OCEAN OF KNOWLEDGE by Nishant Arora
INDEX 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.
29. 30. 31. 32. 33. 34.
Nishant’s Journey
AIM of TFS & Book List Why Stock Prices Move? Beginner Behavior Market Rewards Price Action Perspective Chart Analysis Trading Psychology Habit Transformat Transformation ion Human Qualities Trade Management Why Intraday Futures Stop Loss Profit Taking Liquidity in Trading Trading Expectations FnO Challenges Multi-Baggers Reading and Thinking Candle Patterns Catching the Pullback Wide Range Body Candle Gaps Being Right OI Tale Trapped Traders Pivots Indicator a. RSI b. Bollinger + RSI c. MACD d. Stoch Staircase e. Multiple Trend Identifica Identification tion False Breakout Stock Selection Steps a. Stock Selection - Intraday Why Not Intraday Trading Trading is Bad? Value investing
35. Queries a. Headwind b. PE Ratio c. Wealth Creation 36. Technical Analysis 37. Innate Nature 38. Trading Tenets 39. Quiz 40. Just Start 41. Don’t Quit 42. Add On
NISHANT’S JOURNEY My Story- How I became a "Technical Trader" from being a "Fundamental Value Investor"
Majority of people who participate in markets, don't even know their orientation whether they are a trader or an investor; whether the stock they have bought is for trading or investing. Several people trade while they think they are investing and a lot of people invest with the mindset of trading. That is a sure shot recipe to disaster sooner or later. But once you are past this stage, you must decide what you want to be. And that path of deciding is a long and rocky one. It's like dating lots and lots of potential partners to find out the best suitable one (excuse me for my analogies). The Beginning
Now let me talk a little about my experience. I entered into the mysterious world of stocks because of a guy named “Warren Buffet”. I happened to come across him and “Charlie Munger” due to my voracious
reading habits. And then one thing led to another and before I realized, I was breathing Buffett and Munger. I found them to be the most “r ational” people I had ever known. They had become Gods for me.
I read every single interview, statement and opinion that they ever uttered. And of course, when one discovers Warren Buffett, one is bound to find “Benjamin Graham” as well. So, I read countles s number of books to understand Buffett, Munger and Graham. Then came another set of investors like Peter Lynch, Seth Klarman, Howard Marks, Joel Greenblatt and so on. I read intensively about them and their methods. I also got to know k now about some Indian value investors like Sanjay Bakshi, Sanjoy Bhattacharya, Late Chandrakant Sampat, Late Parag Parikh, Chetan Parekh and so on and I was hooked. It all sounded correct. I was mesmerized by the whole concept of value investing per se. Buying a dollar for 50 cents or less coupled with compounding is a very powerful thesis. And I started my investing investing journey; sorry, value investing journey (it sounds more elite after all). If you want to get started in the field of value investing and are clueless about what to study, you can find more about that by Clicking Here Fundamental Analysis (FA) became my way of thinking and living. Though I hailed from a commerce background in school but I studied accounting once again from the scratch to brush up my basics. Then, since I had not chosen finance in my under-graduate and post-graduate studies, I studied as many books on corporate finance and valuation, as I could. And then, I started reading countless financial statements in search of companies whose underlying value of business far exceeded the share price. Of course, I also looked for moats and margin of safety. There was a time when I was reading 3 annual reports a week. Once I was done analyzing the report, I used to do detailed ratio analysis and indulge in comprehensive valuation activities such as discounted cash flow analysis and various other methods. It went on for a couple of years and I had my share of good multibaggers as well. Disconnect
In fact, Warren Buffett started his career with managing other people's money and thus he had a big capital base to start sta rt with ($1,05,000 in 1956 to be precise). And here I was, managing my own small money not even 1/10th of the capital base of Buffett in 1956. So, there was just no comparison. And when situation was not the same, how could c ould the methods be same?
So it was clear that there was a conflict between my situation situation and theirs and I cannot ape their methods just because they sounded good and rational. I was slowly beginning to realize that the reason that got me into markets, i.e., financial independence, is a far-fetched dream if I stayed on this course as it involved putting money (big chunk) into a stock and forget about it till the value unlocks (and I had no control over the value unlocking process, unlike Warren Buffett who had control over undervalued undervalued companies that he invested in). The value investors whom I was trying to ape were already generating generating huge incomes by the way of dividends and management fees. I understood that I could not compare my present situation with their present situation. Rather, I should compare my present situation with their past situation when they started out. So, I
My Transition
I started searching more and more and I found o ut about a guy called Marty Schwartz. Schwartz. That got me into a different world altogether. The world of trading. This world had different set of Gods such as Paul Tudor jones, Jesse livermore, Ed Seykota, Richard Dennis, Michael Michael Marcus and so on. This group focused more on price rather than the value due to their underlying logic that everything that can affect the price is already in the price. So, it is better to analyse price. And, this made sense as well.
And it was then, that I came to know about a thing called Technical analysis (TA). I had heard about TA in derogatory remarks of fundamental investors so never bothered to know about it in detail. That was my
fault. In a complex system like stock market, one must never have a closed mind. Just because big investors say that TA is useless does not mean we should follow their view. Its like just because Buffett enjoys eating Pork does not mean I should start enjoying it too. The more I delved into the world of trading and TA, the more I realized that this is what I am made for, given my strong reflexes, capability to analyse and of course not to mention, my love for human psychology. Overtime I figured out the reasons as to why TA makes sense:
1. We are in the business of trading stocks not companies (at least not until we buy such a meaningful chunk of share in the company with respect to it's total share capital that we are truly part owners in the company and can affect its proceedings even in a small manner). 2. Our profits are linked to pricing of the shares. And pricing of shares is linked to demand and supply of those shares. Demand and supply, in turn, is linked to people's behavior. And technical analysis is a wonderful medium to gauge human behavior. 3. The shares are priced by people based on their perception perception of fundamentals not by fundamentals themselves. So, it is more important to know people's minds. 4. By the time fundamentals are known to us, they are already in the price. In today's world of ultrafast communication, it is futile to assume that you will find a deep disconnect in price of the share and value of the underlying company by analyzing its numbers. Majority of times, the disconnect, if any, would be there due to some justified justif ied reason. However, you yo u could hope to find a lot of priceprice value discrepancy in the time and age of Benjamin Graham and Warren Buffett but not now. 5. FA has too many variables which makes it a blind bet. Valuation in itself is a game of estimates and guesstimates. On the contrary, FA guys blame this on TA. Irony. 6. It's never the known fundamentals which move the price, it's always the unknown fundamentals that move price. So predicting the stock price 2-3 years or even 10 years (long term value investors) down the line on the back of unknown fundamentals is a pure blind bet. And that too, when you are just a nobody, who reads about the company and its activities after things happen and have no say in how company should manage its affairs. It makes buy and hold, a hardcore speculation business for people like us. Buy and hold worked for Warren Buffett because he had a say in how the business had to be run and he could affect the value unlocking process. So, here we wait for a trigger and there Warren Buffett himself was a trigger. 7. Is there any formula (mathematical approach) to integrate income statement, balance sheet items and stock price in one equation? The idea is to derive the stock price from fundamentals. Lets say if we know that the company will post a 20% increase in profits and 10% decrease in debts and ROE is going to be 15%, then is there a method to derive what the stock price will be? No. There is not, there can't be, because of the simple reason that it is not fundamentals which move the price, it is the people's view of those fundamentals. At the end, it is psychology of the people which move the price not direct fundamentals. You can read more about how human psychology affects prices of shares by clicking here. here. 8. Let's say I tell you that a company's stock price is Rs 100 per share and company is growing at 17% CAGR, they have improved their amortization schedule, the operating margin has increased by 3% and so on. Tell me whether the share price will rise or fall from here. You won't be able to tell. We all have seen stock prices falling despite a wonderful result and rising post a bad one. In fact, I have done a post about it. You can read it by clicking here. here. 9. However, if I tell you that during last 2 years of its listing, the share price has reached Rs 100 levels 30 times and it returned from there every single time. So you know that there is a lot of selling
pressure at Rs 100. And now if I ask you that what will happen when share price would reach Rs 100 again. You can surely give an answer that probability of price falling again from that level is definitely more than it going above. Of course, it can break above that too but then share market is all about probabilities and if you can find something with high probabilities then it is more than enough. 10. So, the situation is that you've have got to make money (income plus wealth) in the markets where:
We don't have a say in what company does and how it does that. We don't know the deep insights of the industry (most of the retailers don't). We don't know whether the numbers posted are up to the mark or not. We know that there is not much concrete and calculable correlation between company affairs, fundamentals and how its stock is priced. We know that in the end we have to make money by buying lower and selling higher and it is people who move that price.
Once I realized this, it made all the sense in the world to study people's behavior more than company's. And the study of people's behavior is called Technical Analysis. To sum it up, investing is about value while trading is about price. The investor in you might argue that what do we have to do with share price, we are only concerned with company's value. Then sir, you are brainwashed by the biggies. You have to do with price because that is the only way you will make money. You make money when prices rise. Period. Final Words
This, in no way, is to be seen as keeping trading over investing. In fact, my current status is that I am both a value investor and a technical trader. And I don't see any conflict between them.
They both are to be seen with completely different mindsets. There are hugely successful investors and there are extremely successful traders. So, it's not about investing vs trading or fundamental analysis vs technical analysis. It's about what suits you best. In fact, I have done a post about how can y ou integrate both fundamental analysis and technical analysis, you can read that by clicking here . However, I have made a clear cut guideline for myself. And that is, that I will limit my trading activities to mid-Cap and large-cap companies only and investing activities on micro-cap and small-cap companies only. You can know the reasoning behind this guideline by clicking here. I would like to end the post with this:
Hope you enjoyed the post.
Back to Index
AIM OF TFS Nishant Arora May 8, 2018
Dear TFSians, My idea is not to post charts of 10 different stocks here everyday so that no one remembers anything the very next day. That's the game of tipsters. They give a lot of tips together so that some will work, some won't and some will be forgotten. Anyway, my idea is to enable beginners to develop an eye. That's why I post charts on one or maximum two scrips at any given point in time and post their charts on weekly & daily timeframes, and also keep on giving intra-day commentary too for several days. I believe that a chart is not a static thing that you put it and forget. That is why I post a chart and keep updating it for days to come. For example, these days, I'm doing it with Apollo Hospitals, few days back it was Vedanta, before that it was Bank of Baroda. And I am sure, you all had immensely fruitful learning experience in all those threads. I'm not bothered about whether our anticipation works in the favor or not as the idea is not to
prove anything. When I post a chart, the point in question is not even the specific stock under discussion but the conceptual learning that a beginner can get. In fact the only reason I disclose the name of the stock while putting the chart so that beginners can open it in their systems and see it from different angles. The idea is to show you what do I see when I see a price chart. The idea is to show you how do I change my mind if I need to, the idea is to show you how to see and think. Devendra Srivastava Hi Nishant, I wish to learn Technical chart analysis, specially candle chart. Please suggest me some good url/pdf/blog. Thanks.. Nishant Arora. This is how you should tread the path. Firstly read "Technical Analysis of Financial Markets by John J. Murphy ." This book will be a primer for Technical Analysis and would set your basics right . Once this is done, then follow up with " Japanese Candlesticks Charting Techniques by Steve Nison ", this book will make you a candlestick expert . Then move on to "Trading for a living by Dr. Alexander Elder ", this book will develop a perspective towards trading in practical manner . Then follow up with "The Disciplined Trader by Mark Douglas ". This book will be an eye opener for you as it will present every single emotion that a beginner goes through and how it can affect the trading and how to resolve it. This book sets you on the path to becoming a full fledged trader . Once, you are done with these 4 books, then I suggest you read some biographical work of the greatest traders like " Market Wizards by Jack Schwager", "Pit Bull by Marty Schwartz " and "Reminiscences of a Stock Operator by Edwin Lefèvre ". These 3 books will give you an insight into how great traders think and when you'd read that with a background of knowledge you have gained by reading above 4 books, it will do wonders for you. If you can truly finish these 7 books, I promise you, you would be in top 10% traders. It seems a big statement but it isn't. But the crux is, if you can TRULY understand and implement.
Pankaj Agarwalla May 12 at 12:11am
Apart from the suggested 10 books on technical analysis by Nishant Arora, can I get additional suggestions? Especially books that focus on technical aspects of trading much like few chapters in "Trading for a living". If not the entire book even if few chapters are dedicated to it I would glad to read it. Nishant Arora As for the books, if you are done with the 10 given in the list, I'd tell you few more but you know these 10 are enough to gauge things like how to trade patterns and all. I mean, once you are done with those 10, it is just the practice that matters and deep thought about everything. However, if you want to read something about trade management, read Definite Guide to Position sizing by Van Tharp. As for patterns and gaps, I feel Murphy, Pring, Bulkowski are more than enough. Read Trading Tools & Tactics by Greg Capra too. You can also read Technical Analysis for the Trading Professional by Constance M. Brown. Back to Index
WHY STOCK PRICES MOVE? Nishant Arora August 14, 2017 Ask anyone that why price of a stock rises, and you are bound to get an answer that price rises because there is more buying than selling. Similarly ask anyone that why price of a stock falls, and you will most probably get an answer that prices fall because there is more selling than buying. Nothing can be farther from the truth !!!
This is a common misconception among market participants. It is to note that number of shares bought will always equal to numbers of share sold. Similarly, number of long positions in a futures will always be equal to number of short positions. So, if number of shares bought will always equal to number of shares sold, then what moves the price? Please note, that though I have said that number of shares bought will always be equal to number of shares sold but I have not implied that number of buyers will always be equal to number of sellers. And, due to difference in number of buyers and number of sellers, the intensity among buyers and sellers changes which moves the price. Let us understand this with the help of an example: You go to buy marketplace to buy 2 Kg apples. On reaching there, you find out that you are the only buyer of apples in the whole market. Let us assume that there are 10 different apple vendors in the market standing next to each other. You go to the first vendor and inquire the price. He quotes you Rs 150/- per Kg. But since there are no buyers around and vendors are already in desperation, the nearby vendor shouts out the quote of Rs 120/- per Kg. You go to another vendor and negotiate and he gets ready to sell you apples at Rs 100/- per Kg. Now, consider another scenario. On reaching the marketplace, you find out that the market is filled with hundreds of apple buyers and each apple vendor is busy entertaining bulk of customers. You go to a vendor and inquire the price. He quotes you Rs 150/- per Kg. You try to negotiate but he denies and says that you are free to go to another vendor. You go to next vendor and he quotes you Rs 165/- per Kg. By the time, you end up inquiring the prices from different vendors, the apples
fall short in supply and most of them are already sold out. Now, you go to the first vendor thinking that he offered a better price but this time, he quotes you Rs 175/- per Kg. Now, let's analyse both the cases. In the first case, since you were the only buyer, you were in a dominating position and the vendors were desperate and hence you could haggle for prices and get the price you want. In the second case, since the total demand of apples exceeded the total availability of apples, the vendors were asking for their wishful prices. Note, that the apples bought by you in both the cases were same in quantity and of course the number of apples you bought would be equal to the number of apples that the vendor sold to you. So, despite the number of apples bought and sold being same, the price moved due to the change in your feelings and the feelings of the vendors. I'm sure you'd already be figuring out the the corresponding scenarios in stock market context. While discussing the application of the above principle, I'll take both the scenarios separately so that a comprehensive picture can be presented. Before I get onto the respective cases of price rise and price fall, it would be prudent to mention that in place of apple buyer(you) and apple vendors, now I will talk about “Bulls” and “Bears”. Bulls are those market participants who think that the price will rise. Bears are those
market participants who feel that the price will fall. It is the tug of war between these bulls and bears that move the price. Now, let us understand the underlying psychology behind both the rise and fall in the prices. 1. The case of price rise
Prices rise when bulls feel greedy and bears feel fearful. Bulls get so greedy that they are ready to buy above the market price and bears get so cautious that they only sell above the market price. Thus price keeps on increasing. The rally in prices turns sharper when bears run for covering their short positions or even turn into bulls and in panic, are ready to buy at any price(even above the market price). This causes price to rise further. Remember, rallies caused by panic buying and short covering are sharper because they are not caused by greed of the bulls but by fear of the bears and fear is a stronger emotion than greed. Bulls feel rewarded and bears feel punished. The rally ends when bulls get cautious and lose their enthusiasm and refuse to buy above the market price and then a major sell order enters the market and there aren't enough buyers and price slides. The bulls get a shock which plants the first seeds of price reversal. Now, even if the price rises again and reaches a new high, the bears feel bolder and bulls feel cautious of this new high. This lack of optimism in the dominant group (bulls) and abundance of enthusiasm among the losing group (bears) create a pattern called bearish divergence where price makes a higher high but the indicator makes a lower high depicting a change in momentum. 2. The case of price fall
Prices fall when bears feel greedy and bulls feel fearful. Bears get so greedy that they are ready to short below the market price and bulls get so cautious that they only buy below the market price. Thus price keeps on falling. The fall turns sharper when bulls run for selling their positions in panic (even below the market price) or even turn into bears. Remember, the fall caused by panic selling is more sharp because it is not caused by greed of bears but by fear of bulls and fear is a stronger emotion than greed. Bears feel rewarded and bulls feel punished. The decline ends when bears get cautious and lose their enthusiasm. and refuse to sell below the market price and then a major buy order enters the market and soaks all sell orders and price rises. The bears get a shock which plants the seeds of price reversal. Now, even if the price falls again and reaches a new low, the bulls feel bolder and bears feel cautious of this new low. This lack of optimism in the dominant group(bears) and abundance of enthusiasm among the losing
group(bulls) create a pattern called bullish divergence where price makes a lower low but the indicator makes a higher low depicting a change in momentum. I am sure, by now you would have understood that prices are moved solely by emotions of bulls and bears and nothing else. The bottom-line is that price increases due to greed of bulls and fear of bears. And, price falls due to greed of bears and fear of bulls. The role of a technical analyst is to study greed and fear on the chart without getting greedy or fearful. Every bar/candle depicts balance of power between bulls and bears. A smart technician studies the underlying psychology of the market and the decided whether he would wear the hat of a bull or a bear or would stay away from the market at all. Relationship of Price and Volume
Today, I got a query from Manu Raj regarding relationship of price and volume. But I thought that the reply has to cover a lot of ground hence it would be better to do it as a separate post. So, here it is. Price tells you the level at which people want to buy/sell. Volume tells you the urgency with which they want to buy/sell. Case-1
If price is rising, it means than the buyers are very optimistic and are ready to pay even higher than CMP and the sellers are ready to sell only at a price higher than CMP. Case-2
If price is falling, it means than the sellers are very optimistic and are ready to sell for even lower than CMP and buyers are ready to buy only at a price lower than CMP. Now, add volumes to this situation, as I said volume represents the urgency. In Case-1, if there is a surge in volume, of course, the urgency of buyers to buy higher is more which shows bullishness. It shows that more and more people want to get into the train at whatever cost. But if there is a fall in volume, then we may count the move as powerless as there is not enough gas in the tank to support the speed of the car. In Case-2, if there is a surge in volume, the urgency of sellers to sell lower is more which shows bearishness. It shows that more and more people want to get out of the stock at whatever cost. But if there is a fall in volume, then this who downmove might now sustain. So, we might say that volume should support the price move: 1. Thus, if price rise is with rising volumes, it is bullish. 2. If price rise is with falling volumes, it is weakening of bullishness.
3. If price fall is with rising volumes, it is bearish. 4. If price fall is with falling volumes, it is weakening of bearishness. Exceptions to Point 1 & 3: 1. High volumes on a price rise in bullish when the move is a breakout move out of a consolidation and not when up move has been present for a long time. In that case, a sudden surge of volume may mean exhaustion of all potential bulls. Think of it as this, an up-move has been in effect for a long time. Several bulls who couldn't buy when the move started (breakout) wait for a correction to buy in but the correction doesn't come. Finally, they get tired of waiting and don't want to feel pain of regret to see the stock going up without them. And out of this emotion, they put in buy order. This sudden surge in volumes give a wonderful opportunity to those who bought earlier, to liquidate. And finally all buy order are filled. Now imagine, there are no bulls left to bid the price higher. That is called exhaustion and generally comes through a good sized green candle with a good sized upper shadow on high volume. 2. High volumes on a price fall is bearish when the move is a breakdown move out of a consolidation and not when down move has been present for a long time. In that case, a sudden surge of volume may mean exhaustion of all potential bears. Think of it as this, a down-move has been in effect for a long time. Several bears who couldn't sell-in when the move started (breakdown) wait for a bounce to sell but the correction bounce doesn't come. Finally, they get tired of waiting and don't want to feel pain of regret to see the stock going down without they selling the stock. And out of this emotion, they put in sell order. This sudden surge in volumes give a wonderful opportunity to those investors who wish to buy but were not getting the supply. And finally all sell order are filled. Now imagine, there are no bears left to move the price lower. That is called exhaustion and generally comes through a good sized red candle with a good sized lower shadow on high volume. The whole concept of buying and selling has different meaning is context of stocks and an futures. In cash, buying is done by BUYERS. In Futures, buying is done by LONG PLAYERS & SHORT COVERING PLAYERS. In cash, selling is done by SELLERS. In Futures, selling is done by SHORT PLAYERS & LONG UNWINDING PLAYERS Thus, in Futures, if the price is rising on a higher volume, it can mean two things; either LONG PLAYERS are dominating or SHORT COVERING PLAYERS are dominating, as both of them are BUYERS. And if, price is falling on a higher volume, it can mean two things; either the SHORT PLAYERS are dominating or LONG UNWINDING PLAYERS are dominating as both are SELLERS. Now, this is gauged through OI. So, if price is rising on high volume with a rising OI, it means LONG PLAYERS are dominating.
If price is rising on a high volume with a falling OI, it means SHORT COVERING PLAYERS are dominating. If price is falling on high volume with a rising OI, it means SHORT PLAYERS are dominating. If price is falling on high volume with a falling OI, it means LONG UNWINDING PLAYERS are dominating. Obviously, LONG CREATION is more bullish than SHORT COVERING, though both mean BUYING. Simple reason is that LONG CREATING means INCREASE IN PRESSURE OF BULLS. While, SHORT COVERING means DECREASE IN PRESSURE OF BEARS. Similarly, SHORT CREATION is more bearish than LONG UNWINDING, though both mean SELLING. Simple reason is that SHORT CREATION means INCREASE IN PRESSURE OF BEARS. While, LONG UNWINDING means DECREASE IN PRESSURE OF BULLS. Now you may ask, if both LONG CREATION & SHORT COVERING are leading to a price rise, why is LONG CREATION more bullish? Similarly, if both SHORT CREATION & LONG UNWINDING are leading to a price fall, why is SHORT CREATION more bearish? Let's understand the above two paragraphs with an example: If BULLS are batting side and BEARS are bowling side: 1. LONG CREATION means runs are being scored because BATSMEN ARE PLAYING WELL. 2. SHORT COVERING means runs are being scored because BOWLERS & FIELDERS ARE PLAYING BAD. 3. SHORT CREATION means runs are not being made because BOWLING SIDE IS PLAYING WELL. 4. LONG UNWINDING means runs are not being made because BATTING SIDE IS WEAK. Now, you tell me, in first 2 cases, though runs are being scored in both the cases, but point 1 will always be more powerful than point 2. As the true win of BATTING SIDE (BULLS) will be considered when they perform well (LONG CREATION) and not when the rise in runs (Price Rise) is due to BOWLING SIDE performing bad (SHORT COVERING). Similarly in last 2 cases, though runs are not being scored in both the cases, but point 3 will always be more powerful than point 4. As the true win of BOWLING SIDE (BEARS) will be considered when they perform well (SHORT CREATION) and not when the low score (Price Fall) is due to BATTING SIDE (BULLS) performing bad (LONG UNWINDING). So, as you can see, volume and price have different dimensions. And the dimension becomes wider in case of derivatives. Hope it helps.
Note: You won't get training of this intensity and detail even in seminars worth 50k plus GST. Back to Index
BEGINNER BEHAVIOUR Nishant Arora May 8, 2018
So many beginner traders, even some old ones, rely upon the calls of TV analysts. They look at TV anchors & analysts as their friends & well-wishers. Some wish to befriend them, talk to them and become so vulnerable while listening to them. I've seen some retailers almost doing boot-licking in anticipation of getting some great investment/trading idea. Well, it's an activity in vain. It just takes some common sense to understand the irony of this indulgence. Just think, they are all part of one industry, be it analysts, anchors or brokers. They are all doing a "job" in their respective companies. And like all people who do a job in a common industry, they all have a belonging & loyalty towards each other which is very natural and there is no problem in that. I mean if you are sales manager in a car showroom, it is but natural that you would develop friendships with a lot of people from automobile industry. You would attend events together, have drinks together and so on. You belong together. There is no harm in that. But one has to understand the implications. So, this TV brigade wines & dines with corporate bosses, institutions, HNIs, brokerage houses, analysts and so on. They are all ONE. They work together, play together, laugh together, attend events together, go on holidays together and they belong together. Isn't it logical that it's their interest that they're gonna put first? Why on earth would they care about you? Who are you, I ask? It is US against THEM. And yet, so many people look at them as some kind of a "Messiah" and run after them with their umbilical cords in their hands. Drop this thinking before it's too late. You are the captain of your own ship. You are responsible for your financial growth and freedom. You have to work towards it. And the only way to do that is self education. Actually this industry knows that you are lazy, vulnerable yet greedy and that is why they push all the right buttons. I am surprised that some TV anchors talk about Nifty levels and people think they are teaching. In fact, their image is that of a guide. Anyway, this doesn't work like this. Stop fooling yourself and stop getting fooled too. Take control in your hands if you wish to achieve something in this field. Dhananjay Chaudhari Nishant Arora Sir can you name any best book on price action you'll recommend us? I would like to read. Nishant Arora. Dhananjay Chaudhari, read books by Greg Capra and Al Brooks . Al Brooks is little difficult. Read Trading tools and tactics by Greg Capra . It will give you a good understanding of seeing price . Make sure you know candlesticks in and out before you read that. Prabh Singh Bhatia People who have formed habit of listening to these commentators,its extremely difficult to change their attitude against so called "Messiah".Their audience comprise of people from all ages hence its very difficult for many of the spectators to educate themselves and start fresh learning by unlearning first.There are rare gems who makes such self realization and for that passion hard work and never-die attitude is needed. So whatever effort you/we put,trading is not every Tom-Dick and Harry job and hence easiest way for these Messiah to earn money is to locate easy people who can fall on their laps for tips and tricks whichever so easy to locate for quick money.
Nishant Arora. True, but we'll still keep on putting efforts. Tfs Faisal January 2, 2018
Many wannabe traders enter the stock market with the expectation of getting rich quick without applying any dedication or going thru any sacrifice or struggle to learn the trade. Leading to broken dreams and utter failuire. Nishant Arora Most wannabe traders think of trading as a gateway to freedom. One of the biggest causes of this psychology is the misguidance by several mentors. Let me give you an example. Take a 21 year old boy with no experience of real world & it's struggles. Some stupid trainers or internet or some friends convinced him that he could live the life of a king by doing trading and that too, with little capital. And the path to make millions from negligible capital is, Options Trading or some other strategy. Now, the problem is that our 21 year old will never have a business like approach towards trading, though he will tell you that trading should be taken as a business. He will say that because he has read that in the books or articles. But the truth is that he will never be able to take trading as a business, because he does not know what a business is. Neither has he worked in someone's business nor have he done some business himself. He does not know what a business means or what it takes to run a business. Let me give you a small litmus test to check it. If you ask a young wannabe trader whether he'd be interested in doing some REAL BUSINESS, he won't be interested. The simple reason would be that he does not know that business and moreover he feels that a real business is difficult. But he feels that trading is easy as it would involve no interaction with any supplier, buyer, competition and so on. This is his biggest illusion. Trading is as difficult rather more difficult that a REAL PHYSICAL BUSINESS. I mean what are the chances of you opening a confectionery shop and going bankrupt? But there are 100% chances of you starting to trade and going bust. Moreover, trading is like any other business. Just as in real business, we buy and sell things and we have to make sure that our buying cost plus other expenses must be well below our selling price, similarly in trading. But in real business, you have a lot of control over physical things. You can negotiate with your suppliers, buyers and so on. You can see your supplier or customer and judge what kind of a person he is and design your strategy accordingly but in virtual share trading, you do not have that luxury. Here, you can get bankrupt for the reasons completely outside your control and completely unknown to you. These things make trading all the more difficult than a real business but ask a newbie and he thinks that a real business is more difficult and that is why he does not want to get into that but all the more ready to become a star trader. So, I feel, one must have a business approach towards trading and to get that one must first know what is a business. So, at least 8-10 years of outside exposure is must. It can be in any field but if it can be in stock market then all the more good. I mean look at anyone who made it big, they all share this common attribute. Paul Tudor Jones did not become a trader just out of the blue. He got an undergraduate degree in economics from University of Virginia in 1976 In 1976. Then started working on the trading floors as a clerk and then became a broker for E. F. Hutton & Co. Then worked as a floor trader with commodity broker Eli Tullis. After that rich experience of REAL WORLD, he became an independent trader. Floor trading is a hardcore real business. You meet 100s of people everyday, get to know the real game behind your screens. Look at Marty Schwartz, worked as an analyst for 9 years before becoming
an independent trader, travelling from city to city meeting businesses and making reports about them. Look at Michael Marcus, He graduated in 1969 Phi Beta Kappa from Johns Hopkins and studied Psychology at Clark University. Worked for several years, more than a decade, with different firms as floor trader, broker, market maker and so on, before getting independent. Look at Bruce Kovner. He went to Harvard College in 1962 for studying political economy. Then went to John F. Kennedy School. Over the next few years, he engaged in a number of eclectic efforts; he worked on political campaigns, became a professor and was also a writer. Being a hardcore economics and political science guy, he discovered commodities trading and worked for several years in Commodity Corporation under tutelage of Michael Marcus. Then, after having first hand experience, did he start on his own. Even look at Jesse Livermore. Started at the age of 14 due to lack of education. Started as a quote boy in bucket shops (unorganized trading shops). Look at the kind o f first hand experience he got of trading. So, a beginner and especially young beginners have to understand that trading is not an ESCAPE ROUTE. It is a hardcore business and a very tough one. Suhas Dange Trading now days is so nearby because of "Dunia meri mutthime {smart phone and 4g }", Watch some attractive youtube clips on trading and get into it. I have seen depressions, suicidal behaviours after losing all from pocket and available funds. Recommendations from authorised is on papers and there are lot many paid 100% guaranteed tips services available . Only TFS is here for guiding properly and those are really lucky who came in and remained in. Nishant Arora Suhas Ji, you made a wonderful point here. It's not just about trading. Kids are becoming so complacent and suffering from a dangerous disease of INSTANT GRATIFICATION. Whatever they want, they want it NOW. It starts with home. Firstly when young, parents fulfill their demands, good or bad. Then advertisements hypnotize them that they can get what they want, be it fair skin or a gadget, just like that. All this program the mind into believing that we can get what we want just by WANTING. But then after studies, the real life comes, lots of dreams are thrashed. One gets to know that no one is out there to fulfill his desires or wants. This brings depression. Then there are other emotions like greed, envy which depress a person further. He wants to be wealthy one day but still gives more priority to that EUROPE TRIP because his colleague went with his wife. And then on top of it, EMIs depress him further. He gets into habit of spending before earning (Credit Cards). All this stress make him wait for weekends so that he can go to a bar and have drinks to forget this mess. So, when this guy gets to know that one can make millions in trading and that one can get rid of his job and work from home, he further gets delusional. On top of it, we have trading coaches, who post their pictures trading from a beach, which further hypnotizes the beginner and he starts looking at trading as his gateway to freedom. But soon he finds failure here too. Then he finds ways to be successful and he lands in the laps of salesmen, selling trading strategies, systems, algos and so on. By the time, he comes to his senses, he has lost a lot of money and back to square one. Then he decides that he will not trade because it is gambling. So, overall mentality is polluted and can't be solved by just getting some MACD or Candlesticks strategy and so on. One needs to have deep thoughts about one's own self and ambitions and perceptions and then resolve the knots that have been built over the years. This is what I feel. Back to Index
MARKET REWARDS Nishant Arora February 15, 2018 Market is the most demanding teacher. It demands utmost discipline & hard-work. If we don't put the effort, it punishes severely. But if we do, it rewards us pretty well too. Took these two trades just before yesterday's close and closed both at the open. No greed no fear. No thoughts that I might make more if I wait. YOU CAN DO IT TOO. Well, buy and read all the books I tell you to. No other way or may be get into one of those HIDDEN GEMS group. Note: No further trades now. Day over, back to books. Remember most traders ruin their profits during the day just because they can't sit idle. So, when you make something in the first few minutes or an hour, LEARN TO SIT ON YOUR HANDS.
Elango Murugesan Can u plz explain why u taken this trade as btst? Nishant Arora Every fierce move has a follow-up. PNB was taken due to this reason. It had to follow up with a fierce down move today as so many people were left out yesterday to make money. As for Infibeam, I have been playing to for a long long time as you can check the posts. Moreover, reason for playing infibeam as BTST was the results were declared yesterday Aanant Lad How you caught pnb yesterday? Nishant Arora It was a simple call. You can call it a follow-up trade. See, the scam broke out yesterday. However, the big money managed to hold the stock. OI rose considerably showing that shorts were built up. Now what happens that amateurs listen to news, read newspapers and then short the open, that is why we get gap downs. so that was the trade, Short before close and cover at the open. All the big players shorted yesterday and today, when all the amateurs shorted the open, professionals covered their yesterday's shorts. You can see that in 10 minute chart. Price gapped down but after first 10 minutes, price rose for 40 minutes. That was short covering of people like me. Then for 3 hours price remained flat. Because, again people like me were accumulating shorts and holding the price to fall. Then finally price broke down again in last one and a half hours. That's pure psychology. Nishant Arora Dreams should be converted into goals which should be converted into deadlines. And all this must be supported by framework of reality
Devesh Chauhan I just wanted to know how would Nishant read this 'candle formation' in Infibeam that formed today Nishant Arora I'd make fresh longs only after breach of this high. Devesh Chauhan Not a shorting oppo tomorrow ? Since the price closed with a big upper wick showing selling pressure Nishant Arora Shorting with RSI above 60 is a bad idea. Nishant Arora Hard to differentiate between selling pressure or LACK OF BUYING pressure. Nishant Arora Moreover, have you seen that OI fell by nearly 13 lac shares? Devesh Chauhan Lack of Buying, wow, so lack of buying means buying might come in coming period, even if there is no buying now. A wick doesn't necessarily form just because sellers want to take sell positions, it can also form after a sharp movement, if there was no follow up buying. Is this what it means bro ? (I'm going to start reading anything available on OI right away) Nishant Arora That's what I am saying. OI reducing with rising price means price rose because contracts were dissolved and not because they were created. But even in dissolution, the buying side dominated. Now, who is the buying side in dissolution of contracts? Those who are covering shorts. They are also buying in a way. So today, even though buyers didn't show much enthusiasm, sellers covered their shorts. Devesh Chauhan I remember that OI post, I'll look for it. Didn't think about trend direction until few weeks ago :p I understand how direction on bigger TF helps in trading, but didn't connect OI with cash trading. I see the need to know it now Devesh Chauhan Until now wick of the reversal formations were telling things, but the change in OI is telling far more in detail. Next day chart
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Price Action Perspective Nishant Arora November 20, 2017
Prathamesh Bobade So what should we like at ? Line chart ? Nishant Arora Line chart is just shown to simplify the price action buddy. The point is not line chart. The point is lower time frame. I could not have created price action using multiple candles given the space to make the picture. Line chart or not is irrelevant. What I intend to show is that a candle has 4 points, OHLC. So, O is fixed but there can be infinite possible moves to create the same H, L and C. So, though OHLC will remain same but the whole interpretation would be different. what you should understand is this, the two candles might look exactly the same but may have completely different interpretations. based upon its lower frame price action. Prathamesh Bobade Got it now, the point is now clear. Basically it shows me how this candle is acting and gives me a probability on where it might move. But I have a question here : How many of us really see this ? Nishant Arora Why should we care? Nishant Arora So, the meaning of this picture is not that one must use line chart. The candle shown is a in specific time frame and all the 5 price actions are lower frame formation of that candle. If you'd choose the line chart for the same time frame as the candle, you will just get a DOT. Prathamesh Bobade Because it's a fairly time consuming one.
Nishant Arora It's not. I do it in less then 5 minutes per stock. Nishant Arora let me give you a simple example. Given below is OHLC of a daily candle. O- 100, H-118, L- 88, C-110 Now, I'll give you two scenarios: Scenario-1: Price OPENED at 100 then made a low of 88 and then zoomed to 118 and closed at 110. Scenario-2: Price OPENED at 100 then made a high of 118, fell to make a low of 88 and then closed at 110. Will the interpretations of both the scenarios be same? No, in the first case price opened and then made a quick low showing the reaction of amateurs but then professionals took over and brought it higher to 118 but then due to profit booking price fell and closed at 110. This price action is BULLISH. Here price made a high and due to profit booking it closed a little lower. In the second case, price opened and then the euphoria of amateurs took it to 118 but it could not sustain at the high and then it started falling and touched a low of 88. Then somehow it recovered near the end of the day and closed at 110. It is NOT THAT BULLISH RATHER DOUBTFUL. Here price made a low and recovered to close higher. Now, see, though daily candle is same in both cases but price action during the day is completely different. And it is that price action which made first case very bullish and second case doubtful. Nishant Arora Between Open and Close, thousands of possibilities are there. Thus, we can not just see the candle and decide the sentiment. We need to see the story between OPEN and CLOSE. That's the point. And as I said, 20 different stories can make the same candle but they all may have different meanings. Devaraj Rangasamy rather than a single candle, the price action of that candle gives more hint on direction of next candle. is this inference right Nishant bro? Nishant Arora Yes, so how that candle is made is more important that what the candle is. The same candle can be bullish or bearish or somewhere in between. Devaraj Rangasamy true.. a green candle might also be totally bearish.. say huge volume might be offloaded from high to close transition.. Nishant Arora True. It holds a lot of value to know whether price first made it's low or it's high, did it close higher after making a low or closed lower after making a high. See the point of this post is to encourage
critical thinking among newcomers. It is to tell them that nothing can be and should be taken at face value. There is no tool like critical thought. Nishant Arora As I always say, there are trends within trends within trends. You must always be clear as to which part of that trend are you trying to trade. A trend on a frame is a range on some other frame and vice versa. That is why I do not believe in taking or giving suggestion on specific stock charts. There is no point. No two people can ever be on the same page when it comes to trading. Back to Index
PRICE DISCOUNTS EVERYTHING Nishant Arora August 17, 2017 Price Discounts Everything- Even Results
There are lots of people who trade stocks based on news and financial results. And they get severely confused and even disappointed when stock price roars despite a bad result/bad news or worse, it falls despite a wonderful result/good news. Today's article depicts how trading based on news and results is a hopeless, dangerous and a loser's game. In India, companies are required to report their quarterly earnings to its shareholders. So, in every three months' time, we are faced with a plethora of companies coming out with their quarterly results. So, most traders buy if results are good and if results are disappointing, they sell. On the face of it, it appears completely logical but let me tell you, it is far from being logical. Let me show you a recent real life scenario which defied the logic of buying on good results:
Mahanagar Gas Limited (MGL), announced it's Q1 2017-18 results on 9th August 2017. The result was terrific yet the stock fell like there's no tomorrow.’
Here are the key highlights of the result:
As can be seen that results were by no means 'bad'. Now, let's see how the stock price behaved:
As you can see, the stock took a beating of nearly 7% on " good results". And had someone bought in futures, he would be cursing himself because lot size of one contract of MGL is 600 shares. So with every one rupee decline in the stock price, a futures buyer would have suffered Rs 600/- loss per lot. To put it into perspective, had someone bought in 1 lot of MGL futures contract at the 9th August close price of Rs
1035.50/-, the moment stock price opened on 10th August, he would have suffered a loss of Rs 12,000/per lot and had he kept it till closing of the day, the loss would have increased to Rs 41,820/- per lot. So, what happened actually?
To understand this peculiarity, let us first understand discounting. You must have all heard the phrase, “Price Discounts Everything" . Some of you would have understood it but some of you would still have
trouble understanding this concept. If that is the case, I wrote this post for you. I have always observed and experienced that, "Price Precedes Fundamentals" or in other words "Technical precedes fundamental" . I know this sounds strange but I'm sure that once you'd think hard enough, you'd agree. Now let me explain the concept. As you'd agree that every happening in the world on all the fronts, economical, social, political, financial and so on is instantly available to everybody and there is no delay in action based upon the information. With the advent of internet and global broadcasting systems, information flows faster than the speed of light so everything that can be KNOWN about a company and its business, becomes immediately known to everybody. So, if you have a news about the result or any happening about the company, you are at NO ADVANTAGE over other market participants as everyone would have the same news as you. In fact, big institutional investors and so called “BIG MONEY HOLDERS” get the information before general public so they take action even before a general investor gets the news. So, before you realize, the information gets INTO THE PRICE. But another thing to note is that w hen everything, that is known, is already in the price then “why is price moving” ? This is a key question. And the answer is, that price is moving due to "unknown fundamentals"
. And by the time the unknown fundamentals become known in the form of some news or report, its too late to act because the price move is already over. The reason is that, in the world and markets, there are always some people and groups who know the information before it becomes the news and it is these people who move the price much before the fundamentals become known to general public. Most of you must have seen the price moving sharply in a direction without any evident cause. And by the time the cause becomes evident, the price move is already over. Now, you'd say that how can these big institutions know the result before the company reports it. Of course, they don't. Becoming party to results or other public information before it is publicly reported is a punishable crime. But remember, they have far more knowledge and resources than an average retail investor (YOU). Their research and analysis is so vast that a retail investor can't even imagine the depth of it. Let me give you a peep into the workings of a big fund house. Imagine having 20 separate teams of financial experts with each team having 10 team members. So, all in all, a grand team of 200 research analysts. Further, each team is dedicated to a specific sector. So, 20 teams focusing on 20 different sectors exclusively. So, one team's job would be to just analyse textile sector and companies in it while the other team's job would be to know everything that is happening in automobile sector and companies in it and so on. And further, within a team, analysts are divided as buy side analysts and sell side analysts. These sector specific teams work day in and day out dissecting every news, financial happening, government policies and everything that is affecting their dedicated sector and it's companies. Further, they work closely with management of the companies that they are following. Plus, they put all their efforts in analyzing decades of past financial data of the companies that they are following and extrapolate that data too far into the future. So, if a fund-house is following Tata Motors, it would already have drawn
profit and loss account, balance-sheet and its cash flow for future quarters and future years based on its in-depth analysis of the past data and future plans of the company. And, it will take positions before the actual result, as they already have a full blown estimate as to what the result would be like. So, in a manner of saying, they 'know' the results before it comes out and before you lay your eyes on it. Now, you may ask, "Fine, they have big teams to analyse companies and sectors and they take positions well before the event (result in this case) but why does the stock price fall on good results?" Let me explain !!!
Let's continue the example of MGL itself to understand this. So, I explained earlier that how the price of MGL took a 6.7% dive on good results. But, what is the logic behind the fall? See, the institutional investors interested in MGL would already have anticipated a good result. They would already have calculated all the numbers through their deep analysis. They'd also know that since result would be good, everyone (retail traders) would rush to buy so there would be great demand for the stock one day before the result (most retail traders would want to buy the stock one day before so that they can enjoy the gap up opening next day post good result). So, if everyone would rush to buy based on good results, who will sell to these institutional investors? And if there would be no one to sell, how would the institutional investors buy and as such they generally buy huge quantities. So what they do is that they make positions much before the result as they already have a good idea of the result. Now, they'd buy when no one would notice and then gradually, they'd take the price to a peak before the result and just before the result when the retail traders rush to buy the stock, these institutional investors dump the stock causing a big fall. See, it's simple demand-supply economics. They collect over a period of weeks as they already 'know' the result and then they dump when the actual event happens. Now, let me show you MGL chart again and you would see the whole theory being applied in real life:
So, now you can clearly see that how the price was kept in a range for a long time so that big hands could accumulate the stock much before the result as they had already anticipated a wonderful result. And you can also see that the rise which retail traders thought of as random was not actually random. It was due to “good anticipated results” . And when the “actual good results” came, the price took a nosedive due to
dumping (profit booking) of the big hands. And the proof of this theory becomes evident when the price again rose to the same level as it was on the result day, just within 4 sessions of making a drastic low. To a fundamental investor (retail), it would be a confusing move, because he would have anticipated prices to rise on a good result. But to a technical trader, the whole picture would have been clear as glass (I am one of them). So, fundamentally, there is no explanation for a rise before the result, the fall after the result and the recovery from thereon. You see, nothing changed fundamentally in the company when the price took a beating from a high of 1089.25/- to a low of 922.90/- in just 2 days. And, nothing changed fundamentally in last four days when price recovered from a low of 922.90/- to 1035.45/- (today's close). You may feel that under such complex circumstances, a retail investor or trader does not stand a chance. No, it is not that way. Just that, he needs to align his thoughts with reality. To become a successful trader or investor, you have to understand what Howard Marks (a legendary v alue investor) call, “Multi -Level Thinking" . To explain this concept, let us take an example of MGL result itself. First level thinking would include anticipating that company will post good results so share price will rise (this is how most retailers think). Second level thinking would include thinking that how people would be thinking about the results and what actions they would take. Third level thinking would include thinking that what people would be thinking of other people's thinking. You're getting my point? So, great investors and traders indulge in second level and third level thinking while retailers confine themselves to first level thinking. But, how to apply this in real life? That is where technical analysis come into play. Since it is focused on analyzing price action, it catches the price movements before the cause of movement becomes evident. While a fundamentalist always wants to find out the causes of price movements, a technician never thinks about the cause and always focuses only on the effects. As I earlier explained that most of the times, there are no evident causes of price movement. There was no evident cause for price to rise before results, there was no evident cause for price to fall on results and there was no evident cause for price to recover post the fall. So, it is better to detach yourself from the causes and put all your energy in looking at effects. Now, let's see, how could you figure out the whole game before it was even played. Since the institutional investors figured out the results beforehand and started making positions, the same could be easily seen in the charts. You would ask but price was being kept in a range, so how would one have anticipated the upcoming rise? See this:
Bottom-line:
The stock prices do not move due to fundamentals. They move due to people's perception and anticipation of the fundamentals. So, there is no point taking actions once the news is out. By the time fundamentals come into public's eye, the price move is already over. In fact, a trader must refrain trading on result day as a lot of unpredictable volatility can happen. A prudent trader would always make his money before the news/result comes out. So, the best way to judge people's perceptions and actions regardless of any cause, is technical analysis. I hope, you'd have grasped the concepts that I tried to explain in this post and enjoyed learning at the same time. I'd end this post by saying this: If you are reading it in newspaper or watching it on T V, you are the last one to know it. Back to Index
CHART ANALYSIS Nishant Arora February 14, 2018 If it ain't simple, it ain't worth a look. Jubilant day-trade description.
