Sunday, 31 July 2016

Always Control the Risk

The objective of this post is to highlight the importance of controlling the risk.  Risk management in trading is of utmost importance.  Controlling the risk is also important for our survival as a trader.  If we do not have a control over the risk, we will most likely blow up our account, not only once but maybe multiple times. If we blow up the account, we will not be able to trade further.  We will have to get back to earlier profession, work hard, save some capital, gather all the courage and confidence back again and then come back to trading again.  All these things will take lot of precious time of our life, and we may not find the way out of it.  On the other hand, if we are able to survive, there will be always another opportunity and we will be in a better position to utilize that opportunity.   In the game of Cricket, they always say, save your wickets.  If you have wickets on hand, you will always be able to make runs, sooner or later and win.  Here our capital is the wickets, without which we will have to face the defeat.

There are only four possibilities once we are in a trade, as ST sir has always said, Big Profit, Small Profit, Big Loss or Small Loss.  What we need to do is, always avoid Big Loss and keep with us Big Profit, Small Profit, and Small Loss.  Small Profit will take care of Small Loss and we will be left with Big Profit in long run.  This Big Profit can only be achieved if we have a control over the Big Loss, and we have to have that control if we want to succeed in trading.

Now, how to avoid that Big Loss in day trading?

There are different ways to manage and control the risk and most common and efficient way among them is always keeping a Stop Loss for the trade.  For trading Nifty Future, 10 to 15 points of SL is enough.  If the SL is more than this, we just need to simply avoid that particular trade setup and look for another one where we do not have to stretch our SL limit.

Putting just SL alone for every trade is not going to be sufficient for risk control.  We need something more than this.  For that, what I do is, I put a limit on a number of loss making trades.  For example, I will limit a number of loss making trades to 2 in a day.  Once I reach this limit, I will stop trading for that particular day.  I also put the same way, the weekly limit of loss making trades,  My weekly limit is 5 consecutive losing trades per week.  Similarly, I have monthly limit also.  So this way, we have two types of risk control.  By putting SL at every trade we will have control over what maximum we can lose , e.g. 10 to 15 points for NF per trade.  And by limiting the number of loss trades, we ensure we will never run out of capital in a short period of time.

Now, lets have a look at an example where by applying this risk control how we can achieve the objective of survival.

Lets say we have a capital of Rs. 100, 000 (1 lakh) and with that capital we decide to day trade only one lot of Nifty Future.  Now lets say the month and the week start with the 1st and we take two trades and both these trades hit the SL limit.  If the loss is around Rs. 1000 per trade (12 to 15 points), we will suffer a loss of around Rs. 2000 for that day. Once the limit of two SLs a day is reached, we will stop trading for that day.  Next day lets assume the worst case scenario where we lost again in next two trades and our total loss of that week now stands at Rs. 4000.  Now on Wednesday, we are only left with the limit of one more losing trade for that week.  If that happens, we will stop trading for that particular week.  This way, considering the worst case scenario, we will have the maximum loss for that week of Rs. 5000.  We will utilize the remaining time of the week analyzing the mistakes and understanding how we can avoid those mistakes.

Now again for the next week, even if we repeat the mistakes and end up with the losses, we can have another maximum loss of Rs. 5000 for that week.  If that happens, it is better that we stop trading for that particular month and try to understand first what is going wrong with the trading.

This way, we will never lose more than Rs. 10K in a month and our existing capital will  help us sustain for at least 10 months even if all of our trades turn into the losses during that time. I think this time period of around one year is more than enough to understand all the nitty-gritty of markets.

Now to give you some confidence and demonstrate a real example of my survival into the markets with the help of a proper risk management, here are some images of my trade diary from year 2011.


























If you go through the diary carefully, you will appreciate the fact that I was always able to control the risk during my learning phase.  At that time, I was trying to do all sorts of things in trading, jumping from one system to another, trying different techniques, all you can think of.  Even while doing all sorts of wrong things, one thing stood out and that was controlling the risk.  I was able to do that with discipline by always entering the SL order immediately after the trade got executed.

