutive winners ...... 4

6) Average profit on a winning trade Rs 21,696

7) Average loss on a loosing trade Rs 6,265

8) Profit factor ........ 3.46 :1 ( Ratio of Av amount won on a winning trade / Av amt lost on a loosing trade )

9) Max Peak to valley drawdown Rs 12,500

Expectancy of this method = ( 0.65 X 3.46 ) - ( 0.35 X 1 )

= 2.249 - 0.35

= 1.899

This method will definately make money as the expectancy is very high ....

Everyone can find the expectancy of his method based on his trades generated by the method....

The above is only an illustration to explain how a good system has its system parameters and expectancy... I will not be able to disclose specifics of the method for obvious reasons.....but with the ideas which will be presented in this thread, people themselves can build such methods and trade them....

Smart_trade __________________ hi ST

I have a small doubt here.. frm whatever I gathered frm ur posts, u trade with the flow and do not close ur trades till the time market comes back and takes ur Sl...

what I imply here is that , as per my understanding, u do not trade with a decided % stop and a decided % profit or a fixed pro loss... In such a case scenario, to calculate the trade expentancy, u will have to rely on the past data of profits and losses...

what I believe is that past data of a small time period may not give the true representation of the robustness of the system, as markets are dynamic and may change....

for instance if I take the the past trade data of profits & losses for x period and find that my system gives a positive expentanc the very nature of the mkt may change fr the next x period. ie. the mkt may go frm a 'trending phase' into a consolidation pha

hence I believe, if one is trading a system where the profits are not predecided, to calculate whether the system has a positive negative expentncy, trades done in all kind of mkt scenarios would have to be taken into account...

regards Hi Anurag....

I agree with you that the markets change and so does profits and losses of various periods.....but if you see the method performance on a long time you get the idea of what to expect in a overall period. This is where having a large expectancy helps.....in a bad period the profits may go down but they dont go negative....

This method is not a flow method in its normal always in the trade type....it takes off the profits on defined critaria...Though we dont have fixed profit which we take on every trade we have our risk defined as a % of the trading capital and based on th distance of the stop point the quantities traded vary.....so risk is always defined...

Smart_trade MULTIPLE TIMEFRAMES

Multiple timeframes is a great concept even for day trading and short term trading . This concept was developed by many and Alexander Elders and Robert Krauz are the two names I associate with concept of Multiple timeframes.

There are many ways multiple timeframe concept can be used in our trading.Some of the applications are as under :

1) Trade in the direction of trend on higher timeframe.....suppose you are trading 5 min bar, take all trades in the direction of higher timeframe...say 30 min timeframe. So if 30 min timeframe is in uptrend, take all long trades and no short trades.....our sequence of trades should be long...add....book profits.....stay out....again long...add....book profits. But what if the 30 min is n trending and is in sideways phase ? Either dont trade in this period or even if you take trades, be very fast to get out on first si of trouble....We daytraders want our trades to move in our favour quickly after we enter....and we dont like hanging around in trade which is going nowhere.

2) When longer timeframe is trending, we trade more aggressively in direction of that trend....we give bit more room for our trades to work.....but when the longer term trend is sideways.....these trades are small , choppy and frustrating ,we enter and fast....grab whatever profits we can.....but in trending period we play for big win.

Smart_trade

Bank Nifty Future on 5 min timeframe traded on the above multiple timeframe concept.....chart is self explanatory....

hi ST

I have a small doubt here.. frm whatever I gathered frm ur posts, u trade with the flow and do not close ur trades till the time market comes back and takes ur Sl...

what I imply here is that , as per my understanding, u do not trade with a decided % stop and a decided % profit or a fixed pro loss... In such a case scenario, to calculate the trade expentancy, u will have to rely on the past data of profits and losses...

what I believe is that past data of a small time period may not give the true representation of the robustness of the system, as markets are dynamic and may change....

for instance if I take the the past trade data of profits & losses for x period and find that my system gives a positive expentanc the very nature of the mkt may change fr the next x period. ie. the mkt may go frm a 'trending phase' into a consolidation pha

hence I believe, if one is trading a system where the profits are not predecided, to calculate whether the system has a positive negative expentncy, trades done in all kind of mkt scenarios would have to be taken into account...

regards

Anurag, You have raised valid point. To address this issue, Van Tharp proposes to use the concept of R-Multiple and measure everything in terms of R, not in terms of $. R is risk per trade. To know the expectancy, we need to understand our R distribut well. If sample size is 200 trades, then avrg win/ avrg loss, win/loss % are lot more reliable then sample size of just 15/20 trade Moreover, by finding out the standard deviation of R-distribution, avrg win/loss, win/loss %, one can always find a range for e of the 4 component (average, 1 standard dev, 2 standard dev, 3 standard dev). and find the very differnet insight into system expectancy. This will give fair idea about what return could be for 70% of the time, 94% of the time and 99% of the time.

If we look at the parameter of consecutive looser/winner etc than we also good confidence in the systems performance. These topics are addressed more in system development part of trading.

ST, has already mentioned about small sample size, and he has already used profit factor as replacement of R.

With this understanding, we can find out expanctancy for purely discretionary trading system too. Assuming human response pattern remains fairely constant, our R distribution will also reflect it over statistically significant sample size.

hope this helps.

happy trading.

Dear AW10,ST,

Just my opinion.Every body who takes a trade with a guess falls under the category of discretionary traders.Just few gifted experienced traders

who are discretionary traders but still highly successful may be less than 1% of the crowd and rest of the successful traders co under the systematic rule based mechanical trading.

And successful discretionary traders response may not be consistent like normal crowd's response and they should have very excellent skills of tuning themselves to the markets movements and that's why other people who speculates or guess loose money.

My point is successful discretionary traders response wil not be consitent like other's behaviour.

Please correct me if it is otherwise.

AW10,

Please give us an example of pure discretionary system.

TIA.

Dear Jagankris....

Successful discretionary traders will generally behave in a predictable manner in any given situation because though they say are discretionary traders they have some trading methodology in their minds....no successful trader trades without reason....t mind is tuned to taking particular course of of action in a particular situation based on their beliefs and experiences......sucess discretionary traders never trade on guesswork....

I have seen some very successful discretionary traders as well as some very successful systems traders.....so I really cannot say which one is more successful.....what suits us is best for us .....

I do see a point in your views and I respect them.....for me a combination of good understanding of the market action ( discretionary) and a good method ( mechanical methods ) along with discipline and good money management works the best but very tough to mesh both the methodologies togather.

I will go a step further to say that pure mechanical systems will always have average results but the combination wil have superlative results.....this is my experience...many may not agree and may very strongly contradict this statement.....anything which gives us an edge in the market and suits our psychological setup is best for us....we have no quarrel with any methodology......

Smart_trade

GAME OF WINNING AND LOOSING

Everyone comes to the market for winning......but most end up loosing...why does this happen ? To answer this question we n to peep into earlier part of our trading career.

We start trading most predictably on some tips given by some friends....we make some money and then some more and we g convinced that we are into world's best business.....no efforts, no work....only make money....this illusion soon vanishes as the reality dawns....

In initial period we have no method....later we latch on to some method....it may be moving averages, camerilla pivot points, indicators, swings....etc and we get into a stage when we make money on 50-55 % trades but small money as we are too scare let the small profits turn into losses so we grab it.....our losses are also small most of the time because market gives us a chanc to get out of loosing trades with scratch trade/ small loss. But very few trades the market does not favour us and kepps going against us inflicting a cripling loss on us which cripples our trading account and our confidence. This has happened to all of us.

Just think about an imaginary opponent who is taking the other side of all our trades....this guy has made all the money we los and he is happily smiling. Why ? because he has never lost big ( ie we never waited for our profits to grow big ) ...he has his sh of small losses and small profits and few bumper profits trades ( which are crippling loss trades for us ) .So if you reverse the r and take small profits/small losses....few largish profits by allowing profits to run anf few very big profit trades then you will d much better than this imaginary opponent in his earlier role.....It is the large loss you have to eliminate and get some large pro trades in your bag and you make it.....

