Dear NiftyTaurus,
First of all let me clear this all dont use price action alone. First see naked chart. What you will see its a rally from 5100 to 5325 odd levels. So its a clear uptrend. In that uptrend first minor reaction got corrected till 5970. Then we have 3 bar pullback to 6220 levels. Again we got a reaction low of 5970 from there in 3 bars. And from there nifty trying to hold 5970 and moving up to sideways.
So what this tell is in a uptrend, we are seeing a correction. And correction can be simple abc or complex pullback. so we are not going into this detail as of now.
Second line of analysis is good candlestick patterns. Like engulfing or stronger patterns, which gives of clues of strong force in that direction, it may be bear or bull.
These patterns alongwith inside bars, which is covered in my thread are sufficient to have clue of whats going on. Like whatever is going on in daily, but on weekly as of now we are forming a inside bar and more it closes towards this weeks high is bullish as it is already above previous week open of 6011 and prev week close was 5995.
Third i overlay my standard averages like 21 EMA , 50 DMA and 200 DMA and you will get the clue where bigger price action is moving in. You cant ignore this moving averages.
Like in your chart you posted the breakdown bar which got closed below 50 DMA on daily, and next bar was a pullback to 50 DMA and then next day with almost open=Low we cleared 50 DMa and then we are spending much time above 50 DMA with bearish bars and yesterdays doji bar. So not much happening here.
For short term direction i use 10 EMA or lower, to judge current direction and i never trade against this short term EMA for whatever reason. If at all i am trying to catch bottom and tops, then my stoploss is no more than 20 points on nifty.
In this way you will never get carried away with price action alone, but also have short term directional indicator like moving average with you. You may used 8 EMA or anything you like. Just stick to it. I mean if daily closing above 10 EMA or so dont short market. Hope i am clear as of now.
Finally, i analyse all thing in perspective of momentum indicator. This one is important, bcoz, i see this on various timeframes. Like weekly/ Daily / Hourly / 5min.
This tells me where higher timeframe momentum is shifting, and you will get this confirmation with price closing below certain key averages, which you have defined, along with some candlestick patterns as proof, and simple support- Resistance line as your arsenal.
At last define yourself where you want to trade/invest, like on daily chart or intraday charts, bcoz thats all matter. The timeframe which suits your composure is key to success.
I use these analysis and note down my levels. and Secondly, i had designed my own mechanical way of trade/invest where no interference from my side, its like a more of SAR system.
Last in trading/Investing, all that matters is your psychology and risk management, and not your holygrail ( indicators/ expert advisors etc etc....).
Many newcomers fail, because they dont have solid risk management in place and with poor psychology they not get anywhere.
There are many good thread here in traderji, with lots of strategies, but are they backtested, only owner of that strategy know. So do your own self analysis before commiting money.
And last accept mistakes, we are not here to show our knowledge or supremacy, we are here to make money, be rigid in following your discipline. Many who teach, dont trade!
This is fact, so read everything with disclosure.
