Simple Trading Based on Trend and Support/Resistance Levels

[sachin_jain3]

I think that today or tomorrow we could get a chance to short above 3100. Keep the order there guys. Next short can be built around 3200. But remember the stop is 3250.

 

[sachin_jain3]

Its quite possible that we may get the level today. But this short is going to a challange us (me included) emotionally. How to short when the rest of the people are long and every body is buying, market is moving up. Remember 2 things:

A. the trend is down. So the possibility of larger gains are with the people who are short/will short.
B. In a down trend, the market has moved up and is about to hit a resistance.

B is augmenting the chances that a short will work better as confirmed by A. so logically we should go short. Keep control over your emotions and do what the logic says.

thanks,
Sachin

 

[ThE HaMmEr]

great gng friend.....but posting charts with trendlines would b appreciated

 

[sachin_jain3]

If the market closes today below the yesterdays close and also nifty does not hitting the 3100 level again will confirm that 3100 is indeed a resistance. so our short at 3100 is correct but the question is whether the resistance will hold. Most likely it would. If not we stop at 3250.

 

[sachin_jain3]

great gng friend.....but posting charts with trendlines would b appreciated

Will try to post them soon.

 

[sachin_jain3]

Those who have taken short position @3100 on the current month, please roll it over, the expiry is today.

 

[sachin_jain3]

Our short at 3100 Nifty has worked well. We are sitting on a profit of 150-200 Nifty points today. Now the next question haunts us: When to close the position and take the profits? We should wait for the market to hit a support before taking off the profits. Earlier i had identified that 2500-2600 is a support on Nifty so we can take our profits there. But is that the only support. Is there another support created by the market after my initial identification of 2500-2600 as a support. Here is the answer

In my first post i had said that 2850 is a resistance and we can short at 2800 keeping a stop at 2850, we failed that short. So we know that the resistance of 2850 was taken over. That resistance now becomes a support. So now we have multiple support to book profits:

A. Around 2850 - 2900.
B. 2500 - 2600 as advocated in the initial thread
C. Below 2500 - we dont know right now to what point Nifty can fall further, but every big downmove has created new lows. 2250 is level which we saw in Oct.

Lets book 1/3 rd profit at 2900, 1/3rd at 2600 and 1/3rd below 2500. Sounds logical? Keep the stop at 3250.

Sachin

 

[sachin_jain3]

Attached the chart for your reference.

Another point to note. We know that 2850 is a support. So if that gets taken over, our new stop loss will move tp 2850. Otherwise we have booked 1/3rd profits already at 2900 and our current stop loss continues at 3250 for the rest of the position.

 

[AW10]

Excellent trend following Sachin.
One questions was bothering me regarding multiple exits/trend chasing and position risk, so thought of raising my doubt here for opinions.

Say we have Short position of 3 contracts at 3100. Initial SL = 3250 ie.Initial risk = 450 pts [= 3*(3250-3100)] on complete postion.

We book 1/3rd profit at 2900 i.e. real profit = +200pts. Remaining risk on 2 contract is 300 pts [=2*(3250-3100)] if we leave our inital stops as they were. Paper profit on 2 position is 400 pts [2*(3100-2900)]. Our risk on postion from current market price is 700 pts [i.e. 2*(3250-2900)].

That means, we are increasing the risk of our postion from 450 points to 750 points now, specially when the market has moved in our favour.

Wouldn't it be better that we move our SL to slightly weaker resistence level (say 3000 or 3050) ?

A bit difficult for me to accept the increased risk hence want your /other peoples view on this.

Happy Trading.

 

[sachin_jain3]

thanks for that post AW10. Yes, you are correct we have increased the risk from 450 points to 700 points. I dont know how to handle this situation. some experts on risk management can jump in and explain. I always used to measure risk from the initial point where the position was taken (in this case at 3100), so with that measure my risk would have only been 300 points (2 lots). But i would agree with your point that the risk should always be measured from the current market price. So I agree that the risk is 700 points.

But at the same time i dont want to change my stop loss to a point where the charts dont confirm any resistance. Max we can do here is the have the stop at 3150 because the last resistance was seen at that level. So that will reduce our total risk by 200 points and bring it down to 500 points.

Lets have the stop at 3150 rather then 3250. That sounds good to me. comments welcome.

Sachin