You need to have a competent method which need not be complicated.....it is a myth that good methods are complicated .Yo method should stack the odds in your favour.It could be a simple method that you take all trades in the direction of larger timeframe moving average.....put your stoploss points, add points, profit taking points and backtest that method....if you like method chances are that method goes well with your psychological setup and belief systems. Then you have your holy grail up and running for you.....

Posting a chart which works o

simple method which trades in the direction of a moving average slope and colour.....all trades taken have valid reasons ....so profits taken at various points......every trade is not a big winner but the last trade is a big winner....

Posting this just to illustrate that simple method with proper position sizing, adds, profit taking.....stops ...can make money in daytrading....you cannot eliminate loosing trades....loosing trades are unavoidable evils and you have to accept them as a part your job.....but let the winning trades be your friends and let them overpower the loosing trades....

Smart_trade

One point which I feel is important that one should try to understand himself during this period. Try to know yourself. Everybody starts looking for different methods, alternatives as a part of learning or as a result of failure in 1 or 2 trades. Important is during this journey, identify what is best suitable for you, in terms of timeframe, in terms of method. Person who is comfortable in trading chart patterns e.g. will trade pennants. For the same script, another person who is comfortable with indicator might use MA or ADX to define trend and oscillator to enter the trade.

The point is one has to find his own comfort instead of running around methods. Once you find it, rest is automatically you wi build strategy around it.

Very true...one of the major reasons for failure in trading is people trade methods with which they are not comfortable...so th is always tension, anxiety before a trade and after a trade....there may be 10,000 ways of making money in the market and we need to just find 1-2 ways with which we are comfortable psychologically and emotionally. After every 2 loosing trades trader feel that their current method is no good and they have to find a better method....this unending search continues.

To take a trade or Wait for some more time...........

Once we have identified a competent trading method, we have to backtest it very rigorously for a long period. The backtest gives us an idea of the "nature" of the method, challenges it throws at you in real trading and prepares you for any situation in the market. Though backtest is not with real money so it cannot exactly simulate the trade environment but it definately is th second best to real trading to understand various issues you face in real trading.

Now comes another problem.....your method identifies a set up in real trading which now you are doing on it , the trade is abo to trigger and now your mind starts playing games......." hmmmm the trade environment is still a bit hazy....bit unclear....let m wait for some more time....." It is my experience that all trades are a bit hazy initially....and the real money is made in betwee the point you start doubting about a trade and you and everyone else get confirmed about a trade......by this time the market moved in favour of your trade and now all scramble to get in......the meat is over....also now the market is much away from yo stops....so now the trade looses its Reward/risk ratio advantage.....and finally you miss the trade.

Many times this will be a big winner and you take a oath not to repeat these things in future but this pattern keep repeating o has to break out of this pattern........let us understand how professionals manage such dilemas.....

When a trade is about to trigger, even a good trader has the same issues which a new trader has......but he takes the trade knowing fully well that if it does not workout, he will get out of that trade with minimal damage.The reaction of successful and novice traders to the failed trade is totally different. The following is the reaction of a loosing trader :

1) Damn.....this trade again going in loss....how does market know I am in a trade so it goes against me..........game of operators.......a honest trader has no chance of succeeding........

2) I need a different tweak to this method.......

3) After such research I have taken a trade.....how the hell can it go wrong ??? I must take some more positions and average...

4) I should have waited for it to be more clear......

Now let us see how a professional reacts.....he has taken a trade on a breakout which is not working out.....he will say....hmmm I thought this trade will be a great winner....but market does not want to go in the direction of the breakout.....ok....no issues. the market comes back in the range it broke....I need to get out of the trade and re enter again if the necessary.....I will not wa till my stops are hit.....the breakout which I traded is not valid....so I am getting out....I will always get many more opportunitie the market ....thank you market.....see you in the next trade...

Once we start accepting that loosing trades are unavoidable in this game we must minimise the damage they do to our accou and we should have no fear of loosing trade when the trade is about to trigger and we take a major step forward in our journe becoming profitable traders.

Smart_trade Originally Posted by Smart_trade View Post [B]

Once we start accepting that loosing trades are unavoidable in this game we must minimise the damage they do to our accou and we should have no fear of loosing trade when the trade is about to trigger and we take a major step forward in our journe becoming profitable traders.

Smart_trade

Very well said smart trade sir. It is the heart of trading. Still we find it extreme difficult to train our mind accordingly. Hats off f you. __________________ Men are born to succeed, not fail. Reply With Quote

this is an image posted by S-1585 . Kindly see this image. will use this illustration ( with permission from S-1585 ) to discuss a very important concept of how different traders can alter Reward/Risk ratio by trading the same chart differently. I wanted to take take this concept a bit later in this thread but as I saw this chart, decided to write a few words on this concept. Will discuss in the next post.........

Smart_trade Different traders will trade this chart differently......Let us see how one can trade this chart.....

1) Entry Point : The chart shows a sideways distribution pattern in a rectangle.....the move has come from the top....so this pattern is likely to be a continuation pattern. Entry points in this trade are as under :

Trader A) Some traders will see the breakdown from the range and wait for market to come up near lower red line as a pull ba or test and then seeing that the market does not go into the range it broke previously they will go short near the lower red lin but on pullback.....

Trader B) Some traders will say that after such long sideways, market is breaking down so go short right at the point it breaks down without waiting for a pullback.....if the pullback does not come you miss the trade or you have to enter at less advantageous place later in the downtrend....

Trader C) Some traders will say let me short 50% of my position at the time of breakdown....and I will short balance 50% on pullback to the lower red line......but if the market does not give pullback, atleast I am in a good trade with 50% position....and the market reverses on my first entry, I will loose only on 50% of the position.

2)Now we come to where to keep the stoploss point.....here again different traders ....different gameplan....

Trader X : He is a swing trader.....he will keep the stoploss at the upper red line.....and if the height of the rectangle is x he will that my target is 2x after the breakdow....so he plays with 2:1 Reward/Risk.....great...

Trader Y : His target is also 2x but he wants to give less room to the stop point.....so he keeps it at the green line......his Reward Risk will workout to about 2.8:1 or so......

Trader Z : He is the most aggressive......he goes for high R/R trades.....and converts his trades into high RR.....he will think after distributing for such a long time, the market has no business to come back into the rectangle.....so if it comes back in rectangl my trade setup has failed and I will get out as early as possible. So he keeps his stops at black line or a pivot high just above th lower red line.......But see the effect on his R/R.....he is able to boost his R/R to 8:1 ......but that comes with a trade off ( there free lunch here too )he may have more whipsaws and he should be prepared to enter the trade again if necessary after he get stopped out.....but trader Z can handle that as he gets a huge advantage in his favour.....

But the Reward /Risk of 8:1 gives huge advantage in the game to trader Z......

Which one is correct ? There is nothing right or wrong in trading in absolute terms.......one should choose the style with which one is comfortable.....

The above discussion indicates the way you can tilt the R/R in your favour and be ahead in the game....

Smart_trade __________________ST.,

Excellent explanation..., Thank you ...,

Now i have a question on the same chart ( Posted below ) ..,

Why not short at the first (bearish ) Candle immediately after the second upmove .. Why to wait for a breakout of the rectang pattern ?

Since during the second upmove there is no money inflow as per Chaikin Oscillator....

My Reasons /explanations to short are in detail on the chart ...,

Is it a Trade Setup that One would short ONLY after a breakout from the Rectangular Pattern ?

Thank you for your Reply...,

Nithin

Nithin,

I picked up this chart from a post of S-1585 where he had asked a question of where to keep stoploss once we go short on the breakdown of lower boundry line of rectangle.....

Actually the second upmove is a kind of double top....also the oscillators might have given a negative divergence ( I have not checked that......) and the failure to cross the earlier high was a good place to short on a red candle.....plus the money flow indicator reason you have given......you are correct shorting there ....stops are close and we get a high R/R trade.....

You nicely picked up the correct place to go short......Great going.....

