Thoughts on Day/Swing Trading Part 2

[rajesh.singh]

Dear ST, thanks for your last few post and thanks to Rajesh.singh to second what I see in my markets now for quit a while.

I am one of the guys which prefers to trade on maths and that is what I told a long time ago.

Now to your kind of trading: Do you trade any morning break out system or do you even have one?

DanPickUp

Dan,
As per my read, the more institutions have play in any instruments, the more it will be based on math or will respect math.

Now coming to your question.in general in opening range I observe few thing to initiate my trade, first any rejection or pullback from previous day pattern& second the opening rangefor example I trade BNF only & say for BNF, if we have around 120-150 point average range , in recent time & we have opening range of 40 points, so it is in breakout mode & we should expect strong break out soon either side as per chart & we can look for swing trade as opening range is around one fourth of average range.if opening range is around 70-80 pointstill in break out mode & we can adjust our profit target, accordinglyif range is big or we have big gaps.then either we can have large range daysor subsequent moves will be small as we already have big opening range. I give big emphasis on opening range trades as, around 80% of time day high or low come from opening range itself, It might happen we get opening range in first few bars itself or sometime it will take couple of hour, but idea is we must have our strong insight on opening range, as it offers strong opportunity to swing the positions with great R:R.
Also many a time it gives some idea what kind of day we can expect.for say big gap day, we can expect trend day in either directionmostly in the direction of trend.or in opening range in very small span of time we have spike in one side, followed by spike in other side,saysboth bulls & bear active, so we can expect trading range days, or we have 3-4 reversals in opening rangeagain sign of trading range, & we can trade ,accordingly. These are few points I monitor in opening range& trade accordingly & so far it is making sense to me in my small trading experience..hope this might give some insight..rest you are far more experienced than me

 

[DanPickUp]

Dear Rajesh.singh

That was an other very informative post about your market.:thumb: Yes, many institutional trader and floor traders use math in that or the other way in there trading style. Standard deviation was made very popular by Don Fishback in the 80's.

I am thinking about the opening range which takes the previous days high and the previous weekly high. The idea is traded by Dr. Keppler, which is also mentioned in Market Wizards Book.

If those conditions are given, we can take the trade with no question. Dr. Keppler does it with a bunch of positions and then starts to take out profit when market moves in his direction. He uses the system of Walter Bressert which I also use.

For example: Three units at start, after first move take out one unit and have a clear idea about your next target, after move take out the second unit and the last unit you let run with a trailing stop loss. Those system can be modified in any way. It is completely the other way round compare to what ST is teaching as this is not adding like also the Turtles did: it is taking out. But that is each persons choice, no best or worst. Just feeling comfortable with what we do.

Good trading

DanPickUp

 

[Smart_trade]

Dear ST,

How to trade the rejection or a failure?

After such rejection/failure to break above, few possibilities are there.

1. Price may come down a little and may make a second attempt to break-out

2. Price may consolidate along that level for some time, all the while making
attempts to break out of that level.

3. After the failure, price may come vertically down without waiting.

So, is there a safe way of entering into a successful trade, without falling into
the trap of consolidation? Do we have any other confirming indicators like
volume or stoch etc?

Murthy,

What the market does after the breakout/breakdown is important for trading it. I find following 4 scenarios to be common, I am taking example of the Pivot High breakout :

1) After the breakout the bar closes strongly above the pivot high.....and in subsequent bars continue going up.....this is is clear successful breakout....trade from the long side.

2) After the breakout , the bar closes strong and then the market goes a bit sideways, and continues in the direction of the breakout without closing in the range / below the body high of the Pivot high it broke....then again the breakout is successful...trade from long side.

3) After the breakout the bar closes above the Pivot High...and the next 1-2 bars show that the market is struggling to go up....it makes doji, small bars, long upper tail inverted hammers.....but still closing above the body high of the pivot it broke......then market is unable to go up and the bears get into the action. The bar closes below the body high....short the low of that bar. Your stoploss should be at the swing high......or if trading too aggressively, the high of the bar which closed below the body high.

4) The breakout bar unable to hold and the price retracts and closes below
the body high of the pivot bar......it is failure and short the low of this bar with stoploss at swing or new pivot high.

This gives early entry in the reversal move with small stoploss giving a very good Reward to Risk ratio.

Hope that the above helps....

Smart_trade

 

[Anillal]

The Market is a Friend
Quite often, we traders get frustrated at what the market is doing. We believe that somehow, the market has decided to destroy our trading career. Often, there is a lot of frustration at Market behavior, which leads to irritation and annoyance with ourselves as well as with trading.

But, truly speaking, the market is a friend. It gives us money, so it is a benevolent friend - on who showers benefits and gifts on us.

If the market is a friend, what is the reason for unusual market movements which often result in whipsaws?

The answer to this question is: What we perceive as unusual is in reality normal market behavior. Markets are a collection of thousands of traders and investors, each with different views. Sometimes, the views re similar leading to trend. often, the views are different, leading to choppy markets. That is the nature of the market.