Survival should be the first priority.  If we ensure our survival into the markets, there will  always be next big opportunity waiting for us.  Make full use of Mentoring and Video Tutorial.  I assure you will be able to save at least Rs. 1 lakh and 1 year of  struggle into the markets.


Thursday, 28 July 2016

Nifty Future 28072016













Expiry day.  It traded almost whole day in a barbed wire range around RN.  Made multiple attempts on range high (RH) to break it but failed.  It could break out of it only after BOF of range low (RL).

I would like to share with all of you an achievement of a DP trader.  His name is Sunil and he is a full time trader.  One fine day he contacted me and showed me his interest to learn the DP trading and I gave him an access to my DP trading video tutorial.  He believed in acquiring the knowledge.  He did all the required things and now he is able to trade full time with success.
All of you can interact with him through his blog, dptradingnotes.blogspot.in


 

Monday, 25 July 2016

Followup on Trading Stocks Post

For most of the stocks which we discussed yesterday, levels got tested giving us a trade setup.

Here are the charts with markings and comments,


















For Idea, the level got triggered but it was too late, around 3 pm so ignored.

What stood out today was Nifty Future. It was stuck in the 100 point range for last 8-9 trading sessions.  Today when it broke out, see how it moved and turned out to be a Type 1 trend day.


















Sunday, 24 July 2016

Trading Stocks

This post is about how to select the stock to day trade out of Nifty 50 stocks and a method (using existing knowledge base) with which we can trade.  I have been trying to explore different methods to trade stocks for last few months and I thought about sharing this method which I found most reliable and beneficial with all of you.

What I do is, I try to find the stock (out of Nifty 50 stocks) which has been in a range for last few days.  So I would scan these 50 stocks and pick the stocks which have been stuck in a range.  The range extremes will serve as a Decision Point for us. At some point, they will try to break out of the range and whenever they do that, we can find a good breakout or breakout failure trade setups at the range extremes.  We can trade other DPs also, but here the main objective is to find the stocks and the levels where we can look for high probability trade setups.

This method is only for Nifty 50 stocks. You can explore it for good quality midcaps, but I have not done that. Also this is for educational purpose only and not a recommendation or advice in any form.

Before the beginning of last week, on Saturday I prepared a list of 4 to 5 stocks this way and I am sharing here charts of ITC and Sun Pharma from that list.

As you can see, ITC was stuck in a range for last five trading sessions between 252.5 and 245.  Now lets see what happened after that.










It tried to break out on July 21st and failed giving us a nice BOF trade setup.  It reached till 246.5 the same day.  Possible short entry could have been taken around 251.  Area around PDL (248) could have been the target generating a profit of 1.3%.

Now lets take an example of Sun Pharma.










As you can see, it was stuck in a narrow range for last 2 sessions and this is what happened afterwards.









Here the prices broke out of the range, generating a profit of around 0.75%,

So, this way scan for the stocks that are stuck in a range and wait patiently for the prices to reach the range extremes.  Once they are at range extreme, they will do something.  Try to read the prices and take your trade keeping a reasonable risk reward ratio.  Around 0.5% of risk or stoploss works well.

Now I am posting few charts where I have already marked the levels for next week.  You can put an alert at these price levels so that you get prompted once prices reach these levels. Once the prices reach the level, you can start observing the chart and look for setup. I may write in brief just to follow up at the end of week.

1) Tech Mahindra









2) HDFC Bank









3) Idea.  Ahead of results tomorrow.















Now 3 stocks which have been close to its short term resistance/support.  Indusind Bank, M&M, and HCL Tech.






































Instructions:  Click on chart images for a magnified view of the charts.  

Keep a note of these stocks and the levels and observe this week. Your views and comments are always welcome.

