There are 2 parties in Options. One, who Invest on behalf of trader and he is Risk Taker and Second, who insure his loss to call amount.
Call Buyer, who bought the INSURANCE and Call Seller is ultimately INSURANCE COMPANY
** UNDERSTANDING OF TREND **
There are 5 zones:-
Zone1 Imaginary Zone (or Range Bound Zone or Consolidation Zone)
In reality, there is nothing as range bound so Sir used word Imaginary Zone.
In practical, these zone dont exist.
Market is always in trend. Basically, there are only 4 zones which is noted down.
Zone 2 Confirmed Short Trend
Zone 3 Short Trend (Unconfirmed Short Trend)
Zone 4 Long Trend (Unconfirmed Long Trend)
Zone 5 Confirmed Long Trend
Based on Support & Resistance these 4 Zones are made.
Basic Trading in market is done on 3 things:-
1) Support 2) Resistance 3) Pivot
These 3 things jointly forms a border
a) On Lower Side, there is Support Line
b) On Upper Side, there is Resistance Line
c) And in mid of Support & Resistance there is Pivot
Now one should be clear, is Support is broken it will automatically become Resistance and if Resistance is broken it will automatically become Support
Support can become Resistance or Resistance can become Support.
Area between Support Line and Resistance Line is called NO MANS LAND
This land is common between both BULLS & BEARS, now there is War between these two. Till nobody wins, they dont protect this area, so price will move frequently in between Support line & Resistance line.
It means Bull will be trading on long side from their Support,
Bears will be trading on short from their Resistance
In short, they will try to save their position.
** HOW ZONES ARE MADE?? **
Confirmed Short Trend When Support is broken then it becomes Confirmed Short Trend
Short Trend If price reverse from Resistance its Unconfirmed Short Trend
Confirmed Long Trend When Resistance is broken it become Confirmed Long Trend
Long Trend If price reverse from Support its Unconfirmed Long Trend
In Short,
No Mans Land, for Unconfirmed Trend
Above Support Line & Resistance Line, for Confirmed Trend
** SHIFTING OF TRENDS **
From Confirmed short, it will always shift to Unconfirmed Long, from Long either it will shift to Confirmed Long or it will shift Unconfirmed Short.
Lets say, if price break Support it will be Confirmed Short Trend, now this trend will shift to Unconfirmed Long( from another Support)
From this Unconfirmed Long Trend it will shift to Confirmed Long( once price breaks Resistance) or it will shift to Unconfirmed Short (as price get reverse from resistance)
In short, from confirmed trend, it will always shift to non confirmed trend on opposite side, but from non confirmed trend either it will shift to confirmed trend same side or non confirmed trend opposite side.