Smart_trade Dear ST sir

as per this attached nifty chart my trades are as below

bought at 5580 with SL at 5568 with a risk of 12 pts

then added at 5586 with new SL at 5575 now the avg cost is 5583 and new SL is 5575 and the new risk is 8 pts

then added one more lot at 5610 with SL at 5598 and now the avg cost is 5596.50 and the SL is 5598 and sealed profit is 1.5 pt

nifty moved up, upto 5623. but reversed back to hit my SL at 5598 and i got my profits came down and managed to exit at cos it correct?

or should i have booked at 5620 levels where i would have got 3*23 = 69 pts. but on what logic?

can u pls correct me.

i normally do it as below.

go long at 5580 with stop of 5568 - 2 lots. risk is 12 pts per lot. and book 1 lot at 1:3 RR ie 5580 + 36 pts = 5616 and second lot trailing SL. --------------------kanna

kanna,

I find that your entries and adds were very good but the final profit taking needs improvement. Remember that in day trading when large profit accumalates, you have to strike a delicate balance of letting it run and grabbing it. In daytrading your minds of a predator.....grab the prey, let it not escape .....

When the market goes up vertical, you have to book the profits without giving too much space to the market to backtrack because your profits will evaporate....I would book 50 % of my profits on a small red bar after the strong verticle green bar sho in your chart. Then we had a small green bar after the red bar....I will book balance 50% once the low of the smallish green ba is cracked......This tightening to be done only in case of vertical moves and we want to grab the profits.....we are open to lettin it run further but we wont allow too much space now.....so dont wait till your stops are hit....that will give back too much to th market......

Smart_trade hi ST one small doubt here, ( hope I do not pester u too much with my 'small doubts') would the case not be the same at around 5610.. there were 3 vertical green bars even there...

regards[/QUOTE]

Yes Anurag....we can book profits around 5610 as it not only has 3 vertical steep bars but the market is at previous resistance....once after the small dip when market takes out a pivot high around 5610, we can enter another initial position an finally book the profits as mentioned in my post.

Look at the top green bar around 5620....it is a very large bar.....probably it will have a very large volumes too , it opens at the lower end of the bar and closes at the top.....it is this candle which generally is a climax candle....all buyers have bought and sh sellers capitulate and there is no one left to buy......and market comes down ....

Don't hesitate in asking any doubt...all doubts most welcome as these doubts give me an opportunity to look at things differe and think whether there is a better way and improve in the way I would trade ...so it helps me too....

Smart_trade

They say that trend is your friend but that statement needs a qualification that it is your friend as long as it is not about to end.......how does one know that the trend is strong ?

I use following critaria to judge how strong the trend is...and when it is about to give explosive move. The technique I follow is based on Trends knowledge from William McLaren and also from Saint....All credit to them, I just apply that knowledge to the markets....

See those magenta colour lines on the chart ? Those are the lines showing gaps in the earlier top and the reaction bottom after breaking the tops....these gaps show that the trend is strong and about to blow off.. .... After such gaps the trend accelerates.....you can see that on any chart, any time frame......if coupled with other techniques, it gives great confidence to hold the positions, add and wait till the trend is about to end.....Referring to the gap between the Pivot high market breaks to the upside and the Pivot low or reaction low after the high is broken. If there is no such gap and market breaks the top,and reacts and gets into the top it broke...that trend is called a creeping trend which is weak and as a general rule indicates that market is near its reversal ( there are certain exceptions though....)

In a strong trend which is about to accelerate you will see such gaps...

Please see the chart I posted...there I have shown 2 such gaps .....

This is different concept from normal opening gap which we normally refer to as gap.

rending and sideways phases are cyclic in any market and after a trending phase expect a sideways phase and after a sideways phase expect a trending phase.....if there is anything certain in the markets ...it is this.

Traders make money in trending phase and give it back in the sideways phase....sometimes they loose more in sideways phase. Every trader has to understand how he is going to negotiate the sideways phase so that he makes some money in it or at least preserve what he has made in a trend and again ride the trend when the market starts trending again...

Traders handle sideways phase in different ways depending on what he is comfortable with ...various ways of handling sideways phase are as under :

1) If you are a range trader, trade the extremes of sideways range....buy near the bottom of the range and sell near the top....

2) Decrease your volumes in sideways phase and increase back to normal volumes when trend starts.

3) Trade on sideways market indicators, oscillators, Bollinger bands extremes etc

4) Totally stay away in sideways phase and trade only trending phases....

How do we know that we are in sideways markets ? The charts will indicate that. I have taken an example of Nifty Futures 5 min chart.....we had a nice downtrend till point A , then we had an upmove upto point B.....the first indication of sideways market came when at point C market was unable to take out point B...then D,E,F,G all sideways moves till we get a breakdown of the range.....

So in this range either trade the extremes or just stay out and dont loose your capital and energy trading sideways markets......get on to trends when they start again.....

Markets routinely go into trending and sideways phases and see any chart on any timeframe, you will see periods of trending moves and sideways moves. Trend traders trading breakouts/breakdowns make money in trending phase ...but give back large part of that ( sometimes even more than what is made in trends )in sideways phase. Most of us always wonder whether there is any way to stay out of sideways moves....and trade only trending moves....as a breakout trader when a trader takes a position on breakout/breakdown he wants the market to move in direction of his trade...and move quickly. He will get frustrated if he sees market going nowhere and that is where he is prone to make plenty of trading mistakes.......

I have posted a Nifty futures 5 min chart for last 3 days. Here we see periods of trends and sideways moves....can we know that we are likely to be in sideways phase ? Yes it is possible.......

Let me explain....when you have points A and B defined and market does not break these two levels it is in a sideways phase.....so at C, D, E .....it is sideways so it is a no trade zone for breakout trader...a range trader can sell at the top end of the range and buy at the bottom end of the range.

I have marked No Trade zones and Trade zones.....you will see that if you trade only trade zones, you will catch 7580 % of the vertical distance which the market has travelled in last 3 days. And the beauty is you have been totally out from sideways phase and thus not getting into those frustrating trades which give back the profits you earned in trending phases.

Anybody can trade a trend.....but if one understands when not to trade, that will make him an expert trader and separate him from the normal "must trade all the times" type of traders.........

Today's Bank Nifty fut 5 min chart. See the gap in the pivot low which broke down and rally pivot high ,which indicated that the downtrend will accelerate....also see the creeping trend at the bottom indicating that it is time to book our gains........

TD POINT REVERSAL

In trading we continuously view the price action from different angles to collect as much evidence as possible about the direction and the trend the market is displaying. If we get 2-3 techniques giving us same indication, it will stack the odds in our favour.

One such technique which help me a lot in knowing the trend reversal is a technique developed by Thomas DeMark. It is called TD Point Reversal.

I am posting the same BNF 5 min graph to demonstrate this technique. For trend reversal to down , following are the steps :

1) Identify a Pivot high on the chart ( marked as PH )

2) Go back 4 bars and in the look back period of 4 previous bars find out a lowest close. ( 4 look back bars are marked as -1,-2,-3 and -4 ....minus sign is put to indicate previous 1,2 etc bars.Here the lowest close is in bar marked -3 )

3) If in next 4 bars after the PH bar, the market closes below the lowest close of 4 look back bars level, it is almost certain that the trend has changed to DOWN....

4) 2nd bar after PH bar closed below this level ( marked in red horizontal line ) thus confirming that the market trend has turned DOWN....

In today's market action many techniques such as trendlines, pivots, Oscillators,TD Point Reversal....all speaking in one voice that market trend has turned down and that stacks odds in our favour and give us confidence to go short in the market.....

Kindly observe that when we get a gap between the Pivot low which is broken and the rally Pivot high, we also get a oscillator OS reading and oscillator staying in Os zone for more than 5 bars and oscillator also speaks of a accelerated down move likely to follow.....

There you go...The beauty of this technique is

1. You can trade only when there is strong trend. 2.You can add big to existing positions and make big money once you spot this..

So far cent per cent results....

Applied on today's nifty......