Chaitanya Mone I didn't get how you spot D point.. Because previous 2 candles looks higher and bigger. Nishant Arora D is a cluster high.
Hope this will help you. Bharat Sisode Kindly shed some light on stock selection in intraday.. Generally we come to know for such opportunity after market hour. Nishant Arora You must sense opportunities a day before brother. I am onto Jubilant for last several days, playing it almost everyday. In fact posted the charts on muti time-frames on 12th Feb. It's about seeing as many charts every evening and selecting the stocks which can give immediate moves. Then wait for the market to give you signal next day by OI/volume etc. and make the move as decided. Execution must be decided during the market, selection is decided before market.
Nishant Arora My screening happens on EOD basis only, on weekly, daily and hourly charts. The stocks come in my screening from multiple lists like day's gainers/losers, OI/Volume spikes and any stock that I've been following previously. So, let's say I see 100 charts every evening. Out of 100 stocks that I see on daily basis, let's say 30 come in my radar. It means that either they are in the trading zone or they are reaching the entry point. Once I'd do that, I write down my preferred limit entry prices and stops. Now, out of those 30, there may be 10 which are in trading territory currently. So, those enter into my next day to-do list. Also, I keep a segregated list of swing positions and intraday positions. Basically, my intraday trades are existing positions in my to do list which have the highest change in day's OI/Volume. So, which trade will be an intraday trade is decided on the very day itself but which stocks are in my trading list are decided a day before. Moreover, I keep a track of all Futures stock on almost daily basis and keep a manual list as to which are in potential trading zone, which are in immediate trading zone and which are in no trading zone. Then immediate trading zone stocks are divided into swings and day trade opportunities. So, as you can understand, I am a manual scavenger Rinku Singh how do you do screening incase you share step by step that will be very helpful Nishant Arora I think analysis is a subjective matter. All I can say is that I see 150-200 charts but what I see in them is something very subjective. That is the analysis part. And I don't use any complex methods. My analysis comprises of basic price structure analysis to understand the domination of bulls and bears. Nishant Arora February 15, 2018 Chennai Petroleum Daily Chart
Gopalakrishnan Narasimhan There are 100s companies. How do you monitor all the charts. Is there a tool which will trigger you when there is interesting change in one of them , say a small cap unknown company activity like bought out by someone else etc .
Nishant Arora I only trade in large cap futures. That's just 200+ companies. I see all the charts everyday post market and have lists as to which are in immediate trading territory and which are in potential trading territory and which are in no trading zone. And there are never more than 20-25 stocks in trading territory. Out of that only 10-12 are in immediate trading territory. And I write entry and stop prices a night before. It is sheer hard work. So many people ask me this question in search of some short-cut answer. The truth is that I have never ever used a screener. You won't believe, I get this question at least 5 times everyday from different people. But I am so short of answer. I am never able to satisfy the query because all I do is just hard work but that is generally not what the person on the other end of the question likes to hear. Roshan Parveez Nishant sir jee..what is the best time frame to see a chart..i usually do it in 15 minutes for my intra day trades. But most of the times I either exit early or get messed up trade. Which book is best for learning the candles. which candle is what. Hope my question is right Nishant Arora For candlesticks, read both the books by Steve Nison; Japanese Candlesticks Charting Techniques and Beyond Candlesticks . Nishant Arora October 9, 2017
Lokesh Shivagnanam Nishant Arora bro. A doubt. A divergence is not the only thing to predict the trend reversal. Here it is good fall n rise for divergence. You have not used any other indicators to confirm the price action.. I have seen some divergences which results in small fall and then a consolidation before next move. So question is how to tell that this divergence will result in a good fall r rise to make trade? How to confirm this? Nishant Arora Brother, few things. firstly I'd like to mention that I made this with the only consideration of demonstrating that divergences work well in hourly time frame. So, please consider it as a draft. Now, coming onto your queries. If I personally talk about myself, I rarely need anything other than price, volume and RSI. To answer your question that how to take a trade based on a divergence. I don't know how it is done generally but I can surely tell you how I do it. Divergence alerts a trader but still a trigger is needed, and for me, that trigger is candlesticks. Even in above case, if you'd open the chart on your screen, you'd
find that patterns like long lower shadows, hammers, morning stars, bullish engulfing and so on, accompany the regular bullish divergence. Similarly, patterns like shooting star, evening star, bearish engulfing, tweezer tops and so on, accompany regular bearish divergence. So, that's how I take the trade. And of course a stop loss will take care if it moves against you. If the market moves against you, it's not your mistake everytime. Markets tend to get random at times and that's why we have a stop loss. Also, you raised a query that sometimes divergences appear but they don't work. For example, You got a regular bearish divergence with price making a higher high and RSI making a lower high and you also get a trigger in the form of an evening star and you take the trade. But then, price consolidates a little while RSI corrects a lot and reaching 40 levels. So, now, your regular bearish divergence has been converted into a hidden bullish divergence. I hope I'm being able to put across my point. So, once you identify a divergence and get a trigger, it's all about putting a stop loss and letting the trade run. You'd see in the above chart that once a divergence occurred, the follow up move was not broken till a reverse divergence occurred. And that reverse divergence can come in the form of a regular one or a hidden one. That's all I can think of, to answer your question. Nishant Arora February 8, 2018 Bharti Airtel Daily Chart
Nishant Arora A close below the support will take it all the way to 400 levels. However, two back to back solid green candles re-affirmed the presence of bulls at the support line. But there's another angle to it. Two back to back green candles at the same level are not that bullish because the they both opened almost at the same level. For bulls to gain temporary control, 200 EMA has to be taken out. That will still be temporary as there is another overhead resistance where breakdown candle happened.
Prathamesh Bobade Can we think of it as gap filling ? Nishant Arora Yes but bulls are giving tough time to bears. We are actually at a stage of stand aside position. Rohan Ram For me its inverted cup formed, for handle to form it has to go up 30% of the depth. If it breaks there with good volume then upward move otherwise the inverted bottom support will be breached. Like to be corrected. Nishant Arora I don't rule out a bounce but I feel that the intermediate bias will be down till it gets above its breakdown point. Nishant Arora April 15, 2018
Asian Paints Daily Chart
Nishant Arora. The idea is to always focus on the points of demand and supply. Of course, this equation of demand and supply would always be different on different timeframes but one must be able to view it across timeframes and correlate. We really don't need to do anything else in terms of some special data, special analysis etc. Nishant Arora Here we are now. The power of SIMPLE !!! (Apr 16, 2018 1:21pm)
Nishant Arora (11th May ’18). Closed at 1285.05 today. Power of SIMPLE Suresh Saini Power of Patience ? Nishant Arora Sure sir, that too but patience is a result of conviction which inturn is a result of knowledge and it's effective application. Chiteshwar Walia Nishant bro one query regarding the chart u posted of Asian Paints which u explained beautifully...how long did u hold the stock for the anticipated move Nishant Arora I didn't hold. I kept trading in and out all this while in futures. Almost got the entire move. Nishant Arora May 4 2018
Apollo Hospital charts. Note: Use it learn charting and not to trade it.
Nishant Arora As you guys can notice that in both the charts, I have clearly mentioned as to when the thesis will get destroyed as per that timeframe. This is the key. You must know the point of being wrong, well in advance. Sagar Scindia In the shorter time frame, the thesis is wrong if it goes above X, but on the daily timeframe we still have resistance at D. Can we plan a trade around that level even if it crosses X? Nishant Arora. Yes, market exists simultaneously in different timframes. It is one's trading style, vision and pocket size that influences the decision. Varun Joshi Half an hour chart, stock crossed 1106 and made a high of 1111.00 So SL hit ? Nishant Arora. Stopped out once but trade still in track as daily is hitting 200 SMA as a resistance. Will keep updating this thread, just as did with BOB or VEDL and several other before that. Vishwanath Prasad Nishant Sir... First day has encouraging developments as far as the hidden bearish divergence thesis is concerned... Expecting this to continue Nishant Arora. I am back in by the way Nishant Arora Short term picture. 10 minute on futures as of now.
Nishant Arora. Here's the simplest representation on weekly chart just using a couple of moving averages.
Nishant Arora. Here's the reason for choosing EMA for 50 periods and SMA for 200 periods. The larger the average, the less the relevance of making it an exponential one. It is absolutely irrelevant to use EMA after 50 periods. There is one more aspect to it. Is EMA really MOVING? SMA is EQUALLY LOADED. EMA is FRONT-LOADED. So, one thing is that EMA reacts to recent change in prices. But that's a disadvantage as well. When we take daily SMA of 20 periods, the data of 20 period is included. On the next day, 20th period on the back gets excluded and the recent period gets included. So, there is no effect of the excluded period in the new SMA. But in EMA, since every new calculation has a component of previous SMA,
nothing actually gets excluded ever. So, even if you drop the 20th period at the back, it's effect is still there. So, it is not really MOVING. Another problem is that the first EMA has a previous SMA in it's calculation which further distorts it. So, it takes a long long period for the effect of that SMA to really clear off. Now when I wish to see a 20 period moving average, I am really more interested in effect of recent prices on it but when I wish to see a 200 period moving average, why would I want the recent prices to affect it? I mean the whole concept of 200 period average is to capture the long term situation, then why exponentialize it with the weight of recent data? That is why I don't use exponents after 50 periods. Mohammed Ateeque Siddiqui Sir, Can you guide about the time frames to be used for while analyzing a Chart . And the duration of the indicators which can be used in that time frame. For example yo have used 50 EMA and 200 SMA in a Weekly chart ! Can we use the same 50 EMA and 200 SMA for say Daily or 4 Hr charts. ? Will it be reliable ? Nishant Arora. Of course it will work in all frames because everything will be scaled to that degree. However, do experiment with different configurations to understand the historical behavior of that specific indicator or average in that stock. Nishant Arora. Daily Chart Structure
Nishant Arora. 10 minutes representation as of now.
Nishant Arora. Skin in the game as of now. Do not imitate as I would scale out and scale in as per my understanding. Secondly, though I am carrying a positional trade for last few days, I might put contra MIS trades to hedge the position if the need be, but this is what I am at now. Just to update !!!
Nishant Arora. Now !!!
Nishant Arora. Unloaded 2 lots almost at the recent bottom.
Pankaj Agarwalla Why did you unload after the break of neckline of h&s as per hourly/daily tf Nishant Arora. It was unloaded here as momentum of going down was completely dried on 10 minute. And I turned out to be right. I got to load up 5-6 buck up after this. Actually, position sizing is not one size fits all. It's not always technical. It depends upon where you have loaded up the lots as well. I mean even if you do no sizing, you would still make money. But the point was to keep booking at different places and keep loading again at little better places. There is always a doubt of something going bad against you, so you need to be agile too. You also need to check the order absorption tendency of the market sometimes, whether when I am buying, is seller too desperate or not. So, lots o f things matter. There is truly no right or wrong. Nishant Arora. Now only 9 lots.
Nishant Arora. Lesson is, when I take a positional, like I took Apollo hospital short few days ago, I sit tight, of course you have to absorb some volatility too. Secondly, I keep a standard position size, let's say 5 lots. However, I scale in and scale out during the day, as you can see I scaled in up to 11 lots at one point. But by the time day ends, I would be almost back to my standard position (if I wish to hold the position). Similarly, on somedays, I would also have to take a counter MIS position, means a long position in this case to be able to hedge my original short position for that day. This enables me to carry the trade amidst volatility. So, positional/swing trading is a combination of Scaling in, Scaling out & Counter trades, and doing this while keeping an eye on intermediate picture which would decide whether you need to stay in the trade at all or not. I hope it is getting clear. Scaling in, Scaling out and Counter trades are done using smaller view, while decision on main position is taken based on the intermediate view. Vishwanath Prasad Nishant Sir, the message & the approach is crystal clear... What is not clear to novice traders like me is when to scale in & out and also when to take a contra in the same scrip Nishant Arora. It takes years. Just keep on reading and keep on practicing. It can't be just downloaded from me to you Rohan Ram u r driving a ferrari with lot of high end maneourability whereas we r driving our old fiat. certainly requires more time to catch up. BTW what is ur approx. average capital for both swing intraday combined. Nishant Arora. Total capital invested at any given point of time was never more than 8.5 lac. Even Fiat can give wonderful results if driven well with discipline.
Rohan Ram Nishant Arora basically what i meant by comparing u with us (ferrari with fiat) is based on capital(read fuel). Probably there is a case for bringing in more capital for your style of trading. Small time part time traders dont have that kind of maneourability. Nishant Arora. Yes got your point. Let me tell you that this account in which this trading is being done is not my account. It belongs to my cousin. He gave this account to me with 3.5 Lac on 1st March and as of now, the account size is nearly 9 lac. So, that's the point I am trying to make. Capital, to a great degree, is the function of skill. Fiat also works with a good driver. Rohan Ram Agreed. However two persons with same level of skills but one having more capital and another having less capital. Who will succeed? I remember u wrote a comment or post about under capitalization Nishant Arora. True, you can't have 1 lac and start doing futures. That's under-capitalization. But then a professional with even 3 lac will over-perform a beginner with even 10 lac. That's also a truth. Won't you agree? You talked of fuel in terms of capital and sort of credited the trade success more to capitalization and I rightfully told you that the account was started from 3.5 Lac, so it was a Fiat actually, which is turned into a Ferrari. Nishant Arora. Now, scaled in again.
Nishant Arora. Scaled out 4 lots !!!
Devesh Chauhan Master, the new positions you entered after last SL was taken out, where was the stop loss? I can understand the big TF thesis, crossover until the head and shoulder and the last symmetrical triangle that you posted 23 hours ago. But then at what point did you actually enter or scale in? Also, just wanted to say this post and each update is valuable
Nishant Arora. I was 5 lots since a couple of days. But yesterday's price action cemented my thesis. I took it to 11 lots today near open, before real action started. Then it was just a matter of getting in and out. But I will be keeping that 5 lot position intact. Devesh Chauhan After your entry, price retraced back, made a higher high of the day. Then connecting the two points a trendline was established. What if price wants to pullback until 1100, you must have had a stop loss point for today's position? Nishant Arora. I was stopped out twice initially. Moreover, the short thesis would have been intact till 1134-1150. So, I'd have welcomed getting stopped out again and again. Nishant Arora. Another perspective !!!
Nishant Arora. As One can see, I have given 3 ways to interpret daily chart itself in this post. One, inverse C&H. Two, fall, bounce corrective and H&S and three bollinger. A swing trader has to be aware of everything in every dimension if he is serious about making money. Devesh Chauhan EOD Close (although Spot chart). Close below the neckline of H&S. Is it okay to always expect volumes at the breakout? Or volumes might follow up tomorrow?
Nishant Arora. Volumes are not of that much important in a breakdown. Volumes matter much in case of breakouts. So, an inverted H&S would be rejected if there is a lack of volume but H&S won't be rejected due to volume. Nishant Arora. Think of it in this manner. The ball needs no external pressure to fall to the ground but it needs external pressure to be thrown up. Pankaj Agarwalla Even if I am trading with 1 lot can I load/unload based on technicals? May be the obvious answer is yes to the question but you can load unload easily some because you're trading in multiple lot and your original positional trade is still intact. Nishant Arora. Gradually build yourself up to a situation where you also trade multiple lots. Everyone starts with 1 lot. Work it to 2 then 3 and so on. Ravi Kumar Over the last 4 days there have been multiple aha moments for me purely because of the close monitoring of this chain of charts which you posted here. Trying to put in everything I went through and how I have personally evolved over the last few days of my life, believe me I have read this thread at-least 8-10 times (Weekly and Daily) * Market structure definition, why its important to look at the overall picture instead of only looking at the right end of the chart and trying to see divergences or Moving average crossovers and assuming what you think is the only reality possible. * Simplicity of analysis, how a combination of 50 EMA and 200 SMA can give you basis o f estimating the next move in a stock. * The biggest learning came across when you entered the trade and it actually started going against you, very close to the SL which was highlighted and then reversed out back into your direction. (I would have surely panicked fully, had the trade been put by me and the market rallied on day one in that fashion). * The number of hypothesis you made up before and during a live trade told me how long to go before even getting remotely successful as a trader. * Another big learning for me was not to have binary thinking. There was multidimensional thinking at all stages, whether it was during market hours or after market analysis. Always looking for clues on why your position might be wrong and what is the market doing to prove you right.
* Knowing full well that the market actually closed against your original hypothesis and remained there for almost 3 days you were still cool and patiently waiting for your turn, if the market behaves this way for 3 hours after I am in my trade I start to panic, that shows the conviction you had all along. * Ofcourse with your level of patience and waiting for almost 72 hours after the first trade was entered, you were in full action today scaling in and out of the trade like a true pro, thats when I realised the importance of the art of trade management. Its one thing talking about pyramiding and another to display it live during market hours, taking in the profits and scaling back in when there is opportunity. * Last but not the least the explanation on how to read Bollinger bands and the interaction of the candles with the band edges itself (It seems these charts talk to you on a personal level) and how it is interpreted was a real eye opener, i am sure a lot of Bollinger band experts will agree that they have learnt a new perspective on Bollinger bands today. If i have to ever talk about the top 10 trading experiences of my journey this one will be right there on top of the list. Great learning bhai, please keep posting more such posts this will surely help a lot of us to grow as traders and some day reach closer to your level of playing the game. Nishant Arora. I've squared almost entire position. Only 2-3 lots pending as momentum is drying. From here on, there are two possibilities and I might take either of them. One, I'd kill the whole trade by EOD and be done with it having made a killing in it. Two, I may keep 1-2 trades moving and start seeing it as a completely fresh trade as if I have taken it right now and then scale in accordingly but looking at opportunity costs, I don't think second option is a good idea. I may end my Apollo's trade by EOD. Just an update. Nishant Arora. Closed all. Total P&L of this trade is around 1.7 Lac including day trades, position sizing maneuvers, counter trades and main swing.
Nishant Arora. As I transparently declared yesterday that I am out of the position, today's update is that stock made a higher close after four consecutive lower closes. After four red consecutive candles, today's candle was a green one. However, still tracking it for next opportunity. Prabh Singh Bhatia Nothing spectacular on Weekly charts which could say trend got changed.However presence of Pin bar and that too on trend line support gives meaningful Stop Loss.
Nishant Arora. Sure, I didn't get out because trend got changed. I got out because it pays to get out in futures. It gives the opportunity to re-evaluate the situation and get in again if everything indicates that way. Prabh Singh Bhatia Sir,How did you identified momentum is drying up? Nishant Arora. It's a tendency of a H&S breakdown to make a pull back after day 2 of breakdown. Secondly, since I was in the trade, I was continuously seeing the order flow of spot and futures and I could see sellers getting tired. Hence, decided to get out yesterday, let the pullback happen and then re-evaluate on all frames. Tara Sankar Chakraborty Sir,first of all congrats for having such a sucessful trade...Just wanted to know where can we get OI history of a stock for say last one month.. Nishant Arora. NSE website. Go to the quote page of futures or specific strike price option, whichever you want and click on Historical Data. I am attaching a sample for futures. You can do the same for options. First go to options chain and click on the strike which you wish, then click on the LTP and you would get quote page of that option. There too, choose historical data.
Nishant Arora. For example, this is the qoute page of 1100 strike 31st May call.
Nishant Arora April 26, 2018
Just an observation in Vedanta daily chart.
Archit Srivastava Nishant bhai how u know this is a fake bounce statistically? Thnx Nishant Arora When you have seen 1000s and 1000s and 1000s of charts in different timeframes over 10 years and see things behave a certain way, YOU KNOW THINGS. Nishant Arora Skin in the game. Entered scaled short positions. Looking forward to have a short swing trade.
Archit Srivastava As mentioned on 1st chart "death cross happened after 3 years"- does it shows the more relevance as it happen after long period? Thnx Nishant Arora Archit Srivastava Think of it this way. If you'd see a chart where death cross and golden cross keep on happening without any substantial effect, that would mean that the chart is more of a whipsaw chart where golden crosses and death crosses don't work greatly as there is no clear trend. But here's a chart where you are seeing that till now, in last few years, there's no whipsaw in 50-200 combination and it worked both the time. So, that increases our probability. Pooja Surana Nishant Arora Sir, How do you decipher your Stop Loss in these cases? Based on resistance/ support or based on averages or any other method?
Nishant Arora Pooja, it all depends upon whether we treat daily chart as our trading frame of higher frame. Let's say it's our higher frame, then sure we got the main thesis that trend can be bearish, then we'd move on to our trading frame, which can be hourly frame and we'd chalk out our stop loss there. That stop loss can be some previous support/resistance, average or price action and so on. However, if we treat daily as our primary trading frame in this scenario, then of course price action stops, or S/R stops can be found out but since the thesis is a death cross, the real destruction of thesis will happen when 50 actually crosses above 200 but that's not practical as one might get bankrupt before being proven wrong from this perspective. So, it is better to set stops on a lower frame. Nishant Arora Varun, make sure you are using 50 EMA and 200 SMA. It's not about zerodha. There is a death cross in all the time frames. Let me explain it a bit. There can surely be difference in different platforms due to time-stamping but that only happens in intraday averages and indicators. We are using a daily chart here and be it 50 or 200, both will be calculated from daily closing prices, which can not be different in different platforms. So, there must be something that you're doing different here. I guess you have plotted 200 EMA and not 200 SMA. Prasanna Wagle Nishant Arora, May I ask what is the logic behind using SMA200 instead of EMA 200 as we can see golden cross has happened with SMA 200 and not EMA200.? Nishant Arora The larger the average, the less the relevance of making it an exponential one. It is absolutely irrelevant to use EMA after 50 periods. There is one more aspect to it. Is EMA really MOVING? SMA is EQUALLY LOADED. EMA is FRONT-LOADED. So, one thing is that EMA reacts to recent change in prices. But that's a disadvantage as well. When we take daily SMA of 20 periods, the data of 20 period is included. On the next day, 20th day on the back gets excluded and the recent day gets included. So, there is no effect of the excluded day in the new SMA. But in EMA, since every new calculation has a component of previous SMA, nothing actually gets excluded ever. So, even if you drop the 20th day at the back, it's effect is still there. So, it is not really MOVING. Another problem is that the first EMA has a previous SMA in it's calculation which further distorts it. So, it takes a long long period for the effect of that SMA to really clear off. Now when I wish to see a 20 day moving average, I am really more interested in effect of recent prices on it but when I wish to see a 200 day moving average, why would I want the recent prices to affect it? I mean the whole concept of 200 day average is to capture the long term situation, then why exponentialize it with the weight of recent data? That is why I don't use exponents after 50. Nishant Arora Now !!! (May 2 nd, 2018 11:32am)
Nishant Arora An act of patience. As you can see, net positive in VEDL positive is 40687.50 but look at MTM, it is 109378 which shows the recovery we made today. For those who don't understand, Q Total P&L is the difference between Entry and LTP whereas MTM is the difference between Previous Close and LTP. In swing trading, big picture perspective and deeper stops are very important.
Nishant Arora As of now. (May 2nd, 2018 11:46am)
Nishant Arora I hope you guys are getting an all round learning. Few mentors just post charts, few just post P&Ls, we try to do both in order to show you how it's done. I am sure this gives a perspective of method as well as trading psychology. Rest you'd have to work hard on yourself.
Nishant Arora And look at the irony. I was short and on Friday some EXPERTS like AG and few others gave a long call. And we kept our ground. And here we are, stock is down 4.5%. Well good luck to those who take advice from TV experts. Nishant Arora See the point is that we did our analysis and entered the position. We know when we should cut it and get out of it. We know how much we can lose if we do. But what about those who got long on AG's call or other experts' calls? I mean they don't know any analysis. Will they call AG and ask now? How will they find those experts now? The person who takes position on someone else's analysis would always be confused and panicked when position goes against favor because he doesn't know the reason of entering, the point of being wrong and all that and there would be no way to find experts who gave the call. Same goes for investing too. That is why, self education is important. Learn the stuff and follow yourself. Nishant Arora VEDL Hourly
Rohit Kakkar This observation is not just about this script, in particular, A very very important lesson/teaching is hidden in this post. The art of holding your trade aka patience. A very rare element missing in most of the traders which incur heavy losses. Emotions are your worst enemy on the market and learning how to diminish their impact on your decision making is a rather tough task that can be achieved through years of experience and hard work. Most traders are too eager to jump in and trade whenever any opportunity arises. This is probably due to our human nature and the eagerness to make a “quick buck”, but as soon as the trade reverses they
are now more eager to exit the trade, this is because of not having complete confidence over your trading setup and the matter even get worse when they start playing the blame game (even small things like internet speed) for their losses. The one to blame is yourself. Some traders fail to realize that to be successful will take time. They often fall prey to their own
impatience in the hope of earning fast money. This position of Nishant bro is a 5- Day gameplay, where at first the stock was holding ground and even the TV gurus started giving buy calls on vedl, but he having complete confidence over his above-mentioned set-up and being patient is enjoying Vedanta. "Patience is not simply the ability to wait - it's how we behave while we're waiting. " Nishant Arora Here are we now. Both position positive now. Courage to act, patience to stay and detachment to avoid booking.
Nishant Arora Rohit bhai warned me on Monday that some expert gave a buy call. But me being a deaf, carried the short position of 5 lots and here we are.
Nishant Arora More money can be made by being a PRICE FOLLOWER if you are a trader and VALUE FOLLOWER if you are an investor. Nishant Arora Several members are wondering about SL logic for VEDL, well here's the description.
Ravi Kumar Wah wah kya baat hai, lesson in patience, multi dimensional thinking, especially the way you have explained why people gave a buy call is the proof enough of how deep you think. Even if the thesis is against your original stand you explained it pretty well this is the hallmark of a true trader who understands this business inside out
:) great stuff bhai.
Nishant Arora The only reason I put the P&L statement was that the concept of patience could not be explained just by words. It had to be SHOWN. Umesh Shetty Nishant Arora Thank you..for support resistance in futures trade should we refer to futures price or cash price? Nishant Arora Futures for day trades and Spot for swings or positional. Mohini Bhatnagar Can one still take a short position on VEDL? Nishant Arora I really can't tell. A trade is not objective thing. It is very subjective dependent upon the style of the trader, his/her capital size, his/her risk appetite, his/her timeframe perspective and so on. I may be comfortable playing a daily chart, you might not be. Or I may be looking at 15 minutes to manage the trade, but how would I tell you that once I tell you to take the trade. I hope you are getting the point. The whole concept of advising a trade is a fallacy and a trap. Nishant Arora The critical point in trade at this point in time is today's price behavior. It opened within the last candle's range which in a way reflects the respect of last candle's low. And a continuous power struggle is going on between bulls and bears. If it manages to break yesterday's low, we're in for a party otherwise the finger is on the button anyway.
Farzan Ahmed Siddique Intense live tick by tick data along with commentary Hats off #Nishant sir I love this type of teaching of yours Nishant Arora We try to give this kind of learning to enrich things for a beginner. On one hand, we keep teaching the concepts and on the other we keep sharing trades, not when we're done with them, but while we are IN them. Everyone who joins the group should go through as many past posts as he can. I
get surprised when, while we are doing such immense training activities, suddenly someone crops up and asks, "how to trade", or "how to see chart" and other such questions. It shows that either they aren't paying attention to what we are doing or they are not working hard enough to actually go through the past posts of the group. I literally spent more than 3 hours to hashtag all my past posts. But then we can only bring horse to the water, as it goes. Nishant Arora As I always say, "When teacher works harder than a student, it's a tragedy." Nishant Arora Finally yesterday's low broken. (May 3rd, 2018)
Nishant Arora Initially posted at 290 levels. 270 now. So many people talked about great results and so on. Well, nothing worked. Death cross worked.
Nishant Arora Have a look at this. We just have a technical support above the price. This will act as a strong resistance and hence a good technical stop.
Nishant Arora People really need to study these threads completely. Prabh Singh Bhatia Nishant Sir,For Moving averages Death Cross you are considering 50 (Small) and 200(higher) time frame.What are your thoughts for considering medium term time frame as well which is 100 EMA?Any specific reason for not considering medium time frame? Nishant Arora Short-long crossover is the first signal. Mid-long crossover is final nail in the coffin. Moreover I use 100 SMA rather than EMA and if you'd see 100 SMA is about the cross below 200 SMA. There is no hard and fast rule. When we see MAs, we don't just depend on them. We see a lot many other things too. Nishant Arora Actually what happens is that most of the times, once 50 crosses 200, price doesn't bounce back. But if it does, 100 EMA generally is the best place to load up on short but if 100 EMA is broken in the bounce, generally 50-200 crossover can be negated too and price can get in sideways. Nishant Arora May 2, 2018
In VEDL post, you must have seen that I am carrying a Chennai Petro short position too. Somehow, I forgot to post its chart. Here it is.
Nishant Arora February 5, 2018
UBL Daily Chart
Nishant Arora Market is not long conducive. No point going that deep. 1195 also offers a support. Nishant Arora This can be the SL to start with.
Praful Arora Ok, I think it's top of the channel that you're referring to ? Nishant Arora Yes.
Nishant Arora Correction on intraday chart. Opportunity to buy for swing.
Nishant Arora I feel it can reach 1195-1200 levels for buying to be done. But if it doesn't, one should not wait and buy in installments. Nishant Arora Devesh Chauhan Intrady Idea for you in the Swing stock
Nishant Arora SL hit on both intraday and swing. Seeking re-entries.
:-). 5 Minute representation.
Nishant Arora I've already given my view brother. As long as we are in this ascending triangle formation, it is bullish. However, on the caution side, today's extreme upper shadow on high volume shows a lot of trapped buyers.
Nishant Arora Devesh Chauhan, here's an intraday set-up. Keep an eye.
Nishant Arora Rs 1.80 done.
Nishant Arora Now (Feb 5th, 2018, 3:08pm)
Praful Arora Pls share what was the indication to buy this ? Was it macd or something else ? Nishant Arora I generally choose those stocks for intraday which I'd buy for swing. So on a higher frame, they are strong hence I immune myself from a surprise counter-move on smaller frames. Now if you see, MACD had made a wonderful basing pattern while we got a bullish engulf and volumes started rising. The stock, as it is, is very strong on daily and weekly so it was a no risk call. If you see, stock didn't fall at all since I posted the chart for intraday trade. A completely no brainer trade. Nishant Arora See the momentum on weekly. These are the times when your 5 min, 15 min, hourly, daily and weekly are all aligned.
Nishant Arora Generally what happens is that let's say you saw hourly which was looking good and then you bought on 15 minute and then a big fall happens and you don't realize why. That may be that stock must be close to some supply point on weekly. So, though, we don't take direction from weekly or daily in intraday but we keep an eye on them in terms of hurdles. Nishant Arora Intraday Closed
(Feb 5th, 2018 3:18pm)
Nishant Arora We have had this whole trade LIVE. I don't know many FB groups which do it. On a second thought, I don't know much FB groups at all ;-). I wish everyone could see it but sadly most won't as it is hidden in a thread within the comment section of a random post. Nishant Arora Actually people have wrong perception about losses. Both mentors and their followers thing that losses are bad and it is a black spot on credibility of the mentor. The mentor thinks that if he would show the loss, followers won't follow him. the followers think that if mentor is making losing trades, he is not deserving of becoming a mentor. BOTH ARE WRONG. As I always say, every trade is just a datum in the probability distribution curve. Money management must be such that even if you lose 20 trades in a row, you should be alive to make 21st trade and not just that but you'd also only need 5-6 winning trades to compensate for 20 losing trades. This is the essence of trading, which sadly, most of the mentors as well as their followers don't understand. Praful Arora When Douglas explained this concept, it hit me like a roof crashed over my head. But then I could see the clear blue skies Nishant Arora Same here, as my other business ventures never worked that way. We have to win there every time, at least most of the times, for the business to make sense. Adjusting to the mindset, that number of wins and losses do not matter but the amount of wins and losses matter, took a great deal of time, effort and of course money. Nishant Arora January 5, 2018
PVR Daily Chart for beginners who're learning to use indicators. I know few "EXPERTS" would comment that one doesn't need indicators and only price can lead the way. I know that. That is why I said, "For beginners."
Rakesh Sharma Nishant sir one quick question I understand that a choice of indicators is totally personal but for beginners like me who have just started learning TA what are the min indicators that can be used to avoid confusion.. I am learning using only RSI and Volume only Nishant Arora For trend identification, you may use ADX. For trend riding, you may use MACD and for momentum during trends, you may use RSI and for momentum during ranges, you may use Stochs. However, as you said, it's about training of the mind. I generally use NO INDICATOR in my trading. I plot indicators for people to understand a chart. But you're right, RSI is more than enough. Nishant Arora Caught it right before the breakout.
Jatin Aggarwal Nishant sir,having one query 1) in rising trend like in this case of flag breakout the stock is correcting with little volume... this means the price is still bullish... 2) but in one older post may be i read that when stock fall it does not need support of higher volume to fall down......if there is no more demand for stock it itself falls confused...please guide Nishant Arora There is a difference between a fall and a correction. The slope of "fall" is also important. Jatin Aggarwal sir please elaborate some more on slope of "fall" price.does it mean the steeper the slope of fall the more bearish the stock is while in case of correction the price moves sideways or falls very less in comparison to its rise ?
Nishant Arora A fall is characterized by larger size of candles along with a steeper slope. A healthy correction is generally on small candles and more time taking, thus creating a flat bias. Hormazd Irani I keep on seeing inverse Head and shoulders Nishant Arora Yes. Made a high of 1441.80 Nishant Arora November 17, 2017
MGL Daily chart
Nishant Arora 10 Minute Set-up as of now (Nov 17, 2017 01:46pm)
Nishant Arora This is hourly
Nishant Arora November 22, 2017
Apollo Tyre Daily Chart. See how patterns coincide and interact with each other.
Rajesh Patel Can be bought above 243 sl239 short below 237. What is u r view Nishant Arora bhai Nishant Arora I will wait for RSI to show it's true zone.
Nishant Arora December 8, 2017
A TRADING CHART. LIVE TRADE DESCRIPTION OF ENTRY, SCALING UP AND EXIT. DONE AND DUSTED.
Nishant Arora I like to keep it simple and leave complexity for GURUS. Luck plays a role for sure. We are born as humans, got good education, stumbled across stock markets, decided to make it our bread and butter; if it's not luck then what's it? So, yes luck is important. And simplicity is very important. Stock market is already too complex and subjective. Why to make it more subjective by pulling in ESOTERIC ANALYSIS METHODS. All we need to see is fight between bulls and bears. Rest everything is for selling seminars and books. Hari Raj Nishant Arora sir ji - when ever you are entering a trade, in this case on 12/5 at around 221, was the day - nifty was still bearish - and was on free fall - and price was falling but RSI was increasing - was this the reason for entry ? nifty freefall didnt deter your decision ??? Nishant Arora If you'd check daily chart, stock was at a solid congestion support hence a bullish divergence on hourly was a good trigger. Always see multiple frames. Also, on the daily, 5th Dec was a Change of Guard (bullish wide range candle after 3 continuous bearish candles). Nishant Arora Hari Raj This is daily chart. This is not some special type of support. I can use any name for this pattern but this is a very simple thing. Price broke out of a consolidation, took some breadth and made several candles at almost same low thus cementing the area as support. Now, whether I call it support or consolidation support or hub support or demand zone or whatever fancy name, it does not matter. It tells me that you have not started with the books that I've listed in the Files section of the group. Trust me, there is no alternative. Hari Raj ON a daily chart - i see a green inverted hammer for Jubilee food - which is bullish reversal sign Nishant Arora Yes it looks like so. RSI should stabilize above 40. If that happens, we will also have a hidden bullish divergence. Indranil Sinha I typically watch a 5min chart to make entry and exit with sanity checks on 15min and hourly... Was the above chart for 15 min ? Nishant Arora Yes, it is 15 minute. I follow 3 timeframes but can not post all so plotted the trade points on 15 minute to make it comprehensive Indranil Sinha Do you change the over bought and oversold zones on RSI when looking at 1 and 5 min candle Nishant Arora I don't rely much on overbought and oversold concept. I look at the pattern of oscillation and range of RSI. Even that is 5-10% of the whole thing. 90-95% is price monitoring. Ganesh Lakshminarayanan Sorry for the late question on this chart, but I see a long tailed rejection before you scaled one last lot why would you do it when you know that the resistance is at that area, wouldn't it be more prudent to exit all lots after that candle.... I can understand that scaling up after the gap but how do you convince yourself when the resistance looks so close it could have easily failed to reach the point of earlier resistance. What made you enter the last lot? Was it the fact that you were already in the money and you had the pulse of the market on that day for this stock which gave you the extra confidence to take that last lot trade?
Nishant Arora You're right that it was more about having the pulse of the stock. That is one. Second, the momentum was holding well and third. the situation was not so gloomy on a higher time frame. Elango Murugesan Nishant sir how to play divergence. After confirmation which candle to enter. Not all the divergence successful. Pls guide us Nishant Arora Divergence tells about momentum. Entry has to be based on individual candle study. But let me tell you, one should not fuss much over the entry. Management post entry is more important. As you can see here, the real game was when to increase positions. Imran Khan Nishant Arora broh...where was the stop loss on the first entry...?? Nishant Arora The swing low of the divergence. Nishant Arora December 12, 2017
Simple 15 minute chart of Union Bank December Futures. Served me well over last few days. Got me entered on short & long positions at perfect places. Of course I coupled it with hourly and 5 minute but this has been the main thesis.
Nishant Arora No complexity and no esoteric analysis. Sure I saw RSI a couple of times. But this simple chart made me 6 month salary of a mid level MBA manager. Amol R Dhanal There are some differences in cash chart and future chart of some stocks. Which one do you use for analysis? Nishant Arora There will always be. Spot charts are used for taking directions because of the simple reason. One, patterns do not form fully in futures charts because of discontinuity and expiry volatility in
futures charts. However, once you've taken your basic direction from spot, you'd have to use futures charts for timing and trade plotting if you're trading futures. Deepak Sahu Nishant sir why u always take entry on 15 min chart compared to entry on higher timeframe Nishant Arora Deepak Sahu Sir, it depends upon type of trade. Not always. I generally keep 15 minute as my primary frame in case of a day trade. Sangram Gantayat Nishant Arora, What bought this stock on ur radar. the continuous lower highs and lower lows post the bank recap news gap up ? and declining RSI trendline on daily charts or something else ? Nishant Arora I see 100s of charts everyday and keep at least 30-40 stocks close to my heart (radar). Plus, I keep in consideration volume/OI spikes. This happens to be one of them. Moreover, my style is to squeeze a stock for a long long time. Though I don't travel A to B in one go but in several split journeys. Sangram Gantayat 1. So these 30-40 stocks which move into ur radar, does that always happen on EOD and / or weekly charts and for execution u move into lower TF like 15 mins 2. For a stock to move into this close to ur heart list, can u list down the things you see in your analysis ( broadly ) in some preferential order ( like in the VGaurd post u mentioned u will give weightage to trend continuation rather than to the probability of reversal) Nishant Arora Most of the screening happens on EOD basis only weekly, daily and hourly charts. the stocks come in my screening from multiple lists like day's gainers/losers, OI/Volume spikes and any stock that I've been following previously. So, out of 100 stocks that I see on daily basis, if 30 are in my radar, it means that either they are in the trading zone or they are reaching the entry point. Once I'd do that, I write down my preferred limit entry prices and stops. Now, out of those 30, there may be 10 which are in trading territory currently. So, those enter into my next day to-do list. Also, I keep a segregated list of swing positions and intraday positions. Basically, my intraday trades are existing positions in my to do list which have the highest change in day's OI. So, which trade will be an intraday trade is decided on the very day itself but which stocks are in my trading list are decided a day before. Now, coming on to your question as to what do I see, I think that is impractical to answer. This is an out an out analysis question. My analysis capabilities are formed after reading innumerable books and I think it is just impossible to quantify into 5 points and write here. I may see several things like stock coming to support/resistance on daily/weekly chart, completion of some pattern, failure of some pattern, breakout, pullback. It's endless. It's more of a subconscious decision that I take looking at the chart at hand. So, what I think when see a chart is not explainable in one comment. However I do keep on sharing my analysis philosophies and my favorite setups time to time. Hari Raj Do you see the fall even further. Rsi is still bearish ... Enough room to fall !? Nishant Arora Hari bhai, will take it as it comes. This trade is not in my swing list. I day trade this stock. I am a follower of market not a forecaster. Hari Raj The first time I read about you was your prediction on kajaria ceramic swing from 608 to 660+. You keep posting better and better everyday
Nishant Arora Brother, the reason I do not give predictions is that no two people's time frame and style of trading can be same. Plus trading decisions change so fast that you won't be able to walk on my forecasts brother. Had it been my mid term view, I would have told you but this is an out and out trading view. As of now, it's a sell on rise. But my view can change tomorrow Nishant Arora December 5, 2017
Powergrid. Daily & 10 minute
Nishant Arora 15 Min Futures as of now (Dec 6, 2017, 9:58am)
Nishant Arora Long upper shadows on high volumes show that all demand is being absorbed. Combine it with the fact the though price broke out of it's horizontal resistance, RSI didn't.
Nishant Arora These bars reflect the sentiment in favor of bears.
Nishant Arora This is hourly. Doji after a bounce and RSI still in bear zone (20-60)
Nishant Arora Price was in hourly downtrend. It broke above thin white line & made a HIGHER LOW (HL) but still trend has not changed as for an uptrend, both HIGHER LOW (HL) & HIGHER HIGH (HH) is required. But if price breaks above thick yellow line too, it will make a HH too & we exit shorts.
Nishant Arora Another view on daily chart.
Nishant Arora December 8, 2017
My update on #PowerGrid. I am a die hard proponent on Simple Analysis for one simple reason. IT WORKS.
Israel Mills Question. Do you think that educating yourself on candles is beneficial? Example Exhaustion candles , etc Nishant Arora See their are two aspects to learning candles. One, learning basic candlesticks patterns and two, learning candlesticks from price action point of view. Very important. Nishant Arora Moreover, one must also understand that point of being wrong are different on different time frames. So, had I used a daily chart as my primary chart, the point of being wrong could have been 210-211 as well whereas in 15 minute chart, I'd be proven wrong even at 204-205. That is why I do not understand why people take suggestions of others in their trades. Everyone's primary time frame is different so everyone's technical point of being wrong or right is different. No point comparing. Nishant Arora As of now (Dec 8, 2017 15:16pm)
Khushboo Choudhary I was just thinking those words of you..it still echo in my mind....paisa toh sab bana lete hai market m bt bada banane k liye TA is imp..to make few thosand and few lakh is easy..belive me anyone can with lil knowledge bt to make more sikhna hi hoga... Nishant Arora After a point, even TA is not important. It is important but it is not the decisive factor in making money. I know several good analysts who are not god traders. As I always say and repeat to the point of making other people frustrated, "ANALYSIS Is just 10-20% of the game. The key lies in position management and risk management." I have several trades where I enter a position on let's say long side, get stopped out, enter shorts with double quantities and make more money than I initially even thought while entering on the long side. I am not saying, reversing the trade is a thumb rule. It has to be done only after review of certain things. But I am just trying to tell you that analysis karne wale bahut milte hain, traders bahut kam hain. Think of it. If you are a CA, all you think of it is specialized tasks related to CA like audit, returns, appeals and so on. But when you'd open a law firm, you will not think about all of it. You will hire 10 CAs to do specialized thinking. Your objective will be profitability, business development, cost cutting and so on. Similarly in trading, an analyst is engrossed in analysis all the time. But traders employ analysts. It means that trading involves 100s of other skills that just analysis. The key is to have NO OPINION and think in terms of Flow Chart method. If A happens, I will do this. If B happens, I will do this. If A happens but C doesn't happen, I will do this and so on. Never think that THIS WILL HAPPEN.Take yourself to a stage where you don't care what happens because you already have a game plan for WHATEVER HAPPENS. Sagar Scindia Nishant bro..if we look at hourly the previous high of B is already broken by wick and a higher low is made..moreover the recent hourly candle has also crossed the high of previous hourly swing high..should you not be exiting your trades? Nishant Arora Sagar Scindia RSI on hourly has not yet broken out so the price breakout above previous high is not sure yet. Moreover, I have had so any entries and exits in this stock that I can afford waiting for some more points Sagar Scindia Thank you..RSI was what I missed to see..I feel that the previous swing low was a hammer with good volumes and the previous candle to the current candle was a maribuzo with good volumes..so a small retracement might happen where you can book your profits and the stock might move up again. Nishant Arora Zappa Tron Sagar Scindia Friends, as we anticipated based on RSI, Price came back in.
