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Beyond Technical Analysis

GBPUSD Journal EntryNote : I am Learning student of ICT trading journal help you to build your basic foundation so if you are learning ICT concepts so you have to do this every single day.. may this example help you (All credit go to ICT only i am his student) So if you are forex trader annotate your DXY \ EURUSD \ GBPUSD chart every day with Your Daily | H1 | M15 chart for next 3 months to build your understanding about how price flow move Note :: Always have narrative and short term bias in your mind for more detail Watch ICT Month 5 , 6 , 7 , 12 And video of ICT from Core content (what to focus on)
Education
by IBT_A
EURUSD Journal entryNote : I am Learning student of ICT trading journal help you to build your basic foundation so if you are learning ICT concepts so you have to do this every single day.. may this example help you (All credit go to ICT only i am his student) So if you are forex trader annotate your DXY \ EURUSD \ GBPUSD chart every day with Your Daily | H1 | M15 chart for next 3 months to build your understanding about how price flow move Note :: Always have narrative and short term bias in your mind for more detail Watch ICT Month 5 , 6 , 7 , 12 And video of ICT from Core content (what to focus on)
Education
by IBT_A
Gann Solar Dates in ActionThrough his methodologies, WD Gann made a noteworthy discovery known as the Solar Cycles, revealing specific days when the stock market's trends shift. Gann's meticulous research led him to conclude that these pivotal days corresponded to instances when the sun was positioned at either a 15-degree or 90-degree angle relative to Earth. He held these solar positions in utmost significance, believing that they heralded market shifts. An examination of Gann's studies and theories reveals the precision of his dates down to the minute, albeit with occasional discrepancies of one or two days. This all revolves around Gann's exhaustive research efforts, which culminated in the development of the Gann Study, a complex endeavour. Gann identified critical turning points in financial markets using geometric divisions, pinpointing days such as those positioned at 45, 90, 135, 180, 225, 270, and 315 solar degrees from the Vernal Equinox. Furthermore, he provided an overview of Gann's seasonal dates: When utilizing the Gann Seasonal Dates tool, one can readily discern the Major and Minor dates that W.D. Gann closely monitored to predict trend reversals. Of particular significance are the solstices and equinoxes: - March 21st - June 22nd - September 23rd - December 22nd Meanwhile, Minor seasonal dates fall precisely midway between the major seasonal dates and include: - February 4th - May 6th - August 8th - November 7th Now, let's delve into the concept of solar dates: Gann categorizes solar dates into two types: Static and Dynamic Solar dates. He emphasised that the year's commencement is not on January 1st but on March 21st(Sun in Aries), marking a moment of great significance. How to Calculate Static Days? 1. The average number of days in a year is 365.256. 2. Divide it by 360. 3. The result is 1.0146, meaning one degree corresponds to 1.0146 days. 4. Static degrees include 30, 45, 60, 72, 90, 120, 135, 150, 180, 210, 225, 240, 252, 270, 288, 300, 315, 330, and 360 degrees. These degrees indicate when the market is most likely to experience significant shifts. 5. With knowledge of the days in a month, you can divide that number by 1.0146 to determine the date. For example, multiplying 30 by 1.0146 yields 30.438, which corresponds to March 21st plus one degree, resulting in April 20th.
NSE:NIFTYEducation
by Gann_Academy
Lesson for entry - an example from last analysisThis is just to show an example of entry when you are done with your analysis. Entry is very important and you never jump into it just because the price starts trading in the breakout or breakdown zone. You must always wait for closing. Which closing you might ask? The closing should be in the direction of breakdown or breakout in the same time frame as the analysis you have done. The candle should be green for breakout and red for breakdown. Sharing the last analysis as an example. The time frame of analysis is 1 hour. Hence, you must wait for any hourly candle to close in green above no trading zone or in red below no trading zone. Now you will see that in the red circle the prices have gone both sides but it did not close either side. That means, there is no entry. So, always wait for candle closing. Now, after the red circle you will see a green candle closing above no trading zone - hence a breakout is confirmed and we have an entry. That's the only approach for correct entry. Always wait for correct entry, never rush, never. Correct entry can be late sometimes, but you are here to earn right, not to gamble or bet. And this is business of patience, just like if you open a shop now - it won't start giving you profit from the first day onwards but you will have to wait for a year or more. Hence, always wait and have patience. Thank you for reading this long article. Just had an urge to share about correct entry as I keep getting such queries and people sometimes get stuck in wrong trades because they get compelled on seeing the price trading in breakout/breakdown zone. Thank you!