Its apparent that many beginners have difficulty in understanding the gap theory of ST Bro. I am trying my best her to clear the concept. Though the question was asked on my other thread I thought it appropriate to post the answer in this thread.

We have 2 charts.Lets analyse.

1st Chart.We are in a downtrend and price makes lower highs and lower lows.

Point A is a lower low Point B is a lower high. Point C is a lower low Point D is a lower high. From Point onwards continuance of downtrend.

Now as per classical theory each time a price breaks a lower low in a downtrend it will retrace and comeback and retest the breakout of that lower low.

To keep it simple as per classical theory price once breaks lower low at point A say at Price of Rs. 5525 it falls further.In this case it reaches 5500 where it forms one more lower low.Then it retraces and comes back all the way to 5525 where it broke the lower low previously .Thats called retest as all of you know.Retest is a success and price now starts falling further.The same cycle repeats.

Summary is price breakouts some level then continues falling ,then comes back to that broken level and starts falling again.

In this case the price falls from 5525 to 5500 and then comes back to 5525 for retest and falls again.

Now lets come to second chart.Lets see what ST Bros Gap theory says:

Point A is a lower low Point B is a lower high. Point C is a lower low Point D is a lower high. From Point onwards continuance of downtrend.

Same chart .But see the difference. In the previous chart price has gone back to 5525 for retest of the break out point i.e:Point A.Here price goes back only till 5515 (IT DOES NOT RETRACE/GO BACK TILL 5525.I.E:POINT A)there by creates a gap of 15 points ( the space between Point A and point D).

ST bro says.This gap is a symbol of strong trend and should be utilized effectively for adding /opening positions.I had

a result of cent percent.Awesome technique.

Hope I am able to make the points clear.

example live.

ST, Forgive my ignorance please. How do we know that the No Trade Zone has started? When neither high nor low of large range is broken in 8-10 bars we know that we are in no trade range.....No trade range is known after a few bars only not when it starts.....

But once we know that we are in sideways no trade range....better to stay away for the rest of the period till we break out of this range....

One reliable indicator is in upmove after making a new highest low which is higher than all previous 10 lows

market does not make a new higher low in next 5-6 bars...there is a possibility that we are entering into a trading range....mirror image for downmoves....

Can We Choose Good Trades From The Bad/Marginal Trades

In trading we have to analyse the market environments and trade all the trades according to our systems/methods. Though we can avoid few bad trades by having a set up critaria but sometimes such set ups too gives us our share of bad trades

I have posted a Bank NF chart 5 min timeframe . Here the trades are taken in the direction of 30 min timeframe. Without going into specifics of entry critaria, we can see two days trades....one very choppy and small profits day and one very good big profit day..... The green line indicates long, red line short,dotted lines adds and black line profit taking levels.

On 2-6-2011 we had following distribution of trades :

1st trade small scratch trade,second trade a looser, 3rd and 4th small profit marginal trades...so end the day with small marginal profit.....

On 3-6-2011 , same method...just 1 trade and hugely profitable....such days give you enough to sustain 2-3 small profits/marginal days....

We do not know when we take a trade whether it will be a big profit trade or a scratch trade. Our method should be such that it gets us out of such trades with minimal damage.....and stay with our winners once we get one till the market shows signs of trend change, with proper MM and adds....

Our distribution of profits/losses should be a few small profit/scratch trades, a few small loss /scratch trades , a few big profits trades ...but NO big loss trades ( this our exits should ensure )

We should take all trades with the belief that they will be big winners.....but manage all of them with extreme care in such a way that any of those trades can loose and we don't want a single big looser.......

All the above is not easy....but we need to work towards achieving this goal....

I will discuss the common information asked in these pms so that everyone benefits.

1) Day trading is not easy....as you come to lower timeframes your margin of error goes down. I need to be more accurate in daytrading than swing and position trading. One has to be very fast in reversing the position if the market action warrants that. Day trading has an advantage that my stops are small and well defined. I donot have to bother about overnight gaps, price shocks etc.Daytrading is definately profitable....

2) Contrary to many people's belief,there is no perfect system. There has never been one in the past and there will never be one in future. There is no magic formula, no secret indicator,no AFL which will make money for you without any efforts from your side. There are competent methods but each will have its share of choppy trades,losses, frustrating periods,big profits etc.My experience tells me that you need to have a good method but it is not that it will make money for you if run on autopilot. A good trader is equally necessary behind a good method in daytrading and that is a winning combination along with good MM.

3) A method though is important, is not everything. A good method given to 10 traders and all 10 will have different results.

4) Day trading requires good feel and understanding of bar by bar market action . It helps us in getting out of bad trades and booking profits before the market hits our stops. This comes by reading thousands of charts, candlestick patterns, and observing each bar and trying to read the supply/demand equilibrium from each of these bars and reading when the advantage is tilting to bears or bulls.

5) Do not fall prey to the people who claim that they have some great system/method which is easy to trade . You can make money on simple methods such as trade on 5 min charts...and take all trades in direction of 30 min trends. So if 30 min is in uptrend, take all long trades and do not take any short trades. This method is simple but it requires a good screen experience to trade it like a professional....learn those skills and you will succeed with any simple

method.

These are my views which I wanted to convey to all the friends who wrote to me about their specific trading problems. I am sure each will find some answer to his problems in the paragraphs mentioned above....

Scalping is a style of trading like day trading,swing trading etc and it really depends on one's mindset if one is suitable for this kind of trading. There are few very successful scalpers like there are successful day traders and swing traders.

Any type of trading is not stressful if one knows how to do it, has liking for it and knows how to get out of bad trades which invariably come in to you no matter what method/analysis one uses....

How much does a successful scalper makes depends on how hard he works,what is his capital and risk tolerance and we cannot have a general answer which will cover all scalpers. But I have known scalpers making 4-5 % of their trading capital in a good day....

Scalping requires continuous monitoring of the market so it is a bit tiring physically and mentally ...but some people find it extremely satisfying and rewarding....

I do few scalp trades in a day but I am not a scalper who is continuously scalping the markets. I find day trading suits my mental set up better....but some extra money by scalping as always welcome particularly when my day trade is in comfort zone....

Inside Story

The trading idea which I am sharing this week is a very powerful idea and I have used this idea to book profits and initiate new positions. As Nifty futures gave examples of both long and short on the same day ....ie on Friday 17-JUN2011 , I thought of sharing the same with you.

Price Action study is nothing but study of price bars to judge the strength of bulls and bears and many times the price bars reveal the "Inside Story" of the fight between bulls and bears. As traders we just have to read these signals in time and join the dominant or more powerful group,bulls or bears....

The chart posted is 5 min Nifty Futures chart of 17-JUN-2011. The market has been trending down and look at the price action in the bottom circle. You see 3 skinny and leggy bars with long legs . What does this mean ? It means that the market is attracting buyers at lower levels and the prices snap back.....and bears are unable to press the market further down.Now see the bar marked as A in that circle....it is a bearish bar which closed into the wicks of earlier bars but a clear down close bar....this is the last attempt of the bears to pin the prices down...and the next bar bounces back and proves that bears got exhausted......once we broke the high of the bar A ...we knew that the short term bottom has been in place.

Look at the top circle......the bar preceeding the bar marked as B is an inverted hammer with a long tail......it is something like a 60 Kg weightlifter lifting 150 Kg weight and suddenly dropping it.....the bar marked as B is a bullish bar which has its high lower than the earlier bar and is a last attempt of the bulls to once again lift the weight....and once low of the bar B was cracked we knew that the bulls gave up.......

These are trading ideas and not proper trading methods/systems.....but they can be incorporated in your existing trading methods to give you an edge in the market.

What makes the markets to go up

Markets go up and down and have we ever thought of what makes the market go up ?? Todays market was a very strongly uptrending market. Do we get any clue about such strong markets in real time ?

Markets go uo on money inflow and it goes down when the money is sucked out from it ...so the strong buying pushes the market up. No amount of intelligent analysis, brokers tips, financial news channels wish talk, greed and fear of the market participants will take the market up. It is only strong buying which will take it up.