Lokesh Sharma I have gone through the full thread bro, my question is that if price breaks the previous high but rsi has not breaks the previous high then broken price should be called higher high or not? Nishant Arora To me it is stop hunting. Yes higher high but no higher high on RSI. Lokesh Sharma Thanks... DEFINITION of 'Stop Hunting' A strategy that attempts to force some market participants out of their positions by driving the price of an asset to a level where many individuals have chosen to set their stop-loss orders.. Nishant Arora Sometimes, you just gotta hold onto your conviction and magic happens
Nishant Arora haha...Finally...This is Futures.
Nishant Arora This is Spot as of now
Nishant Arora RSI had been a wonderful conviction maker and holder in entire trade.
Nishant Arora Now. Booked 70% positions.
Devesh Chauhan "The key lies in position management and risk management." I have several trades where I enter a position on let's say long side, get stopped out, enter shorts with double quantities and make more money than I initially even thought while entering on the long side. I am not saying, reversing the trade is a thumb rule. It has to be done only after review of certain things." - words by Nishant Arora . Good afternoon Nishant. We tried this setup today, my colleague Vrindavani reminded me that Nishant often talks about re-entering once you realize the stronger side is opposite to our lost trade. We went short on a symmetrical triangle breach lower, only to realize next bar engulfed and changed direction. We got stopped at 1 Rs loss, entered with x2 quantities, sold half at T1, moved SL to breakeven point after swing and eventually took T2. Losing 1 Rs, made 1 Rs on half quantities, and 2 Rs on other half with T2. Point is, in your above words, you said ONLY AFTER REVIEW OF CERTAIN THINGS, it has to be done. Right now I'm only feeling lucky that this setup worked for us, until we can understand WHAT IS THAT REVIEW. Any suggestion will be appreciated big bro, anytime you are free Nishant Arora Glad that you could do it successfully but I'd still insist that you practice caution while practicing this. The reason is that majority of times, your technical stop is hit not because the trend has changed but because of stop hunting. In those cases, one can get trapped by entering a reverse order because as you would have seen, most of the times, market goes in your initial trade direction after hitting your stop. So certain things include having enough evidence that it is not a case of stop hunting and trend has really changed. Now that depends upon several things. If your stop was a very aggressive one in the first place, then it already has more tendency of being hit, so it's hitting can not be taken as change in trend. So, the placement of stop must be at such a point which actually indicates a change in minor trend. Secondly, do not enter the moment stop get shit. Give yourself sometime to be sure. Now, time is subjective. For me it might mean 10 seconds, for someone else it might mean a minute. Secondly, the time should also be measured in points. See, lets say you get long at A and place a stop at B. Now, B is the point, which if hit, proves that long thesis was wrong. But, even if the long thesis is wrong, that in no way means that a short thesis will be right. It can go sideways too. So there must be point C too which should confirm your short thesis post your SL is hit. Generally that C is below B but sometimes can be same as B
if your original stop was rightly placed. Now other factors are too subjective like momentum, size of candles, volume and all, that I can not comment upon as that is real time stuff. Also, another thing is position sizing. This strategy won't be useful in the long run if positions are not scaled in and scaled out correctly. Also, I do not take it as, I took a long, stop got hit, so I have to recover my money and I take a short. In these cases, I generally have a short idea itself on the trade right from the start. But then sometimes, there's a move that tells you that it can be a long trade as well. So then, even if my view is short, I just go long with half of intended qty that I thought for short. The reason is that I am not too convinced on the long but price action is little doubtful and the stock might progress on the long side and never get into my short zone. So, I get onto longs with half conviction (half quantity). Now, if stock progresses in a way that it seems that my original short thesis is thrashed, then I scale into longs and make it as big as I would have done in short. Then I won't think of reverse trade and all. But if after taking long, stock shows its real nature and complies to my original thesis, only then I cut longs and go to my shorts with double conviction. So, I hope you are getting the mindset. It is NOT that my long SL got hit so I got short. Not at all. I always wanted to go short but price was getting dicey and could move in long direction also of which I am not too convinced of but to test the waters (probing) I enter. And then I decide my further action based upon the development of long position. Hope it answers. Vrindavani Devi Thank you Nishant for this long and detailed answer. It's always a pleasure to read of your experience and views. We are trading since only couple of months and, since we got ourselves pretty much confused about everything, we're trading super small quantities for practice and to establish a setup that works for us. Now, the said trade was jetairways orb, there was no gap to indicate direction, market was moving sideways, so, considering crude price and bad earnings we assumed direction should be short. However, the low breach turned green hammer and caused an upward breakout, hit our stop. So we entered long after in next few moments price came back to about our stop. I remembered many quotes of correcting direction if initial thesis is confirmed wrong. With your suggestions, I hope this will not prove to be just luck.. again, we are absolute beginners and very thankful for your lengthy explanation Nishant Arora Thanks for your kind words. As it goes, there are a million ways to make money in the market and all are very difficult to find. So, the lesson to be learnt is that never mix trading with news. 'Crude and earnings' is not something known only to us so they are pretty well discounted. When trading, price should direct you, period. I can tell from the messages that you guys are working hard and I'm sure, you'd find your one of those million ways that I mentioned above. Good luck !!! Nishant Arora Thanks for your kind words. As it goes, there are a million ways to make money in the market and all are very difficult to find. So, the lesson to be learnt is that never mix trading with news. 'Crude and earnings' is not something known only to us so they are pretty well discounted. When trading, price should direct you, period. I can tell from the messages that you guys are working hard and I'm sure, you'd find your one of those million ways that I mentioned above. Good luck !!! Nishant Arora Chandan Raj Book is a sure thing. Structure is very important and that's the only way to convey what I want to, so it will see light of the day for sure. Faisal Mustafa PetiwalaFaisal and 5 others manage the membership, moderators, settings, and posts for Techno-Funda Society. Everyday we have charts coming in from our group hero ;) Nishant Arora consistently which have full details..and step by step explanation of what should be done and why the said scrip has been targeted for trade. Follow up is also given as to what has happened and what can
happen later on. Trust me I have seen a lot of fb groups but nowhere have I seen any kind of teaching which is being done here in tfs fb group. Kudos to nishant bro and all members here. Nishant Arora Faisal bhai, I try to be true to the objective of the group. I don't care when my posted chart performs good or bad. Actually, people (including several so called experts) post charts and then when it performs bad, then tend to avoid talking about it. This is wrong approach. If one is ashamed of failure, it means, one hasn't understood the true meaning of trading. Only those people feel ashamed who have EGO because they think their opinion is proven wrong by market. Whereas, in our case there is no opinion. We make chart just to take our first position then during the duration of our trade, we do so many somersaults that is completely out of line with original chart. So, there is no opinion. And since I have no fear or shame of re-visiting my so called failed charts, I do not mind coming back to every post. Because people who are watching my charts are thinking that I lost money on the trade because they see that Nishant posted chart for long but stock fell. But then don't know that Nishant made money on net net in the position by doing those somersaults. I am not one of those guys, "See I told You". I make enough money to satisfy my ego by being right. ;-). Moreover, the objective of the group is to take beginners through the journey of a chart. TFS is and will remain different from other groups. Mohan Venky ji i am new to your group one doubt pls rectify .asper your chart B is broken upside .short must cover on that point?but you are holding short .after it drops .how you hold short .?pls Nishant Arora Mohan Venky, Sir, I do not stay in trades in a static manner. What I mean to say is that if I am short, it does not mean that I will keep sitting in the position. I take multiple rounds in both directions while in the trade. So, while my initial big position was in the short side, which was positional, I scalped every bounce via intraday long trades, which in a manner of saying means that though I was predominantly short, I had already made money on longs on every bounce giving me wider tolerance on my short and eventually, I've closed my shorts in profits too. As I always say, analysis is just 20% of the whole game. 80% includes TRADE MANAGEMENT, which includes scaling in the positions, scaling out, scalping on the opposite side and things like that. Nishant Arora July 19, 2017
View on LIC Housing Finance Note: This is not a recommendation.
Sushil Girdher Price is incresing and RSI decreasing...SO due to this divergence it should be bearish but you are saying bullish...pls let me understand if i m wrong Nishant Arora Sushil Girdher Hi, I am absolutely right in what I've written. This is a hidden bullish divergence. Divergences are not just about increasing/decreasing. It's about highs and lows. If RSI makes a lower low and price makes a higher low, it's a continuation pattern and not a reversal. For clarification, you can read my detailed post on explanation of all types of divergences.
Deepan Kumar December 12, 2017
Its Still not completed, But i think i find out something(H&S), Learning step by step, Correct me if i am wrong
Snehal Sanghavi Try to find h&s at top. Not at bottom. Its a reversal pattern Nishant Arora Also, if using daily charts, try to first capture the bigger view by compressing more data on the screen. Unless one knows the more important S&Rs, current patterns won't make much sense. Kushagra Mittal Isn't double bottom also trend reversal pattern? Nishant Arora A formation is called double bottom only when it crosses above the middle peak. Till then it is not referred to as double bottom. Same with double tops and triple tops/bottoms. Nishant Arora This is a broader view of daily chart. Price is at support zone. Completely trend-less as of now. I think it will not go below it's support zone as that's too solid a support. However, won't rise as well till it gets in a trend. RSI has to breach precious high of 58 and get above 60. However, consider it a sell stock below 134. However, if you are already holding in cash, I won't suggest a sell till 120.
Nishant Arora December 13, 2017
After yesterday's NIIT Trade Set-Up, here's another one for you guys. ADANI PORTS 10 minute Chart. It was a huge position trade. Your learning is of paramount importance to me hence I try to share as much as I can,not just regular charts as shared in every group but trade set-ups like these too, which I have closed or even those which are currently running. I'm sure you guys like this kind of learning. Disclaimer: The day trade is closed. However, I am having swing positions and cash positions as well. Do not use it for trading. Only use it for learning.
Nishant Arora And as it turns out, it was almost a perfect exit. See the price action after I exited. Price straight went below my exit price making a big bearish candle.
Nishant Arora One must keep observing how the stock performs after you exit. It gives you entry and direction for re-entry. Because you have already played the stock so you are aware of it's tantrums. Don't let it go waste. There is just no point digging new wells everyday. One must squeeze old wells completely. As of now, the current 10 minute chart tells me that our exit has been PERFECT.
Lolz Tomar Sir how do you scan which stocks to trade futures for? Nishant Arora Lolz Tomar I see 150-200 charts daily and maintain a proper record. These 150-200 stocks contain stocks from different End of the Day lists like Day's Gainers, Day's Losers, Top 20 OI changers,
Volume Spikes and any previously followed stocks. All these 150-200 charts are seen on Weekly and Daily frame. Out of those, I choose 30-40 stocks which are looking good in terms of patterns and formations. These 30-40 charts, I see on hourly too. Then I divide those 30-40 stocks in two lists. One, urgent list and one less urgent list. Urgent list contains those stocks which are already in trading zone, means already trading around entry price. And less urgent list is that which contains those stocks which are looking good but are currently not in trading zone or little away from my preferred entry points. So, I hope it is clear till now. I see lots of charts everyday from different lists which are available from NSE. Then I shortlist 30-40 stocks from that big pool and then I further divide those 30-40 into two lists, urgent and less urgent. Now, in my mind, I know the characteristics of these 30-40 stocks as to which are appropriate for swing trades and which are appropriate for day trades, based on my experience. Majorly, day trades happen in those stocks which belong to my urgent list plus there is a wide OI change on the trading day. For that, I resort to 15 minute and 5 minute time frame too. All my orders are limit order with few exceptions. As for those stocks which are in my urgent list but there are no wide movements, I place limit orders for them and if order gets executed, that becomes a swing trade. So I see Daily and Weekly of 150-200 stocks daily. Those which get down to next level, i.e., 30-40 stocks, I see hourly too. Then I divide them into urgent and less urgent and next day I place limit orders. And day trades are those trades from my list which are having a big OI change. Others become swings. Then there are combinations. I might be having a long swing position and I might enter a short day trade in the same stock. But majorly, everything revolves around my list. Now, if you notice, every stock I am trading has been filtered through weekly, daily and hourly time frame at different levels of screening. I hope that helps. Angelynn Evin Chan Sir, just would like to gauge how many hours a day you use to do all the above? Nishant Arora Takes me close to 2-3 hours. I don't do that in a go. So, market has closed at 3:30 PM. So, I keep doing it in spurts. By 1:30-2:00 AM, I'd have my game plan ready. Angelynn Evin Chan Huh?! Only takes you 2-3 hours?! Wow! Nishant Arora Been doing that for 11 years. Taking anymore would be a matter of shame..haha Nishant Arora Yes. See let me tell you the main thing. Everyday at least 100 guys ask me which software I use or which trading journal I use. When I tell them I use same things as you use, they get disappointed. Every one thing that if we'd take the paid platform or a paid journal, it will make them profitable. Nothing is far from truth. Remember, Sachin can hit more runs with a regular guy's regular bat that regular guy will make with Sachin's bat. It's never the bat, it's always the batsman. Till last year, I used to record everything in diary by hand. So, excel or no excel, doesn't matter. My total mindset is dedicated to enable beginners. Nothing excites me more, not money, not fame nothing. Teaching excites me the most and that's what I do. Madhav Ranade Nishant Arora price line is up / RSI line is down .... normally the indicator prevails ...... may be big downmove is coming ..... UNLESS THE DIVERGENCE GETS NEGATED .... lets watch ..... Nishant Arora Madhav Ji, You are considering it wrongly. When Price makes a HIGHER LOW and indicator makes a LOWER LOW, it is called HIDDEN BULLISH DIVERGENCE. The above set up is bullish not bearish. Let me put divergence illustration for you.
Nishant Arora Madhav Ji, Please follow the diagram. I have explained both kind of divergences, hidden as well as regular. Regular divergences are reversal patterns. Regular divergences form when price makes either higher high or lower low and indicator does opposite.. Hidden divergences are continuation patterns not reversals. And they form where indicator makes higher high or lower low and price does opposite. so, the above posted chart contains a HIDDEN BULLISH DIVERGENCE which is bullish. Nishant Arora February 9, 2018
Balrampur Chini Daily Chart Naked price action tells me that it has a bullish bias. However, including RSI and MACD to make it easier to understand for my beginner friends.
Poonam Bhatia ONE QUERY- bo candle high has to be broken for valid bo, do v need close too above bo high or close below is ok? Nishant Arora Poonam Bhatia BO high Nishant Arora I have a stop in place which the low of the hammer. So, risk is very very limited.
Devesh Chauhan Why not the low of swing, around 105 or 106 ? Since price went below the low of that hammer recently and made a new low Nishant Arora Doesn't justify the 1st target. Poonam Bhatia Nishant Arora this was the ref. Will u take it as bullish as it has broken p high but closed below p high but closed above p close and out of range too.
Nishant Arora Yes, I will take it as bullish Poonam Bhatia if i go by ur setup in short tf , u must hv sold this just after the big candle at red candle for horizontal tgts?
Nishant Arora Poonam Bhatia Only in case of intraday. I won't sell a consolidation in positional. Sanjoy Roy Nishant bhai, digging an old post. Balrampur, never went any further and infact fell by another ~40%. A couple of queries. 1. How did you deal with it? 2. It is again showing regular bullish divergence and seems to have bottomed out at 75-78.How will you deal with it now? Nishant Arora Sanjoy brother, I made some good money on the short side based upon the market structure. Somehow missed putting that trade here. However, my friend Ravi Kumar is aware of that trade in detail and he was making notes of it too. I'd request him to post it as and when he is convenient. Sanjoy Roy You got my question bang on. Yes, wanted to understand how did you deal with it when it hit your SL. Thank you. Also do you envisage a long here on? Nishant Arora Once it broke below that. I reviewed it again, let it go down a little to capture the essence and then hit it on the downside.
Nishant Arora April 12, 2018
Dedicated to those who keep requesting, "Show us your loss too". Actually, mostly I manage to turn my losing positions into winning ones & even if I don't, the winning ones offset them during the day so net gets positive. But today when I saw both my active positions in red, I thought let's make few people happy and satisfied. Sleep well, I'm a human. "एक इंसान ह ू, मै त ुहारी तरह "
Nishant Arora It actually depends. In Hindalco, had aluminium situation been intact, I'd have been quite ok with a MTM loss of up to 1.5 Lac. But you'd have seen that I cut REC loss at 21600 just because I saw the picture changing. So, more than the amounts, it's the thesis. Vishwanath Prasad But story has changed even in REC today. Nishant Arora Yes, the bears managed to push them away at the daily and weekly resistance. As I said, bulls put up a great show in the last hour yesterday but price was still at resistance. Vishwanath Prasad Nishant Arora With the looks of it, REC is going to make another low Nishant Arora Yes Nishant Arora Well, sorry to disappoint those who wished to see losses. Both trades in positive. Didn't scale in on JD as it was not showing momentum, so closed it at a small profit. Carrying Havells though. Volatility is not risk.
Pankaj Agarwalla Haha...I am sure you did it on purpose.How can you be so infallible? Nishant Arora Actually I was expecting a move in Havells but I was not sure whether it would come today only. Anyway, I am keeping it for carry forward but I'd have been happier if today it remained negative. A lot of my friends would have slept well...hahaha
Gautham Sidhartha Nishant Arora. seems like you made purposely to show that you are in loss to desired dudes and made the trade to your way . Brilliant sir . Nishant Arora I didn't do anything. I just waited. I didn't even know that price will bounce today itself to erase my MTM loss. Nishant Arora I am worried again as to how do I satisfy those fellows who wish to see losses. Actually, whenever I post the P&L, so many people say out there that I only show profits and I should also show losses. I really try too hard. Tried today too but unsuccessful. I tell those people that a negative day is not a big deal and it won't prove that I am a bad trader. In fact, those who feel that losses are bad must not even trade. I lose a lot of trades but net net comes positive due to trade management and asymmetry between profits and losses. I tell them that I can not have losses just to show you. But today I seriously wanted to make them happy. LOL Nishant Arora Well here it ended. From some -30k to +30k to +2600 now. Neither I wanted to book at 30k nor at +30k because at -30k my thesis wasn't proven wrong whereas at +30k, my thesis hadn't yet played out. This is to show the beginners that sitting on hands is very important without letting minuses and pluses affecting your decisions.
Nishant Arora It might very well be possible that tomorrow it goes down and destroys my thesis and may be I book a loss of 50k but then I will not even remember that I was once +30k in this position. If one would start to run after money, one would get lost in the volatility caused by the crowd whereas one must always have a thesis benchmark and one must just sit out the volatility. This was the lesson. Prabh Singh Bhatia When you say thesis you mean Psychology of sector.Does it means same? Nishant Arora Why sector? I didn't take the trade based upon the sector. Hindalco was a macro trade based upon aluminium market but this was not a macro trade. It's purely a price based trade. Nishant Arora A thesis is just a collection of the following: 1. Reason for entering the trade (Story) 2. Point where the reason nullifies (stop) 3. Potential point till where the price might move in your favor (Target) Now, the story can be price based, economy based or based upon any special event. As for Havells the thesis is purely price based. Nishant Arora Some of my friends here asked for Havells trade description, here's the thing.
Abhishek Punjabi Nishant Arora is there a particular reason why you do not trade in indexes and only stocks on an intraday basis ? Nishant Arora I trade indices to hedge mostly. Further, there is no hard reason for this, 40-50 of futures stocks run deep in my veins having been trading in them for years. And as they say, why fix it if it ain't broke !!! Abhishek Punjabi True. The only reason i asked is as i am facing some hurdles in intraday, i generally trade in the 2 indexes & large FnO stocks not the mid cap ones. But yet am unable to formulate a confident strategy. Nishant Arora Have you tried swing trading first and then shifted to day trading or you directly started with it? Secondly, you said you trade F&O stocks as they are liquid, but do you trade them in cash or via futures or options? Abhishek Punjabi Nishant Arora bought it @ 9246 from the last 3-4 days it was taking support at 9220 also from where it broke out from. Entered midday after it was consolidating there for almost half a day. Post entering sl hit
Nishant Arora In Maruti, RSI was in bear zone. As for HUL, I'd have to see other frames to understand. However, I suggest you to take a multi-frame approach. I personally use 3 frames with a factor of 3 to 6. Enter into the trade when volatility is least. See,to tell you the truth, intraday moves have a lot of randomness. I am not saying that all intraday moves are random but to segregate non randomness from randomness is a huge task. This is the biggest reason intraday doesn't work for most people. It's not about the tools, software or anything. It's about the training of the eye. That is why I suggest most people to stick to swing trading. And if trading swing futures is too much to manage, swing cash can be traded. The only reason is that as you increase time frames, price action becomes more non-random and win-ability increases a great deal. But still if one wishes to stick to day trading, I suggest that one must understand price action a great deal in order to segregate non randomness from the heap of random price movements and use at least 2 frames, can also use 3. I'd also tag you in some of my day trades descriptions which I posted in the group. Nishant Arora August 30, 2017
Dish TV Daily. Note: Purely for educational purpose.
Praveen Cr is there a hidden bullish div on macd and rsi ?? Nishant Arora For a hidden bullish divergence, price has to make a higher low and indicator has to make a lower low but no indicator is making a lower low here in this time-frame. Praveen Cr does it have a chance for regular bullish div ?? Nishant Arora In a regular bullish divergence, price makes a lower low while the indicator makes a higher low. Praveen Cr yes ..does it have a chance if we draw a small line from july on macd and rsi ?? Nishant Arora Praveen Cr I got your point. But that divergence has already played out if you observe. See.
Nishant Arora August 30, 2017
HERE IS THE CREATIVE POST I TALKED ABOUT: Friends, let us do something creative & immensely learning. Currently, four studies going on. All of them are swing cases based on September expiry. Now what I'm trying to do is that I am consolidating the charts of all the 4 studies here in one post. And, based on that we will see daily MTM according to given position sizing. Position sizing is important because lot sizes of all the scrips are very different. So, here are the trade details: IRB (2500 Lot Size): Long / 3 Lots / Entry: 213.80 Apollo Tyres (3000 Lot Size): Short / 2 Lots / Entry: 254.50 NIIT Tech (1500 Lot Size): Long / 5 Lots / Entry: 490.95 Dish TV (7000 Lot Size): Short / 1 Lot / Entry: 80.05 Note: Since Dish TV has largest lot size of 7000 shares, I have kept that position at 1 Lot and increased all other positions to match that figure as close as possible. Based on above positions, I will post a daily MTM and would notify when profit or loss is booked. Everyday's MTM will be cumulative means total profit / loss will be calculated from entry price to CMP at the time of posting. And all postings will be done EOD basis. Success or failure, we will learn from all. Remember, one does not make money by winning every trade. Winning or losing is not in a trader's hand. One makes money by managing a trade :-). Also, these are
not recommendations. This is something, that no analyst would want to do because it involves huge risk of falling flat on one's face. But I don't care about losses. LEARNING IS PARAMOUNT.
Nishant Arora 30th August EOD (P&L) IRB: +5250 Apollo: +26700
NIIT: +45375 Dish TV: -1400 Asad Shaikh I would have squared-off by now with that much of profit! Nishant Arora Asad Shaikh The idea is never to look at money and always to look at charts. Though ideally, profit booking and loss booking, both should happen as per the chart but yes you can take a leeway there and book losses as per your appetite. But profits must be booked based on charts not based on the scale of your happiness ;-). And let me tell you, the kind of moves which I am anticipating based on the attached charts, have not yet started. Santanu Chowdhury Yes...being at basic stage ..it will be grt to watch pro traders play like this... Nishant Arora Santanu Chowdhury That's the basic idea. See, charting or technical analysis is one part. But charting is not trading. Trading is much more than charting. It includes maintaining multiple positions, multiple constructs, position sizing, risk management, mind management and so o n. So, with this, I aspire to present an all round picture of complete trading cycle. Let's see how it goes. Sushil Girdher My queries- 1. Why Same number of Lots of Each scrip is not choosen? 2. On what basis number of lots have been decided? 3. A small retail trader generally trade only1 lot and that too of only single scrip at a time. Because creating multiple position requires huge margins....So think in this view also and...Try to have 1 lot of 2-3 scrips and then try to make a different portfolio....U may call it Number-2 . you can simultaneously track number 1 ( present case where you have multiple lots) and number 2 Nishant Arora The answer to query number 1 and 2 are already in the post. The lot sizes have been adjusted as per the biggest lot size, that is Dish TV. This is done in order to equalize the profit/loss per rupee movement of the stock. As for the single position query, that I cover in all my posts where I post a chart. But trading is not just buying and selling. It is position management most of the time. There is nothing to manage in case of a single scrip and single lot position brother. I mean, either you will book profit or you will book a loss. I think I covered that in Canara Bank and MFSL. If you carry 3 positions, with lot sizes of 500, 3500 and 7000 and you carry 1 lot of each, this will be a highly skewed position overall with mis-distributed weight. So, it is better to maintain position weights properly even if that means cutting on the trades or number of scrips. Yogesh Bhardwaj IRB (2500 Lot Size): Long / 3 Lots / Entry: 213.80, today closing price : 213.35 Profit 5250 ??? Nishant Arora Yogesh Bhardwaj Dear Mr. Bhardwaj, I am trading in September expiry contracts which I have clearly mentioned in the post which somehow got missed by you. :-) The September expiry LTP (Last Traded Price) of today is 214.50 (NSE screenshot attached). And as you rightly said, my entry is 213.80, so that means a gain of 0.70 points. And if you convert that into profits, that becomes 0.70 X 2500 X 3 = Rs 5250/-. I hope my answer satisfied all three question marks. ;-) . And also, I hope you liked the post and the concept. Ramesh Kumar Sir what is your total investment? Why are you not hedging your positions with options?
Nishant Arora Ramesh Ji, the total margin out go is 1298400. And yes basic hedging is done by buying relevant OTM options and with the concept of delta neutrality. That's minuscule cost incidence with respect to the primary cost. However, the idea of this post is to show that how positions are taken and booked based on the charts. If I'd have used things like 'Delta Neutrality' and such things, I think that would have been a little over the board for some. So, we'd have to take everyone together at this point of time. As it is, we are teaching different concepts time to time. So, gradually, majority of people will be able to understand a complex trade structure and then I will present that part as well. Nishant Arora IRB 15 minute
Dan Tenan Which 3 ema r u using? Nishant Arora 20, 50 and 200 all scaled to 15 minute frame. Nishant Arora NIIT TECH 15 min. Price falling but then, you have give some leeway to the positions. Chart still looking good.
Nishant Arora Friends, here is today's MTM (Cumulative MTM from Entry to CMP) 31st August EOD (CUMULATIVE P&L) IRB: +15375 Apollo: -6900 NIIT: -6375 Dish TV: +3850 Nishant Arora Also, I'd like to insist all, who are following this post, to read the other thread where a conversation between me and Ganesh Lakshminarayanan bhai happened over NIIT TECH. It was a great conversation and he is really pretty logical and intelligent guy. So, I'm sure there will be a lot to learn from his remarks. :-) Never spare a learning opportunity. Nishant Arora Today when NIIT was falling and we are holding 7500 shares, someone asked me in personal message that would I show today's MTM. Of course yes. Why not? People who feel that it's shameful to post their losses have not understood trading yet. I mean, you name it. Marty Schwartz got "under" couple of times, Livermore, Bruce Kovner, Michael Marcus got wiped off several times. And they are the best of the best. We don't look at trading as a daily ledger game, not even monthly. Yes, when you start, you focus on months. But when you are in thick of the game, you evaluate years. So, even if all 4 of my trades hit stoploss, still I will be proud to share with you all. The process is what is important not the outcome. Let me quote Dr. Elder here.
Nishant Arora So, given a little uncertainty for tomorrow, let's be ready for some real "RED" in our trades. Few things can happen. Market may open gap down but I feel recovery is imminent. But margin migration would have to be done. So, either we'd have to close the green short positions and make up for margin of red longs. Though we are hedged with stock options but let's keep that separate and just see these trades as they are....NAKED Nishant Arora IRB Daily. Still the LONG thesis exists
Santanu Chowdhury What is the exit strategy ? Nishant Arora Santanu Chowdhury Look at MACD, its angle and character will tell out when the thesis will stop to exist. Also, 225 is a little consolidation zone so we might re-look there again. But yes, anything can happen anytime so, I don't fix myself in to saying that I will exit here. It's harsh, rude,
domination and disrespectful to the market :-). So, while I have ideas about future probable movements, I'm not rigid. If some negativity will appear on 30 minute or hourly, screw targets and get out Nishant Arora Apollo Tyres Daily. Still the SHORT thesis exists
Nishant Arora Dish TV Daily. the primary Short Thesis.
Nishant Arora Dish TV-2 Daily
Nishant Arora Idea Weekly will also in a way validate our daily thesis.
Nishant Arora Considering, today is last working day, it's better to take money home Vishal Deokar You mean to say last working day of the week? Nishant Arora Vishal Deokar Yes. Vishal Deokar Am trying to understand . Why exit on last working day? Does it mean that sentiments may change over a weekend? Nishant Arora When you leave money on the table and that too leveraged 1:6, you gotta be able to take money off the table as and when appropriate. Do I have control over what Geo-political actions happen over this two days' off? Do I have control over any economical jolt, that may happen over this two days' off? No, I don't. They why gamble bro? Charts are clearly dissected by us so we have anticipations and probabilities but why leave money on the table? Let's eat it for now and then plan fresh entry on Monday. Who says to eat a move from 10 to 20, you gotta be in all the time. You can enter at 10, get out at 14, then may be enter again at 16 and exit at 19, then may be enter again at 15 and exit at 20. You are getting my point? So, we know the story and thesis that we have made on these 4 trades. But charts can get collaterally damaged if something bad happens over these two days and Monday morning open can write our bankruptcy story. ;-) So, better exit now and plan fresh entries. That's the beauty of trading. No one is gonna ask you when you get in and when you get out. Hope it is clear now. Vishal Deokar Interesting & lucky enough to get those silly question answered from a pro! Nishant Arora No question is silly bro. It takes guts to ask questions. And, you have my huge appreciation for that :-). Just that, derivative positions are monsters, they are good till they are tamed, the moment they get out of control, they even kill their own master. And weekend is a big big time for them to get out of control. As for my stocks, I don't sell them for years. Nishant Arora I sincerely believe that in trading, one must take several small rides rather than one big one. Because if you are taking big rides, one single bad ride will cause financial injury or worse financial death. Also, it is more profitable to take several small rides. Lets say you have a futures position and you are anticipating a 30 point move. It is good to take several rides. Assuming that you take a single ride and targets are achieved, you would still make 30 points and that too in a roller coaster manner. But if you'd take smaller multiple rides, you would get more than 30 points and less volatility. So lets say a stock moves from 100 to 130, it won't go straight to that point, there will be retracements. So, you'd make more than 30 points. Nishant Arora 1st September EOD IRB booked at 221.60 = 58500 Apollo Booked at 253.90 = 3600 NIIT Booked at 498.10 = 53625 Dish TV booked at 80.20 = -1050 Profit = 114675 (9% on Invested Capital, not even annualising it. Not bad for a 2 day activity
;-) )
Santanu Chowdhury Huge...congrats...what was the trigger that u booked apollo tyre? Nishant Arora First is that I never carry positions over a weekend. Second is that Apollo chart has few contradictory points, which I am closely tracking. So, all these 4 stocks will be squeezed again and again till the juice gets finished. Sreejith Thulaseedharan Can you give me the stop loss of each trade amount wise Nishant Arora Sreejith Thulaseedharan If you'll tell me the thing that you are trying to scrutinize, I will be able to explain better. Because as you are very well aware, trading is not one size fits all. the reason I am saying this is that when I'll tell you that my NIIT SL was way too deep, you will judge that risk reward is poor so its a poor trade. But I know the reason for keeping it that way which will not be visible to you otherwise. So, if you'll let me know what you're trying to find, I may be able to give it to you right away. Sagar Scindia Nishant Arora bhai can you write an article on how to select/scan stocks for intraday or positional trading? Nishant Arora Bhai, I don't use any screener. I am manual scavenger. I see 100 charts a day, and choose may be 40-50 out of them. I keep that in radar. Out of that, 5 may be immediate entries so I place limit orders. Rest I keep tracking. That's the way I do it. All in all, I tend to specialize in 5-8 stocks on expiry basis and make repeated entries and exits. No rocket science Anil Shete Bhai you study weekly charts for positional or daily charts ? Pl comment on time frame for positional trading Thx in advance Nishant Arora I study multiple time-frames. For swing/positions, I study, weekly, daily and hourly. Weekly is just to make sure that direction is right. If weekly is bearish, then I will not go long no matter how much bullish daily or hourly seems to look like. In fact, I will use the bullishness of hourly and daily to short. As for intraday, I use daily, 30 minute and 5 minute. Same principles. Highest frame for direction and lower two frames for timing. Nishant Arora August 31, 2017
NIIT TECH FALLS TODAY BUT IT IS STILL LOOKING GOOD. HERE'S WHY: A trade is entered based on some thesis. So, the exit is the point where the thesis stops being correct. And my stop-losses are at a point where the thesis will stop being correct. Moreover, in positional and swing trades, one makes daily and weekly charts as base of entry, so things have to be dealt with too much insensitivity. Today will be in RED. But I think, we must enjoy it.
Ganesh Lakshminarayanan Today NIIT opened higher than the previous it's close and then there was a steep fall, the price actions doesn't give a comfort of buy, why would you enter now, infact yesterday was a similar case which just means that there is a strong resistance at around 500-510 Nishant Arora Have you seen the weekly chart Sir and if yes, then can you see a crystal clear Hidden positive divergence? Moreover, if I get a 510, that's more than enough for me Ganesh Lakshminarayanan Interesting, on the weekly also I see indecision for 2 weeks now.... Having said that I get your point.. The hidden divergence is visible... But I personally feel waiting for correction is a better go on this scrip... Enter around 480 maybe.. So for now it's a monitor for me Nishant Arora Great. Indecision on weekly is a good indicator. Isn't it. I mean indecision has different meanings depending upon where it comes after a fall or a rise. In this case, this indecision is coming after a fall, so bears are having second thoughts now. Ganesh Lakshminarayanan There you go brother... NIIT crosses 510 Nishant Arora Already booked 5 lots. Seeking fresh entries. May be on Monday Ganesh Lakshminarayanan Superb.... I love the increase in confidence after the confirmation from market Nishant Arora But a trader's job is to be confident and comfortable when market is not supporting his view. Isn't it? Otherwise, he will never get the best seat in the bus. Ganesh Lakshminarayanan Completely agree... But it's also important to get off the bus if it's not moving in the direction he wants to go
Nishant Arora Ganesh Lakshminarayanan Ofcourse. Unlike real life, you gotta get off from a moving bus. Buy in calm, sell in frenzy. I had a total of 11 lots going on in 2 accounts. 5 booked in one account completely. 3 booked in another. 3 still on. Pyramiding is the name of the game. Nishant Arora Ganesh Lakshminarayanan Weekly Chart Attached. Multiple triggers for a mid term bounce. 1.) Bullish Harami Pattern suggesting end of downfall 2.) Emergence of Spinning Tops suggesting the above thesis. 3. Hidden Bullish Divergence with oscillators. Would look forward to your views on this.
Ganesh Lakshminarayanan 2) emergence of spinning top (I didn't think of it as a suggestion of downtrend... My initial reaction was indecision supported by the gap up and pull down during the day) but yes I agree it could be treated as a stop of trend as well. Nishant Arora Ganesh Lakshminarayanan Would look forward to interacting with you often. It brings out material for other members to see Santanu Chowdhury One question Nishant ji ...does divergence always work ? Nishant Arora Bro, if you see the charts I have posted here, I am not just counting on divergence. There is a bullish harami, there are spinning tops, there is a divergence and there is a Fibonacci compliance. So, it's not just divergence. Santanu Chowdhury Yes ..it's a confluence of various factors ...actually i asked it on a general sense ..i mean can anyone trade only by looking divergence ? Nishant Arora Santanu Chowdhury Yes, there are lots of divergence traders. See, you can trade just on moving average. Trading is very very subjective bro. Everyone has a different thesis, different risk appetite and different results. I have seen two people entering in same scrip at the same time, one
making loss and one making profit. So, position sizing also plays a role. When we see a confluence of factors, we must give leeway to price in terms of a wider SL. When we are betting on just one thing, we need to be more vigilant. Moreover, let me also add that there can be 10 factors suggesting a trade and TRADE CAN STILL GO WRONG. Nishant Arora Ganesh LakshminarayananBrother, another view to look at it. Fibonacci retracement. It also suggests that correction is over.
Ganesh Lakshminarayanan Cool.... I am a little unsure of using weekly fibo for a intra day trades... May be I will need to study more on how to use it.... Nishant Arora Ganesh Lakshminarayanan I was not aware that you're coming from an intra-day angle. I have a positional trade going on here so I am not much bothered about intra-day volatility as long as my daily chart and weekly charts look good. Ganesh Lakshminarayanan True.... Intraday purely because you mentioned you were happy with 510 :) for a positions trade what would be your stop loss and take profit prices... Can you please elaborate on that aspect please. I personally feel my exit rules are not good enough.. Either I wait too long or I get out too early.... Nishant Arora Ganesh Lakshminarayanan No, that's just a milestone. I keep multiple points above the position and multiple points below the position, to add or reduce positions. The final price above would be profit point ofcourse and the final point below would be SL. So, think of it as this. the entry price is in the center. The SL is below. But between SL and entry are other points to add/reduce. However, I am not much of a guy who strictly think of targets. I have some idea in my mind as to what is the magnitude of the move. But I am not stringent about it. I mean we can only define how much we are willing to lose but we can not define how much we will win. So, on the profit booking front, I keep looking at chart with a fresh view and not with the view of my P&L. Bottom-Line. I fix my loss beforehand but I don't fix my
profits beforehand. Once too much in green, a trail can be a good way to let it ride. My avg is around 487 now. So, even a 510 is good enough considering 7500 shares. Ganesh Lakshminarayan Lakshminarayanan an Hmmm... That's a very good explanation on the TP and SL, I was just thinking in terms of a fixed point beyond which I wouldn't be holding the position at all... May be I should revisit my way of putting SL, Personally if I would enter this trade my SL would have been 459 which is slightly below the recent swing low and take profit would be at 540 which is slightly below the immediate possible resistance. Which is why for the risk return to make sense I would have to wait for the price to be in the range of 480 instead of now Nishant Arora Your strategy also works fine. I am a little aggressive entry wise. Subjective trait. So lets say there is a trendline. Like in this case the trendline which I made below the price. I enter before the price touches the line because the price may never touch the line as too many people are waiting for price to touch the line. Ganesh Lakshminarayan Lakshminarayanan an That's another learning point for me, I believe I look at things in isolation which might be why I miss the other side of the story easily... Happened to me a lot of times I wait and the price moves without me... Or i enter and then there is reversal... Which impacts psychologically and then I end up up judging judging my analysis analysis for for the next trade.... :) all part of learning learning Nishant Arora Ganesh Lakshminarayanan Saw the recovery bro Ganesh Lakshminarayan Lakshminarayanan an :) is this bouncing off your trendline ? Also in one o ne of your earlier messages you did mention that you keep assessing the situation based on the current situation, situation, how do i get out of the bias which I created while entering the trade. Because I notice once I trade and the price moves in my direction I tend to justify my staying in the trade based on my historical assessment, only after SL is hit I go back and reassess and see that it was obvious when the trade started moving against my position and if I had kept an open mind to assess it would have been possible to exit earlier and cut my losses or even end up in profitable situation... How do I change my mindset once a trade is entered and look for market signals to get out? Please guide. Nishant Arora Read this post A Trader's Mind- Anchor Bias. Nishant Arora Ganesh Lakshminarayanan 3 still running will let them go as far as possible.
Nishant Arora May 15, 2018
Two very similar set-ups.
Nishant Arora To make big money, you need to get the big picture right and stay with it. Jeet Shah If many charts are showing the same picture that seems to be a warning sign !!! Nishant Arora In chess, When pawns, rooks, knights & bishops are getting killed, the king and the queen can't hold for longer. Read this in context of small/mid caps & large caps. Devesh Chauhan Stocks opened, made a high, closed near open. o pen. The ones that made pinbars near important levels, where people made decisions but price closed against their positions, can be watched for swing setups I think.
Nishant Arora Here's an update. Closed shorts in NMDC due to following reasons: 1.) The stock held its ground on such a day when Nifty went to close to 1% negative. 2.) It was too quick to jump on BJP good news. 3.) RSI has formed a base as it turned away steeply today. 4.) Stock is back above resistance. No reason to stick to my short thesis brother? Here's a stock which doesn't fall on bad news but rises on good. It shows inherent strength in terms of money flow in its favor. No sense to take a contra call. PS: Keeping Torrent shorts as of now and a mild long bias on NMDC looking at current circumstances. Mild means that though it is still below all main moving averages and structure is not bullish but a bounce can not be ruled out. But it's basically wait and watch before clear position emerges. Nishant Arora Let's see how it plays. Current short term trend down.
Nishant Arora In NMDC daily frame, RSI has taken support. Will have to wait and watch.
Nishant Arora Though there were some green shoots on daily, the hourly rejected the price. Wait & watch is the policy.
Nishant Arora Here's the daily. Though the stock saw a steep rise today on normal volumes but it still ended up closing within the demand/supply zone.
Nishant Arora Hourly chart is more interesting.
Nishant Arora I hope you can see how a confluence of daily and hourly caused a fall. Price was at resistance on hourly and in supply zone on daily. It also teaches about keeping patience in swing trades. Most people would have gpt scared due to yesterday's price action. Nishant Arora Daily Chart. As I presented yesterday that price had reached the top of supply zone but couldn't breach it. Today, it formed a powerful bearish candle with open=high and even breached yesterday's low.
Nishant Arora Futures Hourly Now !!! (May 18, 2018, 03:39pm)
Devesh Chauhan Wow. Amazing explanation. I still have a question master, what does a breakout in RSI suggests? How to read what chart is saying using RSI and Price breakouts? What is the correct way? BR is the supply zone in price, whereas XY is the level in RSI. Occurrence of B and X is days apart. I don't know if I'm able to phrase my questions correctly. If the answer to this is long, I humbly request you to make a separate post on this Nishant Arora Devesh Devesh,, If you'd notice that A,B,C & D corresponded with R1, R2 & R3. You'd ask why four points in price and 3 in RSI? Well, that's because I didn't label the RSI at C. What matters is that while price was making lower highs at A, B & C, RSI was oscillating with same resistance line. Let's first talk a
bit about behavior of RSI with respect to price. See if price is rising making higher lows, RSI would be taking support across a line and most probably that would be a horizontal line. So till that line is respected, higher lows keep taking place. Here it was reverse. Since RSI was respecting its resistance line at R1 & R2, price kept on making lower highs. But the first signal that price will not make a lower high after C came when slopes of lows kept on decreasing and finally a higher low was created at 4. If you see, this happened previous to price breaching out at D or RSI breaching out at R3. Higher low gave first signal. Then RSI breached the resistance of R1 and R2 at R3 & it was evident that a bull move was on the way. That is when I went long MIS keeping short swing position intact. And I got that big move candle. Let's come to B-R & X-Y thing. Now, after that bull move, I could see in daily chart that price had reached supply zone, so it was a big probability that in hourly too, price would be rejected & we could see that at region R. It was a confluence. That's when I closed my MIS longs. Then I realized on hourly that RSI, after breaking at R3 is facing resistance at a previous X level. So I named it Y and made a line X-Y. Now, here was the scene, on price front, we had a resistance line B-R whereas on RSI front, we had a resistance line X-Y. Now, as you noticed that price area corresponding to X was much before B and much above it too, here are the implications. Let's make an imaginary point P in price just corresponding to X in RSI. And now mentally, draw a line from P to R. What is it? It is a clear case of higher low. Agreed? Now look at the corresponding line X-Y, it is flat highs, which is a clear case of HIDDEN BEARISH DIVERGENCE TOO. See, after breakout at R3, RSI reached to X levels but price was way below those levels which were corresponding to X so it's a negative divergence and that became another confluence. So, we had supply zone in daily, resistance and rejection on hourly and a virtual sort of Hidden Bearish Divergence in hourly too. That's how I see it. And I hope I've been able to give you my lens too. Prabh Singh Bhatia Sir,Future price what did today was just a double bottom and there is a probability that R becomes Head and C point was Left Shoulder and moving ahead in coming days formation of Right Shoulder takes place which in this case would mean H&S continuation pattern and any break of neck line or double bottom would proof the thesis.Just a thought. Nishant Arora Double top you mean. Moreover, I have never been comfortable with preempting patterns. Even a double top will be confirmed after the mid trough would be broken which is 223.25. So, predicting a H&S would be a long shot. I don't feel the need to do that. Moreover, H&S is a reversal patter not a continuation pattern. Price in this time frame is already is a downmove, so H&S won't be a catalyst here. Prabh Singh Bhatia No Sir i mean Double bottom only.Snap Shot attached. Also according to John Murphy,The head and shoulders pattern can sometimes appear as a continuation instead of a reversal pattern.Isnt that true?