NSE:NIFTYEducation
by nkspro
Mastering the Double Bottom Chart PatternA double bottom, combined with RSI divergence, can be a powerful signal for a trend reversal. What's a Double Bottom ? It's when a stock's price forms two distinct lows on a chart. The pattern is confirmed when prices rise above the peak between those two lows. Why Does It Matter? The double bottom marks the end of a downtrend and the start of an uptrend. It's one of the most common patterns, but it needs careful analysis. Adding RSI Divergence: RSI measures a stock's strength and momentum. Look for RSI to form higher lows while the price forms lower lows. This is RSI divergence and a strong bullish signal. Key Points to Remember Downtrend First: The pattern begins in a downtrend. Time Gap: The longer the time between the two lows, the stronger the reversal signal. Price Increase: Look for a significant price increase between the two lows (around 10-20%). Volume Matters: Usually, volume is higher during the first low and increases as the pattern confirms. Breakout Confirmation: Don't act until prices break above the confirmation point. Pullback After Breakout: Expect a pullback after the breakout; it's normal. Trading the Double Bottom with RSI Divergence: Calculate a target price by adding the pattern's height to the breakout point. Confirm the pattern only after prices break through the confirmation point. Be patient; not all patterns are double bottoms. Watch for volume during the pattern's development. Pay attention to RSI divergence for added confirmation. Remember: Wait for confirmation, and don't rush into trades based solely on patterns. It's wise to use multiple indicators, including RSI, and keep an eye on market conditions. I am not Sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses. Most investors treat trading as a hobby because they have a full-time job doing something else. However, If you treat trading like a business, it will pay you like a business. If you treat like a hobby, hobbies don't pay, they cost you...! Hope this post is helpful to community Thanks RK💕 Disclaimer and Risk Warning. The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
NSE:DALBHARATEducation
by RK_Chaarts
16
Two side income from stock marketWe all are here in Stock market to earn. And many of us think that there is a limit to earn. It is true but. We required to think about new ideas and new strategies . We should be calculative while we investing in stock market. Why I am telling this? New idea means!! Many peoples investing in stock market only on tips or on advise of there peoples. these people can be their colleagues / friends / relatives / influencer. Whenever you are going to invest your money in any stock, think about how to earn maximum profit with your capital. Get new idea to increase your returns. (I'm advising a new idea later in this post) Calculative What is calculative term? I mean to say. You should have levels of the stock. ie. Before enter in stock you should have your Targets in Stop-Loss in mind. And you should also stick on that levels. Topic Two side income from stock market Two side income means. Invest in stocks which have high dividend yield. Reason - When there is volatility in the market, high dividend stocks can protect your portfolio. Due to high dividend yield, they can balance the risk if fall in stock. Divided stocks have potential for value appreciation. in this way you can bring double benefits in the long run. Now you can understand it with this example. You buy 1,000 Qty and Invest Rs.2,50,000/- (250/- per share) If you get 20% return in one year. Return on Investment : Rs.50,000/- Additionally: Dividend Rs.9/- per share (Dividend Return: Rs.2,250/-) Your Total Profit in one year 50,000/- + 2,250/- = 52,250/- Here I'm mentioning some high dividend yield stocks (majorly PSU, I'm referring) :- Coal India 10.5% SAIL 9.6% ONGC 6.5% NMDC 5.4% PFC 5.1%
NSE:RTNPOWEREducation
by rohitnama3
2
Nifty Index is a terrible investment during most market cyclesI explored a few stats that made me re think whether it made any sense to buy nifty futures, options. Here were a few (well shocking for me) statistics CNX 500 has outperformed Nifty on an absolute basis for long periods of time Bank Nifty has performed even worse than the Nifty - buying that is a losing game Why? I dont know - maybe diversification , low representation of new age stocks, too much commodity / cyclical exposure Nifty does great during bear cycles - fairly evident why - mutual fund managers like to smash it, buying puts, shorting futures to hedge their exposure Bottom Line - Am only going to be looking at Nifty and bank nifty as hedging instruments unless proven otherwise. I do hope we have a CNX 500 Index coming soon. Till then - buy strong stocks, growth names - and use the indices to hedge like the fund managers
NSE:NIFTYEducation
by kunal_finner
1