When the strong hands buy or sell, they may try to hide their real intentions but they cannot erase the trail. They walk with heavy boots and leave behind impressions in the sand which they cannot hide/erase.....I am talking about the volumes...the volumes reveal the market's hand.

I have posted today's 5 min Nifty Futures chart. I have marked uptrend and corrections by red vertical lines.When the market opened, observe first few bars....the volumes are 2-3 times the normal volumes of earlier day. This indicated right in the beginning that we are going to have some fireworks today. Today's market had all tell-a-tale signs of a strong trend day.

See the correction marked by red vertical lines.... observe the angle of these corrections, a shallow correction with volumes dwindling down to 1/3 of the trending period volumes....and when the correction gets over and on breakout volumes surge again this indicated that this upmove is going to sustain,it is durable...we had two such corrections today and many small 1-2 bars dips....

All the action necessary today was buy, add on every breakout and trail the stops to the black supports shown and let the market do the work. Last 30 min rally , even the bears came to help the market to go up by last minute short coverings.

We are traders...neither permanant bulls nor parmanent bears...we just join the more powerful side and relax....and today more powerful side was unarguably bulls.......

Multiple Timeframes Trading

Multiple time frames trading has been around for a long time. Traders like Late Robert Krautz and Alexander Elders have done wonderful work on this concept.

The basic concept is find out a trend on larger time frame and take all trades in that direction in smaller time frames. So if our trading time frame is 5 min and larger time frame is 30 min, if 30 min trend is bullish, take all long trades on 5 min time frame and book profits. We do not take any trade in short side. The larger and smaller time frame generally should have a ratio of 5:1 between them. So if we trade daily time frame, our larger time frame should be weekly time frame. If we trade 5 min time frame charts, our larger time frame to decide the direction we are going to trade is 30 min.

he top chart shows bank nifty futures 30 min chart. This chart is in uptrend....so we take all long trades in the 5 min time frame lower chart and go flat when the market is in sideways mode but we don't take a short trade on 5 min time frame as long as the 30 min trend is up......

This concept helps us to take all impulsive moves and stay away in corrective moves. The trades taken in the direction of larger time frame are likely to be strong and more profitable trades ,and we ignore small ,marginal and frustrating anti trend trades ,stacking the odds in our favour...

can you describe the metods forselling near resistances and buying near support as mentioned above. this would be of great help to all newbies like me.

Once you identify that the market you are trading is in sideways trend in your timeframe, you can use the following techniques to trade the sideways range.

1) Use oscillator such as stochastics or RSI to sell in overbought zone near the resistance and buy in oversold zone near supports.

2) Draw the support/resistance levels boundries and observe how the market behaves near the support/resistance levels, observe the volumes, candlestick patterns. A hammer near a support is a low risk buy and so is a hanging man or an evening star near a resistance level low risk sell .

3) Observe the angle of a rally or a decline in a sideways zone and if the rally looks tired out near resistance , sell .....if decline looks exhausted near the support, buy.....

4) Observe some patterns on lower timeframe...so if you are in sideways in 30 min charts, mark a TDST resistance line in 5 min and a rally in 5 min approaching this TDST resistance line....that is a great place for a low risk sell. Will explain what TDST is in next few posts.

Or a Wolfe Wave 5 on 5 min happening near resistance level in 30 min is a great place to initiate a sell trade......or a Wolfe Wave 5 happening on 5 min timeframe near a support on 30 min is a great place for a low risk buy trade.

5) Failures and Rejections happening near sideways boundries offer great trades . So if you see a breakout failure on 5 min chart near a upper boundry of sideways move on 30 min, that gives a excellent place to take a short trade with very close stoploss. Similarly failure of a pivot breakdown on 5 min chart near a lower boundry support line on 30 min chart gives excellent buy trade with close stops.

6) Selling near a resistance and buying near a support with stops slightly above the resistance and slightly below the support are low risk trades.

.My best advice is trade intraday on price action. Moving averages, oscillators etc always have a lag and a bit late for trading intraday. Concentrate on intraday supports/resistances,larger timeframe trends,consolidation and distribution happening during the course of the day. Also keep an eye on breakouts/breakdowns failures and rejections....they set up great trades in opposite direction with very tight stops.

SET UPs and TDSTs

I use Set ups and TDST which are sub systems of Thomas DeMark's Sequential method. I find that these TDST levels act as very good support and resistance levels. I use these levels to initiate new trades and also to book profits from my existing day trades and swing trades.

1) SET UP :

A.BUY SET UP ( Set up leading to a buy signal)

A buy set up is complete when we have a period of 9 consecutive bars whose closing is less than close of the bar 4 bars earlier

so if we call current bar as T then its closing has to be less than close of the bar 4 bars earlier i.e. T-4....so CT<CT4 should be satisfied for all consecutive 9 bars.....if this relationship is discontinued...the set up gets cancelled and fresh set up needs to start afresh.

B.SELL SET UP ( Set up leading to a sell signal )

This is a mirror image of buy set up.....

A sell set up is complete when we have a period of 9 consecutive bars whose closing is more than close of the bar 4 bars earlier

so if we call current bar as T then its closing has to be more than close of the bar 4 bars earlier ie T-4....so CT>CT4 should be satisfied for all consecutive 9 bars.....if this relationship is discontinued...the set up gets cancelled and fresh set up needs to start afresh.

Power of 9

In a buy set up after 9 bars the market exhibits a peculiar tendency. On 8th,9th or 10 th bar market makes a short term low and goes sideways to slightly up move....this is called Power of 9

In a Sell set up after 8th,9th or 10th bar the market will most likely make a short term top and go sideways to down in Power of 9

The following points are to be remembered in case of set ups :

1) Set up requires minimum 9 consecutive bars following a particular relationship. The set up does not end on 9th bar....it continues till the bar closing relationship is maintained.....

2) After Buy set up is complete, draw a horrizontal line from the true high of the first bar ( true high means high or the earlier bar's close whichever is higher ). This is called a TDST line......this acts as a resistance to any up move.

After Sell set up is complete, draw a horrizontal line from the true low of the first bar ( true low means low or the earlier bar's close whichever is lower ). This is called a TDST line......this acts as a support to any down move.

3) Low of the bar 9 of Buy set up will be generally lower than low of the bar 6 ....if it is not, then in next 3 bars low of bar 6 will be broken.

High of the bar 9 of Sell set up will be generally higher than high of the bar 6 ....if it is not, then in next 3 bars,high of bar 6 will be broken.

We will post some more examples of set ups to understand it better....

Posting examples of a Buy set up......a buy TDST ( blue line ) and sell TDST ( red line )

The TDSTs work great in smaller timeframes such as 30 min/15 min /5 min or even 1 min chart....

In the next post I will try to demonstrate how these TDST lines could be used for trading intraday or swing positions.

Posting a 15 min Nifty futures chart of last 3-4 days. See how TDST lines are giving resistance to the upmove and support to the downmove. Combine TDST,Power of 9, failures and rejections on lower timeframes near TDST lines and price action and you have a great method to trade the markets.....

The next post will show how rejections and failures in 5 min timeframe can be used to set up some wonderful trades in last few days....

Posting Nifty Futures 5 min chart. Market unable to take out blue resistance TDST but cracking red support TDST was a clear pointer that the market wants to trade lower, which it did eventually......all that a trader has to do is select his low risk entry points , keep your stops and let the market do the work....