Then, we have to adapt ourselves to the market behavior. We can control our trading decisions, therefore we have the tools to adjust to what the market is doing.

Example:

I have been long in the Nifty. Yesterday (Friday, Aug 17), it appeared that the Nifty will finally make a strong up move. Then, the CAG report was presented in Parliament leading to a sharp sudden decline. I cannot blame the market for letting me down. It is for me to adjust to changing market conditions. After the initial reaction, the Nifty stabilized around 5375, when I reduced my positions and also shifted my deep in the money calls, to a little less deep.

My point is: we have to do what we believe is the correct response to changing market behavior. It is our responsibility.

Dear friendforever sir

Your above post is word for word same as on http://www.sudarshanonline.com/. Are you Sudarshan? If yes, please ignore this post. If not then sir you should name the source.
I hope you will take it in right spirit
Thanks

 

[sanjn84]

sir,in 2 and 3 scenerio is behaviour of volume or any indicator is change or can we get help from volume or any other indicator in distunguising b/w these two scenerio.

Murthy,

What the market does after the breakout/breakdown is important for trading it. I find following 4 scenarios to be common, I am taking example of the Pivot High breakout :

1) After the breakout the bar closes strongly above the pivot high.....and in subsequent bars continue going up.....this is is clear successful breakout....trade from the long side.

2) After the breakout , the bar closes strong and then the market goes a bit sideways, and continues in the direction of the breakout without closing in the range / below the body high of the Pivot high it broke....then again the breakout is successful...trade from long side.

3) After the breakout the bar closes above the Pivot High...and the next 1-2 bars show that the market is struggling to go up....it makes doji, small bars, long upper tail inverted hammers.....but still closing above the body high of the pivot it broke......then market is unable to go up and the bears get into the action. The bar closes below the body high....short the low of that bar. Your stoploss should be at the swing high......or if trading too aggressively, the high of the bar which closed below the body high.

4) The breakout bar unable to hold and the price retracts and closes below
the body high of the pivot bar......it is failure and short the low of this bar with stoploss at swing or new pivot high.

This gives early entry in the reversal move with small stoploss giving a very good Reward to Risk ratio.

Hope that the above helps....

Smart_trade

 

[Smart_trade]

sir,in 2 and 3 scenerio is behaviour of volume or any indicator is change or can we get help from volume or any other indicator in distunguising b/w these two scenerio.

Yes, the volumes give good clues....observe the volumes on each of the bar in various scenarios and you will find that the volume supports our market analysis and views.On breakout bars volume increases....on next 2-3 small bars low volumes and on rejection bars we get high volumes again.

Smart_trade

 

[friendforevers0007]

Dear friendforever sir

Your above post is word for word same as on http://www.sudarshanonline.com/. Are you Sudarshan? If yes, please ignore this post. If not then sir you should name the source.
I hope you will take it in right spirit
Thanks

ok yes i forgot to mention the source in that post. but in my earlier post i mention that but if i mention the source its against he rules thats why i didn't quoted the name as i am not advertiser of the sudarshan i post which i feel benefit for the other memebers of the forum. and rather then helping or contributing you are spying other

 

[murthyavr]

ok yes i forgot to mention the source in that post. but in my earlier post i mention that but if i mention the source its against he rules thats why i didn't quoted the name as i am not advertiser of the sudarshan i post which i feel benefit for the other memebers of the forum. and rather then helping or contributing you are spying other

Nevertheless, posting them as your own thoughts and passing them off is not a
welcome thing.

If you are impressed with the ideas, you could have observed the same on few
charts and posted them here with your analysis, instead of doing a Ctrl+C and
Ctrl+V job.

If you ever thought it was a contribution, try to make the contribution in terms
of your own thoughts, words and charts.

 

[balasoft80]

Dear ST,
Could you please throw some light on to identify valid breakout? For example a bar is breaking pivot high or consolidation. Now how should I enter into the trade? Above the pivot high or consolidation? Or I have to wait to see how that breakout bar and subsequent are reacting and enter the high of the breakout bar? Thank you

Bala

 

[Smart_trade]

Dear ST,
Could you please throw some light on to identify valid breakout? For example a bar is breaking pivot high or consolidation. Now how should I enter into the trade? Above the pivot high or consolidation? Or I have to wait to see how that breakout bar and subsequent are reacting and enter the high of the breakout bar? Thank you

Bala

Dear Bala,

Every breakout is considered to be a valid breakout unless it proves otherwise. So on breakout, you have to trade in the direction of the breakout and buy above the pivot high or high of consolidation. The market generally moves very fast after the breakout, so if you wait for bar to close above the pivot high then your entry will be away from your stoploss.....and even after closing above the pivot high,the breakout can fail as it does in rejection.

But if the market is breaking out above the pivot high which is at previous resistance level, it has failed on earlier occasions or the market has travelled a lot of distance from its recent low as it comes to break the pivot high...then it is better to wait for bar to close above and make a sideways base above the pivot high .....and then we buy.

Smart_trade