Morning Sectoral Glance - This saves me from errors quite often Generally traders and investors follow every morning- news, analysis, research reports & opinions I am slightly different that i ignore almost all macro, TV news - unless it is stock specific, material (like earnings or M&A) - during trading cycles. These are the things that have kept me out of trouble Sector Analysis - Having all the sectors up on either Tradingview or Trendlyne (which i love btw) 3 Rower Philosophy - What is my stock, its sector and the overall Market doing? (Courtsey William O Neil - who I consider to be the greatest stock teacher ever) Look at things in context to the news - the biggest setups come when the stocks are doing something different from the overall news Just listening to Nifty analysis, news, what XYZ is saying etc has lost me a lot of money. I think the current process I follow now is far better and objective. Please comment or share if you like this - please feel free to suggest any topics as well! PS - the objective of this channel is to learn and share, and not a commercial venture for me
NSE:CNXFMCGEducation
by kunal_finner
6
How to trade ICT Concepts in Indian Markets.This is a demonstration of making executions on the MCX on CrudeOil Mini Futures that are INR denominated derivative contracts of the WTI Futures contracts that are traded on the NYMEX. Any trader in India who wants to trade the ICT concepts on international markets without setting up a foreign brokerage account can try to do so using the Commodities futures traded on the MCX. The price fluctuation of the USDINR leaves you a little bit exposed to some moves. However, most of the time, you can see a near perfect correlated move in both WTI and MCX:CRUDEOILM1! This is a demonstration using Paper Trading on TradingView.com. Please don't try to randomly trade any strategy using actual money. Remember you only risk what you can afford to lose in a responsible manner. It's all on you. You can't come after me if you try this with live funds and lose money. This is something to test.
MCX:CRUDEOILMU2023Education
by I_AM_ICT_KA_CHELA
1
How to calculate stock weightage on index. #What is Stock weightage on an index ? --> Stock weightage on an index is the relative importance of a particular stock in the index. It is calculated by dividing the market capitalization of the stock by the total market capitalization of all the stocks in the index. -->The weightage of a stock in an index is important because it determines how much the stock will move the index when its price changes. A stock with a higher weightage will have a greater impact on the index's movement than a stock with a lower weightage. How the stock weightage on an index is calculated ? -->There are two main methods for calculating stock weightage on an index: Market capitalization-weighted index: This is the most common method. The weightage of a stock in a market capitalization-weighted index is determined by its market capitalization. This means that the larger the market capitalization of a stock, the higher its weightage in the index. This is the most reliable and popular method to calculate stock weightage on an index. Price-weighted index: In a price-weighted index, the weightage of a stock is determined by its price. This means that the higher the price of a stock, the higher its weightage in the index. -->as an example, the stock weightage in Nifty Bank, like in any other index, is calculated using a free-float market capitalization-based method. Here's a simple explanation of how it's done: Market Capitalization: The market capitalization of a company is the total market value of all its outstanding shares. It is calculated by multiplying the company's share price by the total number of outstanding shares. Free-Float Market Capitalization : Free-float market capitalization considers only the portion of a company's shares that are available for trading in the open market. It excludes shares held by promoters, governments, and other strategic investors that may not be readily available for trading. Weightage Calculation: To calculate the weightage of a stock in Nifty Bank, you take its free-float market capitalization and divide it by the sum of the free-float market capitalization of all the stocks in the index. -->For example: Let's say Nifty Bank comprises three stocks with the following free-float market capitalization: Bank A: Rs. 50,000 crore Bank B: Rs. 30,000 crore Bank C: Rs. 20,000 crore Total free-float market capitalization of Nifty Bank = Rs. 50,000 crore + Rs. 30,000 crore + Rs. 20,000 crore = Rs. 100,000 crore -->Now, to calculate the weightage of each stock: Bank A weightage = (Rs. 50,000 crore / Rs. 100,000 crore) * 100 = 50% Bank B weightage = (Rs. 30,000 crore / Rs. 100,000 crore) * 100 = 30% Bank C weightage = (Rs. 20,000 crore / Rs. 100,000 crore) * 100 = 20% --> The stock weightage in Nifty Bank will be adjusted periodically based on the changes in the free-float market capitalization of the constituent stocks. As stock prices change in the market, the weightage of individual stocks in the index will also change to reflect their current market value. All the best !! Follow us for more such insightful information and Give it a like if you appreciate the information. Queries will be answered in comment section.