Posting a 5 min Bank Nifty Futures chart of 12-AUG-2011. Observe how the market failed at blue/red TDST line not once, twice but thrice......this gives a confidence to trade from short side......likely locations of trades marked on the chart.

don't mean to intrude, but pls give some thought to the following points:

1. don't try to pick tops and bottoms...stay with the trend...we are trading crowd psychology here....if the market is falling, why are you buying? 2. enter with a small stoploss and let your profits run...keep a trailing SL or keep a profit target atleast x2 your SL 3. do not exit completely....exit 1/3 or 1/2 at some point and move SL to breakeven...then let the market do all the work for you... 4. entry is not important...where you exit matters..if I had 1 wish from a genie in a bottle, I would ask: "where do I exit?" 5. you can never capture the whole move...and don't ever try to... 6. each single trade does not matter...you need to look at the big picture... 7. BACKTEST!!! you need to know your profit factor, expectancy, max drawdown...otherwise you will lose faith in your system after a couple of losses... 8. books, seminars, gurus are all fake...they can't help you...if you really want to learn, look at 1min charts everyday from 9:15 to 3:30 for the next 1yr...I promise you, you will start to see "things"....battles between bulls and

bears...you will know what is actually going on... 9. I am a bit drunk right now and don't know why I am posting this...so pls do not reply to this post and don't ask any questions

1. To make money in the market one need not have any high level knowledge.a robust system,a certfication.Neither the seminars nor the books makes one a successfull trader. I have a friend in Mumbai who does catering and who sees nothing but CMP and he is highly successfull.He makes crores both in catering and Trading Per Annum. Just by looking at CMP he will decide whether to buy or sell.Hence trading is a belief.If you say "YES" its "YES".Other wise its "NO".

2.No books are waste .Either Elder's or some one else's.A duck if given a glass half of water and half of milk ,will only suck milk and leave the water in the glass. We should be like that.We can take what we need and leave the rest in the book!!.

3.People go for shopping and buy products and they get "WARRANTY"for each products they buy.They look for the same in markets.In market and in life there is neither "GUARANTEE"nor "WARRANTY".

4.Market does not care whether one is an ENGINEER,CA,DOCTOR or a BEGGER.Because one is a 3 PHD holder ,he cannot say I am/can/must be successfull.Please ask each fund manager how much return he can generate per annum.Starting from me for every one the first barrier to success is EGO.

5.No system is great ,no system is inferior.It depends on the user.A Flute is a instrument (system).For a person who don't know music its a bamboo piece whereas in the hands of a classical musician(user) its a magic wands producing wonderful music.

Based on my years of experience as a full time trader who trades for living and observing many upcoming traders fail ( and very few succeed ) bring out the following points.

1) Trading requires knowledge and education about how market functions, greed and fear of market participants, probabilities,risk/reward. This knowledge is different than the knowledge which our schools and universities impart.

2) The basic knowledge about trends, patterns etc can be learnt in 1-2 months....but to succeed one requires to blend this knowledge with mindset,money,flawless execution,entries,stops,adds,profit taking,taking a temporary retreat, re-entry.........all these require tremendous practice. One needs such practice in all performing arts such as dancing,singing.......can we imagine artists like Samnyukta Panigrahi or Pandit Jasraj become what they are and perform in the concerts by reading books on Oddissi or Indian classical music ?

This is where most traders fail.....they start with acquiring knowledge,read books,systems,AFLs,psychological stuff........but they never get to a point where all the above come togather in harmony and effortless blend. They never come to a point where they say ....ok this is a definite trade ( here by definate I mean the trade which he will definately take....and not a trade which definately will succeed.....) then second guessing,then the failure sets in, then starts systems hopping, then again frustrations and the same cycle repeats till he is able to break this orbit and go to the next orbit ,some can never do that and there we have one more failure .

3) The traders also need unshakable confidence in the system they trade. This confidence comes by selecting a system which suits our mindset, backtest the method,have proper MM . The confidence also comes when one tastes success on this method........it is very easy to say have confidence in the method when the method is not making money ....but we cannot have confidence on empty stomachs...can we ?

4) Most traders come to trading with very small capital. They think that one does not need capital in trading.....this belief is also nourished by fly by night tip vendors who claim that you just need 10,000 in your trading account to make Rs 2000 per day....nothing can be further from truth. If one has to live off trading one needs atleast Rs 3-5 Lacs capital......I have seen many who say Rs 25,000 is more than sufficient but it is not true......Many are short of capital because they come to trading after they loose their jobs,or fail in business or fail and loose huge amounts in speculation and finally all these people fail in trading too.....

5) The most important quality is ability to accept that one is wrong, get out of the trade at the earliest and go for the next trade which could be in re-entry of original trade direction or in the opposite direction if the market action so demands. Most people get attached because of ego or because they feel they cannot take that small loss ( but eventually they will take a much bigger loss....)

A trader needs to address all the above points in his journey of becoming a successful trader.

Fortunately, none of us serious trader types ever really gamble. We all take our trading very seriously, like a serious business person should.

Many people have asked me over the years what it takes to be a successful trader. The answer is not clear but here are a few thoughts to ponder and apply.

First, successful traders have a complete commitment to trading and do it full-time. If it is a hobby or a secondary pass-time, I know how the bottom line will be - a big minus. Trading must be addressed as a profession because if you do not treat it as such, let me assure you, those who do treat it this way will separate you from your money very quickly.

Secondly, successful traders fit their trading habits to their individual personality. If you are an impulsive individual, your style will reflect more trading than a calculating individual who waits for all the indicators to fall into place. The personality factor more than any other factor I know of, will determine success or failure. If you are an emotional person, admit that you are and structure your trading habits to make emotions a positive influence, not a negative one. If you are either greedy or fearful, that will affect your decision making on a position and without recognizing the governing emotion, your decisions will tend to be wrong. Whenever I am the most fearful of the market, that emotion helps make me decide to go long and buy. I know that my emotions tend to make me fearful most of the time. Whenever my fears become overwhelming, my discipline tells me to buy and discipline must win out or you are doomed to failure.

The work ethic can never be overstated. I watch the market all day long from the opening bell to the closing bell. I have kept diaries on every day in the market for the last seven years, sometimes having over 40 entries in my diary per day. If I do not do my work my profit suffers. There is no short cut in trading, the market will quickly find if you are lazy.

Planning is the objective part of trading. Start with the worst case scenario and work from there. You will never be more objective than before you execute a trade. Once you are in a trade, emotions take over so the plan must be in place before the activity takes place. Determine a plan that tells you when you are wrong and admit it. Get out, retreat, live to fight another day; these are cowardly approaches but it will keep you from the traders obituary. Remember each rehabilitation takes a long time, but death is final. We talked about TDST lines a few posts back. I am posting a 5 min Nifty Futures chart of 17 and 18 August 2011 with TDST lines marked on it .....look how precisely the blue TDST lines which are resistance lines are holding all the corrective rallies in a downtrending markets.

The opportunities to trade from the short side is given at 6 points ( red arrows marked) in those 2 days with a very high Reward/risk trades . These are the trades which alert and patient daytraders look for.......

I am demonstrating the use of this important concept with the help of charts of Nifty futures for 29 th and 30 th sept 2011.

The upper chart is Nifty Futures 5 min chart . Here many trade opportunities are marked on various concepts/ methods/ systems . See the elliptical areas shown on 29th and 30th. On 29th the market broke out from sideways movement and the decline after this correction did not come below the pivot high it broke and there was a gap in between. This indicated that the market is set up for an upmove. The reverse is on 30th , market broke down and the rally failed to go into the sideways area it broke ( taking candle bodies here ) and this indicated that the market is setup for a downmove.

Once we observe the trade set up on 5 min timeframe, we get down to lower timeframe of 3 min to finetune our trade entry and initial stoploss. This is done for getting more clarity and precision. We use 3 min chart only for initial entry and stoploss. Once the trade moves in our favour we scale back to 5 min which is our trading timeframe. In the 3 min NF chart posted we can take the trades with much better clarity and tighter stops......

The trades marked are on various methods ( most of them come to same location ) but observe the precision which a lower timeframe of 3 min provides with a comfort of tighter but clearly defined stops.....

A spider weaves its net, goes in the corner and patiently waits for the insects to fly past and get stuck in the net, exhaust all their energies and then the spider attacks and feeds itself.....have you ever heard of any spider getting worried that if insects stop flying then what happens ? how do I feed myself ? it has no such worry because thousands of years of history has shown that insects will fly, get caught in the web and the spiders will always have comfortable living...... we traders have to learn from spiders...markets will trend, people will have greed and fear and a good trader will always be on top of his profession........