Nishant Arora Two same level bottoms are called double bottoms when the price breaks above the middle peak. Hence you can not use the word "double bottom". Pankaj Agarwalla Is it totally unadvisable to try to preempt patterns? When I say preempt I mean backed by other analysis. E.g. let's say according to a particular channel breakdown in a smaller time frame I have a target for the price. Now this target if completed will be at a level which may be forming a particular pattern in the next higher tf. Is it then acceptable to try to preempt? Nishant Arora Pankaj Agarwalla Yes acceptable but taking decisions on patterns which you think would form is not. Decision making should be based upon WHAT IS. Nishant Arora Don't come on front-foot and expect the ball to be in line of your anticipated shot. But when the ball is a "Sweet-ball", go all out and swing with all the might. The most important thing in trading after knowing which stock to play is the courage to load up when the time comes & the detachment to offload when the time comes. Of course the stock can continue to go in your direction after getting out but who wishes to catch tops and bottoms? We want the meat in the middle.
Nishant Arora Daily Chart
Nishant Arora Hourly Futures
Karan Khubani Did you carry it as an STBT position after the doji.. Because yesterday Stock was positive with positive open interest ... Or u made the postion today after the 1st 4 down candles Nishant Arora I am playing since Doji. Keeping 2-3 lots positional while during the day, like today, even went to 8 lots position size, back to 2 lots now. As a swing trader, one can not let intra-candle volatility hamper one's thesis. Moreover my main view is on daily so I only decide what to do after completion of a hourly candle. Already booked a lot in cycles.
Nishant Arora Karan Karan,, this was the primary reason of shifting from NMDC for the time being.
Sourabh Garg Sir, what should we call it random price action, volatality or neither? Nishant Arora What looks random on daily provided a good trading range on hourly. So, randomness, volatility, everything is a function of the time frame. As in this time-frame (daily), there is a lot of apprehension to go down with a bang. On a day when Nift is down 0.75% and mid cap per say is down 1.56%, the stock managed to close above its lows. This is sheer lack of will. Prabh Singh Bhatia Nishant Sir,Cluster Sir,Cluster full of upper shadows can be taken as lack of momentum for the price to move higher and whenever it tries there is increase of supply which restricts price to move higher? Nishant Arora Both ways. Upper side is not our worry at all. Price is already below support, RSI is 30ish, so that's not our worry that it will go up too fast too soon. But price hitting support again and again also shows a lot of residual demand. demand. We know there is supply, that's the whole hypothesis but supply is not enough to kill the residual demand. So unless those hopeful buyers get out of the way, why to get stagnated? Prabh Singh Bhatia On higher timeframe (Weekly),RSI still has scope to touch 30 levels and hence Price still has scope to fall more to attain higher demand zone levels.
Nishant Arora Prabh Singh Bhatia I never said it can not fall. It's about capital allocation. Archit Srivastava When u explain charts here in group it looks really simple and one can easily learn if he wants to, but when it comes to trading and finding the thesis or logic to hold, short or go long seems difficult. Nishant Arora That is because when you read my explanations or posts, they are still "MY" posts. Unless you make them "YOURS", this issue will remain. Nishant Arora When earlier during the day, it broke hammer's low but jumped up immediately. Exactly at the same time Nifty too jumped from sub 10500 to above, that's when I closed all positions. Attaching morning's screenshot. screenshot.
Nishant Arora As of now, waiting on the sidelines to confirm whether this is a pullback or first sign of reversal. As you can see, price jumped up and formed an evening star at almost 38.2% retracement level of A-B move. But still waiting for further price action to show whether retracement is complete or not or whether its seeding a reversal. Based on that, further positions would be taken.
Prabh Singh Bhatia Nishant Sir,Looking at your trading style,it seems for reversal you don't give much weightage to Reversal Patterns and believe more on what exists on chart in the form of candles.Is this correct? Sir in your experience,do experience,do you think Reversal or continuation patterns patterns carry any precedence precedence while looking charts from higher timeframe or they are secondary and can be used as supporting data points within our thesis carrying minimal weightage. Nishant Arora Forget candle patterns, there is no reversal confirmation from any angle. If you look at daily, price is well below supply zone with momentum in bearish zone. Even if it bounces back to the supply zone, still that can not be called a reversal. And I am not worried if it makes that bounce to the supply zone of 230-232 as I am out of the position. But even the big picture is not signalling a reversal.
Nishant Arora On shorter frame, the bounce can not yet be called a reversal at all. We are yet to breach even the first Fib level and below 20 EMA. Hourly RSI in bearish zone too. This can well be just a retracement.
Nishant Arora If I see this perspective too, we're still below mid-line. Just that volatility has risen but no reversal.
Nishant Arora See a move till 230-232 can not be called a reversal on the big picture. I mean first it must cross that and then establish that as support. Then we can say that reversal has happened. But since 230232 is quite far away, I am out. But as of today, view is still bearish.
Prabh Singh Bhatia So for reversal,do you give more precedence to patterns or any particular particula r strong bullish candle on daily timeframe or it should be formation of HH on daily timeframe or price coming above 20 Ema. Nishant Arora Also, if you notice we are still below a previous swing swin g low on hourly. So, it's not about candle my friend, it's clearly about structure both on big frame and lower frame. We have not yet breached a previous swing low. Talking of reversal is a speculative thing as of now.
Nishant Arora One last thing. In fact there may be cases where a reversal occurs on hourly or lower frames but not on daily. Even then that's a potential trade in the direction of daily. Here in this case, there is no reversal even on hourly. But the only reason to get out was the speed with which price bounced from the low today. And since window is large, it was better to get out and observe. Prabh Singh Bhatia But in order to consider reversal on hourly time frame,should frame,should not breach of swing high will have more potential and consideration of trend change rather then swing low. Nishant Arora Both but swing low in this case would act as an early resistance. Swing lows represent demand. So, when price is below swing lows, swing lows represent trapped buyers who may sell at breakeven. In fact previous swing lows in downtrends and previous swing highs in up-trends act as good resistances and supports respectively. respectively. Nishant Arora Rather think of it, if price breaches swing low in this case and doesn't breach swing high, then we'd end up with a range in this frame and would have to shift even one frame lower. Nishant Arora As discussed earlier that we had booked 1.66 L in the first ride. This is the second ride now :-). BEGINNERS, TRY TO LEARN AS MUCH AS POSSIBLE. (May 23, 2018, 04:21 pm)
Nishant Arora As we discussed yesterday that it was still a pullback in my opinion, and it turned out to be the case. Will explain on chart, shortly. Shaji Thomas Nishant did u close ur trade on VEDL ??? Nishant Arora This is hourly futures. But the orientation has been daily spot. You can check all the comments above. We are short because price is below supply level on daily chart. And we got out yesterday because a pull back could have bounced to 230-232 without destroying the short thesis and we could not hold it to that extent, so it was better to be out and wait for next entry, which we got today.
Nishant Arora If I were you, the biggest lessons I would take from this would be these: 1. Don't run after many trades. Refer to a big picture and play it on smaller frames in phases till the big picture exhausts. 2. Always play in phases, especially in futures. 3. Don't let volatility of smaller frame destroy your trade bias. Remember, smaller frame is for entry and exit and not for trade orientation decision.
4. Never be in a hurry to call reversals. Always give more preference to the trend. Remember that for a downtrend to change into an uptrend, it has to make a higher high and a higher low and for an uptrend to change into a downtrend, it has to make a lower high and a lower low. Otherwise, if you are playing a support or resistance break, like we are playing a support break on daily chart, the trend would be considered to have reversed only when price manages to get above that resistance (previous support) and establish that as support, not before that. Never be in a hurry to call reversals. A trend is a trend till it reverses. 5. Even a reversal on a smaller frame does not mean a reversal on a higher frame. For example, the trend is in supply mode in daily chart and in hourly too, price is making lower highs and lower lows. All is well and you are in sync. Let's say on hourly, the price makes a higher high and higher low, it does not mean that daily too has reversed. Get out of the trade but do not change bias. Rather this conflict between hourly and daily can give great opportunities. For example both daily and hourly are down, now you get a bounce which changes structure on hourly but price is facing rejection at daily resistance levels, you have got a wonderful shorting opportunity again. Happy Learning !!! Nishant Arora December 15, 2017
My V-Guard trade as of now. Just plotted all my trades on 5 minute chart to show you guys that TRADING IS NOT STATIC. Also, note that I've written the description on 1 lot basis but the original trades are of multiple lots. But it will be easier for you to understand the maths on 1 lot basis. This post is not designed to show WHY I took trades at those points but HOW trading happens in real time. Note: These stunts are performed by a professional. Please do not try this at home.
Nishant Arora December 15, 2017
If you can't explain it simply, you don't know it well enough. Here's daily chart observation of India Cements.
Saurav Panda Hello Sir, Attempted to apply Victor Sperandeo's 1-2-3 reversal on this. Please comment on the veracity/issues of this application.
Nishant Arora Trust support zone more. Trendline is arbitrary. Visualization is correct. Nishant Arora Here comes the news too
DevRaj SecDevRaj and 5 others manage the membership, moderators, settings, and posts for TechnoFunda Society. Simplicity rocks.... Great move since we discussed here For any beginner I strongly advise understanding divergence. Combined with support and resistance- divergence almost always results in profit. Nishant Arora One also has to understand that lot size is 3500 shares. So, imagine the kind of money we are talking about here per lot based on just a simple insight. Almost 13 points which amounts to 45500 per lot and we never trade 1 lot.
Nishant Arora December 15, 2017
Here's one more. Godrej Industries Daily chart. Unbelievably simple. Note: Though I don't want to state something so basic but still. It's a daily chart, and can offer directional bias. Do not take intraday trades based on this.
Nishant Arora November 10, 2017
CANFIN Hourly
Rohan Das Are you thinking to go long?
Nishant Arora haha...interesting question but very difficult to answer. I never tell what I am doing because my thoughts change frequently because I take several calls at the same time, positional, intraday plays, cash and so on. So, if I'd say yes today, I won't remember to tell you tomorrow that I reversed my position and you'd still be thinking that I am long :-). Few days back, I posted CANFIN chart with a long bias at around 485 or so. And what I truly did was this. I got long at 486 got stopped out 479, went short almost double quantity at 477, covered at 457, went long at 461 and covered at 472, now long since 457. So, I won't be able to tell you what I'd do for the reasons I just described. Now, people who are still looking at my earlier canfin long chart at 485 must be thinking that I lost whereas I made more than a month's money in those multiple trades. So, chart we only put once, trading is different and it will be hugely difficult to update everytime I take a trade or change my mind. See, I am a NO OPINION person. I take basic cue from chart and taker the position and then I remain flexible. It's my style, works for me. May not work for you. Rohan Das You use multiple time-frame to enter the trade Nishant Arora Yes, and I take multiple trades too. So, I might be long on positional and short on intraday and long in cash. Nishant Arora Now (Nov 10, 2017 11:14 am)
Nishant Arora 10 min chart
Prabh Singh Bhatia Most of the times our SL gets hit because we are trying to catch bottom assuming trend is going to change and try to do counter trading whereas it makes more sense to trade in the direction of trend. Nishant Arora November 10, 2017
Jet Airways Monthly Chart.
Nishant Arora This is another rendition of the same chart. In this the down sloping line has been started with first actual peak.
Madhur Agarwal Nishant, what does declining volume line indicate? Nishant Arora Volume decline is a signature of a potential inverted H&S pattern which is forming. Think of it in this way. When price made left shoulder (trough 1), volume was heaviest. Then, when head was formed (trough 2), volume was lower that 1., which shows that though price fell more than 1, but pressure behind the fall was lesser than what it was at 1. And when right shoulder formed (trough 3), volume fell to lowest among all three, which shows that this decline was not supported by selling pressure as compared to 1 and 2. So, every time price made a low, volumes were registered lesser than the previous low. This makes the case stronger for bulls to take over.
Madhur Agarwal With crude rising ATF prices will increase. Will be interesting to see Jet play such a set up. Nishant Arora True, all setups are susceptible to delay/failure. As we always say, price does what it does. We can just try to see high probability events but no matter how high the probability is, it's still a probability. That's where proper risk management saves our skin. Back to Index
TRADING PSYCHOLOGY A Trader's Mind- Anchor Bias
Aug 08, 2017 Those who understand trading, know that trading is all about mind management. Of course, there are countless trading techniques available to traders. Some traders do fundamental analysis while others prefer technical analysis. You can know more about fundamental and technical analysis by clicking here. But in the end, the only thing that differentiates a winner from a loser is that how he manages his trade and his own emotions. A beginner trader becomes obsessed with analysis and thinks that in-depth analysis is the holy grail of trading. But he soon encounters the harsh reality that despite every bit of analysis, losing is imminent. In fact, I've done a comprehensive post on this aspect of trading, which you can read by clicking here. . But the question remains that why mind management is an integral part of trading success? Let me put it this way, that since we are humans, we are basically flawed. Remember, trading does not come naturally to us. The mindset required from trading is entirely different from the
mindset we lead our lives with. Our mind is full of biases which affect our trading negatively and hence it reflects in our profit and loss statement. A bias is the tendency to have an opinion or a strong view without considering evidence and reality. The bad news is that you will never fully overcome your cognitive biases, as long as you stay human. The good news is that once you are aware of your cognitive biases, you can cut their effects and stand a better chance at becoming a successful trader. Today I am going to talk about one such bias which inhabits the minds of most of the traders and negatively affects their profitability. Psychologists call it, 'Anchor Bias'. Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the 'anchor') when making decisions. It was first documented by Daniel Kahneman and Amos Tversky, noted psychologists and economists. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgment without looking at the changing facts and scenarios. For example, you go to a buy a shirt and shortlist a shirt to buy. Then you inquire about the price and the shopkeeper tells you that the price is Rs 3,000/-. Now, an anchor is set in your mind. You negotiate and the shopkeeper agrees to give it to you at Rs 2,500/-. You feel elated and a sense of accomplishment travels through your veins assuring you that you have cracked a deal. What if the shirt is worth just Rs 500/- and the initial price was set very high by the shopkeeper deliberately? But your mind chooses to ignore the noise and focus on evaluating everything with respect to the anchor (in this case Rs 3,000/-). Also, you would perceive other shirts as cheap or costly based upon whether they are above Rs 3,000/- or below Rs 3,000/-. The anchor has become your benchmark in making any decision. This flaw of human mind is exploited by most of the companies while they market their products. Now, let's see several practical scenarios to understand how anchor bias affects a trader: Situation-1
You buy a stock at Rs 100/-. The stock rises to Rs 120/-. You book your profits. The stock goes to Rs 140/- but you don't buy it again. The stock goes to Rs 150/- but you don't buy it again. The stock goes to Rs 200/- but you don't buy it again. Reason: You don't buy it again because you feel that price has already appreciated so much. You start seeing the current price in the light of your initial buying price, i.e., Rs 100/-. In other words, Rs 100/becomes your anchor and every price that is above it, looks expensive. This is the biggest reason as to why traders have tough time re-entering positions once they have squared off even if that would prove to be utterly profitable. Situation-2
You buy a stock at Rs 100/-. The stock falls to Rs. 80/-. You book your losses. The stock goes to Rs 70/- but you don't initiate a short position again. The stock goes to Rs 60/- but you don't initiate a short position again. The stock goes to Rs 50/- but you don't initiate a short position again. Reason: You don't short it because of two reasons. One, that you feel that price has already fallen so much so it may not fall further. In this case, Rs 100/- becomes your anchor and every price which is lower looks cheap. Second, since your initial opinion about the stock was that it would rise, so you can't imagine shorting it now. In this case your initial opinion becomes your anchor as well. This is the biggest reason as to why traders have tough time reversing their positions after their stop-loss is hit, even if that would prove to be utterly profitable. Situation-3
You buy a stock at Rs 100/-. The stock rises to Rs. 150/-. You book your profits. The stock falls to Rs 120/-. You want to enter the stock again. Will you get Long or will you get Short? Most probably, you will get Long again even if that proves to be a wrong decision. Reason: You will get Long because of three reasons. One, that since price has come closer to Rs 100/-, you feel that it has become cheap. It happens because Rs 100/- becomes your anchor in deciding which price level is cheap and which price level is expensive. Second, since your initial opinion about the stock was that it would rise, so you can't imagine shorting it. In this case your initial position becomes your anchor as well. Third, that not just your initial opinion about the stock was that of a long but you also made money on that opinion so it becomes almost impossible for you to change an opinion which has yielded profits. Here your recent result becomes your anchor as well. Situation-4
You buy a stock at Rs 100/-.
The stock falls to Rs. 60/-. You hold onto it not wanting to book a loss. The stock comes back to Rs 100/-. Would you square off your existing position, initiate a new short position or buy more? Most probably you will square off your position even if after that the stock goes to Rs 150/- or Rs 50/-. Reason: Let us discuss your thought process while you evaluate all the options. You will not buy more at Rs 100/- because the first time when you bought at Rs 100/-, the price fell to Rs 60/- thus you have become apprehensive of buying more at that level. In this case, the pain of loss becomes your anchor. You will not short at Rs 100/- because the price has recently moved up from Rs 60/- to Rs 100/-, so you will be apprehensive in shorting. Plus, since your initial position was that of a long, you will have tough time in reversing your opinion. In this case, the recent price rise and your initial opinion becomes your anchor as well. You will square off most probably because you have been feeling pain of loss for so long and as soon as price comes back to Rs 100/-, you want to free yourself from the burden of pain by squaring off. That feeling of no profit no loss, is not less than the feeling of making big profits in this scenario. In this case, the pain of loss becomes your anchor as well. Since you have been in a losing position for so long, the moment you reach a position of zero loss, you stop thinking altogether and get out.
There can be several other such scenarios but I am sure you've got the picture in your head. Anchor bias affects every trader's mind sometime or the other. In fact, it affects all of us everyday in everyday situations. Having said that, while it is impossible to completely free one's mind of such biases, but a trader can in fact raise his awareness so as to let the bias from taking control of his mind. Here, I'd give a mental strategy which would help you in controlling the anchor bias and would make you ready to make the most of every situation. I call that strategy, "Fresh-look strategy". It involves looking at every price irrespective of your entry price or exit price. It involves looking at the chart as if you are seeing it for the first time. So, whenever you are in the need of making a decision, have a fresh-look at the charts and other facts. This strategy will help you in becoming more flexible. After all, trading is not about forecasting, it is about reacting to what market does. So, a reactionary stance must be flexible. A trader must not cling to his opinions as that leads to emotional trading. So, if you'd start applying freshlook strategy, you will start looking at the market as it is, not as you think it is. So, be it taking a reverse position after a stop-loss is hit or buying more as the price keeps on rising, you will be able to do it with ease. All you have to do is to see every moment as a fresh moment. Remember, a trader goes through several stages during his journey of evolution. So, enjoy each stage as you pass through it. You can read more about stages of a trader's life by clicking here. I would like to end this post with an amazing quote by Marty Schwartz, a legendary trader.
Happy Learning !!! Nishant Arora September 13, 2017
Nishant Arora Actually, emotions, if given shelter, cause further damage in future. I'll give you an example on the same lines. You book profits and stock keeps going higher. You feel regret. Let's say it happens to you 3-4 times in a row and you don't detach yourself. Then what will happen is that next time you'd become greedy and won't book profits in greed of having more because your experience tells you that it goes higher after you book. So, regret gives birth to greed almost always. So, it's good to kill it at the first stage. Nishant Arora The way to finding money goes through finding peace within yourself. Nishant Arora February 12, 2018
Nishant Arora December 29, 2017
This is a wonderful CASE for MIND MANAGEMENT during a trade, especially for beginners. When I am right, I make money. When I'm wrong, I make all the more.
INFIBEAM_CASE-MI ND_MANAGEMENT.
Saurav Panda Sir two queries: 1) as you mentioned earlier also that analysis is carried out in spot chart but trade is taken on the future chart. Sir, how do we do it? As in we just focus on intraday future for particular day or the whole 3 months duration and figure support and resistances? Never traded future, hence the doubt 2) you mentioned that you could see the momentum and order flow in opposite direction. Are we talking about ask bid qty? Nishant Arora Saurav, My actual trades were taken on futures charts in real time on 30 min, 5 min and 1 min frame. However, if I'd include all that, it would become very very messy for beginners. The idea of this post is to convey the importance of emotional control during trading. That is why, kept it simple. I take only directional view from spot but actual positions are taken using futures charts. So, it is not that I took entries and exits on spot chart just that I am keeping things simple here, in the post. And yes, momentum judgement came from an integrated view of bid/ask fulfillment on both spot and futures. Israel Mills So glad you point this out brother. Half way through this year I started to focus mainly on psychology. Other traders laughed and said I should work more on analysis. But I thought to myself If trading is 80% psychology and 20% skill set Then it would make more sense to me to focus on psychology. Nishant Arora Absolutely true. You're on the right path. Remember, if only 5% people succeed in trading, they must be doing something very different. Tfs Faisal "Splendiferous" , "prodigious" and "indomitable "....in other words "excellent timing" and a very good errorless job which was very well executed by Nishant Arora bhai. All thru the trade I was second by second with him all along. In fact the precision with which he carried out the trade can be seen only by specialists of specialists. The trade taken initially was one which was long, but nishant bro did not take an instant to hesitate and go the other way...In fact it was like a trade moving on nitrous fluid and smoothly , he manoeuvred it in all the cacophony. I was dumb struck with the loss which was booked while closing the long. Normally happens to all..known as brain freeze....and it was like "shit"..And in the mean time in the 15 or 20 seconds I was just moping around..bhai sahab started dancing a different tune..it was like dancing to a mashup of hip hop and waltz mixed..where waltz ended and we smoothly transitioned to hip hop...not a beat missed. And wow..what a result, which is there for all to see. True genius. All TFSians , please take advantage of the gentleman here who is spreading his knowledge, experience and time here without asking for anything back in return except for being good students. Vijendra Kumar Excellent sir, No words to express your effort, sir is it capital is very important to trade in intraday or F&O to take the small profit on each trade based on the trend and price? Nishant Arora Yes Sir, capital is the fuel of our vehicle of trading F&O. But we supply only a small part of that capital and major part isnfinanced due to leverage. But that does not mean that we should entirely
depend upon the leverage. I'll give you an example. For example I take a loan (leverage) of 20 lacs only when I have 20 lacs with me. You'd be thinking why. So the answer is that leverage in F&O carries minor interest. So, I'd be paying a little cost for 20 lacs leverage while on my own 20 Lacs, I'd generate better returns. So, it's a game of cost of capital. The mistake that people do is that they have only 5 lacs and they take up contracts worth 30 lacs. That's suicidal. So yes, capital is important. But more than capital, manager is important just as a driver is more important than the car. Sagar Scindia Nishant bro..hats off for this wonderful post and all the discussions..9 seconds is still what I'm not yet able to comprehend ..what were your thoughts in that small timeframe? Nishant Arora Have done so 100s of times buddy so literally no thoughts. It's called mind in hands mechanism. My fingers knew what they needed to do. I guess it is because I have spent hours and hours of thought on such events. Nishant Arora March 6, 2018
PSYCHOLOGY OF A FLAG I've said it so many times and I'll say it again, "PATTERNS MEAN NOTHING, SENTIMENTS DO." The problem with most people is that they ignore sentiments and try to FIND SHAPES. Market is not a Geometry class, MARKET IS PEOPLE. As we all know that a flag formation is a continuation pattern. It consists of a POLE on high volume, a COUNTER MOVE FLAG on low volume and a BREAKOUT in the direction of the pole on high volume. So, in case of a bullish flag, we have a pole on high volume in upward direction, a flag which forms in downward direction on low volume and then a breakout in upward direction on high volume resuming the direction of the pole. And in case of a bearish flag, we have a pole on high volume in downward direction, a flag which forms in the upward direction on low volume and a breakout in downward direction on high volume resuming the direction of the pole. Also, an ideal flag must not stretch more than a month. Let's consider the sentiment of a Bullish Flag pattern. There is a steep and strong rise on good volumes. That is the POLE. That means that too many people have bought in enthusiasm, bidding at offers higher than the market price. When it rises too fast too soon, few people book profits hence price corrects a little in the opposite direction. But why did I say "FEW PEOPLE?" Because, the correction is on low volume hence it shows that all those who bought in the POLE have not sold. Only the weak hands have booked. And when those weak hands sell, those strong hands, who entered in the pole increase their positions by buying from those weak hands. And they are so bullish, that they buy at the offers even higher than the market price, that is why a flag breakout happens. See how important is the volume. If the flag correction happens on very high volume, it won't represent profit booking but a potential shift in psychology of buyers and sellers and a potential reversal or a sideways action. A correction on low volume represents that only few people are getting out and their selling is being completely absorbed by buyers without price falling too much. Also, see the importance of time. If flag correction takes a long time, it means that there is something wrong brewing inside. Profit booking is a fast phenomena and those want to get out, get out fast. So, if a flag formation stretches too much in time, that also negates its possibility of being a flag and indicates towards beginning of sideways movement or even a reversal. That is the sentiment of a bullish flag. Reverse it for a bearish flag pattern psychology. As you can see,
every rule that is associated with a flag, be it of volume or time, means something logically and psychologically and is not just some textbook rule. Nishant Arora· May 16, 2018
Always keep track of your emotions, your thoughts and your activities while you are in a trade. Be attentive and aware of what you think. The moment a thought comes or an impulse to act arises, immediately CATCH YOURSELF thinking that thought and try to be rational. Thinking is not bad. Thinking without you yourself knowing that you are thinking is bad. Let me give you an example. Trader A goes long with a technical stop. He places his stop at an inflection point, which if gets hit will change the whole picture. Price rises in his favor while he waits for the trade to develop. Then suddenly price moves against him with greater force and volume and his stop is hit. He realizes that this is a classic short trade which he mistakenly when long on, and the trader goes short. Trader B takes a long trade and the moment his trade gets in negative, he immediately reverses the position. Now, as you can see that both the traders, Trade A & Trader B did exactly the same act but Trader A is rational while Trader B is stupid & impulsive. This is the bottom-line. It is not the thought or the act that matters. What matters is the awareness and reasoning behind the thought and the act. AWARENESS is the KILLER of INDISCIPLINE. Always remember- "Don't let your thoughts happen to you. THINK THEM." PS: It happens to be equally applicable in life too as it is in trading. Varun Joshi Every now and than trader B comes into picture, but as you rightly said need to avoid those thoughts and be focused Nishant Arora See the thing is, most people just let things happen to them, including their thoughts. So many people ask me that how can we take control of our thoughts. Well, you don't need to take control. Control is a harsh word. You just need to be aware that you are thinking something and then your intelligence will take over and govern that process of thinking rather than your emotions. Awareness brings intelligence on the forefront and puts emotions on the back burner. Whereas lack of awareness is emotions' best friend. Sanjay Jagtap Sir, i did not understand one thing, while both traders go short, which is the same thing, where did B go wrong? Nishant Arora Trader A did short OUT OF STRATEGY. Trader B did short OUT OF IMPULSE. Nishant Arora December 30, 2017
Trading is a lot like playing poker. In both the games, success depends upon understanding the odds and playing only when odds are in your favor. But most PATSIES (losers are called patsies in Poker) kill that edge by playing every hand they are dealt. Watching a constantly moving price chart makes it so easy to forget that there are actual people who are bidding, offering, buying and selling and causing the price move. When you buy, thinking an asset is going up, someone else sells to you (possibly going short), thinking it is going down. I see a lot of people chasing trades. A beginner sees a chart, decides that it's a good long opportunity & decides a price (if not then he should) at which the trade would have the best odds of winning plus optimum risk reward ratio. But next day market opens, and price doesn't come to his decided price, he gets anxious and jumps the gun. He doesn't realize, that he is playing a SUBOPTIMAL hand. See, if we get a wonderful trade setup with wonderful risk reward, we can assume that the person on the other side of the trade has a weak hand. Every time I get filled on an entry on my decided price, I get very thankful. It's like I've found the sucker who's willing to give me that trade at that price. Entering at a price other than what your trading plan dictates means that you're trading with a lower probability hand. The further away you take a trade from the ideal entry point, the worse your hand gets. Eventually, you become the sucker filling someone else's perfect entry setup. Of course, odds change while in the hand/trade but that's a separate issue. But there is no point entering a sub-optimal trade hoping that it will turn optimal. As Warren Buffett precisely said. "If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy." Extending this to trading, "If you've been in a trade and don't know who's the sucker, you're the sucker." Kaustubh Nawalkha Nishant Arora ep is very important so ? Nishant Arora Talking specifically of Poker, I feel that EP is the least favorable because you'll be one of the first to act after the flop. You want to avoid playing weak cards from these positions. MP is better than EP, but it's not as good as LP. You can afford to play a few more hands from MP than you would from EP, as you do not have as many people left who can call and act after you from the flop onwards. LP. is highly advantageous. There is a high chance that you will be last (or one of the last) to act on each round. This is so powerful it means you can be far more flexible with the range of hands you play. Especially the Button position is the most amazing one. SO HAVING YOUR ORDER FILLED AT YOUR PRICE WITH BEST RR IS SAME AS HAVING LP. Kaustubh Nawalkha Mp and lp I don't know sir . Just know ep as entry price Nishant Arora Kaustubh Nawalkha haha...You mentioned EP so I thought you are well versed with Poker. EP is a technical term in Poker. It is called Early Position. I could not imagine that you meant Entry Price. That's why I took little liberty:-). However, the point that I am making has nothing to do with knowing poker. So, yes EP is very important. Nishant Arora I am sorry to have misunderstood. I thought you're referring to this EP. My bad. Nishant Arora Just take away the learning and that is, PLAY ONLY WHEN ODDS ARE IN YOUR FAVOR. Nishant Arora· November 4, 2017
Downtrend is more powerful than uptrend as the emotion of FEAR & PANIC is more powerful than the emotion of GREED & HOPE. Janak M Merchant And the downtrend speed is always higher than the previous one.
Nishant Arora That's the effect of BAD MEMORIES HAUNTING people's psyche. Back to Index
HABIT TRANSFORMATION Nishant Arora January 1, 2018
NOTHING IS IMPOSSIBLE. EVERY HABIT CAN BE CHANGED, NO MATTER HOW OLD OR BIG. EVERYTHING ELSE IS AN EXCUSE- A PERSONAL NOTE I was a chain smoker. I started smoking when I was 17 years old. Call it validation seeking behavior, an urge to develop a style or to match up with peers, it doesn't matter. The fact remains that I had started smoking. I started playing snooker at the age of 16 (eventually went on to play state level) and almost everyone used to smoke at the club so may be I caught the smoking bug there. It started with a couple of cigarettes a day but increased to a level which was far beyond. Let me tell you about my erstwhile smoking structure. I used to smoke 5-6 cigarettes in the day time outside college but the real game used to begin in the night. It so happened that I used to have a study cum music room which was not frequented by anyone except me. I used to study, read, research, make songs, compose them, practice and all of that in the late hours. So, everyday after having dinner and once everyone was asleep, I used to go upstairs at around 11 PM and get immersed in my thoughts and research which used to generally last till 2:00 AM. So, every evening I used to buy a pack of 20 cigarettes. And then once I was upstairs, I used to light my first cigarette of the night and then the chain used to begin. You can understand it from the fact that only one matchstick used to get lit in one night and then every fresh cigarette used to be lightened with the old stub. I used to study a lot in those days on music theory, western classical so cigarette was a constant companion. I don't remember a moment upstairs when a cigarette was not in my hands. So, you've got the idea of the extent. My life changed, from college to job to getting married but smoking continued. And I never thought that I'd quit or even need to quit. When me and my wife were expecting our first child, suddenly a thought passed through my mind that I'd never want my kid to catch my bad breathe or the passive smell that remains with a smoker. I decided in my heart that I'd stop smoking but continued to smoke. On the night my daughter was born, I remember standing outside the hospital when I got a call from my mother that an angel has come in our world. I had a cigarette in my hand. I remember looking at the cigarette, taking one last big puff and threw it on the ground, crushed it under my foot and ran into the hospital. It has been 7 years since that night and I haven't touched a cigarette again. So, after smoking for 9 good years and that too 20 cigarettes a day kind of smoking, I quit it at o ne go. The real test began afterwards. You see, when someone has smoked for that long, he develops smoking memories all across the places. What I mean by this is that every place he goes, he has a smoking memory attached, he has a shop that he buys from at all the places where he is frequent to. It is like going somewhere and realizing that I used to smoke here or I used to buy from that shop and all that. So, that's where discipline begins. Of course, when you smoke, you develop friends who smoke too. So, that makes it all the more difficult as first they think you're joking and then they push you, then again discipline is needed. Now, having been there and shrugging it off, when I see people claiming that they want to quit but can not because of this or that or whatever, it all sounds like an excuse. And it truly is an excuse. It is only our bad habits which chain us, enslave us a prevent us from achieving our full potential. Determination is the name of the game. And now, after having made it as an independent trader, I now realize that how important QUITTING SMOKING was for the development of my thought process as a trader. Being able to do what you want to is POWER. And I realized my power of determination from my episode of quitting smoking. I became
aware of my mental habits, my inner voice and my excuses. I also became aware of my mental weaknesses. And I learnt to ignore the weak part of myself which was forcing me to get back to smoking. This strength opened doors for me. It enabled me to do anything I wanted to. It made me realize that I AM THE MASTER OF MY MIND AND NOT THE OTHER WAY ROUND. Any habit that I wanted to change, be it mental or physical became a cakewalk for me because I learnt to ignore my weak inner voice and only follow what I determined to do. So, it was smoking for me, it can be something else for you that you want to or should get rid of. It can be smoking, drinking, over-eating, not exercising, waking up late or even BAD TRADING HABITS. Realize your bad habits, shrug it off and remain disciplined. YOU CAN OPEN YOUR DOORS TOO.
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HUMAN QUALITIES Nishant Arora· December 24, 2017
I'm a live example of this quote. When I started with my first and last job, it was just 10k per month. And I worked like hell. I didn't have lunch for 2 straight years and rode on bike at an average of 100 Kms per day. Then when business world started making sense and ideas started flowing, I started my first business. It was again hell of a work. I just didn't know where I was going. No money, no personal life, was working almost 20 hours a day almost without any pay. But then network built up and so did my approach towards life, business and people. The second business got easier and the third one came so naturally. Opportunities started becoming visible as if knocking me in my face. It was as if, opportunities were always there, but my conventional education stopped me from seeing them. This is the case with almost every educated guy who is earning well by being employed somewhere. He gets too myopic and just concerned about his monthly paycheck. We are just not taught to recognize opportunities, at school or home. Even before a person starts his career with his first job, he is more concerned about the package than about the experience that he will get. This is a wrong approach to life and career. Life is bigger than your monthly paycheck. Work your ass off and learn to recognize opportunities. I see people who are well placed in corporate always crying about starting a business. Well, the bitter truth is that most of them can't and won't. They'd always cry. The reason is that they'd have to GIVE UP a lot of luxury that they are used to while being in corporate as their new business will demand much more work and pay much lesser may be nothing at all for sometime. Moving from a well paying and settled job to an unstable and low or nil paying business is like taking a step back to move 100 steps forward. Most of the people aren't ready to take that step back. They are not ready to downgrade their lifestyle that would be a requirement to survive the struggle. They just focus on the riches, wealth and luxury that would be result of a successful business. I was struggling with no money when my contemporaries were earning well by being placed in good companies. I could also do that. But I traded my job security for my dream. It was the biggest TRADE of my life. And it paid. Now, 10 years later, most of my mates are still working on their income statement (Salary) while I've made a balance sheet (Net Worth). Now, more or less, my brain and my money makes more money for me. But I owe it all to the time when I worked much much much more than what I was getting in lieu. Tfs Faisal Perfect example for Rohan Das. Please try to understand you cannot only read books and learn trading ..you need to develop more as an individual and without meeting new people one to one without seeing the world is not possible. Trading needs most importantly temperament..which one can never develop only with books..dear rohan das..I wish you all the best but you must grow as an individual ..for that ..leave watching stock markets for the time being ..go out and interact with people , while doing a job, selling or whatever...mature as a person and no book will teach you that ...this is not only for just an individual..But to all youngsters, to go out and open your mind and heart...experience life the real hard way.. I come from a business family but my father strictly instructed better go out and work, aate daal ka bhau maloom padega...and what a life changing experience it is. Nishant Arora Here's my message for anyone and everyone who wants to make it big in business world. For anyone who is either yet to start his career or is already working, my suggestion would be this. If you ever get an opportunity in SALES, DO NOT THINK TWICE AND GRAB IT. Sales is the next best thing to doing business. A businessman is nothing but a GLORIFIED SALESMAN. You wanna be successful, do sales. It will squeeze you, twist you, burn you and turn you into gold. The reason I am equating sales with doing a business is this. Sales involves a lot of things that will turn you into a businessman. It involves prospecting
which means figuring out that which kind of people or organizations are going to buy your product/service. Then comes approaching them. It would involve all sorts of struggles. You won't get appointments. You'd be told NO REQUIREMENT by almost everyone. That's when you'd learn to take turns and twists. When my sales guys used to come and tell me that I tried approaching 10 customers today and everyone said no requirement, I used to phone all of those 10 prospects in front of them and get an appointment. It's an art. You learn to read people and make them do what you want them to. You learn to walk into doors where you're not even invited. Then once you're able to approach a prospective customer, you gotta PITCH. You'd soon learn that blabbering about features of your product/service will do more harm and would always result in a NO. You'd learn to pitch the ADVANTAGES that he's gonna get by choosing you. Then once prospective customer is convinced, then comes negotiation. This part of sales will teach you things, no school, college or book can teach you. You'd learn the ways this business world works. Suddenly a warm, cool and interested customer will become harsh an uninterested just to make you desperate and give him a discount. You learn to understand that this is just a human emotion gimmick. You learn to stay firm on your ground but humbly. You learn to say NO kindly. Then once sales is done, the real part comes and that is of collecting Payment. I wish that you get a customer who makes you run from pillar to post for getting your own money. You'd see how excuses will be made, "Boss is not here so cheque couldn't get signed", "Take your product back, it's not working well", "Give me some commission so that I can get your payment done faster" and so on. But you won't be able to get harsh because it's your money on the stake and two, you'd have to keep him as a customer as he may buy things in future too. So, in the cycle from prospecting to collecting payments, YOU'D BECOME A BUSINESSMAN. You'd know that NO DOESN'T ALWAYS MEANS NO and YES DOESN'T ALWAYS MEANS YES. In fact, the chances of doing business is more when customer initially says NO. Once you'd do that for a couple of years, you'd be more than confident to start a business. Because YOU CAN SELL ANYTHING TO ANYONE. THIS IS THE BIGGEST POWER ON THIS PLANET IF YOU WANT TO SUCCEED FINANCIALLY. SALES JOB is like doing business on Nishant Arora Work hard, quantify everything and turn dreams into goals. A goal is a dream broken into multiple components and each attached with a deadline. Remember, without deadlines nothing is achievable. So, monitoring and quantifying your activities is very important. Nishant Arora Either dare to do what you love or learn to love what you are doing. Rajni Kant Inspite of all the money...traders don't have a standing in society Nishant Arora This is one of the most surprising, shocking and hilarious comment I've ever come across and trust me I've come across a lot of strange things. I guess you've met or heard about all the wrong ones then, if you think so. World over, successful traders are pretty famous people, be it PTJ or Kovner or Schwartz or Cohen. I won't get into specifics as there are too many. I'd just say they are the king makers, be it senate or even presidential elections. They run huge organizations and trusts and honored by revered organizations, universities and governments worldwide. In India, trading has got a wrong PR due to some fraudsters. But it would be naive of a person to form an opinion based on the PR. How we see the world is how "they" want us to see it not how it is. So, if Warren Buffett would have decided to popularize himself as a trader, he'd have done that too successfully. It's all PR, image building. Coming back to India, Rakesh Jhunjhunwala was and is primarily a trader. He still is a huge day trader and swing trader. Of course, he is an investor, but a trader too with equal intensity. His roots are trading roots. Do not forget he was a futures (badla trading in those times) champion and in current times too. He made his initial
Crores from trading only. Radhakishan Damani has primarily been a trader. He started as a trader, made huge money from trading and specifically in the short side. However, when money gets too big, investing is a natural diversification and they do that. But if you'd ask them who they are in their hearts, they are TRADERS. I am no one to be quoted among these biggies but just to give you a perspective. I am a trader and I DO have a SOCIAL STANDING. Whosoever know me today know me because I am a trader and not because I am an MBA. The platform that we are talking upon here is a social standing in itself. So, never generalize what you don't experience. Nishant Arora November 26, 2017
I abide by this whether recruiting people for business, making friends, making business associations or even in the group here. For me, the integrity and character of a person is more important than his genius mind. And when it comes to this group, we are very clear from the start. We welcome earnest teachers, we welcome earnest students but we do not welcome mockers, egoists, stone-pelters and nuisance creators, no matter how intelligent or genius they are. Teach, learn or get the hell out of here.
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TRADE MANAGEMENT Nishant Arora February 12, 2018 There are two ways to trade, predict or manage. Those who predict, trade like a slave of their predictions. Those who manage, trade like a BOSS.
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WHY INTRADAY FUTURES Nishant Arora February 13, 2018 Few weeks ago, one of our members asked me a question as to why do I trade in intra-day futures and not in intra-day equity as one gets leverage in intra-day equity trading as well. I replied to that in detail but since it was in the comment section of a post which was unrelated to this subject, I fear not many would have seen. So, I decided to make a separate post out of it. Here it is: The answer is two fold. There are two big reason to trade futures. One, leverage and two liquidity. Let me describe them one by one. LEVERAGE:
You are right that one gets financed on intra-day equities too but that's peanuts as compared to futures. Futures are inherently leveraged products and when you add intra-day component to the futures, it become leverage on leverage. Let's take an example: Take Adani Ports at a price of let's say 395. Let's compare 1 lot of futures with same amount of equity. Lot size is 2500 (futures). So, I'd assume the same quantity in equity intra-day to keep the comparison. It would take around 1,40,000 to trade 2500 shares in INTRA-DAY EQUITY. This is close to 7X leverage. It would take 1,25,000 to trade 2500 shares in REGULAR FUTURES. This is around 8X leverage.