NSE:BANKNIFTYEducation
by InvestyourAsset
What is IMBALANCE in the MARKET ? How to TRADE ?What is IMBALANCE in the MARKET ? How to TRADE ? Imbalance also known as Price Inefficiency is a key factor in Stock market price action Trading. Look for any candle which has a full body and look for the part of the candle that isn't overlapped by the previous and next candles' wicks. This signifies an imbalance in the market because there were few transactions going on between buyers and sellers. How to Find? In order to find imbalances, it consists of 3 candles. In a Bullish Scenario, It is where there is a gap between the top wick of the first candle & the bottom wick of the third candle do not meet. Wise versa for Bearish scenario. How do you trade with imbalance? Investors can protect themselves against the volatile price changes that can arise from imbalances by using limit orders when placing trades, rather than market orders. As each trading day draws to a close, imbalances of orders can arise as investors race to lock in shares near the closing price. Untouched Imbalance level? When price moves in one direction without filling the imbalance, mostly it tends to come back and fill the gap. Until then price wont go up/down much. Basically It will act as a magnet for the price. So Always find the imbalance areas which is a strong Demand and Supply zone for good trades and predict the market.
NSE:NIFTYEducation
by ViVenTraders
Freedom From Trading MistakesHi Friends Good evening hope all are you fine, So first of all Wishing all of you a very Happy Independence Day, here I am doing a short writeup on Trading related mistakes very commonly did by me or a common trader on the occasion of Independence day from whom I want to be free now! So always I wondering that why I or common traders could not make it and after deep thinking on trading methods and trading psychology I found some mistakes from what I want to get rid of now sharing below. ⚡⚡⚡⚡ Don’t trade if your emotions aren’t aligning with what is on the screen. If we are not super happy about entering, and you don’t fully accept the loss, don’t take the trade and Don’t ‘force’ something to work because it won’t. Trade as if you are looking for buys and sells in your markup, This removes mental bias, and effectively emotion in trading. ⚡⚡⚡⚡ We focused too much on technical analysis. You know that trading is 90% psychology, 10% technical, yet you don't focus on it. Why is psychology so important, but people focus on technical analysis so much more? Because backtesting and focusing on the technical provide us with instant gratification. It feels good knowing what returns you would have gotten on that trade, over the past weeks, months, or even years. It's feels good to instantly know what you will get out of your backtesting session. ⚡ ⚡ ⚡ ⚡ Never chase missed entries. Let’s say the market is in a nice healthy trend, making a series of higher highs and higher lows. And when you overlay the 20-day moving average over it, you notice the market bounce off the moving average quite a few times. You then get a buy signal near the moving average, but unfortunately, you missed the entry and are just watching the market go up without making any money from it. Now, when you look at the chart, the market is very far away from the 20-day moving average. So even though the market is currently in an uptrend, ideally you don’t want to be buying now because, from looking at your analysis, the market tends to pull back to the 20-day moving average. If you impulsively buy when the price is very far away from the 20-day moving average, when the price is overstretched and the market has been overbought, there’s a high probability the market will reverse or pullback, and you will most likely get stopped out. We all miss entries and opportunities; it is completely normal to do so, and sometimes the market can give you a second chance to enter by coming back to your original level. If it does not and you completely miss the move, do not dwell on it; dust it off and move on. The markets are not going anywhere, and plenty more opportunities will come your way. ⚡⚡⚡⚡Overtrading To avoid overtrading just we have to create a well Defined trading plan with setting the daily or weekly trade limits, so if you are observing that you are doing overtrading or compulsory trading just take a break make some strict rules and try to comeback with a committed risk management plan. ⚡⚡⚡⚡Respect your losses Don't try to argue with market if your trades are going in wrong direction always respect your stop loss and understand that is the most important part of your trade from which you can avoid the vanish of capital and trade capabilities because small losses always prevent from big losses to us. And somehow you should follow your targets too like a disciplined trader likewise if you are trading with 1:2 RR and after two consecutive stop loss if you will sit till target you will get back to your capital almost so never try to come out early believe your trading system. Key Takeaway-: Trading system is also like our health system which needs a checkup after sometime so that we can know the problems in time and get Freedom from it. Best Regards- Amit Rajan Happy Independence Day 2023 Jai Hind Jai Bharat