SQUEEZE THE LAST DROP OF THE JUICE ........GO FOR THE KILL

This is one trading technique which I use very regularly and I wanted to share the same with all. At 2:40 -45 I was long in Nifty Futures and the market was looking strong. I had to take a decision whether to book some profits there or wait till the end.

We play on simple technique that find out which is a side which is trapped and how much are they under water. At 2:45 the weighted average of Nifty future was showing 5035-40 whereas NF was quoting at 5085....a clear gap of 40-45 points. This means that the market is heavy at the bottom or lots of trades have happened below 5035 ......and the longs are comfortable but shorts are now feeling the heat. They will come for covering their short positions......also at 3:10 the brokerages will square off all loosing positions which are not covered by margins. So here instead of booking profits add on every dip ......the bears are dieing to cover their short positions.

After 3:10-3:15 there is panic in bear camp.......the die-hard bears come to cover after 3:20 and it is adding fuel to the fire. We just have to watch market going up like a rocket.....last 20 min give us a very quick move up.......and we get best price when the bears say " damn.....cover at any price...." and that is where we liquidate our long position built up anticipating this to happen.........it is a fun to trade this move.......

You get this average price on your trading terminal....in some front end softwares it is called Weighted Average, or Day's Average or Average Price it keeps changing throughout the day.....this is one very important figure for a daytrader to understand which side is strong and which side is trapped. This figure is summary of all trades happened till that time on that day because it takes volume and price traded of all transactions actually traded.......

Dont try to take positions when the average and current price difference is small 10-15 points....that gets reversed anytime and no one feels the heat....but when we have sudden reversal in the day and towards the end the gap is 35-40 points or more, this is sure shot trade based on psychology of maeket players......I normally book 50 % of my position in the end when there is visible panic and keep 50 % for gap open the next day ( I had kept some position for todays gap open )and this strategy gives me 30-35 points by EOD and another 20-25 points in the next day gap open.......

I have shared one of my best techniques...hope all will find it useful or atleast avoid getting trapped in the loosing side.......

heres how its calculated....

lets assume the following scenario....

9.30 - 50 qty of nifty traded for 5000.00 10.00 - 100 qty of nifty traded for 5050.00 10.30 - 200 qty of nifty traded for 5100.00

the average of above @ 10.30 would be = ((50*5000)+(100*5050)+(200*5100))/(50+100+200)

=1775000/350

=5071.43

,but on tick to tick basis,weighted of every tick is calculated ,and then calculated in real mkta

...........Professionals go broke by taking small profits.

I keep getting many pms and though I do not consider that I have answers /solutions for all trading problems I try to help because I had similar questions when I started out in trading many years back as full time trader and I had no one to ask these doubts.

One such pm came today and I am quoting the same without disclosing the name of the sender ....as I thought many will have this question in their minds.

Dear Smart_trade,

"I am having problem managing my trades. I have been able to make consistent profits of about 500 Rs to 1000Rs in 1/2 lots of Mini-nifty. I don't want to go for nifty because i am not yet fully confident. But i have a problem now, even though my profits are good, due to STT/brokerage and other charges are high for futures. So my account has been in negative even though profits are positive due to multiple entries and exits.

Is there any advice? I know basics of options . Seeing futures , can i trade in option? I have traded options before. Your advice on the same would be helpful.

Thank you "

My reply to him is as under :

Hello ****,

I do not accept that because of STT and brokerage,the account goes into loss. It goes into loss due to too many small trades,and ocasional large loosing trades......avoid both these. When you take a Nifty Futures trade you should normally expect atleast 10-12 points minimum run ( unless you are scalping ).The STT and other charges will take away Rs 2 to 2.5 max......you should also catch some trades which will give you 30-35 or 40 points.

There is no problem in trading with options. But that is not a solution to your problem as 10 points move in futures will give you only 5 points move in options.....so trading futures is no way restricts the profitability as out of 10 points move we make 8 points in future ....but in options the same move will give you 5-.05 or 4.5 points profits....

Your problem is not STT/brokerage but too many trades and small trades...try to overcome that and you will be fine.

But if you so desire, you can trade options.But make sure options do not give you false sense of security and you dont make large losses by overstaying in options positions.

We must have some big trades to take care of small profit/loss/scratch trades we will always have.

My signature which says "While amateurs go broke by taking large losses,professionals go broke by taking small profits...... William Eckhardt in New Market Wizards aptly describes the problem which is very basic problem in trading........every trader has to address this before he achieves trading success.

Dear murthyavr,

I have some query regarding calculation of VWAP.

1. If we are calculating VWAP after day end for next day, whether VWAP remains same for the next day, thorought the day or will it change within a day? If it keeps on changing what is the logic of calculating it on running basis? 2. In above calculation H,L&C are of prev day & then multiplied by volume of the whole day to get VP. Right? 3. I have not understood "And cumulative VP divided by cumulative Volume is the VWAP." can you pl explain with e.g. 4. Since you are calculating VWAP for next day on the basis of prev day data, how you are linking it with 1 min chart? 5. If i want to caculate VWAP on 5 min chart in metastock what should be the formulas so that i can have a VWAP line on my chart itself?

Kindly explain,

Regards 1. I am only aware of VWAP calculated for the intraday data. I don't know if it can be equally and effectively escalated to a daily TF. What I have narrated was the treatment for the intra-day data, and as such the value of VWAP keeps changing every minute.

2. H,L,C refer to the values of completed 1-minute candle.

3. VP is calculated for each 1-minute bar. For example, by 10:15, you have 60 such values (VPs) on hand, besides 60 items of volume data. Divide the total VP with total volume, to get the VWAP by 10:15

4. Please refer to (2) above.

5. I am not aware of the MetaStock environment. If you know the programming, you can perhaps create a program with the kind of calculation suggested by me. But then, you need to be knowing about arrays to do this job.

Q.If it keeps on changing what is the logic of calculating it on running basis? The idea is to find out how far away the current price is from the VWAP. From ST's experience, deviation of about 35 - 40 points is to be watched out. __________________ I am putting down my views in the same order as per your questions :

1) and 2) I guess there is no difference between ATP(Avg Traded Price) & VWAP (Vol Weighted Avg Price) , some front ends call it ATP and some call it VWAP.

3) Dont consider this as a trading strategy. I had give this as an observation which helps me to decide whether to hold my winning positions till the end ( and preferably add to them ) ....this is a way of finding out which side bulls or bears is loosing and which side is winning and which side is likely to panic and rum amuck in the end. Your positions should be taken on whatever methods one follows.

4) One has to understand the difference between the large gap between futures and cash nifty one sees in the current settlement period ( this gap is almost constant throughout the session)and the gap between weighted average and the futures because of the price swing in one direction. This gap is not constant throughout the session. If the current price of Nifty futures is less than its VWAP by 35-40 points in the last 1 hour , then that means that the bulls are trapped and they will come for liquidating their loosing long positions and this will drive the prices lower and the gap to get wider.......

5) Some longs may decide to carry their loosing positions to the next day but the leveraged day trading long positions will try to go flat at the end of the day. Also the excessive positions taken with the brokerages will be compulsorily squared off between 3:00 to 3:15 and that puts further pressure on the market.

6) One can trade this strategy anytime in the day when the difference becomes 35-40 points...but the strong effect will result into a fast and furious move only in the last 1 hour as the day end nears.....we can square off our daytrading positions in profit when there is atmost panic in the bulls camp....that is when we get the lowest rates to take our profits.

7) There is no historical data available...so you have to test these in real time when action is actually happening.

Yesterday was a classic example of difference in VWAP and Nifty Futures exceeding 25 points and NF cracking the low of the day in 2:40 bar on 5 min timeframe indicating that the bulls are getting squeezed and soon there will be panic in the bulls camp and the market is likely to crack further .....this prompted to hold the short positions till the end as the squeeze was near the end of the day.....that is what happened in the end and the panic in bulls camp gave a great chance to cover the short positions at very opportune levels with minimum slippage......

Note that the low of the day was a red TDST level which was a strong support level known in advance.....indicating the profit taking level.......and the 9 marked on the chart is a 9th Set up bar indicating we are near the low of the day....this with TDST level gave exact bottom to book the profits.....