It would take 50,000 to trade 2500 shares in INTRA-DAY FUTURES. That is 20X leverage. The futures contract was already leveraged and we added more leverage on top of it by making it intra-day. This is no small thing buddy. I am getting 3 times more leverage in Intra-day Futures than Intra-day Equity. There is one more angle to it. Even a regular futures contract has better leverage than intra-day equity. And I am in no restraint to square it off as well. So, let's say I want to short something, which can only happen intra-day in equities, but in futures, I can carry the short position. That is a huge advantage. I am talking about regular futures not intra-day futures. So, my point is that if you see closely, the real competition product of intra-day equity is not intra-day futures. The real comparable product of intra-day equity is regular futures. So, if I get better leverage plus an option to keep my position overnight, why would I even look at intra-day equity. And if I am sure, something will work out intra-day itself, that why would I block 3 times more than what I would do with intra-day futures. It will make sense for me, not everyone because of quantity. People trade intra-day equity because there is no lot size restriction but my average quantity would be equal to 4-5 lots of future so I have no limitation of that sort. If you ask me, intra-day equity is a forced product, to trap novices who don't have enough money to buy futures lots. So, it's like, they don't want to lose any customer. LIQUIDITY:
I'll give you today's example. I got long 10 lots in Adani Ports. Since it was an out an out intra-day trade, I chose INTRA-DAY FUTURES as the product. I paid around 5,00,000 as margin to trade 25000 shares. On the leverage side, it would have taken 14,00,000 to take the same position in Intra-day Equity. Even if I ignore it (putting stone on my heart), imagine buying and then liquidating 25000 shares in cash market. Imagine the hassle involved. I hope you've got my reasons to trade futures, be it regular or intra-day. PS: Futures are not for a layman. It takes serious amount of study, experience and capital to be able to trade futures successfully. Anil Araganji There is some process( formulae etc.)to change spot market value of scrip to future market value of that particular scrip. Am I correct sir ? Nishant Arora Futures price is Spot + COC. COC is Cost of Carry. It involves carrying charges, interest cost and miscellaneous charges. Anyone who wants to understand futures should first understand the history of futures and why futures were made and its structure. Bharat Sisode Which chart should be referred while trading future? Spot or Future? Also how to relate stock and future prices in terms of price levels quickly in intrday trading? Nishant Arora Future charts lack continuation as futures expire. Even if there are software to make continuation charts by connecting prices expiry after expiry but even then there will be problem. See, futures prices become volatile near to expiry hence that price action may not give right view. Coming onto your specific question, since future charts are not continuous, use spot charts for analysis. Futures charts are for execution. And once you are in a futures trade, you don't need to refer spot charts again and again. You don't need to relate your prices to spot every now and then. I personally see daily, weekly and hourly of spot to have my trade view and direction. Then I get onto hourly, 10/15 minute and 3/5 minute futures
chart to execute and then if it's an intra-day trade, I dont need to look at spot. But if it is swing, then I mark levels on spot charts. For example at spot, price is at a resistance. And I know that price must get to at least this level for a breakout. So, I consider that. I only take position in futures when price reaches so and so level in spot. I so badly wish, someone told me this 10 year ago. But don't let the importance of this small comment diminish just because it's a small comment because it took me years to reach to this. Sangram Gantayat Agreed Nishant Arora. But i have 2 points to make. One that there are brokers - decent ones - who offer around 15-20 times leverage in intraday equity. Like i trade with upstox ( RKSV) where depending upon the product the margin for the Adani ports trade wud be 50-65k vis a vis 33k in intraday futures. Second - with equity there's flexibility in terms of quantity. For eg if my technical SL and MM rules dictate a size of 4000 shares i cant in futures, it either has to be 2500 or 5000. Also with exiting a trade i have much more flexibility in terms of scaling out in parts whereas in futures i have to unwind the entire position(2500) at one go. but as u said in case u are taking size equivalent of 4-5 lots, then its a non issue. Nishant Arora You're right. It's more about quantity. Liquidation of huge quantity is more smooth in contract form as hundreds of shares as such are considered 1 quantity. Sangram Gantayat Also need one more input from you. How do u interpret volumes here. Logical v/s numerical . for eg in a equity chart on a candle the volume reads 1 lac shares it means 1 lac shares actually changed hands ( got transacted) , whereas in futures that 1 lac isn't it misleading, coz that 1 lac shares is a function of lots trades and lot size. doesnt it logically have different interpretations if the lot size is 500 vis lot size of 5000 . ( I hope i have been able to make u understand the point ). Like for a stock with lot size 500 , 1 lac share wud mean 200 lots whereas if the lot size is 5000, it means 20 lots only..... i mean the level of activity is 1/10th in one vis a vis other for the same reading in terms of no of shares Nishant Arora Lot sizes depend upon the price. So, in a way, we are talking about comparing volumes of two contracts which are having a huge price deviation. But then, the comparison that you're talking about isn't valid even in spot. We can not compare volume of a stock to volume of another on absolute basis. We can only compare the volume to the past average volume of the stock and same in futures. If we want to compare volumes across the stocks or contracts, we would have to compare the rate of change not the absolute number. For a stock 5 lac might be good volume which for some other stock 50 lac would be a normal event. So, your query is basically not about futures per se. It is all the same in stocks too. Back to Index
STOP LOSS Nishant Arora October 2, 2017 Some Thoughts on Stop-Loss for Beginners
You all know what stop losses (SL) are so I won't get into that. So, basically there are two kinds of SLs; Technical SL and Money SL. In Technical SL, you let the chart decide where the trade would stop being right. It is that very point where price will deny your original thesis of entering the trade based on the chart structure. For
example, if you are taking a long trade with 1000 shares of Rs 100 each. And the nearest support is at Rs 91. So SL will be put there because that is the point which, if broken, will break the thesis of going long in the first place.. Money SL is simply deciding how much you wish to lose in the worst case scenario. For example, if you are taking a long trade with 1000 shares of Rs 100 each and you don't want to lose more than Rs 2000. So, you will place a SL at Rs 98 irrespective of what chart says. Now, the question is which one is better and how to place one? Simple answer is that professionals use the first, amateurs use second (that is why their's get hit most of the time). But what if a technical SL is coming at a point which too much to afford? Simple, do not take that trade (you have to be very selective in trading). Further, the SL, if hit, must not value more than 1-2% of your total capital. Also, always define your SL first thing after looking at the chart because without an SL you won't be able to define the risk reward ratio. So, it gives another angle to the concept. Even if technical SL is coming at a price which you can afford even if SL gets hit, still it does not justify taking the trade. It will only justify when the potential reward is also bigger than the loss that will incur if SL gets hit. The ratio must be at least 1:2 (some people don't trade below a risk reward ratio of 1:4 but minimum it should be 1:2). Always remember, risk reward changes while in the trade. In fact, one can enter a position with very loss risk reward but can skew it in his favor using trailing stops and sound position sizing techniques like pyramiding. This will solve more than half of your problems. Let's see the benefit objectively: 1. Since every SL will be maximum 2% of your total capital. It will take lots and lots of straight losses to wipe you off which is a distant possibility. 2. Also, since the risk reward ratio is at least 1:2, even if your probability of winning falls to 40%, you'd still make money. So, the bottom-line is this: 1. SL should be at a technical level which if hit changes the thesis of the trade. 2. SL potential loss should not be more than 2% of your trading capital. 3. Potential profit must be at least twice of the potential loss if SL hits. Santanu Chowdhury Nishant ji ...how practical is the 6% rule that Mr elder mentioned in his book? Nishant Arora Santanu Chowdhury Brother, it is very practical. More thab techniques, money management works. However you have brought up an important point. These rules are difficult to implement with small capitals. Hence the myth breaks that you can just start with a couple of lacs and make money. I am specifically talking about leveraged trading. So if you have 10 Lacs to start with, these rules will sound more practical to you but if you have 1 lac capital, these are unfollowable. So lets say if
you have 1 lac and you take a leveraged trade of a scrip whole lot size is 1000 and price is Rs 500. It may be perfect entry price but 1% rule says that you can't lose more than Rs 1000 and that means keeping a SL of Rs 1 which will surely be hit. So if you have small capital, then finding those trade where you can follow the risk maagement rules and that to with a technical SL, it is impossible. That is why I say that people who lure others saying that they will double your money, are frauds. In the manner of saying, chhoti capital per risk bada hota hai and these 1%, 6% thing doesn't work. Santanu Chowdhury Ekdam sahi dada ...risk bada to mgmt bhi tough ... after loosing 6% capital in a row ..revenge trade comes into play and forced us to trade more .. Nishant Arora Pura mental wiring damage ho jata hai and every ruke goes for a toss so it's better to stop trading for some time and then start small again. Dishank Kothari Nishant Arora Enlightening insight!! What according to you would be an ideal trading capital to start with if one is gonna be involved with derivatives!! I am a new member!! Hence catching up with the older posts. Nishant Arora Dishank Kothari One way to know that is to think in terms of returns. If you can generate 30-40% CAGR in trading, you must be really good. So, think of the kind of returns you are looking at and reverse engineer the capital. But practically speaking, if I consider swing/daytrading and hedging in perspective, I think anything less than 8-10 lacs is suicidal. Asit Bhaskar Satm Nishant ji SL can also be placed by ATR along with position sizing, your expert views please Nishant Arora Yes brother, there can be hundreds of techniques. Some use ATR, some use Pivots, others use moving averages, some use candle patterns in setting SLs, some use trendlines and so on. But the basic premise must stay that if SL is hit you must not lose more than 2% and reward must be at least twice the size of SL. Techniques depend upon a person's style of using technical analysis, I believe. Hari Raj Now next question .... Is .. how often we get trade which will have 1:4 reward ratio. Can u write few words regarding risk: reward ratio please Nishant Arora The only advantage that a retail trader has over an institutional trader is CHOICE TO TRADE. But sadly, a retail trader kills that advantage himself by trading even sub-standard trades. An institutional trader has lots of targets due to which he HAS TO take trades. But a retailer has ultimate advantage. So, to answer your question, how often we get a trade with 1:4 RRR, there is no hard and fast rule. You need to dig wells continuously to find out which can yield more water with minimum investment/risk. But, the bottom line is this. If you don't find an optimum trade, don't trade. There is no gun on our head that we should trade everyday or every week. That's a huge advantage. We must appreciate that Sir. The whole idea of RRR is to have a positive expectancy system. See, there are two things involved in calculation of expectancy. One, the probability of win-loss and second, the magnitude of win-loss. You don't have much control over the probability no matter how hard you try, no matter what technical system you use. The only thing that you have control over is the capital that you LOSE. Yes, you have control over your losses. And, that's real power. So, that is why RRR is very important. Rajesh Raheja Nishant bhai, in a F&O trade where the price is 500 & lot size is 1000 (lot value is 5,00,000) ,the margin money required is 1,00,000 & the capital I have is 10 lakh, then what should be my stop loss
2% of margin (2000/-) or 2% of the lot value (10,000/-) or 2% of my entire capital (20,000) irrespective of the value of the above trade.. ? Nishant Arora 2% of your trading capital, nothing to do with contract value or your trade investment. However, don't look at this as static 2% that you'd just have to set a 2% stop. Should be technical stop which coincidentally is coming in 2% range. Rajesh Raheja Also, should we follow 2% for both swing trades as well as day trades as we expect higher rewards in swing trades ? Nishant Arora There is a way to manage that. In range trades, keep quantity high and stop tight while in trend trading, you can compensate wider stop with a low quantity position. Zahir Shah Skewed risk-reward ratio adopted by Trader, "Paul Tudor Jones". Love his documentary. Check out https://youtu.be/Pz5JUt9IKPM Vasu Sharma Sir I m beginner may I request how to select technical SL seeing chart. Nishant Arora Technical stop is a point where your thesis of the trade becomes nullified. Of course, for that you'd need to learn technical analysis. So, I suggest you do that first. Amit Dhakre It was only after reading your posts about dynamic risk:reward I sometimes started taking 1:1 trades as well and it worked great with scaling in. I have a question wrt this. If the price starts to move in opposite direction, should we scale out as well or wait for SL to trigger? Nishant Arora See, one scales in only in favorable direction, it means that at the point of entry you had a standard size then as trade turned favorable, you started scaling in. Now, let's say you have scaled 3 times in the duration of the trade while it was in favorable territory, but if it starts turning back, scale out as you scaled in. And by the time you reach point of entry, you must be left with the initial standard position because your stop was set as per your original standard position in mind not your scaled in position. Nishant Arora November 5, 2017
If your SL gets hit, you should be proud of yourself and not ashamed. Only those traders' SLs get hit who put them. Remember only immature and rookie traders' SLs don't get hit because they don't put them at all. Be proud of your stops being hit. That's a reminder that you got successful in saving your capital with a minimum setback. As I always say, trading is not about increasing win/loss ratio, it's about increasing profit/loss ratio. Nishant Arora STOP LOSS IS SUPER HERO. It saves us from collateral damage. It is the best tool available to a trader but most underused. I just do not understand people not accepting a failed trade. I mean, what's wrong in accepting a failed trade. My 5 trades out of 10 FAIL over a series of trades. If I take 2016 FY, my win/loss ratio was 48% and I more than doubled my trading capital. Just because of STOP LOSS and proper position sizing. People who think that they will be judged on the basis of individual trades or people who think they can judge someone based upon outcome of individual trades, have not understood the game of trading yet.
Nishant Arora Absolutely. The game is to play defense and not offence. If you'd preserve capital, you'd run into few jackpots every now and then. Just keep focusing on your losses. Profits will take care of themselves. Vivek Reddy Nishant Arora: Generally , do you put a stoploss at 1 ATR down? or how much below the support ? Nishant Arora Vivek Reddy I don't follow a hard and fast ATR rule. I also take into consideration support levels on higher timeframes as well, in terms of some old trendline, important moving average level, Fibo level or some important price level where too much volume was traded. If 1 ATR down is free from all this, then yes otherwise, I customize according to the situation. Nishant Arora December 16, 2017
When all is said and done, the stock has been chosen, chart has been analyzed, trading strategy has been planned, trade has been entered and position sizing has been applied; the only one thing (and the only one really) that you have in control is the amount of loss you would take. Nothing else is in your control other than this. You can't control the direction, momentum or even target achievement. The only thing you have 100% control on, is the level where you would book the loss and get out of the trade. And guess what, the biggest irony is that a trader tries to control everything else which is not in his control but doesn't use his control over this aspect which is his biggest strength and controllable Nishant Arora In simple words, PRICE- NOT IN TRADER'S CONTROL TREND- NOT IN TRADER'S CONTROL MOMENTUM- NOT IN TRADER'S CONTROL AMOUNT OF PROFIT- NOT IN TRADER'S CONTROL AMOUNT OF LOSS-COMPLETELY IN TRADER'S CONTROL However, the trader tries to control the uncontrollable & doesn't control the controllable and keeps wondering what is wrong. Tfs Faisal Always go in for technical stop loss instead of stop loss kept for preserving capital, infact if you do not have the right amount of capital in a trade, it's a sure shot recipe for booking loss in it. Nishant Arora November 3, 2017
Stop-loss is a major point of distinction between a successful and a bankrupt trader. It's like a safety net beneath, while you walk on the tight rope of trading.
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PROFIT TAKING Nishant Arora October 20, 2017 It takes guts to take losses. But, it takes more guts to delay taking profits.
Nishant Arora I can tell this by experience. Let me tell you one of my investing side experience. I can name the stock because I've sold it. I bought Visaka Industries first in December 2015 at Rs 132. Few friends also bought along with me. It fell to 88-90 levels by February 2016. They got scared, I bought more. It went to 240 in October 2016. However, some friends had already exited at 200. I bought more at 235 levels. It fell to 172 or so in December 2016. And those friends felt proud of themselves. I asked them to buy as much as they can. But they didn't because they were too attached to their initial 132 buying level. To cut it short, I asked them to buy at 300, 350 even 400 but they didn't. I kept adding till 400 in May 2017. I finally liquidated all my positions between 700-710 in August 2017. So, it told me a lot about nature of the problem. In fact, the people I'm talking about are intelligent investors. So, I've seen that most people can't see their stocks beyond double. This was the investing side story. Trading side has another set of stories.
Suraj Odeka Actually, taking losses depends upon individual risk appetite. But Delaying Profits is an Serious ART. Nishant Arora Suraj Odeka Absolutely. And it is not just optional. It is MANDATORY. Because if you won't let your profits run, you won't be able to compensate your losses. And in the end, trading is a game of probability where there will be losses and there will be profits but profits must be larger in magnitude than losses and that will only happen if you let the profits run. Nishant Arora May 2 at 3:45pm
Though on the face or it, this is a normal P&L statement but beginners can learn a lot form this if they dig deeper. That is why I am posting it. Here are the details: As you can see, today's MTM (based on last close & LTP) is 182237.50 & Q-P&L (based on entry & LTP) is 89340.00. It shows that we were down around 92897.50 when last session closed. With today's move, we recovered the entire MTM loss plus much more than that. And now that we have moved in a highly positive territory, we can have pretty favorable stops wherein we make money even if stopped. Here are the lessons:
Lesson-1 Patience is very important attribute of swing trading as initial stops are kept little deeper. Patience is also needed when in profits. So I was patient when I was 93k down, I was patient when during the day today VEDL position went from being in 60k profits to 38k profits and I am patient when I am close to 90k plus in the position. Lesson-2 All that matters is the timeframe that you are following. Everyone has a different perspective depending upon trade duration and chart timeframe that is why it is useless to take advice and tips. If I'm following a daily chart, no point jumping from seat looking at 10 minute chart. Lesson-3 Do not get swayed by TV experts. Too many experts gave buy in futures on VEDL on Monday & it's 5.03% down today in spot and 5.11% down in futures. I am not saying that they can not be wrong. Everybody can get wrong and that's part of trading but what I am saying is that when you enter on someone else's analysis, you won't know what to do once wrong. You don't know whether you should add more or exit if the position goes unfavorable. That is why education is important.
Nishant Arora Well, some may say, "Nishant, we can not bear the MTM of minus 93k and still be patient that is why swing trading is not for us." Completely wrong logic. No one forces you to trade futures. Trade spot in swing, that way you'd be able to control the quantity. I have no fear in blatantly and frankly declaring that the moment you'd shift from day trading to swing, you'd see that charts have suddenly started working better. That's because, as I have said a number of times, randomness is inversely proportional to chart timeframe. Nishant Arora There is no achiever I know of who was not disregarded in the beginning, be it by friends, relatives, people at large or even by his own family. Sagar Verma Nishant Arora sir how to and when to use 10 minute chart in swing trading. . Nishant Arora I think before we discuss "how to" and "when to" use a 10 minute chart in swing trading, we must ask ourselves "why to" use a 10 minute chart in swing trading. Nishant Arora I think if one would use 10 minute chart to make a swing trade (spanning several days), one would blur all the required boundaries between day trading and swing trading. A 10 minute chart would be my lifeline in a daytrade but it would be sheer noise in a swing trade. Personally, I won't do below 30 minute in a swing trade while making the trade. Sagar Verma To fine tune risk reward set up. One may take help of hourly charts as a swing trader ??. Nishant Arora Of course, hourly is the lifeline for a swing trader. Nishant Arora Courage comes from analytical skills. Shiv Ram N Nishant Arora bro, i find chennai petro to be very thinly traded.....do you consider volume while in the trade!
Nishant Arora Brother, two things. This is the reason that I am only 3 lots in this. Secondly, though it is thinly traded, volatility is unaffected so it still makes a good swing/positional trading candidate. Shiv Ram N only sitting in a trade makes money.....have to give enough space/room to the market to play out in full! but then how do you manage the drama played out in the market. is it like set and forget so that market takes out either TP or SL OR actively manage watching your position whole day! if so, how to keep ones emotion in control??! Nishant Arora No, I do manage my positions. I play contra MIS positions on swing/positional trades too if I feel the day is going temporarily yet significantly unfavorable. As for the emotional control thing goes, I think in case of a positional, one should use both the mindset of a trader and an investor. Most people don't have both. CA Abhay Hirawat Nishant sir, what should be the ideal time frame for intraday, working on a daily chart? CA Abhay Hirawat Nishant sir, what should be the ideal time frame for intraday, working on a daily chart? Suresh Saini Nishant Arora Sir, for swing trading, is advisable to put stop loss based on hourly chart. Like for Vedanta, i had placed the the Stop Loss at 295.50, which got triggered easily. Nishant Arora Suresh Ji, a stop loss must be a logical technical point on chart where the trade thesis stops holding true. If you can get that on hourly, then there is no harm in it. But as I said, it must be dictated by its technical relevance. Of course, affordability is also of concern so a good stop is always at the intersection of affordability and technicality. Back to Index
LIQUIDITY IN TRADING Nishant Arora· May 11, 2018
Always check liquidity before trading. It's far easier to get in than to get out. Make sure that you trade liquid counters only. Make sure that orders get filled easily. Remember, when you sit to drive a new car that you're not hands on, you first test brakes not the accelerator. Bhavik Mehta Sir please suggest how to check liquidity of a particular stock and suggest a reliable source for the same. Is there any parameter/oscillator to judge the liquidity before entering the trade. Nishant Arora. Liquidity != Volume. Think about it. Manoj Mahalik Difference between best bid price and best ask price should be very low . Instruments where bid-ask spread is as low as few paisa are more liquid compared to ones where the difference is is more. Praful Arora Liquidity can be seen in 2 ways
- Bid/ask spread: highly liquid stocks will have continuous transactions within 5-10 paise or whatever their tick size is. - When you look at the market depth, you can see the transactions happening live, so the speed of those transactions ticking up and down is also a gauge of liquidity. Just today I got into a stock where bid ask spread was around 10-20 paise, tick size was 5 paise. But the transactions speed was dismal. Volume was not moving for minutes at a stretch. I dropped the trade and got out because if it were to go against me, who knows how much of a hit my trigger SL would take. So that's a very important point being highlighted by this post. Praful Arora - Gauge volatility by 1) looking at the charts and visually seeing the behaviour of price 2) ATR indicator on your platform will tell you an average of how much your stock moves daily. - Narrow bid ask means low slippages, it does not have much to do with volatility. Check ATR, BOLLINGER BANDS, ADX etc for volatility, and do make a habit of visual identification without any indicators also. Nishant Arora May 12 2018
Most people wrongly equate liquidity with volume. Volume & liquidity are two very different beasts. Volume is just the amount of shares, or contracts traded in a given timeframe, nothing to do with liquidity. A stock with high volume can be completely illiquid whereas a stock with thin volume can be highly liquid. Liquidity, on the other hand, means the ease of getting in & out of a financial instrument with least difficulty & slippage. The lowest unit of price movement is TICK. Tick is the least amount of fluctuation that can happen in the price on either side. So for example the price of a scrip is Rs 100 and tick size is Rs 0.05, it means that the least movement tha can happen on lower side is Rs 99.95 and least movement that can happen on upper side is Rs 100.05. Of course, it can happen more than that on either side but the least is the tick size. As for the tick size, the current norm is that tick size would be Rs 0.01 for stocks with closing price of upto Rs 15 and tick size would be Rs 0.05 in stocks with closing price above Rs 15. Enough of the tick size. Now, what has liquidity to do with tick size? Well, everything. Before that, let's understand Bid-Ask spread, also called market depth. You all must have seen the market depth which shows top 5 bids and asks. Well a bid is the highest price a buyer is ready to pay and the ask is the lowest price a seller is ready to sell at. Sometimes the buying side gets more enthusiastic and places bid at or even above CMP. Whereas, sometimes the seller gets too enthusiastic and places ask at or even lower than CMP. However, bid can never be equal to ask. The bid-ask spread is nothing but ASK-BID. So, for example a stock is trading at Rs 100 with a tick size of Rs 0.05, the best bid is Rs 99 and the best ask is Rs 101, which means that the bidask spread is 101-99 = 2 points. Now, compare it with a situation where a stock is trading at Rs 100 with a tick size of Rs 0.05, the best bid is Rs 99.95 and the best offer is Rs 100.05, which means the bid-ask spread is 0.10 point. Now imagine a situation where a stock is trading at Rs 100 with a tick size of Rs 0.05, the best bid is Rs 100 and the best offer is Rs 100.05, which means the bid-ask spread is 0.05 point. You see, even when the tick size is same, the bid-ask spread is changing. This is a major indicator of liquidity. The lowest the multiple of bid-ask spread to tick size, the more the liquidity. So a stock having 0.05 point bid-
ask spread is definitely more liquid than a stock having 2 point bid-ask spread. So, before trading a stock, always spend some time looking at it's bid-ask spread. Bid-ask spread is not a static thing. It's a dynamic thing ingrained in the character of the stock. Hence, you would have to spend sometime to truly understand whether the multiple of bid-ask spread and tick size is more or less. Also, understand that even a very low bid-ask spread can result in low volume. So, though the price is Rs 100, and the best bid is Rs 99.95 and the best offer is Rs 100 itself, thus bid-ask spread is equal to tick-size, i.e., 0.05 point, but still no trade is happening. It shows a stale and stagnant market. Thus, along with bid-ask spread, also observe Last Trade Time. You need those counters where trades are happening frequently on second to second basis, not on minute to minute basis. Before I close it, I'd like to talk a bit about the character of bid-ask mechanism. Here is this common misconception that for any given trade in the market, we have two sides. One side betting that the market will go up and the other side betting that the market will go down. This is erroneous because in most markets we have middle men (market makers), who don’t care w here the market is going and they make
a two sided market at every tick (offering to buy, and offering to sell simultaneously). A market maker maintains a spread based upon his understanding of buying and selling pressure. If there would be no market maker, even most large caps would become illiquid. Imagine a stock being traded at Rs 100 with a tick size of Rs 0.05, and the best true buyer is at Rs 95 and the best true seller is at Rs 110. The deal may never happen. Moreover, the bid-asks would be very haphazard if ORGANIC BUYERS & SELLERS (Real Buyers & Real Sellers) would control the transactions. It is the job of a market maker to maintain a bidask spread by simultaneously buying from organic sellers and selling to organic buyers, thus keeping the liquidity going. So when organic buyers and sellers arrive they always have an order ready waiting for them and the market functions smoothly. In turn, the market makers gets to pocket the spread. So, the bottom-line is that always check liquidity of a counter or the instrument before trading it. Observe it's bid-ask spread's multiple to tick size and also observe last traded time (frequency of trading). PS: This is purely for trading not investing. Lack of liquidity is an enemy of traders but a friend of an investor. Let's keep that discussion for some other day. Nishant Arora The truth is that most people think that trading is technical analysis, whereas it is just 1020% of the game. Secondly, very few beginners bother to understand the business of stocks, as to how exchanges work, how clearing houses function, how brokers function and so on. Thus, most traders are actually one eyed blind in the market. Nishant Arora I'd blame the laziness of most beginners onto the ease with which trading account and demat account can be opened and the ease with which orders can be placed and the ease with which charts can be accessed. This EASE gives them illusion of knowledge and they forget or ignore to learn about the functioning of the industry or business. In fact, they forget that it is a business consisting of people, processes, rules & regulations, because they see no people. In a normal regular business, since we go out, meet people, we have a touchbase with the reality but here it is quite easy to lose touch with reality. That is why even more effort is required to keep sanity flowing. Kapil Sood Hello Nishant Arora ji Much Thanks for Time to Time very useful guidance provided by you. Please clear one more thing. If I m tracking any stock, If it is having heavy delivery based buying since last one week but almost at same price means not heavy fluctuations in price. Overall companies Financials
are good. So what dose it mean Sir Heavy delivery based buying every day. Please guide if it is not against the rules of group. Nishant Arora Delivery based buying itself suggests less trading interest. See for investing, liquidity does not matter at all. Delivery % though is a good indicator for investors. Wazir Singh sir, who is market maker, exchange or broker? I have heard that small discount brokers kill traders with spread is it true? Nishant Arora Market makers are appointed for the job. Their job is all the more important in small caps and micro caps. As for "killing traders", an ignorant trader kills himself. Back to Index
TRADING EXPECTATIONS Nishant Arora November 7, 2017
The reason a beginner trader gets frustrated is because he sets the wrong expectations from his technical system or chart analysis. And since he thinks that analysis is the key, he suffers from all sorts of trading errors, like widening his stops, jumping the gun & taking a trade too soon, not booking profits in time and so on. But sooner or later, he needs to accept this fact that outcome of a trade is uncertain even after deep analysis. Yes, the outcome of every individual trade is RANDOM. It's easy to get a winning trade and it needs no skill. Even a monkey can click on the mouse and put an order which may turn out to be a profitable trade. No skill required to have a winning trade. Skill is required to become a profitable trader. And it's one thing to have a profitable trade and it's another thing to be a profitable trader. So, outcome of every individual trade is random. Of course, with a combination of technical analysis, position sizing and mind management, you put the odds in your favor and your probability of winning increases over a number of trades. The keyword is, "OVER A NUMBER OF TRADES". So, let's say you have a system that has an almost 60% win rate. It means that you'd win 60 trades out of 100 trades. But you don't know the sequence. You will never know. You can have a streak of losses or profits. Profits and losses are a random distribution in time series. But over a period of time, your edge puts the odds in your favor. So, if one wants to become a professional trader, one must shed the mentality of finding a trade which can't fail. Every trade can fail. Remember, if your technical analysis, position sizing and mind management is good, you will be a net winner over a number of trades. So, when you do not know the sequence of losing trades and winning trades, how will you survive the uncertainty? There comes the money management part. See, it is very much possible that over a number of 50 trades, you lose the first 20 in a row and win next 30 in a row. But, the point is, that you need to preserve your capital through those first 20 losing trades. That is why the saying goes, "cut your losses short and let your profits run". See it in this light. You need to cut your losses short because you know that the outcome of every trade is random and you know that you can have a streak of losses. So, you need to survive to see the winning trades. And you need to let your profits run because they allow you to have those losing streaks and still come out net positive. This is the basic difference between an amateur and a professional. An amateur puts so much time in analysis in order to take only winning trades. A professional KNOWS that this is a futile exercise and trading performance is a distribution curve and can not be controlled on trade to trade basis. Chandra Sekhar Lingam Is money management = risk management.
Nishant Arora Yes, risk management is a component of money management. Together they are part of trade management. Nishant Arora Chandra Sekhar Lingam Listen to this fully and make notes and then think over it brother. https://www.youtube.com/watch?v=sg4YzRhILFE Devesh Salunke 99% of new traders entering the markets have no education in markets for lack of interest or lack of availability. That is the reason why people get frustrated . Even if someone wanted to learn, I bet he cannot find one place of repute Nishant Arora True but it's a great fault on their part too. It's a very old adage, "where there is a will, there is a way." Had you said the 'availability' thing 15 years before, I'd have understood. But in this age of high speed internet, if one truly wants to learn something, he has all the great books, interviews, articles and videos available at the click of a button. But sadly, internet, like everything else, is also used for all the wrong reasons. I've seen 100s of kids that even if you show them the way, they just don't walk on it and are ready with bunch of excuses. So many people ask me how to become a trader and I give them a list of 5 basic books to read first. I say, "finish these basic 5 and then we'd talk". I mean, one needs to be on some plane first in order to even start learning to trade. And, they come up with things like, "Sir I checked it, it's 596 pages". I tell them, if you want to become a brain surgeon, would you expect to become one without reading anything? For that matter, to become a lawyer or engineer or architect or whatever, one puts in effort but here, the mentality is to find jugaad. Most of the beginners just don't know what they're getting into. I started this forum with this intent only. And, we are doing 'real work' here in spreading the knowledge in terms of suggesting the right books to read, discussing the queries that may arise during the reading and discussion everything from analysis to psychological issues. Though, I am patting my own back but then it's the truth:-). So, if one truly wants to learn, I feel he won't find any resource better than TFS. Devesh Chauhan 250 Trades done. 80% trades resulted in net profit loss of 0 after covering fees. Big losses killed capital. Capital depleted 50%. Learned a great deal in last 3 months. Its not about how many trades you can take, it is more like how many you can avoid. Nishant Arora Absolutely. One can make consistent money on basic analysis too. Risk management, money management (position sizing) and mind management is the key. Devesh Chauhan I must agree. If one can't control themselves then no indicator is going to work. It should be more keep it simple and should remember slow and steady wins the race. This is what I learned. And thanks for the wise words in the post above :) was really helpful Nishant Arora True, the holy grail is simplicity. Choose simple methods to succeed rather than complex methods to fail ;-).And, you are most welcome brother. Nishant Arora Richard Dennis is a legendary example. His 10% trades used to end up in such monstrous profits that all he needed was a win/loss ratio of 10%. Nishant Arora Even Bill Lipschutz, one of the greatest currency traders and win ratio of 35-40%. Nishant Arora People need to understand that why majority of traders fail. They fail because they focus on having every trade as profitable trade. And when you want every trade to be a profitable one then
when it moves against you, you don't cut it and wait for it to get into positive territory. So, unless one understands the statistically probabilistic nature of trading, there is no chance. Nishant Arora A broker and a trader have complete conflict of interest. Every trader should understand this. Paul Thompson Nishant Arora, in my opinion what you are speaking of, position / money management is the true Holy Grail in trading. But most Traders will never believe that. Nishant Arora Paul True, most of the beginners don't believe as they feel that success in trading can't be about managing a trade. Moreover, they don't want to accept that trading outcomes are random. It hurts their ego. They want to keep on thinking that they can predict the markets. As Ed Seykota rightly puts, "Win or lose, everybody gets what they want out of the market. Some people seem to like to lose. So they win by losing money." Vishwanath Chiniwar Nice post bro. I guess you have understood probability and stochastic theory very well Nishant Arora Actually, probability and stochastic theory has deep applications in the world of finance and specially in the world of trading and portfolio management, be it discrete random variables, Gaussian distribution, bivariate distributions, random walks, conditional expectations, martingale theory, Wiener process, Taylor's theorem and so on. But one can't explain those things so need to present the crux in a simple language. Nishant Arora Actually, to succeed in the world of finance, I feel one must learn to think in terms of probabilities and subjects like probability, game theory and behavioral psychology are far more important than subject of finance per se, if one wishes to excel in finance. Prathamesh Bobade Amazing. To add a out of tangent point. Normal distribution curve can be used to trade too :p In short everything in life moves in form of the bell curve. Worst to best and best to worst. Nishant Arora It has to be traded. Only then you'd have a probabilistic edge. the more the sample size, the more the edge. Prathamesh Bobade I used it on the concept on mean reversion. Had made an excel sheet on it. Tried it on stocks fut, it worked on 80% on the trades but making excel sheets is a big hassle. Prathamesh Bobade I usually take sample size 200 when my holding period is long When it's a short hold I prefer sample size of 50. The only problem here is that it's self adjusting bcz it is N-1. With every passing day the channels shift. A longer time period helps in this case
Nishant Arora Any business is 80% clerical. Same here. but records are difference between a trader and a gambler. Nishant Arora Indices are better to backtest a strategy than stocks. Shiv Ram N Being loyal to a method that has a proven statistical edge or better odds in favour will result in profit......Key there is persistence and perseverance with that method with proper risk and money management to survive the ups and downs of the market drama and random distribution of winning/losing trades! This is where win%, PF, expectancy, RoR, RRR, and all other metrics come into the picture! Dhiren Desai My 2 cents from personal experience of early days. What Nishant said, totally agree.... Went thru it all. Then tried something which atleast worked for me, due to my discipline n risk management. After inconsistently performance ...... I tried trading 1 single stock.... In my case it was Tata Elxsi. Would c nothing but TElxi.... Traded the same for months. Use to have a money tgt or sl.... Which ever came 1st use to get out...0 emotions. Eye ball setting came thru..... Levels came from sub conscious mind..... It came easier to trade even interested after a month.... Did this n still do this time to time, successfully. It can get boring... Only if u don't get your levels whilst other stocks could b flying that time....but it needs to hold on. Persistence is the key. Nishant Arora This is one of the most important post that every beginner should read. Devansh Gadda Sir I have a doubt. What is your average Win/Loss ratio on a 100 scale? Nishant Arora Devansh Gadda Last year was one of the best years in my life and win rate was around 42%. Overall win rate over last 5 years would be around 48%. It includes all stops hit and all. The average profit per lot over this period is around 5 times that of average loss per lot. However, when you take more positional trades, the win rate increases but the loss size increases too as stops are deeper. This year till now, I am taking more swings so win rate has risen to almost 90% but that means risking big amounts too. It's always a trade-off between Trade Win- Trade Loss and Amount Win- Amount Loss. One decreases, the other increases and vice versa. Depends upon what kind of trading one is doing at that point of time. Devansh Gadda Nishant Arora Amazing! Wow 90% is insane.
Nishant Arora It's a thing of strategy. To me it really doesn't matter if it is 40% or 90% as long as I am clear what I am doing. Richard Dennis took a $400 account to almost $200 million account in 10 years and his overall win rate was around 10%. Nishant Arora It depends whether you are doing day trading or swing trading, whether you are doing trend trading or reversal trading and so on. It really doesn't matter. It's how this game works. Back to Index
FNO CHALLENGES Nishant Arora December 20, 2017
IF YOU TRADE IN FUTURES & OPTIONS WITHOUT PROPER KNOWLEDGE, EXPERIENCE & MINDSET, SOON YOU WOULD HAVE NO FUTURE AND WOULD BE LEFT WITH NO OPTION. Divyank Gupta I agree with u sir. Bt how to decide that i have proper threshold knowledge to start futures. Nishant Arora You'd know when you're ready. If you're asking, it means you're not yet ready at all. A Pilot KNOWS when he's ready to shift from single engine to multi engine jet. A swimmer KNOWS when he's ready to go deeper. Apart from this KNOWING stuff, too many other things are required to trade derivatives and proper capitalization is one of the biggest requirement. I see kids having 40-50k in their trading account and they get trapped in the idea of trading Options due to preaching of FRAUD & FAKE GURUS. I mean why not make paper boats of each and every currency note and launch them in bathroom tub. That would be more fun. FUTURES & OPTIONS ARE THE MOST COMPLICATED INSTRUMENTS IN THE FINANCIAL MARKETS AND TOO MANY STUPID KIDS TRADE THEM. One needs to be well experienced and capitalized. Futures and Options are big guys' play. I see a lot of people trading futures and they do not have even slightest idea of how exchanges work, how trading happens, how orders get filled, how big guys play and so on. I don't know who popularized this mad idea that you can be an 18 year old, a complete beginner, not knowing anything about how the world works, not knowing anything about how money moves in the system, learn some charts and make a killing. This is STUPIDITY at its best. So, the answer is, You'd know when time comes. Divyank Gupta Got it sir...i also think more time and knowledge ...bt on contratry one can never learn swimming unless getting in pool. Nishant Arora Cash market is also a pool. Learn there. Why to learn directly in the ocean? This "never learn swimming unless get wet" example is given by lots of trainers who are out there selling. I can also tell you that futures is easy and convince you as well :-). But the truth remains the truth. You can never ever ever ever learn brain surgery by practicing. I mean, only if you're ready to kill a good amount of patients before you learn something Devesh Salunke Why did you single out FNO? Is it not true for anything and everything? Nishant Arora One, because we are talking markets here and not anything and everything and two, that in markets it is easy for a beginner to go bankrupt in F&O than it is in delivery bases investments. Mistakes in delivery based trading do not kill as bad as a mistake in futures or options. Of course, there are
exceptions in cash trading too but then exceptions can't be made rules. I do not know anyone who would say that F&O is very safe for beginners and everyone must start their trading/investing trading/investing career with it. So, what I said is a very generalized advice that F&O is a game of professionals and beginners must not dabble in it unless they gain some experience, capital and mindset. Divyank Gupta Nishant Arora sir ..earlier whn i was not a member of this grp ...i thought fno is quite easy and lucarative as well...bt now u have set so high standards for fno ...that i cnt think of it right now and i m blessed that i knw it. Even in cash equity i dnt go for intraday trading now ... jst delievery trading that to whn i get green signal from my little technical knowledge.. Position sizing , sl, rr , each and every thing... what little i knw i apply. RESULT - my no of trades have reduced drastically ... bt positive is that i m assured that over sample space i will b in profit. Its like now it has been inculcated in my habit and its good. All this bcos of u Nishant Arora Yes buddy. It's very good. You're developing a disciplined approach which will go a long way. We are not here to make big money this year. We are here to last for next 30-40 years. Slow and steady approach is the best one. Divyank Gupta Sir can u pls guide me about no of trades( sample space) i should use to dermine i m gng right aur wrong abt my approach. approa ch. Bcos from last few trades i gaining gain ing good ..bt then i think , its my approach approac h which is yielding me money aur market is gng up thats y i m earning ... Really confused in this cycle Nishant Arora For any strategy to be validated, you must see it on yearly basis. That way you'd be able to do monthly, quarterly, half yearly dissections. Ravi Vijay-rv May 12 2018
Can someone discuss some options strategies for various time horizon(1 week, daily or 1 month) and their practical implications? Example: Volatility strategy, event strategy, Sideways market strategy, result strategy, pure option hedging etc. This would be of great help to those buying or selling naked options and burning their fingers fingers in them. Nishant Arora. Buddy, I am planning to work on a post which would introduce options to the beginners and we would gradually build on that. I don't want to directly start with a strategy. Secondly, if someone is not aware of different strategies, strategies, then why is he even trading options and burning fingers? Anyway for your help, I'd suggest you follow theoptionsguide.com & read Guy Cohen's book on Options Strategies . It will cover everything you are looking for. Options strategies can not be described in detail in the comment section section of a post, I feel. Guy Cohen's book is a must if you wish to delve into options. Nishant Arora. On a second thought, Along with Guy Cohen, read Lawrence Macmillan too . He is the best author in Options. I read it in 2008, planning to read again. Back to Index
MULTI-BAGGERS Nishant Arora March 30, 2018
I see so many people cry about multi-baggers but the bitter truth is most people can not digest multibaggers. The point is simple. For a stock to become 10 bagger, it will first have to become a 2-bagger, 3bagger, 5-bagger and so on. Secondly, it won't ever be a one way ride. It will so happen that it will correct from being a 5-bagger to back to being a 2-bagger and so on. Most people sell at the sight of a stock getting doubled. Even if they survive the doubling, they'd sell at the first correction. Value is the navigational tool of a multi-bagger stock, not price. So, multi-bagger stocks are hard foods, and not everyone has got a stomach to digest them. Nishant Arora You never find them, they happen to you if you stick to disciplined investing. Just like, you never go out trying to find love, it happens to you. Devansh Gadda how do ideas happen? I mean don't we analyze stocks which turned cheap or look undervalued? Nishant Arora Is it a rule of thumb that only "cheap" or "undervalued" stocks turn multi-baggers. Well, using cheap and undervalued in the same sentence is not logically correct too as they both mean very different things. Nishant Arora Nestle was almost at 2500 bucks in 2010 and PE was 30+. Today it is 8200 and PE is almost 60 plus. Neither undervalued nor cheap and yet a return of 225+% in just 8 years while PE just expanded twice. Clearly evident that the returns didn't come through expansion in PE but expansion in earnings. You look at the past. In 1992, Nestle was selling at 68 times earnings. Would it be a mistake having bought it then? Not at all. Since 1992, it has given 20+% CAGR returns to this day. An investor has to keep a very open mind. Nishant Arora All growth investing which turn good turns into value investing at some point in time. Devansh Gadda Then do you think Garware Wall,BEPL etc were undervalued or were they growth stories? Nishant Arora Highly undervalued when I bought it. An undervalued stock can also be a growth story, isn't it. I guess you you are too obsessed obsessed with with definitions definitions :-). Can't Can't we have a superbly growing company selling at undervalued prices because the sentiment is not right, or because there is some crisis in the company or industry? So, if I'd invest then, would it be value investing or growth investing? Nishant Arora If there's no concept of undervalued or overvalued, means securities do not deviate from their true worth, then I guess, I won't be able to explain the money in my bank and so would be Buffett. Back to Index
READING AND THINKING Nishant Arora May 10 2018
POWER OF READING & THINKING I see some questions frequenting the group like, "Is it possible to be a full time trader?", or "Is it even possible to be profitable trader?", or "Is trading profitable?", or "Which indicator should I use?", or "Which moving average combination combination should I use?" and so on. I'd say these questions show that the one who is asking has not spent any time in educating himself and looking forward to a heart warming, short-cut answer. Well, there is none. As I've said time and again, I don't have any trading system, screener or any fancy tool. I just trade using immensely simple simple analysis. I just have a simple laptop like all of you, access to same quotes as all of you and access to same information as all of you. I only use NSE website other than the broker's platform. I don't follow any facebook group other than TFS. I don't even have Telegram installed on my phone. I am not part of any stock market related Whatsapp group and I don't watch financial TV channels. But if I have an extra unfair advantage over you, that is of R&T, that is READING & THINKING. I just read & think. I don't waste time in finding ways to make money. So many members think, "There has to be something else. It can't be just reading and thinking." Well, if there is something, then I am uneducated in that sense and I don't really know any consistent technique other than R&T. Let me have some numbers speak in favor of R&T, so that beginners can know the power of R&T & get motivated. Here's an account I started looking after on behalf of my cousin from March this year. As you can see, the first sheet shows the ledger statement showing the OPENING BALANCE as on 1st April 2018. As you can see that ledger contains 100s of rows so it is not viable nor important to display that but you can see that the Opening Balance as on 1st April 2018 was approximately 3 Lac. The second sheet shows P&L from 1st April 2018 to 10th May 2018. It's almost one month's duration. As you can see the gross profit made is approximately approximately 6 Lac and net profit of approximately approximately 5.65 L. The third sheet shows the current account value which is around 9 lac. As you can see that no new money was added to the account after that 3 Lac. Bottom-line: The account is tripled in approximately one month. It is always the driver, never the car. It is always the Jockey, never the horse. It is always the batsman, never the bat. NOTE: I am not selling any CALL SERVICE SUBSCRIPTION not any FUND MANAGEMENT SUBSCRIPTION so do not do comments like, "Please manage my account or how can I contact you." The o nly objective is to remove whatsoever apprehension a beginner might have in believing the R&T is the way to go.
Lolz Tomar Thank you for the inspiration. There's information overload, the books listed in the pinned post are enough? You probably get this question a lot but please do answer it once again. Thank you sir. Nishant Arora They are more than enough if one has a thinking mind, doing brainstorming all the time. They are not enough at all if one is reading them from a non-thinking mindset just to read what is written in them. Nishant Arora Since I've started the group, I have observed so many beginners and even some amateurs asking me the way to make consistent money. And I told them in great detail as well as suggested them books. And it pains my heart to see them moving around still asking those questions. It shows they are not serious at all. They want easy answers and there are none. Nishant Arora The greatest reason to do this post is to tell you all that IT IS POSSIBLE. There is just no shortcut. It takes everything everything you've got. And the reason I did not show a 50 Lac account going to 1 Crore is because then most of beginners beginners would have thought that he could do it because he has big money. They would have given themselves an excuse. That is why I presented it with an account of just 3 Lac. As I said, an adept driver with FIAT will defeat a beginner with FERRARI. So stop finding FERRARI (Systems/techniques/strategies) and start becoming that ADEPT DRIVER. NO EXCUSES. Shiv Ram N Great going, fabulous returns Nishant Arora bro. would like to know more data if you dont mind. how many trades....average trades....average duration! how many lots....equities lots....equities or futures! My contention is.....when one can lose so much money in a trade, just in case that trade was flipped,
mean if one lost in buying then if that trade was a sell, then that loss would have been Profit! now what made one to stay in so much loss can also BE used to make so much profit too if that trade was presumably flipped. In a trade, if so much loss is possible, then so much profit is also possible??! ;) Then is it possible to stay in a trade while being profitable??! that is the moot point of my thinking, a constant endeavor. What is stopping you to stay in a trade to cut its profits and what is prompting you to stay in a trade to extend its losses.... Market does not do anything special to anybody....it is what it is.....it does what it does! we are doing what we do and hence results are because of our doing/actions, as market is not controllable by any retailer or any entity or other market participants, but a trader can control himself, with the aid of a plan, rules, method, etc. Nishant Arora Shiv Ram brother, all Futures no equity. All trades revolve around 5-6 scrips. VEDL, Hindalco, Chennai Petro, Bank af Braoda, Havells & Apollo Hospital. Majorly swing trades. All were discussed here in great detail. Few day trades too but that's not much. As for holding, I have discussed in individual threads but an average would be 4-6 sessions. As for lots, when I started with this account, it was 1-2 lots but as you could see in Apollo, I even went till 11 lots.