NSE:NIFTYEducation
by AMIT-RAJAN
8
Support and Resistance- Flipping Roles⚡In simple terms, support is a level where demand overcomes supply, while resistance is a level where supply overcomes demand. In the market, different types of traders participate, and I have broadly categorized them into four groups based on their behavior. ⚡You may have heard that once a support level is broken, it tends to act as a resistance level, and vice versa. This phenomenon occurs because the roles of support and resistance flip, influenced by the psychology of traders at these levels. ⚡Let's illustrate this with an example. Consider Group A, a set of buyers who bought a stock at 80. The stock price rises to 100 but faces some resistance. At this point, Group B, consisting of short sellers, enters the market and starts selling the stock near 100, with their stop-loss orders placed just above 100. Thus there is supply present at this level. ⚡The price consolidates within a narrow range and eventually breaks out above 100. Group A is delighted as they bought at a good price, but Group B becomes unhappy. Some members of Group B exit the trade as their stop-loss orders get triggered, while others continue to hold in hope of a favorable outcome. ⚡Now, another group of traders, Group C, known as breakout traders, becomes active above 100. Their buy orders, combined with the buy-stop orders from Group B, add momentum to the upward movement, pushing the price up to 110. ⚡As the buying pressure eases, and short-term traders take profits, the market starts to pull back, eventually reaching the old resistance area around 100. ⚡Many pullback traders look for buying opportunities near this level. Additionally, members of Group B, who shorted at 100, realize their mistake and start buying to close their short positions at breakeven. Some of them also reverse their positions. Other buyers who were waiting on the sidelines also start entering the market. All these buy orders create a strong demand. ⚡Notice that once there was significant supply at 100 and now there is significant demand. If this demand is substantial enough, the price resumes its upward movement, illustrating how changes in market sentiment impact a participant's psychology and consequently affect the nature of support and resistance levels. ⚡The reverse is true for how a support level, once broken down, turns into a resistance level. ⚡I hope you found this tutorial helpful. Please stay tuned for more educational content in the future. Feel free to show your support by liking this post. Disclaimer: Practical knowledge
NSE:NIFTYEducation
by Bravetotrade
15
7 Expert Risk Management Techniques for TradingRisk management refers to the techniques used to identify, evaluate, and mitigate the potential risks associated with trading and investing. Whether you are a day trader, swing trader, or scalper, effective risk management can help you minimize losses and protect your hard-earned money all while maximizing potential profits. Let's take a look at the top 7 risk management techniques for trading! 👌 Have a Trading Plan ⦿ Many traders jump into the market without a thorough understanding of how it works and what it takes to be successful. You should have a detailed trading plan in place before making any trades. A well-designed trading plan is an essential tool for effective risk management. ⦿ A trading plan acts as a roadmap, laying out a set of guidelines/rules that can help traders avoid impulsive decisions. It is crucial because it requires you to think deeply about your approach before you begin risking real money. Having a plan can help you stay calm under stress as your plan will have specific steps to take for anything the market throws at you. ⦿ It is essential to clearly define your trading goals and objectives. Are you aiming for short-term gains or long-term wealth generation? Are you focused on a specific asset class or trading strategy? Setting specific and measurable goals helps you stay focused and evaluate your progress. ⦿ Another important part is to describe the trading strategy you will employ to enter and exit trades. This includes the types of analysis you will employ (technical, fundamental, or a combination), indicators or patterns you will rely on, and any specific rules for trade execution. Determine your risk tolerance, set appropriate position sizing rules, and establish stop-loss levels to limit potential losses. The Risk/reward ratio ⦿ When you are planning to open a trade, you should analyze beforehand how much money you are risking in that particular trade and what the expected positive outcome is. Here is a useful chart with some examples to understand this concept: ⦿ As you can see from the data above, a trader with a higher RR (risk-reward