Please share this post to as many people as you can through Twitter, FB and Google+.

Thursday, 21 July 2016

Are you trading on MCX?

I have been trading on MCX for quite some time now.  I first started focusing on Gold, Silver and Crude oil, then included in this list Nickel, Copper, Zinc, and Lead. I decided to go slow and take my own time as trading commodities was very much new to me, so I chose only mini contracts to start with.  The reason is, I can afford my own lunch or dinner outside everyday but I cannot afford lunch or dinner with five other people everyday outside.  In other words, I can afford couple of hundred rupees loss per day but definitely not couple of thousand rupees of loss in my initial phase.  Survival should always be the first priority in trading and survival is only possible if there is enough capital to trade all the time. Capital will last long only if losses are very less and manageable.  

Now I can proudly say that I have got a grip on it trading with the DP method. It was possible only because of low risk of trading with mini contracts.

Here I give you an example of my trade today in Nickel Mini.  It was trading in the range ahead of expected new flow around 6 pm today.  Then it gave breakout, paused for a bit, and then gave nice BPB setup to go long. Possible target for the trade was around 6 points and I was able to keep SL of 1 point,  Everything was there for a good trade setup, low risk, high reward.  To no wonder it took just few minutes to reach the target.















To trade with mini contracts, you require less than Rs. 5000 for the MIS margin, SLs will not be more than couple of hundred rupees.  You just need to spend 2 to 3 hours in evening,  Isn't it better to start learning the trading with MCX this way rather than Nifty future?

The nicely made Video Tutorial will surely help you learn the day trading most efficient way.

Wednesday, 20 July 2016

Nifty Future 20072016















It opened above PDH and traded in a range.  Attempted direct BO of this range.  It did not work well. After that range envelope happened and could not find good setup to trade.

Tuesday, 19 July 2016

Nifty Future 19072016















Expected rangebound move as yesterday prices moved in one direction.  Took BOF of PDL/PDC.  Did not attempt direct BO of Range High as expected rangebound movement.  Then it did give good BOF.  It moved nicely.  Then there was a good Pressure Play setup which moved well.

Monday, 18 July 2016

Nifty Future 18072016















It opened above PDC and traded in the narrow range for long time.  Avoided taking direct BO trade above Range High as  I felt the BRN/PDH level strong and would hold. Took BOF setup and it moved well.  Hesitated to take the short trade below PDC and missed the last down move.

Saturday, 16 July 2016

Free Pension of Rs. 5000 per month for life

Image result for gold


You can get a pension of Rs. 5000 per month after your retirement age of 58 years for absolutely free.

Learn how?

To get the pension free for life, you can use the power of gold which may be lying in your bank locker idle and an Atal Pension Yojana.

Lets first understand how to unlock the value of gold lying in the bank locker.  There are two options. One is that you deposit your gold in a bank.  Instead of your gold lying dead, you can give it to the bank and earn some money. Your gold will be safe there, you would get the benefit of price appreciation in gold plus an interest income every year.

Another option is that you purchase a sovereign gold bond. If you have money to purchase the bond, it is fine.  Else you can liquidate your physical gold and use that money to purchase  a sovereign gold bond.  Reserve Bank has just announced that Series I of the Sovereign Gold Bond 2016-17 will be open for subscription from July 18 to 22 and issue price has been fixed at Rs 3,119 per gram.  It is a simple average of closing price of gold of 999 purity for the week July 11 to 15, 2016, as published by the India Bullion and Jewellers Association Ltd (IBJA).

The benefit of purchasing a sovereign gold bond is that you get an annual interest of 2.75% on the investment of bond.  Plus you will earn returns linked to gold price. These bonds carry sovereign guarantee both on redemption amount and on the interest.

Get all the details regarding these bonds at NSE website by clicking here.

