• No products in the cart.

nifty price action context trading on levels >>

Below is the nifty chart. We see flip support is on 5415. We're placing a direct buy entry order on 5415.tgt will be the upcoming resistance around 5600 & since it's a round number so we'll exit before it hits the round number resistance.Note: ROUND NUMBERS also react as support/resistance so we need to count that hence I'll be taking a resistance target of 5595(just before round number).Now, we'll trade with a R:R of 1:3 so to set the R:R, we need to calculate our stoploss area.Below is the calculation to find out stoploss when you're trading just with one lot.

entry = 5415 & exit = 5595

difference between entry & exit is = 180 points

now divide 180 with 3 as our reward should be 3 times of risk which is = 60 points

now substract 60 points from entry level means entry5415 – 60 points = 5355 is our stoploss level.


now lets see what happened after-wards >

As you can see below, our stoploss gets hit & now the same layer of support becomes a flip resistance where we'll be setting up our sell entry order with the same calculation of stoploss discussed above.check below:


Now lets see what happened with this trade after it tested flip resistance layer :


Above pic shows price hits our tgt area with a gain of 3R & didn't hit stoploss for around 5-10 points.Now our next move will be looking for a sell signal either on a retest of flip resistance area or on a breakdown pullback of 5215 level.We'll place a sell entry order on the flip resistance zone in case price moves back up there with the same target of 5215 layer of support.lets check what happened below >


So THIS IS THE STRATEGY where we'll be trading the level directly based on overall price action context on chart. Initially you start trading with 1:3R calculation & once you master on it & start understnding price action behaviors well, you'll be able to risk less amount as stoploss which will increase your rewrad for 4 to 5 times or more. You'll be missing trades if you're looking for a confitrmation on the levels using candlestick formations or change of trend pattern etc.If you're confident on your price action context chart analysis, you should trust the level as well.So overall price action context setup is your confirmation while trading these setups.

When you have two or multiple targets, i'll prefer start using two lots for that. First lot will be exited in 1st tgt & 2nd lot will be exited in 2nd tgt.I'll give you an example in one of my current trade in nifty how i manged >

Below is the trade signal >


As you see on chart, i sold nifty on a retest of prior lower-high swing resistance in-line with overall downtrend & we have have been talking about this level in charts on focus section for a long time.Since i got three suppot targets hence i traded 3 lots of nifty here(you can trade 1 lot or 2 lpts too as per your risk).I'll be exiting each lot on upcoming support-1,2 & 3.Since price has already hit support tgt-1 on 7835 hence i already exited one lot there & waiting for tgt-2 & 3 with other lots.If i assume the lot size is 100 for nifty then i had 3 lots which is 300 qty short at 7960 level.now the real challenge is finding out stoploss level with these 3 lots of nifty hitting different targets for 1:3R risk:reward. Try this way:

entry=7960 /  tgt1 = 7835  /  tgt2 = 7737 /  tgt3 = 7610

now deduct each tgt from entry price & add the differences like below :

(entry7960) – (tgt1)7835 = 125
(entry7960) – (tgt2)7737 = 223
(entry7960) – (tgt3)7610 = 350

now add all the values = 125+223+350 = 698 points of total target

now divide total target points by 3 like ; 698/3= 232 and again didvide this value by 3 which is 232/3=77 points & this is your stoploss points above entry level of 7960. In next few days, i'll create an excel sheet when you just need to place the target and entries & you'll automatically get the stoploss points.

SO, in the overall nifty trade i got 1:3R ratio including three different lots & target locations.

CONTINUED for tomorrow……………

January 5, 2016

0 responses on "nifty price action context trading on levels >>"

Leave a Message

Copyright @ financialhubindia.com