Nikhil Khot Nishant sir, I have seen most of the traders trade in the future.Options are not that suitable to make profits? Because I trade in options (generally hedging) but earns a small amount.please share your views on this Nishant Arora Trading options is an illusion sold by pseudo mentors to beginners. And beginners think that since Option trading needs small money, this is best for beginners. Nothing can be farther from the truth. And you'd see that most trainers and tipsters are hell bent upon selling options strategies. This is a trap that, one day, will kill the beginner. Options are highly specialized instruments to hedge or play different kind of spreads in HUGE ACCOUNTS where there are other positions running. World over, only
those professional traders trade options who have million dollar accounts and that too as secondary trades. It is only in India that options are promoted as beginner's play. If one doesn't have skill or money for futures, stick to equity. In fact, all beginners must trade equity, at least for a couple of years. F&O for a beginner is a blasphemy and sadly most beginners trade F&O. Suicidal tendencies at its best. Nishant Arora Most of people here don't know TRADING and you can very well see that. So that is my primary agenda. If you can see, I have not included any single books on either Futures or Options in the book list. Beginners don't have basic trading understanding and psychology. People don't know a support from a resistance properly, there is no point. Secondly, if you can imagine that a voracious reading and curious guy like me whose BUSINESS is TRADING wouldn't have read 10s of books on Options or wouldn't have traded options, then you have a lot to learn in life to understand people. Ghanshyam Kedia You know what comes across as a problem, that even after R&T, I think is it possible to make money in such a short span of time (when we are said from our birth that you have to work very hard to achieve something) and doesn't it makes us a little greedy leading to some stupidity. Human psychology if I am not wrong. Family members say you are destroying your life, this not for you, do something real. Nishant Arora Ghanshyam Kedia, if you are thinking that this money is not a result of "WORKING VERY HARD", then no one can truly help. If I can make money in few days or few minutes, that is a function of those sleepless nights and unending, back-breaking hard work that I have done over last 10 years my friend. So, this is not to make members greedy and do some stupidity. I AM NOT SAYING THAT LEARN MY SO & SO STRATEGY AND YOU TOO CAN MAKE SUCH MONEY. That would have been making them greedy. It is to show beginners THIS IS WHAT YOU CAN ACHIEVE IF YOU WORK HARD because beginners tend to have that mentality that IF THEY LEARN SOME TECHNIQUE, THEY WILL ALSO MAKE MONEY. So, in a way this post is to push beginners to work hard and making them realize that there really is no other way. Nishant Arora May 12 2018
Knowledge is common, understanding is rare. Sunil Takle Knowledge needs BRAIN. Understanding requires VIVEK. Nishant Arora The only way as Sunil Takle said, is practice of "Vivek". Listen to understand not to speak.
Read to think not to ask immediately. Learn to stay confused for days on end and thinking hard to resolve those confusions. Understanding is nothing but a cross connection of different sets of knowledge in your head. And that cross connection will only happen when you shut up & THINK. Back to Index
CANDLE PATTERNS Abhishek Aggarwal May 12, 2018
Nishant Sir, How to differentiate between mat-hold pattern and three black crows?
Nishant Arora. See the primary foundation is that Mat-hold (MH) is a continuation pattern whereas Three Black Crows (TBC) is a reversal pattern. So, the first difference is that MH pullback has relatively much smaller candles than TBC. This shows that a correction of MH is of less momentum than a correction of TBC. Second difference is that in TBC, the first corrective candle opens within the body of previous bull candle whereas in MH, the first candle opens gap up of the previous candle. Hope it clears. Umbrella Lines
Nishant Arora December 9, 2017
Many beginners who start reading technical analysis get stuck in patterns, shapes & names. They get in a deadlock to such an extent that they want to classify everything as per the text book. They don't understand that they are not here to do a Ph.D. on patterns. They are here to trade. Please note that the patterns are formed by sentiments of people. All you need to do is to focus on those sentiments rather than wasting time in thinking whether this qualifies to be this pattern or that pattern. Remember, there are so many successful traders who do not understand formal technical analysis. But they understand charts much better than you do. So, spend time in understanding the psychology of people (demand/supply) who are making that formation on chart. If you'd do that, there will be two benefits. One, that even if the pattern on screen is completely different from it's textbook form, but underlying psychology is matching, you know it may work. Secondly, even if the pattern is exactly like text book but underlying price action is not complying, you know it can fail.
Nishant Arora The only way, as I said, is to understand the logic of buying and selling that forms those patterns. Mugging up patterns, shapes and names won't help but do a lot of intellectual damage. Zappa Tron sirs sometimes pattern formation is wrong say due to time taken but still it can happen to have all the qualities of what the pattern does Nishant Arora That is due to the concept called time correction. Moreover time has a great effect on emotions of people. Think of it. The joy of winning and the pain of losing fades away with time. Time affects emotions thus affects decisions. That is the only reason that time is associated with patterns. Several parrots can regurgitate that cup and handle should be stretched to a maximum of 65 weeks but there is no RULE OF THUMB. Even a 68 week long pattern can be highly effective and a 52 week long pattern can fail badly. That is why I am saying, focus on the price that makes those patterns. Focus on the emotions of people. The size of candles will tell you the emotional state of people. They will tell you whether people have forgotten some previous support or resistance or not. Nishant Arora The reason I am saying that just looking at a pattern is not important but the psychology behind the pattern is more important is that you can have patterns where the underlying psychology is not what it has to be. In this example itself, the psychology works only if prices were rising making higher highs and higher lows. Let's say you get a beautiful H&S pattern in a flat consolidation. That still will look like H&S but there is no psychological reason behind that. So, it will hold no value at all. Pravin Korde Nishant Arora Sir is there any indicator reflecting psychology? Nishant Arora Sir, we are out here to see psychology of indicators and not to find indicators of psychology. Jokes apart, to understand psychology of buyers and sellers, you have to REMOVE indicators and not add one. For uptrend to continue a higher high has to be established and for a reversal, a lower high followed by a lower low has to established. Sometimes what happens is that stock make a higher high and then makes a lower low, even that is not reversal because a lower high is still not made. In that case we wait for a lower high to be made. Back to Index
WIDE RANGE BODY CANDLE Nishant Arora December 6, 2017
Always be wary of A BIG GREEN CANDLE (Wide Range Body) on big volume after a prolonged uptrend as it is generally a reversal. Shiv Ram N Exhaustion candle!??! Nishant Arora Yes Lalit Isarani Any recently observed?? Nishant Arora Always try to think of the reason rather than example. Example will not help in learning. Example will only demonstrate not validate Nishant Arora For those, who couldn't understand the one liner, let me tell you that it is very simple. See, imagine there's an uptrend and bulls are buying but there is not enough supply by bears so trend keeps rising. Now it has been a while that price has been rising. But still, there would be some people who could not buy (Left out bulls). So, they wait for a correction in order to enter. But the correction does not come and price keeps on rising. So, finally, the left out bulls get tired of waiting, lose their patience and BUY. This buying in a rising market forms a BIG GREEN CANDLE. But think about it. It marks the entry of whatever bulls were left out of the rally, leaving no more bulls whatsoever left behind. There is no one left who wants to buy at a higher price now. Every bull who wanted to buy has bought. That marks the end of the rally, generally. So, a big green candle after a steep and prolonged uptrend marks the end of the trend. Shailesh Mishra Does the same concept holds good for downtrend ....just a thought?? Nishant Arora Yes. Just replace the big green candle with a big red one. Ravi Shankar 2 questions. 1. How do you define "BIG". Any thumb rule. 2. In what time frame. I suppose not less than weekly. Nishant Arora Ravi Shankar Thanks for your patience but as you'd agree I respond the very moment I get the opportunity. So buddy, you'd never need to remind me to respond. Coming to the point, the word WRB means Wide Range Body (candlestick chart users) or Wide Range Bar (bar chart users) and there are different types of WRBs based upon volatility analysis, gap analysis or support/resistance analysis. The wide range is an interval that has a body (difference between Open and Close) or bar (difference between high and low) with a price area larger than each of the prior three intervals. In fact, you can use any number greater than three intervals as long as it's not less than three due to the behavior of volatility analysis because its less reliable and too difficult to analyze the volatility of two intervals or less regardless if the intervals are based upon time, volume or tick. Secondly, WRB techniques are used in any time frame but yes the bigger the frame, the more meaningful the move. There are several techniques associated with WRBs, namely breakout fading, exhaustion, hidden gaps and so on. WRBs in themselves are not that important, it is the CONTEXT which makes them important. So, in the case of exhaustion, WRB marks the exhaustion only when it comes after a stepp and extended move.
Nishant Arora An exhaustion bar has 4 key elements which make it really powerful and meaningful. (1.) A wide range body. (2.) A long wick at the bottom of the bar, and no or negligible wick at the top of the bar in case of “Bear exhaustion bar” and a long wick at the top and no or negligible wick at the bottom of the bar in case of “Bull exhaustion bar”. (3.) Extreme volume and (4.) Bar forming at a key support or
resistance area.Going further in making little modification to the conservative theory, an exhaustion bar needs not necessarily have to be at the end of an extended move (as is normally the case). It can be at a retest level as well as at a retracement level.Thus to identify an exhaustion bar, what we need is the four key elements mentioned above and any variations of these elements.A good trader always adapts and does not stick to rigidness. Nishant Arora A small illustration on hourly. Price is in a downtrend. Yellow is negative and white is positive. So, downmoves are impulses and upmoves are correctives which can be used to enter a short. Now notice, that every corrective precedes a big yellow candle. Or to put it in another way, a big negative candle kills the impulse every time.
Shailesh Mishra after prolonged uptrend or downtrend condition is missing i think in this example.....nothing in bad tone just wanted to clear what came to my mind Nishant Arora Nishant Arora Sure buddy. This is an illustration on 10 min and 15 minute charts buddy. And moreover, it is clearly visible that the big candles, here in this case, are not REVERSING the trend but just bringing the corrective. And every time a big candle comes, the corrective begins. This was put here to demonstrate an aspect of big candles in lower frames too. As a trader, one must see different aspects of the same thing and not take anything as rigid or literal. So, if a big/huge candle comes after a steep rise and on big volume on a stable timeframe like hourly or daily or weekly, they mark reversal generally. Even on smaller frames, if they come after a steep rise, they mark reversals. But another aspect is that even if they do not come after a steep rise, they mark beginning of consolidations too. Think of it. Before a flag/pennant forms, generally the pole is a big green candle. That does not mark reversal but beginning of consolidation. Try to understand the dynamics of demand supply here.
Shailesh Mishra Nishant Arora so considering this if we see todays chart of UPL and GAIL ...there is huge candle made....sorry i will be unable to post chart ....but whenever you get time just have a look....and suggest your opinion. Will that qualify for the example and if yes how one should act to this if someone planning to take any trade....I am just asking opinion and others please dont take it as action point. just relating the rule to the todays scenario. Sorry if bothering much. I have lots of patience and feel free to reply as per your ease Nishant Arora Both your cases are not correct for this description. In UPL, there is a big green candle after a down move, that is not exhaustion of DEMAND or supply. That is Beginning of DEMAND. Had it been a log red candle, then it would have suited this thread. In GAIL, the big green candle came after a period of consolidation in UP TREND and not in an extended move without consolidation. Nishant Arora UPL
Nishant Arora GAIL
Nishant Arora Context is very important in charting. Same thing in two different places can have different interpretations. That is why one must understand the demand/supply structure and not just patterns.
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GAPS Raman Wadhwa December 30, 2017
What are your Observation on Gaps. Nishant Arora It's a very old post of mine. Hope it helps. A Lesson on Gaps, using Nifty FMCG. Most of the times, we see the market or a stock gapping up or gapping down. So as to understand, gaps are of 3 types. Breakaway, Runaway and Exhaustion. Breakaway gaps are the gaps made at the start of the trend be it uptrend or downtrend. They happen on high volumes. Generally they come at completing of some basing pattern or some topping pattern. So, lets say double bottom gets completed and market gaps up. That's a breakaway gap because completion of double bottom means start of uptrend. Similarly, lets say head and shoulders completes and stock gaps down. This is breakaway gap because completion of head and shoulder means start of a downtrend. So, breakaway gaps are made at the start of a trend. They are never filled. Second, runaway gaps come in the middle of the trend. So, let's say an uptrend or a downtrend is already going on and market/stock gaps up, it is a runaway gap. Runaway gaps happen on normal volumes. They are also never filled. There is a significance of runaway gaps. With the help of them, you can measure the length of the trend. Just measure the distance between runaway gap from the start of the trend and add that ahead of the runaway gap. So, basically runaway gaps come in the middle of the trend and when they come, you have an idea as to how long trend will continue. So, let's say stock started uptrend at Rs 100/- and while at Rs 130/-, it gaps up. That gap is called runaway gap and that tells you that trend might continue till Rs 160/-. Finally, exhaustion gaps come at the end of the trend. Near the end, stock gaps on high volume. Gap up in case of an uptrend and gap down in case of a downtrend. That marks the end of the trend and a possible reversal generally or at least a consolidation.
Raman Wadhwa is this approach works in day trading just want to know that... Nishant Arora Yes, it works in intraday too. You just have to align time frames well because a long candle on 15 minute can actually be a hidden gap on 5 minutes. But if you'd observe, there can't be any other type of gap in any timeframe. Gap at the beginning of the move, gap during the move and gap at the end. Obviously, they all will come is not necessary. You'd have to use diligence to classify. Back to Index
CATCHING THE PULLBACK Lokesh Sharma November 6, 2017
Once a trader develop an expertise to catch the pullback then he will never regret of being missed breakout or breakdown Nishant Arora In my 10 years of trading, I have never bought a breakout. I never feel comfortable with respect to the risk reward, being a very very conservative trader. Lokesh Sharma You gauges the breakout happened while we don't see because of our overshadowed Nishant Arora It's not that I wait for a full pullback on primary chart. I may get in on a pullback on a lower frame. But I do not feel comfortable participating in a state of euphoria or panic. That part of my psyche is one of the reason that I do not buy IPOs. Nishant Arora MGL. I won't go in short term chart analysis but this is the big picture.
Saurav Panda Ok, so why didn't you enter at the breakout point? Volumes seem very good there too. And if am not wrong, you were tracking this for quite sometime. Abhi yaad aaya, wo adx and macd bear zero ka example diya Tha aapne Nishant Arora Saurav Panda Bhai, I played it in as many plays I could. Cash, intraday, scalp, positional, swing...But having said that, the biggest gain was in pullback trade. Back to Index
BEING RIGHT Nishant Arora September 26, 2017
Being right is not enough !!!
Nishant Arora. DO NOT TRADE FUTURES, OPTIONS AND INTRADAY IF YOU ARE A BEGINNER. UNDERSTAND THE WHOLE BUSINESS OF STOCK MARKET FIRST. UNDERSTAND YOURSELF. UNDERSTAND WHETHER YOU ARE FIT TO BE AN INVESTOR OR TRADER. ONCE YOU GET AN ANSWER, START YOUR STUDY IN THAT DIRECTION. EVEN IF YOU DECIDE TO BE A TRADER, IT DOES NOT MEAN THAT YOU WILL START TRADING DERIVATIVES AND INTRADAY FROM DAY 1. REMEMBER, INTRADAY AND DERIVATIVE TRADING IS GRADUATE LEVEL OF TRADING. DO NOT EXPECT TO TRY IT AT NURSERY LEVEL OF UNDERSTANDING. Sagar Scindia Nishant bhai.. Can you elaborate about the futures part please? How can we be perfectly right and still lose money? Nishant Arora. The point suggests to "Timing". In investing, if you are right about direction, timing matters very little. In futures, you can be completely right about direction but if timing is even a little off, you will be out. Back to Index
OI TALE Nishant Arora December 17, 2017 THE TALE OF OPEN INTEREST
As the name suggests, Open Interest (OI) is the INTEREST that is OPEN. What is INTEREST? INTEREST is the POSITIONS of TRADERS. And What is OPEN? OPEN means OUTSTANDING. So, OPEN INTEREST means POSITIONS of TRADERS which are OUTSTANDING and not yet squared off. There are only two type of positions that a trader can take in the market. LONG & SHORT. Now, since for every LONG there is a SHORT and for every SHORT there is a LONG, so we don't count OI as LONG + SHORT but either TOTAL LONGS or TOTAL SHORTS. They both would always be equal. So, as I said OI is a number that tells you how many futures (or Options) contracts are currently outstanding (open) in the market. So, Let us say the seller sells 1 contract to the buyer. The buyer is said to be LONG on the contract and the seller is said to be SHORT on the same contract. The open interest in this case is said to be 1 not 2. HOW CAN YOU JUDGE BULLISHNESS OR BEARISHNESS WITH OI DATA 1.) If PRICE is rising and OI is rising, it means market is STRONGLY BULLISH. DESCRIPTION: If PRICE and OI both are rising, it means that every new contract that is being added is dominated by bulls, that's why PRICE is rising with every new contract addition. Never think that since PRICE is rising, more LONGS are being created than SHORTS. LONGS will always be equal to SHORTS just that LONGS are dominating SHORTS in the transaction, that is why PRICE is rising. See, it's like a normal share transaction. Number of shares bought is ALWAYS EQUAL to number of shares sold. Then why PRICE rises or falls? It does so because of buying pressure or selling pressure. So, if buyers of a share are dominating the sellers, PRICE will rise and if sellers are dominating the buyers, PRICE will fall. But BUYERS will always be equal to SELLERS. So, OI is rising, means new contracts are being added. But since PRICE is rising with it, it means that LONGS are DOMINATING the transactions. Thus, market/share is STRONGLY BULLISH. 2.) If PRICE is rising but OI is falling, it means market is WEAKLY BULLISH. DESCRIPTION: If PRICE is rising but OI is falling, it means that the rise in price is due to SHORT COVERING and not bullishness. See why is OI falling? It's falling because positions are being squared off and number of open contracts in the market are reducing. But since PRICE is rising with it, it means that SHORTS are SQUARING OFF and dominating LONGS in the transaction. See, how would SHORTS square off? They will square off by BUYING. That is why PRICE is rising. So, PRICE is not rising because LONGS are dominating. It is rising because SHORTS are dominating the squaring off process. Thus, it can not be called BULLISH. It is WEAKLY BULLISH. It can be a TRAP for new LONGS. 3.) If PRICE is falling, OI is rising, market is STRONGLY BEARISH. DESCRIPTION: If price is falling and OI is rising, it means that SHORTS are dominating the LONGS. And since OI is rising, it means that new contracts are being added. But, since price is falling, it means the new contracts which are being added are dominated by SHORTS not LONGS. Hence, it is STRONGLY BEARISH.
4.) If PRICE is falling and OI is falling, market is WEAKLY BEARISH. DESCRIPTION: If PRICE is falling and OI is falling, it means that the fall in price is due to LONG COVERING or also called LONG UNWINDING. See why is OI falling? It's falling because positions are being squared off and number of open contracts in the market are reducing. But since PRICE is falling with it, it means that LONGS are SQUARING OFF & dominating SHORTS in the transaction. See, how would LONGS square off? They will square off by SELLING. That is why PRICE is falling. So, PRICE is not falling because SHORTS are dominating and creating new positions. It is falling because LONGS are dominating the squaring off process. Thus, it can not be called BEARISH. It is WEAKLY BEARISH. It can be a TRAP for new SHORTS. DISTINCTION BETWEEN VOLUME & OI Just remember, volume is number of contracts traded and OI is number of outstanding contracts which are not squared off. Also remember that volume is measured daily and OI gets accumulated. Now, we'd understand the concept of open interest by creating some transactions: Assume that a new futures contract is out of transactions for January expiry. All these transaction are happening in a single session. Initial counters Volume: 0 Open Interest:0 Transaction 1: Faisal gets LONG 1 future contract which Nishant SHORTED Open interest: 1 Volume:1 Transaction 2: Abdul gets LONG 1 future contract which SURESH SHORTED Open Interest: 2 Volume 2 Transaction 3: Manu gets LONG 5 future contracts which Vishal SHORTED Open Interest: 7 Volume: 7 Transaction 4: Gaurav gets LONG 10 future contracts which Nitin Shorted Open Interest: 17 Volume: 17 Transaction 5: Naman gets LONG 1 Future contract while Abdul sells. Open Interest: 17 Volume: 18 Transaction 6: Nishant gets LONG one contract which Naman sells. OI: 16 Volume: 19
Notes:
1.) Till transaction 4, everything is smooth as new contracts are being created so open interest and volume, both are rising. 2.) In transaction 5, you can see that volume increased but OI stayed the same. Volume increased because a trade of a contract happened. But OI stayed the same because no new contract was opened. Naman got LONG on the same contract which Abdul carried. Abdul squared his LONGS off by selling and Naman bought it by going LONG. So the LONG position holder just got replaced in the contract but no new contract was made so OI remains same. 3.) In transaction 6, you can see that volume increased but OI decreased. You must have understood the reason as to why Volume got increased. But the reason that OI decreased is that Nishant who was an existing SHORT, squared off the contract by getting LONG while on the sell side is Naman who is an existed LONG and squared off by going SHORT. So, one old LONG and one old SHORT closed their positions. Thus, one contract got closed and OI reduced by 1. 4.) Bottomline is that each trade completed on the exchange has an impact upon the level of open interest for that day. 5.) If both parties to the trade are initiating a new position ( one new buyer and one new seller), open interest will increase by one contract. 6.) If both traders are closing an existing or old position ( o ne old buyer and one old seller) open interest will decline by one contract. 7.) The third and final possibility is one old trader passing off his position to a new trader ( one old buyer sells to one new buyer or vice versa). In this case the open interest will not change. I HOPE THE CONCEPT OF OI IS CLEAR ONCE AND FOR ALL Elango Murugesan Nishant sir I got still doubt about the movement of stock. If buy and sell same how the stock moves up and down with open interest.if only buy is more then sell the stock move up. Nishant Arora. Elango Murugesan, please read this post completely. Vikrant Khanna Nishant Bhai, kindly correct my understanding after reading your detailed post. In futures for every short there has to be a long , but it's not necessary that every long has to have short. Hence once a long is taken it becomes a rolling contract and a short squared off is a closed contract. Whereas a long squared off(sell),is a new long contract. Nishant Arora. Vikrant brother, Don't think this way. You have to think that WHAT IS A BUY & WHAT IS A SELL. A person who goes long, BUYS. Also, a person who covers shorts, BUYS as well. A person who goes short, SELLS.
Also, a person who covers longs, SELLS as well. So, there are two circumstances BUY and two circumstances of SELL. Now if you apply permutation and combination, how many unique situations can you have. FOUR. SITUATION ONE: 1 person gets LONG (BUYS) and the other person gets SHORT (SELLS). In this situation OI increases as a new contract is being created. SITUATION TWO: 1 person gets LONG (BUYS) while the other person COVERS LONG (SELLS). In this situation OI remains the same as the contract is merely being transferred. SITUATION THREE: 1 person gets SHORT (SELLS) and the other person COVERS SHORTS (BUYS). In this situation OI remains the same as the contract is merely being transferred. SITUATION FOUR: 1 person COVERS SHORTS (BUYS) while the other person COVERS LONGS (SELLS). In this situation OI reduces as a contract is being liquidated. Hope it makes sense to you !!! Nishant Arora. Use OI as, what I call, an AMBIANCE INDICATOR. It may not be directly involved in your trading strategy but it gives you an idea of the atmosphere in which you are trading Rahul Katariya Sir, will you write something about OI as how precisely are you using OI in your trading style ? Nishant Arora. I don't use it precisely as I said. I use it vaguely to gauge the temperature. Nishant Arora. The fire extinguisher in my house may not be of my URGENT need but it is never on LOW PRIORITY. Farzan Ahmed Siddique Seedhi baat no bakwas but #Nishant sir one query as per the expiry comes closer the OI start dropping in future & options also because the premium starts eroding so in the last week of expiry do we have to take our trade using OI in mind PLEASE REPLY IF POSSIBLE SIR Amarnath Peddi Y do u take current month contracts as u know expery is there bro Farzan Ahmed Siddique #Amarnath bro bcoz people wait for the expiry to take fresh trade & to roll over there futures position so if we will take next month contract in mind we will not be able to get the right idea and also one think to mention that big traders hedge there positions in futures & options so if they are going long in this month they will stand a short in next month so we can't get the right OI Nishant Arora. You answered your question yourself. Rollover is the key component here. You have to see whether the change in the current month (decrease) is reflecting in the change in next month (increase). If yes, then ignore the reduction as it is part and parcel. But if no, then you gotta be cautious. Farzan Ahmed Siddique Ok thank you for replying feeling blessed but one more query does this OI interest increase & decrease theory works also with stocks alsoo ??? Thank you once again sir jii
Nishant Arora. Yes it works with the stocks too. You don't relate price and OI as cause and effect. Treat them as two separate things and then relate them based on their combination. Nishant Arora May 11, 2018 THE ONLY TRUTH OF FINANCIAL MARKETS !!! TIPS GET YOU INTO PITS. LEARNING GETS YOU ON THE PATH TO EARNING Nishant Arora August 23, 2017
Just an observation !!!
Nishant Arora. Price rise with huge OI rise means long buildup. Asad Shaikh Price drops and OI drops .. how can this shape up? Nishant Arora. Squaring-off of long contracts. But better to analyse the data over the whole expiry. Snehal Sanghavi A whistle blower. Sir ur analysis are awesome. U shared open interest addition yesterday by smart money. And today goldman sachs comes out with a buy report of 850. Dont u think this report was leaked. Bcoz 20% addition of total open interest is not small Nishant Arora. Another example of Technical Precedes News & Fundamentals. Yes, you are right, for any stock to rise, public frenzy is required and reports, TV channels, news papers; these all are tools of creating public sentiment as per the requirement
Nishant Arora. Haha..Big win despite a 40% win rate this time. You don't need to be right in terms of quantity, you need to be right in terms of magnitude. Nishant Arora. Actually when I saw its chart yesterday, I found it good. And, I traded it intraday and took 2 rides. Kept few lots for swing and here it is Nishant Arora. 8% up. 703 now. That's 55 points from the suggested level. Considering lot size of 800, that is 44000/- profit per lot. Huge
Nishant Arora. This is one of a screener but in trading nothing is sureshot and nothing can be followed blindly. I suggest that you mix it with few other things as well. For example, see top 20 stocks in this list, see their weekly and daily charts. You will have a good idea about the upcoming move. Your aim is to find them early so search for scrips which are in OI spurt list but price has not moved much yet. I personally focus on stocks in congestion zone with OI spurting. Also, you would need to chalk out contradictory scrips. For example, OI is spurting, price rose a little but weekly and daily are bearish. So don't get trapped into the idea that since price is rising with rising OI, it is bullish. Always see OI data over the whole expiry to have complete understanding of OI movement. Prashant Vig May 19, 2018
OPEN INTEREST QUERY! We all have seen the posts by sir on OI from the basic and myself have asked in person to him and from other members as well. We have got a lot of info on this concept and how it’s one of the factor we can use to gauge the index or stock but still I want to dig this more to clear my doubts whether i am right or wrong. So documenting my thought what i am most curious on OI concept at present.
We have been reading and hearing this support and resistance from TV anchors and newspapers about the index levels through open interest built up. What they mean from the support and resistance levels is on the basis of highest open interest at strike prices near the index spot. In the picture, 18th may 2018 , Nifty Spot closed 10596.40 , so as per the f&o analysts we can see saying next support for nifty is 10500 on the basis of highest open interest 53.76lac, breaching 10500 , 10400-10300 is next support range with a total OI of both strike price 58.48lac and resistance is 10700 as OI is 33.63 lac , and if we cross 10700 , then next but a strong resistance is 10800 with 51.59 lacs. They somehow tell these strike levels on the basis of OI total. But one thing kept me confused for a long time when I used to see written “Heavy Put writing(long) at ***** level” or “Heavy Call writing(short) at ******level”. Today itself i saw written “Heavy Call writing(short) seen from upper levels” when market corr ected, now this option writing or option selling
requires lot of margins and can be done by smart and strong traders. Whereas weak traders buy naked options , so nobody see written like this “Heavy Call buying or Put Buying”. So , on this basis when Call
writing happens above spot , it is termed as resistance and analyst provides total OI figure at call strike or Put writing happens just below spot , analyst provide us a support with total OI figure at put strike. But , Total OI is built by one by one OI being added and that means Call/Put bought=Call/Put sold , but consideration is given to option selling side as they are strong hands and know where market will lead. In the picture , we can see Call option OI added at 10600 -9.83lac , 10700-7.16lac and can be called Heavy Call writing, whereas there is no equivalent put writing at strikes below spot. Just look 10500 Put , 0.42lac added. Also noticeable thing is we can see Heavy OI reduction at 10300-10800 Put strikes except 10500. So what can be concluded is something i am now confused , whether market will fall next week as shorts are made on Friday or do we see 10500 will provide us a good support ? But right side seems to be short side for next week? And even if we fall , where we will reverse due to short covering? Or if we do not fall instead but scale up , are these shorts participants - the strong traders cover short , that will be a firework to see? Now what the curiosity is : Is it actually important to find a key to gauge direction and that key is to see what market participants got active when I am giving you a level? why do we call a resistance when market scales up and we quote a next call strike conveniently , as call writing had happened already and that can be seen in total OI. For example we could not make above 11000 , but why ? On reaching 10990 level call writers should be shivering and covering short at 10990 we could be breaching 11000 or is it other way that they covered that’s why we reached up so much? Or take today , as we are falling , we see OI decreasing at put side , Call writing happening above spot so it’s a double selling pressure. Does that mean Call w riting
precedes big fall , Put writing precedes big move or it happens simultaneously , traders go out and go in. So when do these option writers, the strong traders go active.
Nishant Arora Prashant, Firstly I'd like to tell you that I can hear you :-). I know where you're coming from and I ca understand the level of confusion & mental struggle that pushed you to write this post. And I really appreciate that. See when it comes to looking at options chain or decoding open interest mystery, we are not actually predicting anything. These are facts. They don't show what is going to happen. They show what has happened. So, always approach it from that side. When we are looking at options chain, we are seeing what has happened and not what will happen. Anything can happen. Shorts can cover, longs can unwind, shorts can add up, longs can go full cylinders on. And based on that anything, the options chain would represent what has happened. And that can be completely out of line with what you thought before something happened.
So, what's the point? Well, the point is that options chain gives us the context. If you'd see on the call side, premiums slashed across the board and great OI addition in near spot levels. That is surely call writers dominating the scene. Now, some beginners would ask why call writers dominated the scene, because for every seller there is buyer so how can we say that only seller dominated. Well, that is visible from the premium. If one thinks of premium as price, forget strike, spot everything and think of premium as price. So, there are too parties, buyers and sellers and of course items bought would always be equal to items sold but whether price went up or down would tell us who dominated the process of buying-selling. So here on call side, we saw that premiums fell with OI rise which shows short build up means call writing build up. There is no doubt about it. IF you'd see some OTM strikes on call side, you'd see that premium slashed with OI fall. That portrays the long unwinding as well in OTM. Take it as whatever longs were left have started losing hope too. Now coming onto the put side, if you'd see from ATM (10600) to nearly all ITM strikes, premiums shot up with a falling OI. That is a mass level short covering. By short covering I men covering by put writers. A put writer is a bullish guy. So it shows that they are not bullish anymore the way they used to be. Even OTM put strike 10500 saw the rise in premium with a little addition in OI, That means even put writers weren't active in that strike which has the most OI count. The addition is very small though as you said, 42150. It shows that even at this strike, put buyers dominated put sellers, tough very mildly. Buyers dominated because OI addition is positive with rise in premium. So, here are the nuggets: 1. Call writers dominated all through the strikes. 2. Put sellers completely inactive. 3. Short covering in ITM Puts 4 A little activity in Put buyers too. This shows that bears are active. Bulls have closed longs and become cautious. Few of them turned into bears too (OI addition with rising premium). But still, they are waiting. The mass crashes happen when bulls become bears. So, we're not at that stage as of now. But OI addition at 10500 with rise in premium is not a good sign. That is a sign that even that support is weakening. Note: Always notice the action in premium with OI change on both the sides, If OI rises with rise in premium, it shows buyers are active be it call or put. If OI rises with fall in premium, it shows sellers are active, be it call or put. If OI falls with rise in premium, it shows covering by writers, be it call or put. If OI falls with fall in premium, it shows unwinding by holders, be it call or put. Prashant Vig Sir, I was influenced with OI as these are footprints of the market participants and combining with technicals will come up with a positive result. Then , one important thing I read from you , why OI is important to be seen over a period of time. Then I heard TV anchors giving levels, and came across how option selling perspective is considered valuable. Now , I am more clear and convinced by your response , how it is a context i.e. what has happened and not a prediction. Though option chain
can be perceived differently by anyone and anything can happen. Yes, I ignored the premium price and it is really crucial to know who is active. Nishant Arora Great that you got some context. See the only way to judge whether buyers are active or sellers are active is to look at the price. It applies to everything in life. Buying pressure increases price and selling pressure decreases price. There are two sources of buying pressure namely buying & short covering and there are two sources of selling pressure namely selling & long unwinding. So, if one sees the change in price with change in OI, one gets to see as to who is active and what is the source of that pressure. Back to Index
UNDERSTANDING BUSINESS Nishant Arora 14th May, 2018
When a person starts a business, he tries to understand EVERYTHING about the business before putting in money. Let's say someone decides to take dealership of HP computers, he'd understand the business model of dealership business, his target market, customer profile, expenses involved, potential revenue, internal workings of HP itself, processes of HP with respect to buying, selling, commission disbursement, payment structures, credit policies, inventory management, distribution model, supply chain & what not. He'd visit website of HP to understand its offerings in great detail, read countless brochures with attention. He'd also spend a great deal of time in understanding the competition, be it comparison of HP products with products of other brands or even his own dealership level competition with other existing HP dealers. Once equipped with the BUSINESS INTELLIGENCE, he will plan his BUSINESS ACTIVITIES. On the other hand when the same person starts TRADING BUSINESS, forget detailed understanding of the INDUSTRY, he doesn't even dig BSE/NSE website, where all his business is happening. He doesn't even spend time to understand the terminology & processes of this business. I've talked to so called derivative traders who don't even know the meaning of "Haircut", "MWPL" or even the difference between "Exposure & Span". He equates joining few Whatsapp, Facebook & Telegram groups as INDUSTRY RESEARCH & starts thinking of himself as a businessman, updates his Facebook profile caption as "Entrepreneur", gets a trading account & dreams of making money. Recognize this STUPID GREED element within you & remove it otherwise you would remain a gambler & would never become a PROFESSIONAL TRADER. If you really wish to become a PROFESSIONAL, you'd have to understand this business from all sides: 1. Understand the industry & all its participants 2. Understand the processes & operations of the participants 3. Understand your business model 4. Understanding market & trading (analysis & management) 5. Understand your edge. Nishant Arora. 95% of beginner traders wouldn't have even seen a Bhavcopy. That is why I always say, get out of the shell and know this business. Old timers had a great advantage over today's beginners. One, old timers didn't have any handicap of technology so they had to work hard to learn everything. They used to go to the ring everyday and participate in the trading. Then post market, they used to sit for hours
digging deep in bhavcopies and other such daily reports to find opportunities. Today, technology has surely made things easier but it has created an illusion of knowledge too. So, my suggestion to beginners is that don't let technology and ease of doing business become a handicap. Rather, use this ease as a leverage. Imagine working as hard as old timers and access to the technology at the same time. Back to Index
TRAPPED TRADERS Nishant Arora May 8, 2018 OPEN INTEREST, TRADING RANGES & BREAKOUT/BREAKDOWN
In futures, the early stage of a trend, post a range breakout, is not driven by trend followers but by those who are caught on the wrong foot and are forced to liquidate their positions in the direction of the trend. The more traders caught on the wrong side (gauged by open interest before breakout), the more furious the move post breakout. Another way to say this would be, if open interest rises during a range bound action, the move post breakout (any direction) will be fierce. Therefore, if the open interest dips at the beginning of a new trend, there is nothing to worry. It's basically losers covering their positions . Lets say price is moving in a range for 6 months. And, you see that OI has started rising heavily. The price is still in the range. So, let's say average OI during the range was 10 lac and in last 1 week it has become 50 lac but price is still in the range. It means that new positions have been created but no one dominated each other. Buying and selling pressure is in balance (that's why price is still in range). Now, how would you see the figure of 50 lac. See it as, there are 50 lac long side speculators and 50 lac short side speculators (for every one long there must be one short). So, now imagine that price breaks out on the upside. You have 50 lac short side speculators in panic who will rush to cover and fuel the rally. So, even before long side guys fuel the rally, the rally is promoted with short side speculators who are covering their shorts. Once the uptrend is in place, then come the trend followers who make new contracts on the long side. That is why we may see OI falling on breakout sometimes. That is because old short contracts are being covered. Think about other case that price breaks down on the lower side, 50 lac long speculators are in panic and unwinding longs and promoting the downside further and it picks up speed, the new short side speculators also enter and further drag the price. The more the OI in the range, the more the panic by those who are at wrong side of the trade and the more the explosion in the direction of the breakout. Ghanshyam Kedia Can you explain me, the people who run to cover their shorts also need someone to sell them contracts; then in that case don't you think the OI remains the same? I don't know how irrelevant the question might be. I had a doubt. Nishant Arora. Ghanshyam Kedia, the people who are running to cover shorts are basically buying. Now the question is who is selling, right? Since price has caught shorts on the wrong foot, it is understood that it won't be the fresh shorts which will fill demand of short covering traders. But what we have
observed that when price breaks out, most long side players who got long within the range, book their profits, hence unwind their longs. So, it is the long unwinding traders who sell it to short covering traders, hence a reduction in OI. But sure it can remain same too. The crux is that a breakout trader must not be concerned with the fact that why OI didn't shoot at the time of the breakout. As one can understand, OI may not shoot due to short covering. Back to Index
PIVOTS Nishant Arora February 10, 2018 SIMPLE PIVOTS
Pivots are one of the most reliable and time-tested points in the chart. A pivot is like a swing point. It offers reliable trade set-ups and acts as a good support/resistance. And the real beauty is that one can use pivots in any time frame. Bear Pivot (Left): Candle which has two preceding candles with higher highs & two following candles with lower highs. It will be more potent if the two following candles have lower lows too. Bull Pivot (Right): Candle which has two preceding candles with lower lows & two following candles with higher lows. It will be more potent if the two following candles have higher highs too. Note: The color of Pivot candle does not hold much importance.
Sekhar Raja Which pivot is good for trade. Daily weekly or monthly. Please reply sir
Nishant Arora Depends upon your trade outlook. My sincere request to everyone here is that never try to make RULES out of concepts because there are no rules. So, as I have explained in several posts and comments that your trade duration and your chart frame has to be in sync. You can not use a weekly chart pivot to take a day trade. Anupam Chamuah the pivots you have mentioned, is it different from the pivot points (S1, S2,S3, R1, R2, R3)? Nishant Arora S1, S2, S3 / R1, R2, R3 method is used more in scalping and forex due to sheer liquidity. Pivots can be of several types. What I've demonstrated here is the most basic Pivot structure there can be. It represents the overall context of pivot. For a swing trader, previous high/low can offer enough S&R to trade by defining stable stops. However, once one gets into scalping, one needs to get precise to the last tick. Then one uses more complex methods of pivot calculation like the one you mentioned. Even within that, there can be several ways of calculation like Classic method, Camarilla method or Woodie method. Nishant Arora I've just taken a random chart. This is Apollo Tyres 10 minute. I've marked 3 simple bear pivots and 1 simple bull pivot. See the effectiveness and the magnitude of move that came after those pivots.
Mayur Patel Dhadhi When there is price rejection we should enter ?? Nishant Arora This specific technique is simple pivot. In this case just rejection is not enough. You gotta wait for two candles after the pivot. Sathyamurthie Dhanushkodi What shall be the Initial Sl and the Trailing SL when things go in our favour?.
Nishant Arora Initial SL as a standard is high/low of the pivot but if it is too far then previous high/low can be considered. As far as trailing SL is concerned, that's a separate topic in itself because once price moves away from pivot, how you set trailing SL does not depend upon the pivot and it is like setting a trailing SL in any other condition, nothing specific. Nishant Arora December 5, 2017
Pivot on any time frame is a shadow on the higher time frame and a cluster on the lower time frame. Go figure. Nishant Arora I insist that you guys kindly try to do it with a pen and paper. Draw a pivot candle on a time frame, then transform the collection of candles in a larger frame and similarly in a lower frame. Nishant Arora The circled candle is the pivot which has two candles to its left and two to its right. The left one is a high pivot with two candles on the left and right each making lower highs. The right one is a low pivot with two candles on the left and right each making higher lows.
Nishant Arora Assume that what I've made is hourly. Now imagine how would it look like on daily frame and how would it look like on 15 min frame. V Vijay Ganesh Sir, whether second one is correct?
Nishant Arora Second is wrong. Candles on the side are not making higher lows. V Vijay Ganesh So the structure cannot be altered? Nishant Arora There are several kind of pivots but I mentioned the kind of pivot I'm talking about in context of this message.
Nishant Arora See, your hourly pivot is a shadow on daily and cluster of candles on 15 minutes. This is the kind of thought process that a trader needs to develop when he sees price in any timeframe. Nishant Arora See this. Made it on paint brush. This is how the given hourly formation would look on daily and vice versa. I have not made smaller frames but you can understand that in that, the pivot candle will be a cluster of candles hanging on the top. So, this was the point I was making. The pivot candle is a shadow on the higher frame and a cluster on the lower one. This is how your eyes must see PRICE ACTION. People ask me what is price action, is it candles, bollinger bands and so on? See, knowing basic candlesticks patterns is not price action trading. Price action is when you see a candle and can visualize the demand and supply structure. And that can only happen when you can see a candle on a frame and imagine its lower frame and higher frame. Once your eyes are accustomed to this kind of study, you would know good support/resistance levels where actual buying/selling has been done rather than using arbitrary support resistances like trendlines, moving averages of fibonacci.