ratio) and a low win rate can still be profitable. ⦿ Let’s examine this a little more by looking at a profitable example with a 20% success rate, a RR ratio of 1:5, and a capital of $500. In this example, you would have 1 winning trade with a profit of $500. The losses on the other 4 trades would be a total of $400. So the profit would be $100. ⦿ An unprofitable RR ratio would be to risk, for example, $500 with a success rate of 20% and a risk/reward ratio of 1:1. That is, only 1 out of 5 trades would be successful. So you would make $100 in 1 winning trade but in the other 4, you would have lost a total of -$400. ⦿ As a trader, you need to find the perfect balance between how much money you’re willing to risk, the profits you’ll attempt to make, and the losses you’ll accept. This is not an easy task, but it is the foundation of risk management and the Long & Short Position Tools are essential. You can use our 'Long Position' and 'Short Position' drawing tools in the Forecasting and measurement tools to determine this ratio. Stop Loss/Take Profit orders ⦿ Stop Loss and Take Profit work differently depending on whether you are a day trader, swing trader, or long-term trader and the type of asset. ⦿ The most important thing is not to deviate from your strategy as long as you have a good trading strategy. For example, one of the biggest mistakes here is to change your stop loss thinking that the losses will recover... and often they never do. ⦿ The same thing happens with take profits, you may see that the asset is "going to the moon" and you decide to modify your take profit, but the thing about markets is that there are moments of overvaluation and then the price moves sharply against the last trend. ⦿ There is an alternative strategy to this, which is to use exit partials, that is closing half of your position in order to reduce the risk of your losses, or to take some profits during an outstanding run. Also remember that each asset has a different volatility, so while a stop loss of -3% is normal for a swing trading move in one asset, in other more volatile assets the stop loss would be -10%. You do not want to get caught in the middle of a regular price movement. ⦿ Finally, you can use a trailing stop, which essentially secures some profits while still having the potential to capture better performance. Trade with TP, SL, and Trailing Stop Selection of Assets and Time intervals ⦿ Choosing the right assets involves careful consideration of various factors such as accessibility, liquidity, volatility, correlation, and your preference in terms of time zones and expertise. Each asset possesses distinct characteristics and behaviors, and understanding these nuances is vital. It is essential to conduct thorough research and analysis to identify assets that align with your trading strategy and risk appetite. ⦿ Equally important is selecting the appropriate time intervals for your trading. Time intervals refer to the duration of your trades, which can span from short-term intraday trades to long-term investments. Each time interval has its own advantages and disadvantages, depending on your trading style and objectives. ⦿ Shorter time intervals, such as minutes or hours, are often associated with more frequent trades and higher volatility. Traders who prefer these intervals are typically looking to capitalize on short-term price fluctuations and execute quick trades. Conversely, longer time intervals, such as days, weeks, or months, prove more suitable for investors and swing traders aiming to capture broader market trends and significant price movements. ⦿ Take into account factors such as your time availability for trading, risk tolerance, and preferred analysis methods. Technical traders often utilize shorter time intervals, focusing on charts, indicators, and patterns, while fundamental investors may opt for longer intervals to account for macroeconomic trends and company fundamentals. For example, If you are a swing trader with a low knack for volatility, then you can trade in assets such as stocks or Gold and ditch highly volatile assets such as crypto. ⦿ Remember that there is no one-size-fits-all approach, and your choices should align with your trading style, goals, and risk management strategy. Here is a chart of Tesla from the perspective of a day trader, a swing trader, and an investor: Backtesting ⦿ Backtesting plays a crucial role in risk management by enabling traders to assess the effectiveness of their trading strategies using historical market data. It involves the application of predefined rules and indicators to past price data, allowing traders to simulate how their trading strategies would have performed in the past. ⦿ During the backtesting process, traders analyze various performance metrics of their strategies, such as profitability, risk-adjusted returns, drawdowns, and win rates. This analysis helps identify the strengths and weaknesses of the strategies, allowing traders to refine them and make necessary adjustments based on