So lets assume if your age is below 40 years and you have a sovereign gold bond worth around 4 lakhs of rupees, you can earn an interest income of around Rs. 11000 yearly.  Now you invest this interest amount in Atal Pension Yojana every year till your retirement age, and get Rs. 5000 pension after your retirement.  Plus if you are a trader, you can keep these bonds in demat form and avail a margin for your trading as it can be used as a collateral.

Your gold will remain the same gold, its value will remain the same, and you will get some added benefits if you decide to hold the same gold in a sovereign bond form.

Please spread the word and share this article to as many people as you can through Whatsapp, Twitter, Facebook, Google+ etc, so all can benefit.



Friday, 15 July 2016

MCX CrudeoilM 15072016















Took two trade in the evening session on MCX.  First was on CopperM which ended as a scratch.  Second one was BPB of PDH/HOD.  There was also TRAP  pattern at that time. Exited with minor profit.

I posted both these on Twitter.  Those who want to explore trading in MCX can follow me,

@charttechnical


Infosys 15072016


Once you know "The Art of Price Reading" It becomes lot more easier to trade without any worry or hesitation.  More importantly, you are able to find high probability trade setups.  Today's Infosys price action is the classic example of same.  Have a look at the chart,



You would make killing when prices respond like this and you are proved right.  It is more than 100 Rs move in few minutes, around 10%.  To catch such moves you don't need to listen to experts or analysts or any predication from traders. You just need to be aware.

In the video tutorial of "The Art of Price Reading" everything to potentially trade this setup is explained in detail with examples, like the reading the ranges correctly and how to read the news flow or event and what to anticipate out of, especially in case of shock or surprise.

Knowledge is a power.  Acquire it.

Wednesday, 13 July 2016

MCX CopperM 13072016















I tried one trade on CopperM as BPB of Range High.  Prices were trading above PDH, thought it would work well but SL got triggered.

Nifty Future 13072016















It opened full gap up but showed no strength at all.  Hesitated to take the BOF of PDH in morning as did not want to go against the strength on larger timeframe. It was the only best trade setup of the day.  Looked for an opportunity to buy at BRN or LOD in the afternoon which did not come.

This last Sunday I met a gem of a person, Mr. Yashraj Rana in my town.  He has been following the Nifty Nirvana blog and mine for quite a long time.  His passion is the day trading so we had a good time discussing all about the trading.  He has started his own blog, http://nftyview.blogspot.in/
I wish him great luck and all the success in trading.

Monday, 11 July 2016

MCX CrudeoilM 11072016















Thought about a potential Pressure Play setup as marked and entered on direct BO.  It moved well and exited at 3060 as there was good profit.  Now I think I should have waited for some more time before booking out. Today I was active on Twitter throughout this trade.

Sunday, 10 July 2016

Video Tutorial






How to trade with DPs with success?

How to trade Index Options with great success?

How not to get confused deciding when to trade and when not to trade?

How to read the prices efficiently in order to trade them?

How to trade on MCX using price action?

How to trade stocks using DP trading tactics?

How to hold on to a position for few days using price action?


If you want to know the answers, please click here


Friday, 8 July 2016

Nickel Mini 08072016















Tried one trade on Nickel as marked on BPB but got shaken out and exited prematurely.

I will not be much active, but still if you want you can follow me on twitter @charttechnical 

Wednesday, 6 July 2016

Nickel Mini 06072016
















NSE markets were closed today but MCX was open for the evening session. Took one trade as marked.  Prices yesterday were down around 8% from the highs.  That is a lot of move in one day.
Today in the evening session it traded in a narrow range within last corrective wave's range. Once it broke out of this range of up side, attempted a BPB trade.  It was also a classic example of measured move and reached the target.

Monday, 4 July 2016

Friday, 1 July 2016

Crude Oil Mini 01072016
















It was trading in the range during evening session.  It gave BOF at Range Low which gave confidence to take long trade on BPB of Range High. Booked at PDL.