Nishant Arora I always suggest people not to get too stuck in whether this is a hanging man or a Three white soldiers and so on. One must be able to visualize demand/supply relationship. Everything else is just mumbo jumbo. Hormazd Irani So by shadow you mean the lower price action reflects on the larger time frame, Nishant Arora I always suggest people not to get too stuck in whether this is a hanging man or a Three white soldiers and so on. One must be able to visualize demand/supply relationship. Everything else is just mumbo jumbo. Nishant Arora See price action concept is a deep one. I see so many people using low highs on intraday candles a support/resistance. That's a wrong approach. Price doesn't know whether you are using a 10 minute candle or a 30 minute one. So, what may seem to be close of a 5 minute candle would be a random point in a 30 minute candle. So, how can you treat that as support or resistance. One must open his mind. That's the point. Nishant Arora OPEN/CLOSE on intraday candles DO NOT MATTER. Only shadows matter on intraday candle. That's a huge point I'm making. Spend time to understand that. OPEN/CLOSE on intraday candles is a RANDOM POINT. What is OPEN of a 5 minute candle is a completely non-important point on a 15 minute candle. Nishant Arora Now, having said that OPEN/CLOSE on intraday candles are random because price doesn't know that you are using 5 minute as open close or 30 minute. However, a HIGH/LOW on any intraday candle shows up as some kind of reversal on a lower frame. So, a lower shadow on a 15 minute candle will reflect as a basing formation (bullish reversal) on a 3 minute frame. Hormazd Irani So basically your saying we have to have the reason for pattern formation in our heads rather than look up the 15 minutes charts vs the three minutes charts , it should automatically form in our heads. Possible but with a lot of experience. Nishant Arora Yes, automatically form in your own head. That is the stage when you need no indicator other than price. Hormazd Irani People get confused because of the time line which is horizontal, but we must imagine a particular days candle in a vertical ruler with prices as centimeters or notches on that vertical ruler . With the median. And prices below the median is negative and above is positive. Nishant Arora Yes, daily open/close, weekly open close and monthly open/close matter because between any two candles, market is CLOSED. But intraday open/close do not matter as market is already OPEN and it is YOU who is trying to divide an already OPEN market into OPENS and CLOSES and market doesn't know YOU. Nishant Arora This is sheer common sense but people just don't think that way as they are too busy with their PREDICTIONS and complex tools. Remember, people made millions in trading even when there were no computers and just OHLC data. Nishant Arora I feel we are better of keeping investing and trading separate. I am of a pertinent view that it is not TIME HORIZON which is a segregating factor between investing and trading. It is the
approach. Having said that, we can have an year long trade and a 5 day investment. Time is of no importance in deciding what is a trade and what is an investment. Nishant Arora Yes PRICE is Paramount. thousands and lacs of people transact into a share at the same time with their collective knowledge. It includes, newbies, amateurs, professionals and institutions. They all have separate levels of understanding, information and decision making. But price, at any given point of time, is a collective CONSENSUS of everyone's knowledge of fundamentals, which makes it much more important than the fundamentals. Back to Index
INDICATOR Nishant Arora January 3, 2018
I SUGGEST EVERY BEGINNER TRADER HERE TO DROP THE THINKING PATTERN OF OVERBOUGHT AND OVERSOLD. THIS DOES NOT WORK ANYMORE. AN OVERBOUGHT STOCK CAN REMAIN OVERBOUGHT FOR A LONG TIME AND VICE VERSA FOR OVERSOLD. IN FACT, OVERBOUGHT REPRESENTS STRENGTH NOT WEAKNESS AND OVERSOLD REPRESENTS WEAKNESS NOT STRENGTH. NEVER SHORT STRENGTH JUST BECAUSE RSI IS ABOVE 70 AND NEVER GET LONG A WEAKNESS JUST BECAUSE RSI IS BELOW 30. FURTHER, DO NOT FOCUS ON REGULAR BEARISH DIVERGENCES THAT COME ABOVE 70 AND ALSO IGNORE REGULAR BULLISH DIVERGENCES THAT COME BELOW 30. ALWAYS REMEMBER THAT IT IS NORMAL FOR A SUPER BULLISH TREND TO HAVE REGULAR BEARISH DIVERGENCES TIME TO TIME. THEY ARE NOT NECESSARILY REVERSALS, THEY CAN BE JUST A HALT BEFORE STOCK AND RSI RESUMES ITS JOURNEY AGAIN. AS I ALWAYS SAY, FOCUS MORE ON HIDDEN DIVERGENCES BECAUSE THEY GIVE SIGNALS IN THE DIRECTION OF THE TREND. FURTHER, THINK OF RSI IN TERMS OF ZONES, BULLISH ZONE & BEARISH ZONE. A COMMON UNDERSTANDING IS THAT 20 TO 60 IS A BEARISH ZONE AND 80 TO 40 IS A BULL ZONE. SO IF RSI IS AT 60, IT DOES NOT MEAN THE STOCK IS BULLISH, YOU MUST SEE WHETHER IT HAS COME TO 60 FROM 20 OR FROM 80. ALSO, DO NOT SEE ABSOLUTE VALUE OF RSI IN ISOLATION. SO IF RSI IS AT 20, DO NOT THINK IT'S A LONG OPPORTUNITY. RSI CAN JUST BOUNCE A LITTLE TO CORRECT ITS OVERSOLD SITUATION AND THEN THE DOWNTREND CAN RESUME AGAIN. SIMILARLY IF RSI IS AT 70, DO NOT THINK IT'S A SHORT OPPORTUNITY, RSI CAN CORRECT A LITTLE TO CORRECT ITS OVERBOUGHT SITUATION AND UPTREND CAN RESUME AGAIN. ALWAYS FOCUS ON RANGE SHIFTS AND NOT OVERSOLD AND OVERBOUGHT. SO THINK OF 20 TO 60 AS BEAR ZONE AND 80-40 AS BULL ZONE. REMEMBER I AM NOT MENTIONING BULL ZONE AS 40-80 BUT AS 8040. IT IS VERY IMPORTANT TO UNDERSTAND THIS. SO IF RSI IS AT 70, IT MEANS IT IS IN BULL ZONE AND IT WILL REMAIN IN BULL ZONE TILL 40. ONLY IF 40 BREAKS THEN YOU CAN SAY THAT RANGE HAS SHIFTED AND YOU CAN SHORT THE BOUNCES. SIMILARLY IF RSI IS AT 30, IT IS IN BEAR ZONE AND IT WILL REMAIN IN BEAR ZONE TILL 60. DO NOT BUY TILL IT CROSSES THAT. ALSO NOTICE THAT 40-60 IS A NEUTRAL ZONE. SO ANY VALUE OF RSI BETWEEN 40-60 SHOULD BE SEEN FROM THE PERSPECTIVE OF WHETHER IT HAS COME TO THAT VALUE FROM BELOW 40-60 OR FROM ABOVE 40-60. ALSO THE REASON OF CALLING 40-60 IS A NEUTRAL ZONE BECAUSE IT IS PART OF BOTH BULL ZONE AND BEAR ZONE. ALSO YOU'D NOTICE THAT DURING MOST OF THE TRADING RANGES, RSI IS 40-60. A GOOD UPTREND STARTS ABOVE 60 AND A GOOD DOWNTREND STARTS BELOW 40. TILL THEN, ITS RANGE-BOUND. I HOPE IT WILL GIVE YOU A NEW PERSPECTIVE.
Meenakshi Sundaram R 20-60 rsi is bearish zone.sir if rsi is moving from 30-60 and then 60-80 how should we interpret?rsi has moved from bearish zone to bullish zone so price will be bullish.what abt other way around? RSI comings from 80-60 and then 60-30.u say 80-40 rsi is bullish.how to interpret this movement? Aneesh Philomina Antony Once rsi breaches 60 and goes on to beak 69.2 without any dip while price makes higher high , then it's bullish. If rsi breaks abv 60 comming from bear zone, and went side ways or correct, but didn't go below 40(preferably 50), and again breaks abv 60 with a higher high in price, it's bullish too CA Paaras Gangwal RSI overbought and Oversold works beautifully in Hourly chart n if this happens near support or resistance , My personal experience ....Whats ur take Nishant Arora Sir Nishant Arora I think I've already said this. It works in intraday frame Devaraj Rangasamy more i read of how rsi is calculated, weaker it appears. RSI depicts ratio of positive, negative candles of last 14 candles.. i thought it risky to go by absolute value, but transitions as explained in pic makes lot of sense.. Nishant Arora True. Everything in TA has to be either seen as a rate of change, % or in context of something. Shiv Ram N Andrew Cardwell's RSI strategy! this works well than traditional way of RSI psychology!! Nishant Arora Though I'd like t keep it simple unlike the detailed calculating techniques of RSI and using RSI to give price targets and so on. Because if one gets into that, one starts giving more importance to RSI than price. Actually, anyone who invents something gives more importance to that thing; so Joseph Granville thought that OBV is the holy grail, for Cardwell, it would be RSI, for Robert Prechter, it would be Eliott but as a trader we need to be very balanced and unbiased. Sandy Bishap in practice i use rsi to exit the trade not to enter. if rsi made bottom 2 times say below 20 then i exit my short vice-versa for buy. for entering the trade one should must consider another approach apart of rsi. for entering the trade rsi should take as reference like if above 50 or rsi breakout then consider those stocks to buy and take entry as per your method.. Nishant Arora Multiple things can be done. RSI zones, divergences, failure/non failure swings and so on.
RSI Nishant Arora July 20, 2017
An overbought RSI can stay overbought for a long duration and an oversold RSI can stay oversold for a long duration. So, just because RSI is overbought or oversold, don't go long or short. It might BANKRUPT you mentally as well as literally. Herbert A. Koehler RSI by itself is Russian Roulette because there is no interperative data that efficiently pinpoints the start of a reversion. RSI can be useful with a momentum indicator like MACD, Slow stochastics can be used to pinpoint statiatical deviation as well as pinpoint a reversion.
Nishant Arora Yes, combining MACD is better. Moreover, I feel RSI has to be seen from a different point of view than what Welles Wilder introduced originally. Andrew Cardwell has done a wonderful job in redefining RSI and his student Constance Brown has documented it very well in the book called, "Technical analysis for the trading professional". It completely discards the general overbought/oversold view and with great logic. Herbert A. Koehler I love RSI as an option seller. Particularly on my settings. It helps when you have a margin of safety. Nishant Arora Absolutely, indispensable in selling options. Good to hear from you Herbert A. Koehler.Keep posting your wisdom !!! Nishant Arora October 16, 2017
A technically bent trader must be able to look at the RSI action and figure out the price action. So I am putting here a screenshot of RSI action, guess the price action. It is daily RSI of 14 periods.
Nishant Arora Those who placed their bets on "Price broken out" or "Big Green Candle", you win yourself a round of applause
Subramanya Prasad Please let me know how you analyse with 2 lines drawn. Please explain to me. Do we call this a pennat? Nishant Arora It is a Pennant / Almost a symmetrical triangle which is a continuation pattern. For more information and underlying reasons, I suggest you buy and read the following book. Technical Analysis of Financial Markets by John J Murphy. Nishant Arora In fact, if you see hourly, this is the case. However, price is at a 6 year old resistance. This is a critical stage for the stock.
Meenakshi Sundaram R I thought increase in buying momentum will lead to a price break out.but I have one question here RSI is a lagging indicator I suppose can it predict price action? Nishant Arora It's not lagging if we see the right things. Think of it. RSI is a ratio of Average Gains and Average Losses of a look back period. So, a 14 day RSI tells you that over last 14 days, what is the relationship between average gains and average losses. So, If RSI is breaking out, it tells you that average gains are dominating average losses and thus momentum is building up. So, it works well as a leading indicator as well. RSI divergences also lead price moves. If there is only one indicator that you can choose to master, choose RSI blindly. Meenakshi Sundaram R And u have shown a nice path too.i will take out MACD and stochastic for a while and study RSI alone. Nishant Arora Read this link if it helps you in getting more perspective and get cues for further study of RSI and MACD. http://www.expovest.bobs-webdb.com/macd-rsi.htm
Manas Joshi Nishant sir, based on the same discussion, do you have some references to material explaining about advanced concepts of RSI. For me, it's only price and RSI. Want to learn as much as I can for my only indicator. Nishant Arora For advanced RSI understanding, you can read, "Technical Analysis for trading professionals by Constance Brown". Andrew Cardwell When I look as this chart I can see many things based on my RSI coursework that it showed it was going to be a good position trade. ( Rising Bottom in RSI in mid to late May, my Range Rules support in early and late June, a break above resistance at 60 in July and multiple Positive Reversals in July/ August projecting higher price targets going forward.
BOLLINGER + RSI Nishant Arora April 2, 2018
Bollinger Bands + RSI combination + HIGH-LOW Analysis !!! Nifty 50 Daily Chart. Tried to make it as comprehensive and detailed as possible for a beginner to understand. Note: This is positional view on daily chart. Views on shorter frames can be entirely different.
Gomathi Shankar Bhai, Have you ever tried Money Flow Index inspite of RSI? bcs MFI combines both price and volume but RSI is based on price alone.. Nishant Arora MFI tends to be more volatile and gives more whipsaws than RSI. Jnyanesh BL what is Channel M in RSI? Is it just a representation of break of some level on RSI? Nishant Arora Jnyanesh BL, two ways to look at it. One, 30-50 is sort of a neutral to bearish zone in RSI. Secondly, while RSI kept oscillating within this channel, Nifty kept making lower highs and lower lows, thus confirming the channel as a bear zone. For Nifty to get enough momentum to break the pattern of lower highs and lower lows, this RSI channel has to be broken. Until then, even bounces can be considered as fake bounces. Aman Shah Sir Nifty breaking middle of bollinger band + rsi in upward direction + macd crossover upwards Time to get flexible I guess? Nishant Arora Aman, I have given a detailed explanation of when the thesis will be broken. If you'd read carefully, you'd know that thesis is still not destroyed, on daily time frame. I suggest you read both the charts. Of course mid line has been broken, i.e., C has been broken but RSI has still not expanded out of the channel M so positionally there is no point to go long. When I say positionally, I include the possibilities of going long on lower frames and exiting in time. But positionally would strictly be tied to daily chart view. So, C has been broken, RSI still in channel M. Next resistance is at B. However, if RSI breaks out, that will be time to get flexible. Otherwise, the further close price gets to B, the better the opportunity to short. Lastly, I have also shared my positional view even when price breaks above B. I repeat, intraday view was undoubtedly long but positionally, the view remains short. Aman Shah I completely agree with you sir but is just that I really liked your concept of flexibility sir
Nishant Arora Yes buddy, always. To be honest, I carry positional shorts while I made money on the long side today but you see I can not share very short term views because they change very fast and one doesn't get to learn from that too. That is why I am sticking to daily chart view on Nifty here. Nishant Arora As of now !!! (Apr 3, 2018 03:37pm)
DevRaj Sec Great piece of analysis When everyone was aiming for 10450 .... takes lots of conviction to give a short call. Whatever the global factor - news flow, it was all in chart and is always in chart.
MACD Nishant Arora March 14, 2018
An example of Price & MACD coordination. Price has been falling sharply on every MACD bearish crossover but isn't rising on bullish crossovers but just stabilizing to resume the fall. It shows there's a bias on the downside. And then, we have a hidden bearish divergence as well and a fresh bearish crossover has been made recently. Let's see if the price repeats its behavior.
Devaraj Rangasamy Nice.. This is 30m chart, and we can map these swings to short/long covering by intraday players .. Right? (additional parameter to time our entry/exit) Nishant Arora Of course. For a day trader, this can be a higher frame while for a swing trader, this can be lower frame. Nishant Arora March 14 Now !!! (Mar 14 th, 2018 11:10)
Nishant Arora Well, as they say, theory must be accompanied with action. Here's the action.
Saify Husain Nishant Arora Sir, at what tf did u execute this trade (entry /exit)? Nishant Arora Combination of 5 and 10 min Kaustubh Nawalkha Nishant Arora sir whenever you plan to teach , please tag me also in the post. Waise i dont miss any of your post , but still want to be on safer side. Many thanks Nishant Arora Ganesh Kuthadi Anytime you realize you have made a mistake, get out. There is no definition to that. And realization of being wrong may not only be a loss. As you said, it can also be a conceptual realization even if you are not in loss. Nishant Arora Wrong way to think. If this feeling develops further, one sets the perfect stage of failure. Returns are in context of investments and risk. They should never be seen in absolute terms. Attached screenshot is of Monday. So, if you'd add this to today, it will be worth several months' salary. But if one wants to succeed in trading, money doesn't have to matter.
Prasad Thota Nishant Arora sir, i don't mean to ask you personal question, but how many lots do you trade at a time. Such profits is tough to make with single lot. The intention of the question is to understand the capital requirement for such a magnitude of profit / loss. Nishant Arora While trading MIS, I might go to 15-20 lots as well depending upon margin requirements and money management requirements, which I acquire at different milestones of the trade. But for a trade where I know that no pyramiding will be done, I enter in one shot. But generally it is never less than 5-7 lots.
Abhinav Arora If not for money, then for what all r doing one of the toughest job (trading) ? According to me it's toughest , may be I m completely wrong. Nishant Arora Abhinav I've talked a lot about it brother. May be you haven't been yet able to understand my psychology. Let me put it again for you. There is a difference between OUTPUT & PURPOSE. Money is the OUTPUT of the game of trading and not the PURPOSE. If money will become purpose, how would you keep yourself motivated when you'd have a streak of losses? If money will become the purpose, how would you remain motivated to trade even after earning a lot of money. Why is Warren Buffett in the business, if money is the PURPOSE? Why is Ed Seykota still trading if money is the PURPOSE? Why is Amitabh Bachchan still working so hard if money is the PURPOSE. If money is your PURPOSE, no one can save you from being bankrupt in this business. Not even this, a person with money as a PURPOSE will not succeed ever in anything. Let me tell you why. Learning to trade will take years and during those years, you might not make money. Plus you'd have to study for uncountable hours, sacrifice your sleep, family time, leisure time to study and that too without making money for a long time? So, how would one be able to do that if the purpose is MONEY? Same with anything in life. If I want to be a cricketer, it will be because cricket is my PASSION and not because I'd get a lot of advertisement contracts when I'd become a cricketer and I'd make a lot of money. Because being a successful cricketer will mean hard-work for uncountable years without money. It will mean working very hard without anything in return. And even then you might not succeed. So, how will you keep the motivation? Only when CRICKET is your passion and not money. And even then success is not sure. I mean you enroll in CA and you finish it, you are sure to have a job. But if you are a wonderful actor and you go to Mumbai, is it sure to get a job, forget being famous? Money, fame, power; all these three entities are OUTPUTS of being successful in ANYTHING. They are never the PURPOSE of any endeavor. I wish all this should be taught in schools and colleges because I see people who are even mature and settled in their lives get all of it completely wrong. It is passion that attracts money, never the other way round. And you can't force a passion upon you just because you see someone else being successful doing something. I am a trader and investor because my passion since my childhood is reading, thinking, making notes, brainstorming and researching; irrespective of the subjects, irrespective of the rewards, irrespective of the OUTPUT. And every time, I've got the OUTPUT.
STOCH STAIRCASE Nishant Arora January 17, 2018
Here's a SIMPLE TECHNIQUE that I call STOCH STAIRCASE TECHNIQUE (SST) which can help you understand whether an uptrend or a downtrend is ENDING or if there's more STEAM ahead. The example I've taken is in the scenario of an uptrend. The same situation applies in the downtrend as well by reversing the dynamics. Hope you'd enjoy it !!!
Nishant Arora See this. This is how we got ready to play Hexaware before most of the people. Also, note one thing, the closer the oscillations, the stronger the move.
Amol R Dhanal Quite interesting...nice one. Please explain some other indicators for intraday like this.. Nishant Arora I'll keep on doing things but what matters the most is that you should see 100-200 charts after these sort of lessons and try to get in deep. That way, you'll be able to make out situations where it works best or where it does not work at all. Those things have to be observed, can't be taught.
Nishant Arora Intraday trading is best done with price, that's my personal opinion. Nishant Arora I post so many of my trades on intraday charts. But one of the reason I do not post them much is that execution of intraday charts is not just about knowledge and concepts but a lot about emotions and reflexes and intraday charts change very fast. Hence, I tend to put them only after I take trades, marking my entries and exits. Kaustubh Nawalkha From point A the price and the stoch fell straight down. Point B price did not touch the channel top but stoch went up. Point C price made a higher top than B buy the stoch was lower than what it was at point B . Point D stoch and price both were at channel top , so ideally they should have gone down straight but stoch started making a staircase and price also went only to midway of channel , indicating that this time bulls had a more powerful hand with them , and as expected price zoomed up doing a breakout. Than price did a retest of the bo zone , stoch also fell , but the price has made a hidden bullish divergence in relation to the stoch. As a result stock has again resumed it's journey to upside. There is a trendline break on stoch , as well, . The scrip looks good to go long . Sir please correct my advise. Nishant Arora Yes, your observation is correct.
MULTIPLE Nishant Arora December 28, 2017
A chart for TA beginners using multiple indicators.
Israel Mills I love your chart markups Because not only do you indicate how you take a trade
You also indicate why you take a trade and what to look for
That’s priceless education for the masses
Nishant Arora Thanks Israel brother. As the first line of our pinned post goes, "WE TEACH HOW TO INVEST / TRADE NOT WHAT TO INVEST / TRADE." So, I try my best to break down things so that a beginner who has started reading books can relate. Talking about this specific case scenario, every trade can fail but our focus should be on how much we can lose when we're wrong and how much we can win if we're right. So, as one can see here. post explosive upmove a couple of months ago, price has been in time correction making small candles. Such consolidations are very healthy. Price has made a wonderful basing in the consolidation. If you just see the chart superficially, you'd see that 35-40 bucks can be made at a risk of 56 bucks. That's the kind of trades we're looking at. Bikash Gautam RSI and stoch shows almost same trend line, should we use both or RSI is sufficient Nishant Arorat bro. Nishant Arora Bikash Gautam Only price is sufficient bro. Used all of them so that whosoever use whatsoever oscillator (RSI or Stoch) should be able to see the play.
Nishant Arora As I always say, never hold onto an opinion. Will do a detailed case about it.
Nishant Arora You know, several guys are still PMing me and saying, "But you said it will rise. Oh man, get a life. It's trading not some fixed static writing on the wall. Nishant Arora Some people won't ever learn. They would always remain stuck with ANALYSIS part and would never graduate to MANAGEMENT part.
Nishant Arora This is the order sheet. The last row is when I covered my longs in losses. Approximately 40k. Then as you can see in the middle row, I went short and then covered as depicted in the first line.
Sharad Patil How price went from 156.5 to 115.45 in less than 5 minutes? Nishant Arora Sharad Patil Open the chart and see for yourself. Not just 115, it went to nineties levels and rebounded. Sharad Patil I seen it. My question is why it dropped hugely? And how to read such mooves earlier? Nishant Arora There's no why. A trader is not an astrologer who has to predict. A trader is a reactor. He has levels in his minds, that if price will do this, he will do that and if price does that, he will do this. You know what I mean. So, I had levels in my mind that if price breaks this point, I'll close my longs and if it crosses this level, I'll initiate shorts and I just followed that. In my 11 years career of trading, I have never bothered to know WHYs. Nishant Arora
Umesh Punjabi Nishant bhai... As correctly predicted - the storm did arrive in this stock. Any reason why it did not get support as per RSI & MACD? Nishant Arora Umesh bhai, there are no reason ever. RSI or MACD or Moving Averages DO NOT MOVE THE STOCK PRICE. STOCK PRICE MOVES THEM. So, I was bullish only till they were giving support. The moment, weakness came in, I changed the stance to a short. So, as I said, RSI, MACD or whatever, they are good till they are good. Lalit Isarani Means the main leader is price volume action only, is it so?? Nishant Arora Obviously. This is not a cricket game where if I am cheering for India, I will keep cheering for India. I may change teams as per the situation of the match. That is why most people fail because they are not habitual of changing teams. Polaki Srinath Leaving technicals apart, what news made such a great fall? Nishant Arora There is no news. Just personally telling you, when trading, never ever look the the cause. The reason is that it may affect and rather distort the decision making. News may make us panic or hopeful and all at the wrong times. Polaki Srinath As u said for trading/technical analysis reasons don't matter, but curious because it's abnormal case fall from 160s to below 100 Nishant Arora Infibeam, inherently is a very volatile stock, you can tell that by looking at lots of low shadow candles. So, it's nothing new for this counter. However, one reason could be too much bullishness all around. Everyone had given a buy call which should make us very cautious. Then yesterday's OI rose too much and price couldn't go with it. It was a perfect opportunity for bears to trap bulls. And they used the opportunity. Back to Index
TREND IDENTIFICATION Nishant Arora July 15, 2017
TIP OF THE DAY I have seen several people, even seasoned traders going short and long against the trend. They do it out of restlessness, desperation or whatever you call it. As I usually say, "success in trading depends more on the trades you don't take than the trades you take". So, the question is what is the first thing to look for while deciding whether to go long or go short. Some people short/long based on RSI, some go long/short based on some chart pattern. But all this is secondary. The first thing to remember and practice is that NEVER TRADE AGAINST THE TREND no matter how good the opportunity looks like. This means: In an uptrend, don't short corrections.
In a downtrend, don't long rallies. It needs hell lot of patience and courage to stop oneself but it's necessary to restrain oneself. Now, the million dollar question is that how to decipher a trend. The answer is simpler than you would believe. 1. Find long opportunities in stocks which are trading above 20 Day Exponential Moving Average (DEMA) and 200 DEMA. But if it is not above 200 DEMA then atleast ensure that it is above 20 DEMA. 2. Find short opportunities in stocks which are trading below 20 Day Exponential Moving Average (DEMA) and 200 DEMA. But if it is not below 200 DEMA then atleast ensure that it is below 20 DEMA. An example would be, never short a stock just because RSI is overbought. An overbought RSI in an uptrend can sustain for a long time and price can reach to unprecedented highs. Similarly, never long a stock just because RSI is oversold. An oversold RSI in a downtrend can sustain for a long time and back you bankrupt. This would filter a lot of trades that you take and make sure that you take the winning ones. Nishant Arora So ensure that long candidates are above EMA 20 and short candidates are below EMA 20. Only, then look for other indicators. Better enter a trade little late, but enter when all confirmations are there. Small profit is always better than a big loss. Remetey Rezso and what period ? if you set 24hrs with 15 min timing there is a difference like you set 2 weeks with 2 hours timing, as i see on a char you can still make something under sma200 because ia a big downtrend for 2 weeks, there is an uptrend for couple of days, and price between 2000 and 2200 lets say Nishant Arora 20 EMA on a daily chart is 20 day EMA. 20 EMA on an hourly chart is 20 Hours EMA. 20 EMA on a minute chart is 20 Minute EMA. So, it doesn't matter. The EMA will adjust itself according to your chart timeframe. Also, sometimes, it is better to leave some trades which could have been profitable, just because there is no point taking risk. There is always a next bus coming. Back to Index
FALSE BREAKOUT This post is a real life case analysis of a very frequent happening in a trader’s life, a false breakout. The scrip in consideration is REC Ltd. Below, I am presenting a stream of charts from the point of breakout to the point of complete retracement. I hope you'd enjoy the case. Chart-1: Daily Chart (7th August 2017)- Before EOD
The theory was that since candle was hitting 20 DEMA (red line), it will face resistance and would come lower. Another thing in the favor of a short was MACD below center line and meager volumes.
Chart-2: Weekly Chart (7th August 2017)- Before EOD
Weekly chart also confirmed what daily portrayed. The price was trading below 20 WEMA (red line), which could act as a resistance. Also, the momentum seemed to dry down.
Chart-3: Daily Chart (7th August 2017)- EOD
One of the part of the theory was thrashed as price breached above 20 DEMA and broke a trendlie as well. But a consolation remained in the form of MACD still crawling below center-line. Moreover, volumes did not portray a stable breakout. However, let me tell you, most of the people would have considered this a breakout just by the look of a long green candle.
Chart-4: 5-Minute Chart (7th August 2017)- EOD
This chart portrays the 5-minute view of the chart after the price broke out of the trendline (refer chart 3 to see the trendline). However, as deciphered above in daily chart that though price broke above trendline and 20 DEMA, the MACD still does not show momentum. Her, it was comforting to see that while price broke above the trendline on 5-minute chart, MACD actually made a top and did a negative crossover with its signal line.
Chart-5: Daily Chart (7th August 2017)- Almost EOD
Here, it is seen that stock has a tendency to correct big even after a big day. A previous instance has been marked where stock rose with a huge green candle and next day itself corrected with a red big candle and that too on a higher volume. That expressed the strength of 20 DEMA as a resistance because the green candle took the price to 20 DEMA and the red candle corrected the price from there not allowing it to go above. Please note that MACD was falling then and crossed center line on the red day. It is also seen that on a recent instance, price again traded above 20 DEMA for few sessions, but soon returned. Also note here that MACD could not get above center line. Hence this was evident that two components are very important in this stock, 20 DEMA and MACD. The stock respected 20 DEMA and MACD center line as resistances.
Chart-6: 5-Minute Chart (8th August 2017)- Before EOD
As expected, the price opened gap up from the close of 7th August. This happened because as I said that a lot of people would have placed buy orders in anticipation of playing a breakout. You can seen that though price opened gap up, it soon started falling tick on tick and crossed below 20 EMA on 5-minute chart.
Chart-7: 1-Minute Chart (8th August 2017)- Before EOD
As can be seen, that price opened gap up, fell down and then rose to hit the same resistance and again fell down thus creating a double top. Though it's just a 1-minute chart but the weakness is strength was pretty evident. And eventually the weakness would travel to daily chart as well.
Chart-8: Daily Chart (8th August 2017)- Before EOD
As can be seen. 20 DEMA (white line) is well below 50 DEMA (yellow line), so even if price crossed above 20 DEMA, it would have face a tough resistance at 50 DEMA.
Chart-9: Daily Chart (8th August 2017)- Before EOD
It can be seen, the price was well in place to from a dark cloud cover hence cementing the hypothesis that breakout was false.
Chart-10: 5-Minute Chart (8th August 2017)- Before EOD
As can be seen, that price not only continued its downward trajectory but did so on higher volume.
Chart-11: Weekly Chart (8th August 2017)- EOD
While the day was going on, another thing happened, that due to intra-day price fall, price fell below 20 WEMA on weekly chart thus getting back into resistance zone.
Chart-12: 5-Minute Chart (8th August 2017)- EOD
As can be seen, that price made a double top on 5-minute chart and RSI and MACD respected their respective resistances.
Chart-13: Daily Chart (9th August 2017)- EOD
Finally, the event happened, which was being anticipated. Price, today, destroyed all the gains of the 7th August breakout and closed will below 20 DEMA hence establishing the breakout as a false one.
I hope, you enjoyed the whole stream of charts and thoughts. As you can see, just two simple things predicted and confirmed the whole scenario, 20 DEMA and MACD. And, it proved to be very accurate. Hence, it does not make sense to trade all breakouts with a blind eye. In fact, statistically speaking, majority of breakouts are false. So, if you want to be successful in an endeavor like trading, always be searching for even tiniest of knowledge that you can get about the stock or market that you are trading. As eyes are gateway to the soul, charts are gateway to the soul of the stock. I'd like to end the post with a quote of Paul Tudor Jones.
Back to Index
STOCK SELECTION STEPS Nishant Arora April 13, 2018 10 STEPS OF MY TRADING- SELECTION OF STOCKS & TRADING MECHANISM
1. My trading universe is very restricted, i.e., futures stocks which counts to a little above 200 stocks. Having a universe is very important. 2. Secondly, I do not rely on any technical screener. Technical screeners can only do objective screening, i.e., on the basis of moving averages or RSI values and so on, but it can never screen based upon the subtleties of price action, character of price structure or even character of an oscillator or indicator. I make it a point to see charts of at least 100 scrips almost everyday, if not everyday then at least 3 times a week. I've been doing it for years so I tend to remember a lot of things in lot of different scrips. This is something that I can not pass onto you. It can only be acquired through consistent hard-work. 3. In my EOD chart screening, I see all the scrips on 3 frames, weekly, daily and hourly. The weekly and daily gives the big picture while the hourly gives the price action for market structure of smaller time frames. 4. Now you'd be thinking how do I choose which stock charts to see. Well, I take stocks from all major lists such as day's top 10 gainers, day's top 10 losers, top 25-30 OI spike stocks, volume gainers plus some back log is always there. So, more or less there are 80-100 stocks to look at. 5. Now, I look for the following: 5.a Whether price on daily & weekly frame is in trading range or trend. 5.b Major supports & Resistances on daily & weekly frame. 5.c Whether hourly is in the direction of the move which is there on daily/weekly or whether it is in a contra move to large frames. 6. The objective is to enter only in those charts where their is a clear non-random move and entry is feasible. Coming onto the entry, it depends upon whether price action is a range or a trend. If it's a range, I'd like to get long at the bottom of it and sell at the top of it with tight stops. In case of trends, there can be two entry strategies, breakouts and pullbacks. Breakouts are when price is in mid of a trend but is in a tight consolidation such as triangle, flag, pennant rectangle and so on, and entry is made when price breaks out of the consolidation and resumes the trend. In case of pullbacks, entry is made when price makes a contra move to a support in case of an uptrend and resistance in case of a downtrend. And once the contra move happens & a reversal candle comes at support/resistance, an entry is taken with the trend. 7. Based on the above analysis, all the charts can be categorized into 3 lists: 7.a Bad Charts where price movement is mostly random and no proper trend/range is in place. I call this list as No Trading Zone (NTZ) 7.b Great charts where there is a clear range or trend but price too far away from the nearest technical stop. I call this list as Away from Trading Zone (ATZ).
7.c Great charts where there is a clear range or trend & price at almost perfect place to make an entry. I call this list as Trading Zone (TZ). 8. NTZ is completely put in the dust-bin. ATZ are kept in radar and tracked on daily basis. TZ is where the action is. So, let's say I analysed 100 stocks, out of which 50 went straight to NTZ, 30 went to ATZ and 20 passed for TZ. Now, those 20 are those stocks which have good chart and offer a good entry too based upon any parameter defined in point number 7. 9. Now these 20 TZ stocks can be further segregated in two lists, Swing Zone (SZ) & Day Trading Zone (DTZ). If you'd note, all these 20 of TZ list are in SZ because they have good charts and they offer a good entry. But whether they would fall in DTZ is a matter of how the next day's action takes place. Hence, the swing trades are decided a night before but which of those offer day trading opportunities will be known in the very session itself. Next day, based upon the analysis, I take my swing positions. And those stocks in TZ list where the action is heating up in terms of OI spike or volume increase, they fall into DTZ list as well. So, swing stocks are those which have great charts plus price is at a good level with regards to riskreward whereas day trading stocks are those which have great charts plus price is at a good level with regards to risk-reward PLUS movement as well. Always remember, day trading is all about volatility whereas swing trading is all about momentum. Other than this, I may get some day trading ideas in the trading session itself as some of the stocks which were anyway in ATZ but have become volatile. So basically my universe of swing trading stocks and day trading stocks is same and decisions are taken based upon the volatility, volume and OI spike whether a day trade must be taken or not. 10. Also, stocks keep shuffling between three lists, i.e., NTZ, ATZ & TZ but most movement happens between TZ & ATZ. Also, swing trade ideas remain same for quite sometime but day trading ideas change in a fast manner. What I mean by this is is that lets say 20 stocks are in TZ which means they are good swing ideas. So, they will remain good swing ideas for quite some time and there might be few additions from ATZ and NTZ time to time but that list remains same for quite a while. But DTZ changes swiftly. So, lets say 3 stocks from TZ are in move today, but tomorrow some other stocks from TZ would be in action. So, DTZ changes daily but even that change is within the TZ. Now, if you'd keep doing this for days and weeks and months and years, you'd develop a great eye and memory for stocks, their character, their movement style and their behavior which can not be taught. I am sure this must have given you a navigator to walk through the treacherous landscape called markets. Ganesh Malpani How long do you take to look at each chart sir? Nishant Arora Ganesh Malpani 5 seconds are enough to see a chart and decide if there is a trend, range or not. If there is a determinable structure, another 40-50 seconds to chalk out basic levels. So, in a way 1 minute per stock is more than enough. But this speed comes only with practice. Kids today ask for screening sites even before they put their first trade. The game is to develop an eye, not a handicap. Sudip Haldar Sir which timeframe you look first hourly ,daily or weekly? Which is the best timeframe to find chart patterns clearly? And please bring your support /resistance detailed post as soon as possible,it will be very much beneficial for us Nishant Arora I always start from weekly then daily and then hourly. In case the stock falls into TZ then for swing I use Hourly as PTF, 10 or 15 minute as LTF and daily as HTF. In case of positional, Daily is PTF,
hourly or 30 min is LTF and weekly is HTF. In case the stock also falls into DTZ, then I generally use 10 or 15 min as PTF, 3 or 5 min as LTF and hourly as HTF. Mahantesh Naganuri Sorry.. Wats dis LTF.. PTF.. N HTF sir?? Pankaj Agarwalla Lower Time Frame, Primary Time Frame and Higher time frame Mahesh Baira Nishant sir , pls provide the steps to select the Fundamental of of stock.
Nishant Arora Fundamentals stock picking is not step based buddy, I told you. You really need to finish those basic accounting/finance/investing books I told you about. Unless you learn to read P&L, Balance Sheet, correlate them with each other, understand cash flows, valuations, fundamental investing is not possible. It is never step based like trading. It's about understand a business and its finances. How can it be step based as every business is different, revenue drivers, profit drivers, cost structure, cost of capital, returns are different. Industry dynamics of every company are different, government policies affecting it are different. Investing can never be put in a formula. Trading is price based and prices of all stocks follow few templates that is why they can be divided into steps. But business is a dynamic monster, it's more of an art to understand businesses. I am sure you still aren't through the books I've told you and still searching for point wise investing methods. Please understand, no escape and no short-cut. Nishant Arora Practical is useless without study. That's also a point most beginners ignore. One can not just enter an operation theater and become a brain surgeon by practicing. No matter how much one practices, it won't work. One has to put in years of studying only then practical exposure would mean anything. Same here. Most trainers mislead beginners by saying, "Book reading se kuch nahi hota", practical se hota hai, "come to me I will teach you". This is BS. Of course, practical exposure and application is needed but it must be preceded and complemented with a lot of study. Rohit Kakkar Simply incredible, For all the beginners out there Nishant bro has just disclosed a secret to success i.e. having a trading plan is the most important skill for a trader. Always remember “If you fail to plan, then you’ve already planned to fail.”
Why having a trading plan works? A trading plan will help you to remove making any bad decision in the heat of the moment. Your emotion can cost you a lot of hard earned money. Nishant Arora Secrets are worthless if not followed with immense dedication, hard-work and consistency. In fact all secrets are a result of these 3 attributes. There is truly no secret, just hard-work
Prithvijeet Bhattacharya Sir I think Its all about observation. We should observe first & then enter. But in actual we made our mind to enter a stock & hence observation just remain a formality. So we ignore all the negative things in the chart & only see the positive. When we made a loss, then we realise that ...oh I missed this negative factors in the chart before entering. Nishant Arora That generally happens due to lack of hard-work. When you see 100 charts daily, you don't suffer from such biases my friend. Back to Index
STOCK SELECTION - INTRADAY Nishant Arora July 13, 2017
This is for intra-day traders, both futures and cash segment. Many traders remain confused as to how to choose a stock for trading. So, here I am spilling the beans. After 15 minutes of market operation when dust is pretty much settled, go to NSE website. Hover over "LIVE MARKET" menu. Then, click on the "INDEX" sub-menu which is the sixty item from the top. In the "INDEX" sub-menu, got to "SECTORAL INDICES". There, see the sectors which have more than 1% movement, positive or negative. The positive sector will give you opportunity on the long side and the negative sector will give you opportunity on the short side. Then, click on the sector itself and you will be presented with a list of stocks which make that sector index. Look for stocks, which have moved more than 2%. In the positive sector, look for +2% move (first 3-4 stocks) and in the negative sector, look for -2% move (last 3-4 stocks). Now, these are your trading stocks for the day. Once you have chosen them, you can apply different trading techniques. One, you can see 1-minute chart and wait for the "LONG SIDE STOCK" to become oversold and "SHORT SIDE STOCK" to become overbought to take entries. Second, technique can be use of VWAP (Volume Weighted Average Price). You can get long in the chosen "LONG SIDE STOCK" when price falls below VWAP and you can get short in the "SHORT SIDE STOCK" when price gets above VWAP. I hope it helps !!! Prakaash Saaraf nishantji shall we look for overbought/oversold on 1min time frame, is it good see in this smallest time frame or we should look in 5 o 15min time frame
Nishant Arora Prakash ji, there is no hard and fast rule. In fact, the idea of 1 minute is to get you in as soon as possible. But if you want confirmations, you can use a 10 minute sort of frame. No issues at all. Secondly, along with RSI situation, always look for a candle to denote the reversal. Madhurjya Mahanta Sir, I use an another way in selecting stocks for intraday, just I go to NSE website and download the daily volatility list, from which I select the nifty 100 shares from highest volatility to the lowest of 1.7% only. Nishant Arora Absolutely. There are a million ways to make millions. Snehal Sanghavi Once stocks are on you hands , one can look for open low, Open high factors. Bcoz this stocks qualifies for marubozu candle too. And if the prices have opened gap up / downfrom previous day high / close. Success chances increases even more. Back to Index
WHY NOT INTRADAY TRADING Nishant Arora November 11, 2017
You all must have heard that beginners must stay away from intraday or intraday is a recipe to sure shot loss and so on. Well, there are several reasons for these statements, like intraday trading requires fast mental skills, trained reflexes and subconscious level decision making. All these things make intraday trading a very tough activity. But there is a reason which overpowers all other reasons. And that is, that as we reduce the timeframe of analysis, the level of randomness increases and as we raise the timeframe, the level of randomness decreases. Having said that, it is relatively easier to anticipate a price move that may happen over a week or a fortnight or a month or over 6 months but it is far more difficult to anticipate a price move that may happen in next 10 minutes or 5 minutes or 1 minute. Here's an analogy. Assume that you are a doctor (technical analyst) and you check a patient (stock) who is sneezing and has cough. You check his temperature, blood pressure and an do a blood test. And you find out that he is suffering from flu and it will take 4-5 days to clear-up. So, you can more or less anticipate an outcome over a period of time but can you anticipate when he will sneeze next? Similarly, if you check a lung patient who is having Asthma. So you can anticipate that over a period of years, he is likely to suffer from COPD (Chronic Obstructive Pulmonary Disease) as well. But can you tell when is he going to have his next bout of breathlessness? So, intraday trading is like finding out when the patient will sneeze next, which is immensely difficult and random to a huge extent, while positional trading or mid term/long term investing is like doing macro tests and anticipate the future health status of the person, which is quite predictable with high success ratio. Nishant Arora You all must have read the disclaimers whenever any stunt scene happens, "This stunt is performed by professionals, do not try this at home." This statement, as it is, applies to INTRADAY trading. I am an INTRADAY FUTURES TRADER and I am telling you the truth. Whosoever tells you that intraday is easy and all one requires is to know some techniques, that guy is SELLING you something. Learn organically, that is the best way to grow. Devesh Chauhan Nishant very true, its like one can't read a few articles, even books, watch some tutorials, pick up a scissor and say, "Let us perform a successful heart surgery." I have a question though.
Why futures for intraday ? Why not equities ? Please forgive me I know nothing about derivatives. If the reason is margin leverage, then one can use leverage trading intraday equities. I'm sure there's more to it than just leverage. Nishant Arora The answer is two fold. There are two big reason to trade futures. One, leverage and two liquidity. Let me describe them one by one. LEVERAGE:
You are right that one gets financed on intraday equities too but that's peanuts as compared to futures. Futures are inherently leveraged products and when you add intraday component to the futures, it become leverage on leverage. Let's take an example: Take Adani Ports at a price of let's say 395. Let's compare 1 lot of futures with same amount of equity. Lot size is 2500 (futures). So, I'd assume the same quantity in equity intraday to keep the comparison. It would take around 1,40,000 to trade 2500 shares in INTRADAY EQUITY. This is close to 7X leverage. It would take 1,25,000 to trade 2500 shares in REGULAR FUTURES. This is around 8X leverage. It would take 50,000 to trade 2500 shares in INTRADAY FUTURES. That is 20X leverage. The futures contract was already leveraged and we added more leverage on top of it by making it intraday. This is no small thing buddy. I am getting 3 times more leverage in Intra Futures than Intra Equity. There is one more angle to it. Even a regular futures contract has better leverage than intraday equity. And I am in no restraint to square it off as well. So, let's say I want to short something, which can only happen intraday in equities, but in futures, I can carry the short position. That is a huge advantage. I am talking about regular futures not intra futures. So, my point is that if you see closely, the real competition product of intraday equity is not intraday futures. The real comparable product of intraday equity is regular futures. So, if I get better leverage plus an option to keep my position overnight, why would I even look at intraday equity. And if I am sure, something will work out intraday itself, that why would I block 3 times more than what I would do with intra futures. It will make sense for me, not everyone because of quantity. People trade intraday equity because there is no lot size restriction but my average quantity would be equal to 4-5 lots of future so I have no limitation of that sort. If you ask me, intraday equity is a forced product, to trap novices who don't have enough money to buy futures lots. So, it's like, they don't want to lose any customer. LIQUIDITY:
I'll give you today's example. I got long 10 lots in Adani Ports. Since it was an out an out intraday trade, I chose INTRADAY FUTURES as the product. I paid around 5,00,000 as margin to trade 25000 shares. On the leverage side, it would have taken 14,00,000 to take the same position in Intra Equity. Even if I ignore it (putting stone on my heart), imagine buying and then liquidating 25000 shares in cash market. Imagine the hassle involved. I hope you've got my reasons to trade futures, be it regular or intraday.