the insights gained from the backtesting results. ⦿ The primary objective of backtesting is to evaluate the profitability and feasibility of a trading strategy before implementing it in live market conditions. By utilizing historical data, traders can gain valuable insights into the potential risks and rewards associated with their strategies, enabling them to manage their risk accordingly. ⦿ However, it's important to note the limitations of backtesting. While historical data provides valuable information, it cannot guarantee future performance, as market conditions are subject to change. Market dynamics, liquidity, and unforeseen events can significantly impact the actual performance of a strategy. ⦿ There are plenty of ways to backtest a strategy. You can run a manual test using Bar Replay to trade historical market events or Paper Trading to trade real examples. Those with coding skills can create a strategy using Pine Script and run automated tests on TradingView. Here is an example of the Moving Averages Crossover strategy using Pine Script: Margin allocation We are not fortune tellers, so we cannot predict how assets will be affected by sudden major events. If the worst happens to us and we have all of our capital in a particular trade, the game is over. There are classic rules such as the maximum allocation percentage of 1% per trade (e.g. in a $20,000 portfolio this means that it cannot be risked +$200 per trade). This can vary depending on your trading strategy, but it will definitely help you manage the risk in your portfolio. Diversification and hedging ⦿ It is very important not to put all your eggs in one basket. Something you learn over the years in the financial markets is that the unexpected can always happen. Yes, you can make +1000% in one particular trade, but then you can lose everything in the next trade. ⦿ One way to avoid the cold sweats of panic is to diversify and hedge. Some stock traders buy commodities that are negatively correlated with stocks, others have a portfolio of +30 stocks from different sectors with bonds and hedge their stocks during downtrends, and others buy an ETF of the S&P 500 and the top 10 market cap cryptos. ⦿ There are unlimited possible combinations when diversifying your portfolio. At the end of the day, the most important thing to understand is that you need to protect your capital, and using the assets available to you a trader can hedge and/or diversify to avoid letting one trade ruin an entire portfolio. Thank you for reading this idea on risk management! We hope it helps new traders plan and prepare for the long run. If you're an expert trader, we hope this was a reminder about the basics. Join the conversation and leave your comments below with your favorite risk management technique! 🙌 - TradingView Team Be sure to follow us on Instagram , YouTube , and Telegram for more valuable content! 💘
Education
by TradingView
10
Everyday Of The Week Is An Expiry Day | Impact Of 0 DTE Options After the latest circular from NSE, MidCPSelect Nifty which tracks a handpicked 25 stocks will have expiry date shifted from Wednesdays to Mondays. And BankNifty which tracks the top most banks in India will have expiries on Wednesdays instead of Thursdays. This change in status-quo has created a situation wherein we have a daily expiry. Much similar to the 0 DTE (zero day to expiry) by CBOE in the US. Many economists have published whitepapers on how this could impact the options trading industry, speculations, index movements. But we still have no clarity on how the future will unfold. You might already know how “options” as a financial instrument is a double edged sword due to the leverage it provides. Let me try to voice my version of what will happen! Stock markets have already caught the attention of the wanna be rich guys. Although options trading is a newer concept, stock market & betting has been here for more than 100 years. People generally buy stocks in the anticipation that they could sell it back at a higher cost and thereby profiting. Most often these buys are not because they like the underlying company or have done the research of the firm but just to get rich quick. Options trading is the next level of betting from stock trading. Options instruments CALL & PUTS give the ability of the buyer to handle a higher number of shares of the firm for a fraction of the total cost (for a limited time). That limited time is the catch here. Every option instrument will expire on a predetermined date called expiry day. Whereas the stocks have no expiry dates. What this means is that if you have purchased CALL OPTIONS you expect the stock to move up real quick before the expiry, if it doesn’t you lose the premium paid. Whereas in stocks you have the privilege to hold the shares as long as you like. The reason options were introduced was to hedge the owner of the shares against its short term fluctuations. For eg: If I own 100 shares of XYZ and I wish to hold this for the next 10 years, but a recent report says