A good daytrader is neither permanant bear nor permanant bull ......but he is an opportunist....he senses the opportunity,has his risk control in place...takes the trade......joins the stronger group ( be it bulls or bears ),rides the trend and says 'thank you'. He is never bothered about why the market fell or rose.....he is happy both ways....

ATP method of trade created Havoc for Bears after 15.00hr. We were able to clearly anticipate the move of NF once the ATP & Stock price widened after 15.00hr. Nifty also showed Buy signal by Stoch method above 4884( 14.35 Bar) But there was real Roller Coaster with equal fight bet Bears & Bulls till 15.00hr.

he success of this pattern depends on the urgency and desperation of the loosing side.....the urgency and desperation increases when the market is coming to end and when the difference is large and increasing ....not giving a chance to loosing side to get out of their position. So always see this pattern at or after 2:30 when the loosing side realises that their game is coming to an end...and they have to cover. This pattern may not work if we see at 1:30 as there are still 2 hours left ...so the loosing side is still hopeful of getting their price.

When you see the that the NF is at 35 points below its VWAP what does it mean ? It means that the last fall is sudden and drastic and the bulls never got a chance to get out and the major volume has happened at the higher prices ( and that is why VWAP is high....it is not near the NF price ) and if this difference is increasing , that causes fear , urgency and desperation necessary for this pattern to work out.....

I don't use this pattern for initiating fresh short positions...we are always short on some other methods....when I see this pattern , I add and wait for the prey to come in the range and then go for the kill.......this is the thought process I have while trading this pattern....but I have seen that the market not only closes at the low point but normally you get a gap opening the next day if you are in the direction of the longer timeframe trend...so one can keep some positions for the sweet gap opening in the direction of our position. OBSERVE MARKET'S REACTION TO GOOD NEWS AND BAD NEWS----It tells you a lot about what the market has in mind

I saw a post by someone yesterday which said market should have tanked 500 points on bad GDP numbers. True.....but always remember that if you can read the market's reaction to good news and bad news, it will put you light years ahead of rest of the traders.....market took a very weak reaction to a strongly bearish news of GDP numbers.....and that should tell you something that the markets are poised to trade higher.....and that what it did today after yesterday's high is taken out.....

I remember a day when the market was in downtrend and the news came in the evening that the coalition partners are withdrawing support to Government and it has to prove its majority on the floor of the house the next day.....I

was short a large position in Reliance and was expecting the market to tank by atleast 50-60 points the next day......

The market opened just 7 points below the earlier days close......and I thought to myself, damn, is market giving only 7 points for the survival of the Government ?? Something is not right.....the market knows something which we all dont know. The market stabilised in next 30 min and started going up.....and I started covering my short positions.....went a small position long above the earlier day's close and it so happened that the confidence motion was won on that day, Government survived and RIL opened 60 points up and went on to over 100 points by the time markets closed.

The above incident taught me so much in trading that no book would have ever taught me..... It is a real incident from my early days of trading.....

SCALE IN AND SCALE OUT OF TIMEFRAMES .......To trade fast and furious markets.

Fast and furious markets are great markets to trade as they offer very good Reward /risk in shortest possible time. But they are also very volatile and furious and can hit you very hard if they suddenly reverse and you are not trading with tight stoploss.

Many trader friends mentioned that they could not participate fully in yesterday afternoon's crash because of they did not know how to enter in between the running trend and how to protect themselves if the market suddenly reverses. This is one of the questions a trader always faces.

I am posting a NF 3 min chart with markings. If one is normally trading 5 min timeframe, then scale down one step,say to 3 min. The chart shows the green bars , short the low of the green bars and keep a stoploss of the swing high in 3 min ( stops indicated by black lines ) This 3 min timeframe is only for initial stoploss. Once the trade moves in our favour, we scale up to 5 min timeframe and trade that. The chart shows that there were atleast 5 places where one could have entered with 8-12 points stops in the downmove which we had yesterday.

The beauty of these strong and violent trends is that your trade moves in profits very fast and then you are relaxed

and the only job is to manage the trade.

With these entries and stops one can participate in strong and violent trend moves very profitably without any fear of large loss.....

Is there any way to check if market is in mood of fast and furious ? If we desparately want to enter the trade but very scared to pull the trigger and in the meanwhile market runs away from us and our stops now become 25 points instead of 10-12 earlier and we feel like "damn I should have entered 10 points back" ....that is the sign that the market is fast and furious. This happens to all of us , I am sure....

RADING THE HOLY GRAIL

Posted Nifty Fut 5 min chart of today 06-01-2012. The entry is on pivots, and trade direction determined by 21 SMA red line. Plain vanilla entries...no indicators, no oscillators,no higher timeframes ....not to complicate life with all those.

Below the red line we are looking to go short.....above the red line we are looking to go long......stops trailed as per shown in black lines.

For profit taking we have taken help of stochastics positive divergence....also the green arrow between 10:00 and 11:00 is a Sequential Buy point.....additional reason for booking profits there.

In the long trade, the move gets steep and we trail the profit taking levels to the lows of each of successively higher bars.....

Trading is simple...we traders make it too complicated......

Below is a Chart of NIFTY Hourly (GCI) reason I put GCI within brackets is because I am not sure about their Nifty Data and since their Sever Time is set to NY Time (EST) we will have Candles which are different from those that are formed based on IST. Noticed this anomaly creates quite a bit of price/bar splits especially troublesome for the higher TF 30 & 60 minute.

Having got the anomaly out of the way.... Here is an exercise for those interested to try & identify 'Demand Bars' & 'Supply Bars' on the chart below with reasons either annotated on the Chart or in the post

Demand Bars & Supply Bars do give extremely juicy Entries & Exits & surely there will be failures in the conditions hence the S/L ... 1) Entry Points 2) Exit Points 3) Where to Keep the Initial S/L

Here is the same Chart with Demand Bars & Supply Bars marked with A Green & Red Dot respectively

Can you find 'Why' those Bars are singled out for Demand & Supply

ualifiers' To Single Out The Bar For 'Supply Bar'

Immediate Candle on the Left & Right of the Supply Bar Should Have Smaller Top Wick Than The Supply Bar & Both Candles On Either Side Should Have Made Lower High

'Qualifiers' To Single Out The Bar For 'Supply Bar'

Immediate Candle on the Left & Right of the Supply Bar Should Have Smaller Top Wick Than The Supply Bar & Both Candles On Either Side Should Have Made Lower High

'Qualifiers' To Single Out The Bar For 'Demand Bar'

Immediate Candle on the Left & Right of the Demand Bar Should Have Smaller Lower Wick & of course Both Wicks on either side should be Higher Than the Demand Bar Low

ow Of The Demand Bar is not the Correct Initial S/L for Long Entry & Similarly High Of The Supply Bar is not the Correct Initial S/L for Short Entry

SG There is some obvious advantages to trading, with this simple identification of SB & DB is...

a) Reward To Risk is better b) Percentage of Winners improve squeezing out lot more juice from the Trade c) Failure of DB & SB is much Less d) Gets one out of a losing trade faster & e) False Breakouts & Break Downs which many new traders fear so much is well taken care of through this Identification of DB & SB an we use this Demand and Supply bars concept to any time frame? ..you can...!!! Test it on some charts that you have for smaller TFs like 5 min.

Depending on what the 2 previous bars have done & if it looks like the current bar is going to qualify for DB/SB based on the previous 2 bars...then take the Trade in the last 15-25 second before the 5 min. Bar closes....for other TFs like 10 or 15 min. you can enter perhaps even 30-45 seconds before the bar closes.

Do Keep the 'Qualifiers' in front for a few days till it becomes second nature. I got great success with the following :

1) TD Sequential

2) TD Combo

3) TD Double TD Point

4) TD Point Reversal

5 ) TD camouflage

6) TDST

7) TD POQ and Oscillators

8) TD Open,TD Trap,TD Clop and TD Clopwin.....

The above I find are the best of DeMark.