Rohit Kakkar Maximum people have a skill to find market trends but some find it in few minutes, some in hours,days,weeks,months and so on. It is very simple if you can find and understand market trend in minutes or even hours, you have good reflexes and finally if you can act emotionlessly than Intraday is for you. Trading is more like driving a car you should know when to apply breaks when to shift gears when to speed up and when to slow down. Lastly we should treat intraday trading as an adventure sport as Irrational behaviour and cognitive biases can cost you real money Umesh Shetty Nishant Arora Sir- How was your initial days of intraday experiences..did you also gone through all those common mistakes of any other normal traders,loss of money, patience and all.. Nishant Arora Not just about intraday, let's call it trading per se. The experience was shocking, full of denial and self-damaging. I had come into trading from already having been an investor both as an entrepreneur and as an equity investor. I had tasted success. That made it worse. And since I was already an investor, I made big sized trades right from the beginning only to lose big. Of course I was a voracious reader and curious fellow so can't be compared with someone who didn't know anything or worked on tips or ran after people. I did nothing of that sorts but still lost. The simple reason was that I was trading big with fundamentals. For example, this is what OPEC is doing, so this is what Russia will do and this is what US will think and do and this will create these many issues in these many industries and then company specific, that this company would have most exposure of this development. You see things like that. Let me tell you, there is no problem is this approach either. There are so many big fishes who trade this way only. The problem was with my approach. I mean if one is TRADING MACROS then one must have long horizon and deep stops. I was keeping nothing. Because I was TRADING, I thought it has to be short term even sometimes intraday and since duration was short, obviously stops were small, sometimes stops were not in place at all as I was too sure of my macro economical analysis. It was all messy, no structure. I despised technical analysis entirely being a hardcore follower of Graham, Munger and Buffett. But that was also a mistake of technicians around. They had always made it like its some magic and it moves prices. I used to hear their forecasts and I would think, what the hell. But then, since I have always been an open guy, I started understanding technical analysis, trading psychology and so on and realized that TA as a subject is not presented in rightful manner. IT is made to look like tea-leaf reading that is why most sane, intelligent, intellectual investors despise it. Most TA trainers have a wrong idea of TA and I chatted with a lot of them. And that is what they pass onto their students. Not that they teach wrong things but the overall vision of analysis is based on wrong foundations. Anyway, I started that and realized that there is just no conflict between investing and trading s it is made out to be. Similarly, there is no conflict between TA anf FA as it is made out to be and they both can go together. That is why I emphasize this so many times. Anyway, so I thought a lot about a lot and gradually things started improving. So, gradually, I segregated my accounts, thoughts and activities in terms of trading and investing. But yes, I lost a big big chunk in trading when I started. But it didn't take long to get hold of things due to hard reading and continuous thinking. Nishant Arora Intra-day trading is not an isolated profession wherein you directly transform from being a novice to being an intra-day trader. Intra-day trading is most difficult because it is most random and a beginner is unable to differentiate between random price action and non-random price action. Thus, one should first strive to learn TRADING, ANALYSIS and PSYCHOLOGY. Be a trader first. Be good at that for few years and then if you wish, you may explore intra-day too because by that time, your eyes and mind would be trained enough to differentiate between random moves and non-random moves plus you will be emotionally strong as well. However, if you are a beginner to trading overall, intra-day would
prove to be one of the biggest torture you would ever inflict on yourself. Teach yourself to drive first, then drive a car in normal conditions for some years only then think of becoming an F-1 driver. Back to Index
TRADING IS BAD? Nishant Arora May 21 2018
Someone asked my views on Vijay Kedia's article. This is my reply: Great "article" with great "quotes", partly true partly not. Here's what I think. See, it's true that trading won't work for most people. People by default don't have the attitude required for trading. People think of trading as a shortcut to riches. Brokers also promote trading, so a beginner feels that this must be the right way. Then TV channels also promote trading all the time. A beginner sees suited booted polished talkers talking about trading on TV in a friendly manner, so he feels this must be the right way. In fact in our group itself, we come across a lot of people who trade but are not even aware of the basics of trading. If this was not enough, beginners dabble into futures and options without any trading experience or instrument specific knowledge. So, of course this is a sure-shot road to disaster. Personally I feel that most people who are into trading, SHOULD NOT TRADE AT ALL. I see it on everyday basis. Just that I don't tell them to their face that look, forget trading, you are not apt to become one. Other than technical skills (even those are missing in most beginner traders), a specific kind of attitude and aptitude is required to become a trader. Most people don't have that. This is a fact and has to be digested. Trading requires multi-dimensional thinking while majority of people have linear thinking approach in life. And you cant just change your mental structure at drop of a hat. We all listen to statements like, "Never Quit" and all that but sometimes quitting is a wise decision. I mean not everyone is made for everything. There is no point if I make winning a gold in swimming in the Olympics. Even unlimited amount of hard-work won't get me there. Goals must be aligned with capabilities. And within capabilities domain, there are some which can be developed, some which can't be (at least so easily). But other than this, I completely differ. He wrongly generalized that trading is bad & futures trading is like smoking and so on. Well, it is a full fledged business. There are countless derivatives trading firms across the world with thousands of traders employed in it. Every single bank has a trading department. RBI trades derivatives. Countless freelance traders trade across instruments. Even non-trading companies trade derivatives to hedge their business. For example, Asian paints trades crude oil to hedge their business and so on. Forget institutions, there are countless highly successful individual traders too, be it in India or outside. Rakesh Jhujhunwala started his career with trading and he still trades a lot (at any given point of time with positions greater than 100 Crore). Radhakishan Damani, though popular now due to D-Mart has been a hardcore futures trader and still is. Of course, trading without right kind of knowledge, mindset and attitude is suicidal but it can not be generalized that trading per se is wrong.
As long as one knows what one is doing and it is in line with one's aptitude & attitude & knowledge, it will give reward. Problems occur when people do something which is not in line with their skills and attitude. I mean Michael Marcus would do terrible at investing & Seth Klarman would do terrible at trading but that doesn't make anything right or wrong. Similarly Mohnish Pabrai would talk bad about trading while Bruce Kovner would talk terrible about investing. This has been the case ever since these both streams are in place. Investors belittle traders, traders criticize investors, it's futile. World is full of both successful investors & traders. It's about clarity. It's about understanding yourself and the business. You can not put a blanket opinion on trading as a whole just because you are an investor and not a trader. And mostly those who blame either one of the professions are those who themselves have failed at the other. See, Vijay Kedia failed at trading and succeeded in investing so he talks accordingly. Marty Schwartz got unsuccessful in investing and became a multi-millionaire in trading so he would talk accordingly. There are very few who have been able to become successful at both. If you'd ask them, they'd never talk bad about either one because they know that both are completely different games with different rules, different objectives and require an altogether different rather opposite mindset. Hedge fund companies would never talk bad about either one as they both invest and trade. So many individual investors too. I personally practice both and I must confess that it is not easy keeping both mindsets as they are altogether 180 degree to each other. But once clarity is achieved, things fall in place. At this point, I do not find any contradiction between what Benjamin Graham says and what Jack Schwager says. I don't have any mental disconnect between learnings of Warren Buffett and learnings of Paul Tudor Jones. It all makes sense. Actually the thing is that most big-shots like Kedia know that people follow them blindly. And people would follow whatever they'd say. And they also know that trading is a tough profession and most people don't have the right mindset and willingness to put in what it takes. So, they know that if they'd promote trading, people would get bankrupt and then abuse them that it is due to them that they started trading. Hence they play it safe and keep a stance that trading per se is wrong and one should not do it, which is right on their part. In reality, they also know that trading is a full fledged business and there are countless successful traders around. I mean they are in the heart of the industry having links with hundreds of investors and traders, institutions and so on. They know that trading is hugely important for the market and even for investors. But they can't promote it as people would fail and give them a bad name.
Here in TFS, you all see on daily basis that unlike suited booted salesmen on TV, we put strong emphasis on learning first. TV guys portray that trading is easy if you follow their calls. Whereas, we discourage people from trading unless one has spent at least an year in understanding the concepts, market and himself. We can do it because we have a connect with you and we all are in discussion mode here. Whereas biggies don't connect with you and they can't discuss with you. They can't connect with beginners personally. They just have to present their stance through an interview or an article so they have to be very very politically right. In the end, I'd just say that there is no bad trading, there are bad traders. Abhinav Arora After Vijay kedia's article , I was reading about his past available on diff sites quora, you tube etc. Actually in his initial phase he was also a trader, lost a gud amount of money in trading. He promised to his mother he won't do trade in his life, but as everyone knows trading is like a addiction. He again tried but failed. Then he invested some 30k in Punjab tractor then ACC and made 10 times return with in 2-3 years ( Harshad Mehta bull run) and rest is history. Now his PF is more than 500 crs. Nishant Arora So the point is that his perception of trading is shaped by his failure in trading and not by rational approach. That's what I am trying to say. You can not generalize anything. Trading is a reality of life and you can not close your eyes to it. You don't do it, it's fine. You realize that your calling is investing, it's fine. But why to say that trading is bad? What if he made 500 Crore in trading? Then would he say the same? So, a person of such repute should talk on principle basis and not on the lines that something is right because it worked for him and something is wrong because it didn't work for him. Naishadh Joshi Nishant Arora Has anyone ever made 500 cr by trading? Nishant Arora In India, I am not too sure because trading as a systematic profession is quite new in India but if you'd ask globally, countless traders have made it, not just millions but billions of dollars. India in true sense has just woken upto technical analysis and systematic trading whereas in the west, it is prevalent since late sixties and early seventies. However, if you'd specifically ask in India's regard, a lot many big names have made huge sums in trading. RJ made 40 Cr in 1989-90 in forward trading only (futures of today). RK Damani made over 100 Crores in futures trading in early to mid-nineties, especially in short trades. Just that, Indian trading industry is getting shaped up professionally now and by 2030 or so, you'd see a variety of names as you see in the west. Nishant Arora Moreover forget 500 Crores, imagine if Kedia would have made just 10 Crore in his early trading activities, even then his thought process would have been different. That is why I see RJ as a more fuller market participant. He invests, trades everything. There is no DII or FII which does not trade. They have to. Even Buffett has been selling options for as long as I can remember to generate a float as well as to hedge. So, trading per se is not bad. Traders are good or bad. Read Market Wizards by Jack Schwager, both old and new, I suggest. Nishant Arora May 2, 2018
Follow PRICE if you are a trader & follow VALUE if you are an investor. If you can manage to follow the right thing at the right time in the right context, you won't need to follow anyone and you would be widely followed.
Back to Index
VALUE INVESTING Nishant Arora January 4, 2018
When you first learn of the value approach, it e ither resonates with you or it doesn’t. Either you are able to remain disciplined and patient, or you aren’t. As Warren Buffett said in his famous article, “The Superinvestors of Graham-and-Doddsville,” “It is extraordinary to me that t he idea of buying dollar bills for 40 cents takes immediately with people or it doesn’t take at all. It’s like an inoculation. If it doesn’t grab a person right away, I find you can talk to him for years and show him records, and it doesn’t make any difference.”
~Excerpt from Security Analysis (Benjamin Graham & David Dodd) Back to Index
QUERIES Headwind Devansh Gadda May 15, 2018
How does someone identify industry headwinds? Large investors always talk about this but I never understood it. Nishant Arora Anything that presents as a hurdle is a headwind. So, if cost of bauxite rises, it's a headwind for Aluminium industry. If cost of fuel rises, it's a headwind for nearly every industry. Increase in RMC is a much bigger headwind if company is unable to pass the cost to customers. A rise in interest rate is a headwind to most industries as they can't get cheap loans and finance cost increases. A government policy can also act as a headwind. So, you need to truly understand the business in order to figure out which components are required for its smooth running. And then a misfire in any of that component is a headwind. And when wind blows against the face, the speed of walking gets slower. Hope it clears.
PE Ratio Nishant Arora May 15, 2018
Ghanshyam Kedia, In the morning I saw a post by you wherein you posted that you do not understand PE ratio and wanted to learn. Though I would have said that please use Google for that. But Faisal bhai already said that before me and you replied that you checked on internet but you could not understand. Well, since you said that you tried reading via Google but couldn't understand, it made me very worried. The reason is that everyone is gonna explain it the same way as Investopedia or Wikipedia or any other article defines it. There is very little scope for subjectivity and explaining it differently, because it is a
concept, a formula which can not be changed. That is why everyone's comments were in the same line. But I thought that if you didn't understand it on internet sources, you obviously won't understand the comments as they were saying the same thing in the same manner. So, when you say that you didn't understand it even after reading from other sources, logically I was not sure whether you did not understand due to conceptual reasons or language reason. Though I can not help with the language barrier, but I can surely help with conceptual barrier. Since it is my job, I will try. See, in ratio analysis, be it mathematics, statistics, accounting or anything else, there are two items, a numerator (N) and a denominator (D). The ratio of N & D is always calculated as N / D. N / D shows that what will be the value of N if D is 1. This is also the process to find a percentage. What is a percentage basically? A percentage means what is the value of N if D is 100. That is why when we need to find any percentage we multiply N / D by 100.
Let me give you an example For example: You gave an exam and got 40 out of 100 marks. Now, if you take N as 25 and D as 50. You take a ratio N / D That is 25 / 50 The result will show the value of N if D is 1. So, 25 / 50 is 0.5, which means that if D is 1, N will be 0.5. In other way of saying, you have got 0.5 marks out of 1 mark. And if we proceed further to calculate the percentage, we just multiply the result by 100, that is, 0.5 X 100 and we get 50%. Which means that per hundred (Cent) marks, you have got 50 marks. Now, coming onto PE. PE is Price-Earnings ratio or Price-Earnings multiple. It is calculated as follows: PE= Price of the share / Earnings Per Share (EPS) Which means that P is N and E is D. So, if Price of a share is 20 and EPS is 2.
It means that PE = 20 / 2 = 10 It means that for every Rs 1 of earnings, market is valuing the company at Rs 10. Which means that market is ready to pay Rs 10 if company is making Rs 1. But why is market doing that? Well, market is doing that because market is expecting the E part to grow, hence they are paying more than E. This is why we say market discounts everything. Let me also give you an alternative way to look at it. As I earlier said that: PE = Price Per Share / Earnings Per Share Now, what is the Price of a share? The price of a single share is what the market is ready to pay for 1 unit of its ownership. Now if we multiply price of the share by total number of shares, we'd get the price of the whole company, which is also called Market Capitalization or MCap. Similarly, if we multiple Earnings Per Share by total number of shares, we would get total Earnings of the company. So since PE = Price / Earnings Per Share We can also say that: PE = (Price X Total Number of Shares) / (Earnings Per Share X Total Number of Shares) Which means, PE = Market Capitalization / Net Earnings The ratio will remain the same whether we calculate it on Per Share basis or Whole Company basis. Let's take an example: The Net Earnings of company XYZ Ltd. is 500 Crore Price of a share is Rs 250. Total number of shares is 100 Crore
Let's calculate the PE from both formulas: PE = Price Per Share / Earnings Per Share Now, since we don't have Earnings on Per Share basis, we'd first have to calculate that. Earnings Per Share = Net Earnings / Total Number of Shares Earnings Per Share = 500 Crore / 100 Crore Earnings Per Share = 5 Which means that company is making profits of Rs 5 per share basis/ Now, PE = Price Per Share / Earnings Per Share PE = 250 / 5 PE = 50 It means that market is valuing the company at Rs 50 Per Share, if the Earnings Per Share is Rs 1. Now, let's calculate the PE on Company Basis and we'd see that the answer is same. So, PE = Market Capitalization / Net Earnings Now, since we don't have Market Capitalization, let's calculate that first. Market Capitalization = Price Per Share X Total Number of Shares Market Capitalization = 250 X 100 Crore = 25000 Crore Thus market is valuing the whole company at Rs 25000 Crore. Now, PE = Market Capitalization / Net Earnings PE = 25000 / 500 = 50 So, as you can see, whether you calculate PE on Per Share basis or on Company Basis, the answer will remain same. So, PE effectively shows the sentiment of market in terms of how much it is valuing the company with respect to the profits that it is making.
PE can be calculated using past earnings or using forward (potential) earnings. See price changes on moment to moment basis but earnings don't. I mean even if they do, we don't get any notice of that. So, we only have two options to calculate PE, either we use earnings of past or we use earnings of future (prospect). PE calculated using earnings of past (factual real earnings) is called TTM PE or Trailing Twelve Months PE. Whereas, PE calculated using earnings of future (prospective earnings) is called Forward PE. Of course TTM PE is more reliable as that is based upon a fact and not some guess. Now, coming on to importance or use of PE in investing. The more people's perception of earnings growth, the more will be the PE. This is to note that perception can be right or wrong. That is what produces opportunities for investors. As I said PE represents the investors' sentiments towards the stock. So, if a stock is trading at a PE of 50, it means that there is so much demand that the market is ready to pay Rs 50 for every Rs 1 of the earnings. Basically it shows that market is so much bullish on earnings' growth in future that it is thinking that even if Rs 50 is invested against Rs 1 of earning, still they will get a return on investment. Similarly, if the company is having a PE of 2, it means that the stock is not much in demand and market is just ready to pay Rs 2 for every Rs 1 that company makes in profits. It shows that market is not too bullish on the stock as they are not ready to pay anymore than Rs 2 for every Rs 1 that company makes. Now, the question is that why would an investor invest at a high PE? In other words, why would he pay, let's say 50 times its earnings? Well, when an investor invests at high price-earnings ratio, he aims to make money by: Either 1. Earnings Expansion Or 2. Price Expansion See if PE is 50, it means that market is ready to pay Rs 50 for Rs 1 of profit that company generates. But why would market or investors do that? Well, either they feel that Earnings will rise or they feel that Price will rise.
See if investors would feel that earnings will rise, it means that the denominator of PE equation is rising, which will contract the PE hence making it look more attractive and market will again price it more dearly based upon fresh increased earnings hence he will get a return on his investment. And if price will expand, it means that investor who is investing at 50 PE is expecting that in future, he will get buyers who would be ready to invest at even a higher PE and he will sell to them and get a return on his investment. This is called Greater Fool Theory which means that a fool buys a share hoping that he will get a greater fool in future to buy it from him at a higher price. But does that mean that Low PE is good? Well, not necessarily. But if you'd notice, you will find that so many investors get attracted to low priced stocks. Well, it so happens sometimes that market is not ready to pay a premium to company against its earnings because the company does not deserve it. So, never get attracted to a stock just because it is low PE. Low PE ground is full of junk. But having said that, sometimes you get diamonds in that junk too. It so happens sometimes that a great company having a great future is dealing with some temporary crisis and its share price drops but its earnings do not drop in that ratio, in that case sometimes even good companies trade at low PEs. Also sometimes very small companies are completely hidden from eyes of big money and investors in general, even if they are very good. In that case too, they trade at low PE. So, the bottom-line is that you should not buy a company just because it is low PE or high PE. But you must first understand the company's business, quality and growth prospective and then look at PE to understand how much the market is paying for its future growth. That will show you whether you have an opportunity or not. A Bad Company trading at Low PE is JUNK. A Bad Company trading at HIGH PE is TIME BOMB. A Good Company trading at Low PE is DIAMOND. A Good Company trading at High PE is SPECULATIVE. In my final words, I would cite one advantage of PE ratio in general sense. See generally what happens is that people mistakenly compare Price of shares of two companies and decide which is cheaper and which is expensive. So, for example: If Share A is trading at Rs 5 And, Share B is trading at Rs 200
Many beginners would think that Share B is expensive. This is completely wrong and this is where PE can help. See, Price does not show valuation. PE shows valuation. Price is just an absolute figure but PE is calculated using two figures so PE is basically a relation of Price to Earnings. So, if Share A is trading at Rs 5 with a PE of 20 While, Share B is trading at Rs 200 with a PE of 10 It shows that Share A is more expensive than Share B Yes, Rs 5 share is more expensive than Rs 200 share Because in Rs 200 stock, the investor is paying Rs 10 for every Rs 1 of earning. Whereas in Rs 5 stock, the investor is paying Rs 20 for every Rs 1 earning. So, price never shows if the stock is cheap or expensive. Valuations method show that and PE is one of those methods. But having said that PE is not the final destination, it is just one of many tools to see the market sentiment towards a stock, sector or index. A high PE doesn't guarantee a failure if growth prospects are wonderful and a low PE doesn't guarantee a success if earnings have no future. Personally, I don't base my decisions on PE as it is based upon an item of P&L account, i.e., earnings which is highly manipulative. My decisions are majorly based on either cash or other balance sheet items. However, my suggestion would be that be it any topic, you must work really hard and try to explore internet as much as possible. See the right strategy to learn anything is to learn it from all angles. And that needs a play of keywords on google. So, let's say first you type "PE Ratio" on google, try to read 8-10 links. That will make a base and give you an idea. Plus, it will also give you 4-5 new queries. Then you can search for them too. So, what will happen is that though you started searching to learn PE ratio, you would end up learning 5 more things with it. Then once you're done, then search "Use of PE ratio" and read another 8-10 links. Then search "PE Ratio is useless" and read another 8-10 links. This will make you a master of PE ratio. Any topic on earth can be understood in this manner from all the angles and there is no match for that. I hope it helps. Nishant Arora But I thank Ghanshyam Kedia, as due to him, so many beginners who had no idea of PE would learn it. I mean there would be so many who didn't have the courage to ask due to fear of being laughed upon. So, it will be a benefit to them all.
Khushboo Choudhary Etna likhne se toh hoga hi ..any plans of starting your venture..based on the poll you conducted...i am waiting for it to come alive.. Nishant Arora Khushboo Choudhary Arey nahi, I write much more than this everyday for my own, making my notes, writing my activities and thoughts and all that. That is the only reason I can think of things in different perspectives. Writing sparks up Reticular Activating System (RAS) of brain which is actually connected to cross connections and idea generation. Moreover, I write much more for a blog post. As for the venture, it would surely come and you would definitely be notified. Ghanshyam Kedia Sir, all you said is noted. I heard in one of Peter lynch's interview where he said that '' a P/E ratio can be thought of as the number of years it will take the company to turn back your amount of initial investment, assuming, ofcourse company's earnings remain constant''. What does this mean? Nishant Arora Ghanshyam Kedia, that was a rhetoric ( a manner of saying) used by Peter Lynch. That is not the way to look at PE ratio. That's just a kind of a punch. See, let's say share price of a company is 100 and earning per share is 5. It means PE is 20. Now, look at it from this perspective that if you invest in 1 share and buy it at 100 and earnings remain constant. Then it would take 20 years for the company to generate profits equivalent to your initial investment if earnings remain constant at 5. But think of it, this is not the practical way to look at it because of two reasons. One, that you are not getting earnings as it is. I mean Lynch said that, "P/E ratio can be thought of as the number of years it will take the company to turn back your amount of initial investment, assuming, of course company's earnings remain constant." But in the above example if I bought the share at 100 and EPS is 5 and it remains constant then of course company would make 100 in 20 years but it does not mean it is giving it back to me all of it. I mean who gives a Rs 5 dividend on a Rs 5 earnings. Secondly, Peter Lynch's statement completely disregards movement in price. I mean it can also happen that EPS remains constant at 5 while share prices rises to 200 in 2 months. Then also his theory is failed. I mean I would make double my money in two months whereas as per him it would have taken 20 years to get my investment back. So, he didn't actually say it to EXPLAIN PE RATIO. It was just a manner of saying. Please learn to read between lines. This is the primary requirement for being an investor. I wrote the post to clear the concept of PE. So use that to understand PE and then Peter's line will make more sense. Peter Lynch's statement is just a punch not an explanation. Hope it clears.
WEALTH CREATION Abhinav Arora December 31, 2017
Hi everyone, is it possible to earn 2 percent monthly return on consistent basis. Target : wealth creation Capital : initial cap 10 lakhs and 50k or more will be added monthly Capital protection (low risk) and consistency what I want. I m considering 3 options 1. Short term investment ( based on charts) and MFs Or
2. Long term investment (based on fundamental and to some extent charts) and MFs Or 3. Options strategies and MFs Please advice. Tfs Faisal I find it prudent to divide a cash portfolio into 3 parts..1/3 For long term..2/3 yrs plus ..1/3 For swing trading to make some quick bucks and 1/3 funds for margin money ..actually margin money should be kept constant ..can't increase it with size of cash portfolio.For decent returns I think 10 to 12 lacs is a must for futures trading..the lesser you have the more riskier it is...so I believe minimum 10 lacs is a must ..else do not enter futures ..Yes and use professional guidance and continous presence on the screen for it ..else leave it. Snehal Sanghavi Its very easy. Not a big deal. Needs long explanation and short execution, discipline and care. Will post the Strategy by next Saturday
Nishant Arora Abhinav Arora Let me be very frank. You problem till now has been that you are FINDING PEOPLE who will tell you how to make money. It is the perfect way to get fooled and trapped. Right from the start, I am insisting you to work towards being independent and the only tool is self-education. Do not think that it will not work. Why will it not work? It has worked for me. It has worked for almost any good investor. It worked for Warren Buffett. It worked for Sanjay Bakshi. I think you haven't read the post I did on Sanjay Bakshi. He was a CA struggling to become an investor. Reading Warren Buffett's shareholder letters changed his life and he read all those books I am suggesting to you. There is no substitute to gaining knowledge. Talk about anyone, Sanjoy Bhattacharya, Ramesh Damani, Raamdeo
Agarwal and so on, what's common? The only thing that is common is that THEY ALL ARE BIG TIME READERS. And being a CA, it is very easy for you to acquire the required knowledge. No one will be able to stand in front of you if you just finish 10 books that I will suggest. It will take time, but time will pass anyway. In fact, it breaks my heart when I see you going from person to person on FB and asking them what to do. You are sitting on a treasure without realizing it. I have no self interest and I am not selling anything to you. But sadly, you are in a state where you will trust a SELLER more than me. My advice of reading books is looking simple to you and you are feeling that how can you become rich by just reading books. So, let me share what I haven't shared till now. I made my first Cr just due to Intelligent Investor, Security Analysis and Letters of Warren Buffett. That's all. So, I insist that you stop INVITING NOISE, rather close your eyes and ears towards everyone and everything and get down to study. No harm will be done if it will take 1-2 years before you finish 8-10 books. No harm. You will thank me, I am more than sure of it. Abhinav Arora boss salute to u , really ur this comment made my day. 18 months back me and my two colleagues started trading here in market, actually that was not trading its pure gambling. Paid lakhs of rs to advisories, result same lost good amount of money. After that one left and moved to MFs only, but dont know why I was not ready to believe that one cant make money here. One day I am watching Mr Ramdeoo's interview with Anil singhavi on you tube and the titile was "zero se 1000 cr kaise bnaye". After watching my concentration was only on how to get initial capital( at least 50-60 L) for investment and start searching for trainers hehe, done three trainings and feel lyk now no one can beat me. Again result was the same LOSS, so now again thinking to change my strategy for that again start asking people what to do ? but now after reading ur post no one can teach you in 15 -20 days how to make money here. Nishant Arora Absolutely, no one can. Even if Sachin Tendulkar personally coaches you to bat for 1 month, will you become world's best batsman? Never. That's why, I asked you to decide between Investing and Trading. They both are deep oceans. So one must choose. Of course, at later stages you can mix but never in the start. So now that you've chosen investing, my suggestion is that you close your doors to everyone and finish books I've asked you to. Tfs Faisal has tagged you in a post. You will get you complete path there. So, now just DO IT WITHOUT DOUBT. You are here to make big money and to sustain for decades not to make some change and run. So, give yourself time. Read that blog post carefully and make those guys your hero. Read as much about them as you can, their videos, interviews and all. See, when you can learn directly from Warren Buffett, why do you want some Tom, dick and harry to give you advice. Follow the REAL GURUS of investing. They have written enough material to make you rich and more importantly WISE. Devesh Chauhan Nishant Please suggest me an awesome book for intraday trading. I, like, really need to pull brain out of live trading and give some time to reading Nishant Arora Devesh Chauhan How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology’ by Andrew Aziz.
Amit He Hi Nishant Arora , I have a question for you .... did Jesse Livermore or succesful traders like him focused more on reading books and then applied those concepts in real time trading ? Is it so a person who doesn't read those infinite books available today on internet about stock market or technical analysis or about investment can't be a successful trader or investor
Nishant Arora Amit He, glad that you asked this question. So many people ask me about the importance of reading books in trading/investing success. Here's my answer. THREE STEPS REQUIRED TO SUCCEED To succeed in anything, including trading, there are only 3 steps which are: 1. INPUT OF KNOWLEDGE 2. INTERNALIZATION OF KNOWLEDGE 3. APPLICATION OF KNOWLEDGE. Let's discuss them one by one. 1. INPUT OF KNOWLEDGE To get started and to advance in any field, we need knowledge. Now, where does that knowledge come from? Either from some person, being with professionals or books. Hardly matters, what is the source. In case of Jesse Livermore, his input came from BEING ON THE FLOOR from the age of 14. Imagine being a 14 year old and listening and observing the shrewdest of mean. I or several beginners do not have luxury to obtain our input of knowledge from being on the floor. Similarly, Marty Schwartz, Rakesh Jhunjhunwala, Paul Tudor Jones and people like that, they all obtained their input of knowledge about workings of the market and about psychology from being on the floor. Since we do not have that luxury, we resort to books to get our input. Also note that even those who obtain their input of knowledge from being on the floor or being in a trading related job, even they read hard. Rakesh Jhunjhunwala reads 4-5 books a month. Paul Tudor Jones has a personal library of more than 2000 books on finance and economics. Ramesh Damani is a hardcore reader. Raamdeo Agarwal at least reads 100 pages a day. So, reading books is PRIMARY. 2. INTERNALIZATION OF KNOWLEDGE Now once you have got source for your input of knowledge, you gotta internalize it. Mere being on the floor or reading 100s of books or articles will not help at all if YOU DO NOT THINK HARD. Internalizing means reading then thinking hard and deep and asking questions to yourself then thinking more and reading more to answer those questions. It involves continuous thoughts which create a mess in your head. This is the way YOU MAKE THE KNOWLEDGE YOUR OWN. Otherwise no teacher, book or job can train you. 3. APPLICATION OF KNOWLEDGE This is the final step of course. But this step is not the end. In fact, it's a circle. When you apply what your have taken as input and internalized, you get either a good result or a bad. In both the cases, you analyse the reason and that takes you back to step 1 and 2. So, as you can see, all 3 steps are very important. Some people are very good at grasping things and they don't need many input. They get a small input and then they think so hard about it that they turn it into a life changing activity. Some have to take more and more inputs to understand something. So, personal
aptitude is also a point of consideration. But whatever the method, situation or circumstance is, READING IS OF PARAMOUNT IMPORTANCE. It forces us TO THINK. And only when we THINK, WE APPLY. It's not a coincidence that great entrepreneurs, leaders, investors, doctors, lawyers, engineers, all are avid readers. I am sure, I've answered your question. Back to Index
TECHNICAL ANALYSIS Nishant Arora July 11, 2017
SIMPLIFY, DON'T COMPLICATE !!! Let me tell you a funny thing about technical analysis. The less fancy the chart is, the more effective it is. Here's a tip. Always start with just price, pure naked price; candles, bars, whatever you are accustomed to. Have a feel of it on multiple time-frames, be it daily, weekly, hourly and so on. Write down the interpretation of all the time-frames. Once you'd do it, I bet, you'll get into the skin of the stock. The stock will start flowing in your bloodstream. Then, you can add indicators/oscillators one by one to testify or contradict your interpretations. Note everything down. Writing things down maintain your objectivity. All these fancy technical things you see or hear are good for selling a service but bad for trading. We all know how these 'Gurus' sell their services like they have the holy grail. You see, "astrotechnical trading" sounds seductive enough to sell but not good enough to use. Trading need not be rocket science. There are people who trade by just reading orders, not even charts. So, trust me, the only thing that works best in trading is simplicity. It has worked for me during my entire trading career and I trade full-time. Most of my trades are just based on price. Sometimes RSI too, but nothing more than that. And, it has worked out well all these years. And yes, I am still alive to tell the story !!! Rohan Das Sir, when you first tried to get the feel of the price action. So I am talking about your earlier days. How much time did you spend on one chart, what did you try to interpret and how long did it take to get the feel of the price action. Forgive me, if you find this question silly. Thank you. Nishant Arora It's not about one chart, but about how many different types of charts you see. Spending too much time on one chart can rather have adverse repercussions. When you spend too much time looking at a chart, you see what you want. So, rather than spending too much time on one chart, I'd say that see as many charts as possible. Human eyes and mind are the best back-testing tools there can be. Use that to the maximum Amarnath Peddi Mean to see interpretation of candle behavior, if am not wrong sir Nishant Arora Amarnath Peddi That plus overall price structure. Slopes, number of candles it takes to make a move, steepness of moves and so on.
Nishant Arora Though the message was about an intraday trade I took but as I said in the message itself, I hold swing positions in this stock. Adani Ports 413 now. Closed 80%% swing futures positions bought below 400. Patience pays !!! Nishant Arora December 27, 2017
I completely agree with Marty, that "I've never met a rich technician" is an arrogant statement. But we must also consider that the real big money runs after causes and not after effects. This is not to belittle Technical Analysis but one must understand the basic difference in premise of technical analysis and fundamental analysis. Technical analysis is about FINDING OUT TRAILS OF BIG MONEY. IT IS ABOUT SEEING THE EFFECTS OF ACTIONS TAKEN BY BIG MONEY. So, it is good to an extent. But WHEN YOU ARE THE BIG MONEY, the game changes. I mean if you have 500 million dollars, you don't put money in a company based upon its chart's RSI and MACD. Of course, RSI will react based about your actions but that won't be your premise of taking the trade or making the investment.
Rohan Das That means technical analysis for small traders? Nishant Arora As you grow bigger and bigger, your view of market and stocks become multi dimensional. You can't be a frog in a well and make big money. I am not saying that one necessarily becomes Warren Buffett who doesn't even look at technicals but even technical traders consider a variety of other factors to take decisions. It's not just limited to looking at charts. THEY MAKE THE CHARTS. Nishant Arora Even PTJ wasn't purely technical due to size of money. He started off as being completely price focused (technical). But as his money grew, he started getting into economical factors, global issues, political factors and so on and his trades used to be based on that. When you become big, your circle greatly increases. Your sense of the world greatly increases (of course you've got to work towards that). And that's your decision making matrix.
Nishant Arora Look at Bruce Kovner. He is one of the biggest currency traders on earth. He looks at technicals but decision making is not based on that alone. His understanding of economics and politics is amazing due to years of reading and meeting people. His premises can be as follows, the nature of the chairman of this bank is like that so he is more likely to take such decision or the relationship between the this government or that government is sore so they might order their banks to short the other country's currency and so on. This is his main premise. TA is just for reference. So while TA is of utmost importance, no denying to that but you can't trade billions of dollars based on a moving average. Nishant Arora August 23, 2017
Knowing technical analysis is not equal to successful trading. There is a vast difference between a technical analyst and a trader. Technical analysis is just one part of the whole game. Discipline is the bigger part. It takes many years to develop the discipline to just wait, be patient and do nothing until there is a good trade signal. Back to Index
INNATE NATURE Nishant Arora October 29, 2017
Effect of Nature of an Individual on Trading Behavior ANGER
If you are an angry person in your real life, you'd not be able to cut losses soon. The moment you'd get in loss, you'd get angry at the market for not going as per you. And when you get angry, you don't accept defeat. And eventually loss will get bigger and bigger. SADNESS
If you are a sad person in your real life, you will book profits too soon. The moment your trade will become profitable, you will feel happy. And since you're sad anyway, that happiness will be very important to you and you won't want to lose it and be sad again. So you book out the moment you get in profits. ENVY
If you are an envious person in real life, you'd over leverage your trades and bet big because you want to make too much too soon as you need to buy that long car to show off to your office colleagues and neighbors. VULNERABLE
If you are an overly emotional person in real life, you will get trapped by tip providers and other pseudo system sellers.
REVENGE
If you've a nature of taking revenge, you'd end up hating the market the moment one of your trade ends up in a loss. You'd get revengeful and would consider every trade as a tool to take your revenge from the market for a previous losing trade. LESSON
The bottom-line is that your trading performance is directly linked to your attitude in your real life. That is why I always say that the path to becoming a successful trader is very messy because it will change you for good if you allow. If you'd keep an open mind and keep a learning attitude, market will extract all your vices & bad habits one by one and make you a better person with each passing day. And by the time you'd become a successful trader, you'd find that you've become a better person, a better father/mother, a better son/daughter, a better husband/wife and a better human being overall. There is no other way. You can't become a successful trader over a long term without being a better person otherwise your emotional shortcomings will never let you become a successful trader. Back to Index
TRADING TENETS Nishant Arora October 3, 2017
Nishant Arora. These 10 tenets have been serving me well for more than 10 years now. Nishant Arora May 23 2018
Posted this in Torrent Power post but thought it would be good if posted as a separate post, so here it is: 1. Don't run after many trades. Refer to a big picture and play it on smaller frames in phases till the big picture exhausts. 2. Always play in phases, especially in futures. 3. Don't let volatility of smaller frame destroy your trade bias. Remember, s maller frame is for entry and exit and not for trade orientation decision. 4. Never be in a hurry to call reversals. Always give more preference to the trend. Remember that for a downtrend to change into an uptrend, it has to make a higher high and a higher low and for an uptrend to change into a downtrend, it has to make a lower high and a lower low. Otherwise, if you are playing a support or resistance break, like we are playing a support break on daily chart, the trend would be considered to have reversed only when price manages to get above that resistance (previous support) and establish that as support, not before that. Never be in a hurry to call reversals. A trend is a trend till it reverses. 5. Even a reversal on a smaller frame does not mean a reversal on a higher frame. For example, the trend is in supply mode in daily chart and in hourly too, price is making lower highs and lower lows. All is well and you are in sync. Let's say on hourly, the price makes a higher high and higher low, it does not mean that daily too has reversed. Get out of the trade but do not change bias. Rather this conflict between hourly and daily can give great opportunities. For example both daily and hourly are down, now you get a bounce which changes structure on hourly but price is facing rejection at daily resistance levels, you have got a wonderful shorting opportunity again. Happy Learning !!! Cma Tarkesh Patro For a downtrend to change into uptrend, it has to make higher high and higher low, you mean it has to break the previous high from where it has fallen?? Devesh Chauhan Cma Tarkesh Your question put up a question in my mind. This image below is kind of demonstrating the answer to your question as well. My question to Nishant sir is, can we call 'Y' a Higher Low, even if it has not breached Z? Or, a swing low is an established Higher low, only if a Higher High has been formed? (In this if it will breach Z a new higher high will be formed and then only we call Y a Higher Low?)Manage
Nishant Arora Y is a higher low. Y's existence as a higher low doesn't depend upon price to move beyond Z. It may or it may not. That is why, there is a concept of failure swings and non-failure swings. Nishant Arora December 26, 2017
In trends, BUY STRENGTH & SELL WEAKNESS. In trading ranges, BUY WEAKNESS & SELL STRENGTH. Back to Index
QUIZ Nishant Arora November 15, 2017
A stock has been falling off lately. But, now it is reaching a support zone, be it a trendline or a Fibonacci retracement percentage or a long term moving average. So, the INTELLIGENT RETAILERS (Those who at least see charts or use some statistical method) start building long positions and LAYMAN RETAILERS (who have no idea of what's happening) sell to them because they think that the fall would never stop. So far so good. The INTELLIGENT BIG MONEY also wants to go long and they also get some share of their longs from the selling of LAYMAN RETAILERS. So far so good. But the problem is that stomach of INTELLIGENT BIG MONEY is too big to be filled just by selling of LAYMAN RETAILERS, so how will they get their desired quantity of long positions? Nishant Arora As so many of our friends said correctly, the INTELLIGENT BIGGIES will make their longs by eating STOPS of INTELLIGENT RETAILERS. Stop orders in case of a long position are nothing but LIMIT SELL orders once triggered. So, the INTELLIGENT BIGGIES have to just push the price to the very obvious trigger points and they won't even need to panic the INTELLIGENT RETAILERS as stops will become limit sell orders and obviously will create a lot of liquidity for INTELLIGENT BIGGIES. Once their stops are hit, obviously price would have broken support, then few DESPERATE INTELLIGENT RETAILERS will get short too, creating more liquidity. Mostly, this is the scenario of stop hunting. Once you have understood this then Sanjay ji's advice must be followed, i.e., enter the longs after a signal/confirmation. Never get into a long position just because you can see the support nearby. Let the dust settle and then get in. There will be two advantages of this. One, you will get a better seat in the bus at a better price. And two, that since your entry is either at the support or even little below the support, your stop will be at such a place where it won't be too obvious and chances of hunting would be very less.
Umesh Shetty Nishant Arora/Tfs Faisal Sir - I am always getting confused with the the right support and resistance..Should we look at the support resistance over the years or pivot points or timeframe specific or any other methods and which one takes precedence out of all.. Nishant Arora Hi Umesh, every time frame has its own set of supports and resistances. Get out of a definition seeking mindset because that is not letting you understand the concept. You are trying to have a principle and then understand it. Don't get stuck in the crowd of pivot points, moving averages, fibo and so on. Look at it from the most basic, beginner's perspective. A support is a level (not necessarily a point) where demand overpowered supply and a resistance is a level where supply dominated demand. When you'd keep this mindset, you'd start seeing them. Of course, pivots, fibo, price action will show you those points but do not approach it from that perspective. Nishant Arora My rule in life is that whenever I find it difficult to understand something, I remove all its frills and decorations and try to see it from a bare basic perspective. And it works everytime. Sagar Verma How should intelligent retailers save themselves from stop hunting. Also then how is best way to trade breakout if breakout really occurs. Also how to know if its a fake out or breakout. Fake out and you are stopped hunt . Breakout you can ride the trend Nishant Arora There is no hard and fast rule but telling you from experience that never enter on the breakout candle on whatever time frame. Wait for the breakout high to be broken. That is one. Another way can be to gauge volatility and momentum expansion. They must expand in the direction of the breakout. Most of the break-outs which turn to be fake-outs do not have volatility and momentum expansion. Another way that you get gauge a breakout's strength is that while in the range, see the range of candles, if there is an expansion in the range. Also notice the change in open interest. If open interest has risen extremely well then whichever side the breakout happens, it tends to sustain itself. Chiteshwar Walia Have one query... do long term investors also need to know about charts Nishant Arora Depends whether one is a long term investor or a long term trader. But knowing charts would actually add a lot of value to even a long term investors skill-set as sometimes price is saying something else while fundamentals are saying something else and price wins. Back to Index
JUST START Nishant Arora May 23, 2018
Never confuse "Biological Age" with "Achievement Age". Warren Buffett bought first share at 11. Sachin Tendulkar debuted in test cricket at 16. Richard Branson started Virgin Records at 22.
Ray Croc built McDonalds at 52. Henry Ford started Ford Motors at 40. Colonel Sanders opened first KFC at 62. There's no age barrier to achieve anything. JUST START !!! Back to Index
DON’T QUIT Nishant Arora December 24, 2017
IF CHARLIE MUNGER DIDN'T QUIT WHEN HE WAS DIVORCED, BROKE, AND BURYING HIS 9 YEAR OLD SON, YOU HAVE NO EXCUSE- AN ARTICLE BY JOSHUA KENNON. At 31 years old, Charlie Munger was divorced, broke, and burying his 9 year old son, who had died from cancer. By the time he was 69 years old, he had become one of the richest 400 people in the world, been married to his second wife for 35+ years, had eight wonderful children, countless grandchildren, and become one of the most respected business thinkers in history. He eventually achieved his dream of having a lot of money, a house full of books, and a huge family. But that doesn’t mean he didn’t face unbelievable challenges and tragedies. In 1949, Charlie Munger was 25 years old. He was hired at the law firm of Wright & Garrett for $3,300 per year, or $29,851 in inflation-adjusted dollars as of 2010. He had $1,500 in savings, equal to $13,570 now. A few years later, in 1953, Charlie was 29 years old when he and his wife divorced. He had been married since he was 21. Charlie lost everything in the divorce, his wife keeping the family home in South Pasadena. Munger moved into “dreadful” conditions at the University Club and drove a te rrible yellow
Pontiac, which his children said had a horrible paint job. According to the biography written by Janet Lowe, Molly Munger asked her father, “D addy, this car is just awful, a mess. W hy do you drive it?” The broke Munger replied: “To discourage gold diggers.”
Shortly after the divorce, Charlie learned that his son, Teddy, had leukemia. In those days, there was no health insurance, you just paid everything out of pocket and the death rate was near 100% since there was nothing doctors could do. Rick Guerin, C harlie’s friend, said Munger would go into the hospital, hold
his young son, and then walk the streets of Pasadena crying. One year after the diagnosis, in 1955, Teddy Munger died. Charlie was 31 years old, divorced, broke, and burying his 9 year old son. Later in life, he faced a horrific operation that left him blind in one eye with pain so terrible that he eventually had his eye removed. It’s a fair bet that your present troubles pale in comparison. Whatever it is, get over it. Start over. He did
it. You can, too.
Nishant Arora The history of planet tells us that most of the big things have always been achieved by those who were broken down emotionally and financially. Nishant Arora Let me tell you a little story about his eye dysfunction and his attitude towards it. Munger had a horrific cataract surgery in his left eye that rendered him blind with pain so severe that he eventually had that eye removed. When doctors notified Munger that he had developed a condition that was causing his remaining eye to fill up with blood, he stood the risk of losing his vision in his other eye too. Being the obsessive reader that he, the prospect of losing eyesight entirely made Munger comment, “Losing the ability to see would seem to be a prison sentence.” Undeterred, Munger was ready to brace himself for what life had to offer. He told a friend, “ It’s time for me to learn braille” and
started taking braille language lessons. But as luck would have it, the worrisome eye condition receded and he could see well with the other eye. Now, see the attitude. Doctor is saying that you are gonna be blind. And rather than worrying over it, you are worried that how will you read and you start learning braille language. And, we have people who can see well but do not read and yet want to become investors/traders. You don't become Warren Buffett or Charlie Munger just like that. Back to Index
ADD ON Biography Nishant Arora May 1, 2018
In case any of you is looking for a good business biography to read, here's the one I'm reading currently. Sam Zell, with a net worth of almost $5 Billion, has always been one of my two most favorite real estate investors, the other being Kushal Pal Singh of course. (AM I BEING TOO STABLE, SAM ZELL) Howard Marks Nishant Arora December 23, 2017
It's always a pleasure listening to Howard Marks. If you're reading types (which you should be if you've decided to make a career in financial markets), read all the "Memos" by Howard Marks They are freely available on Oaktree's website. https://www.youtube.com/watch?v=6WroiiaVhGo Interview Tfs Faisal February 24 2018
Proud to have our teacher cum brother Nishant Arora interviewed by moneycontrol website. Check his interview on... Reading his way to riches: Journey of a printer salesman to a successful trader and investor
http://www.moneycontrol.com/news/business/reading-his-way-to-riches-journey-of-a-printersalesman-to-a-successful-trader-and-investor-2515503.html Bruce Kovner on Michael Marcus Nishant Arora October 8, 2017
He taught me that you could make a million dollars. He showed me that if you applied yourself, great things could happen. It is very easy to miss the point that you really can do it. He showed me that if you take a position and use discipline, you can actually make it. He also taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money. Insights