XYZ company has lost one of its licenses & the shares could tank. What I could do is buy PUT options of the firm so that my downside is protected for the short term. When I decide to buy the PUT options someone has to take the counter position. It could be the market maker or a speculator. The market maker, if he decides to sell that PUT option to me, has a net long exposure, which means he makes money only if the stocks stay as they are or move up. Technically no market maker likes to have a directional exposure, so he will immediately take another few trades to become delta neutral. Or it could be a speculator who is just there to make money. This guy may not have a stock holding against the position he has taken. Most likely this person has the belief that stock XYZ is moving up. Stocks still have a monthly expiry, which gives ample time for the buyer/seller of the option instrument to change or modify their long/short exposure according to the price action/news flow. Whereas Indices are now set with weekly & monthly expiries. Earlier both Nifty50 and BankNifty expired on the same day ~ Thursday. So the speculation was either mostly on that one day or via overnight positions built up towards the expiry. With the new changes 6 separate indices are set to expire on separate days of the week, which means a speculator has the opportunity to gamble into a long or short exposure every single day of the week. We now know the speculator is only interested in making money provided his views/research is accurate. Honestly I still dont believe any retail trader is a match for the institutions with their supercomputers, mathematical modeling or the kind of talent they attract. So if someone has to lose money in this process, it has to be the lowest hanging fruit. Since there are daily expiries, the retail trader is enticed into an opportunity to make easy money. The good thing is that overnight is not there, but this trader has to be knowledgeable enough on what he is getting into. Both the size & count of betting will increase & its going to be a harvest for the Government, Brokers & Professional Traders. After a while it is going to be like any gambling sport or a lottery business. Market makers will be glad to offer a wider bid/ask spread and profit, usually the end trader is not aware of this slippage. Since the volume of trades are going to explode, there is a risk of risk-oversight. Let me try to explain. Case1: Markets prefer to stay range bound — this is the best case for all the participants. Most often the day ends just like the day begins & there are no hefty options adjustments, roll up or roll down. The premiums in the strikes will be normal (usually low) Since the swings are normal, option strikes do not create unwanted build up of open interest (volumes will be as usual) This scenario is safe for all the participants even though there is an equal amount of money to be won or lost. Case2: If the markets start to pick a direction — it is going to have a spiraling effect which cannot be quantified by any mathematical modeling If the markets are moving against a net sell position, the trader will start covering to reduce loss. This will create a spike in open interest of that strike & nearby strikes. Once the volumes begin to spike, more speculators will jump in creating premium mispricing. When the option premium mis-pricing exists, arbitrageurs will enter the game. Market makers will be glad to write options & counter balance it by going long or short in the underlying. This algo or HFT will further escalate the directional move. This 2nd category will create a self perpetuating trap if left unchecked. The high frequency traders are usually computerized and do not stop if they see the directional movement picking up speed. These machines feed on this distress & usually suck the soul out of the retail traders. Well it’s not a fault, but the machines are engineered that way. The indices would fall or rise for no real reason and could wipe out a select portion of traders due to their unlimited loss options exposure. And the next day this index could revert to normal as this fall/rise was just due to speculation & nothing to do with fundamentals. A black monday or a flash crash could be normal and more frequent. And there are 2 instances where this could even translate into deeper wounds. The same component stocks, almost in the same weightage are participating in adjacent expiries. FinNifty on Tuesdays & BankNifty on Wednesdays Nifty50 on Thursdays & Sensex on Fridays. So if we had a big movement on a Tuesday, it could even set the stage for further acceleration on Wednesday as the same underlying component stocks were impacted. Having said all these, I am sure there would be many think tanks who would have thought through all these & implemented some safety nets to protect the vulnerable subset of people. If the case1 scenario plays out it should be a hunting ground even for a commoner like you & me to make some money!
NSE:NIFTYEducation
by viswaram