Peter Lynch's Philosophy of Stock InvestingWho is Peter Lynch?
Peter Lynch is a renowned American investor who is best known for his tenure as the manager of the Magellan Fund at Fidelity Investments from 1977 to 1990. Under Peter Lynch's leadership, the Magellan Fund became one of the most successful mutual funds in history. During his tenure, the fund averaged an annual return of around 29% , consistently outperforming the S&P 500 index.
In the US, in 1960, individuals allocated 40% of their assets, including their homes, to stocks and mutual funds. By 1980, this figure dropped to 25% and has further decreased to a mere 17% in coming years. Lynch attributed this decline to people's flawed methods and their tendency to lose money when attempting to invest without proper knowledge.
Peter Lynch's performance as the manager of the Fidelity Magellan Fund:
Average Annual Return: During Peter Lynch's tenure from 1977 to 1990 , the Magellan Fund achieved an average annual return of approximately 29%. This means that, on average, investors in the fund experienced a 29% annual growth in their investment.
Cumulative Return: Over the course of Lynch's 13-year management, the Magellan Fund delivered a cumulative return of around 2,700% . This impressive figure indicates the overall growth of the fund's value during that period.
Assets Under Management: When Lynch took over the Magellan Fund in 1977, it had approximately $18 million in assets. By the time he retired in 1990, the fund's assets had grown to over $14 billion , a significant increase over the span of just over a decade.
Peter Lynch's Investment Philosophy
Peter Lynch's investment philosophy is centered around the idea that individual investors can achieve successful results by leveraging their own knowledge , conducting thorough research, and adopting a long-term approach. His books, such as "One Up on Wall Street" and "Beating the Street," provide valuable insights into his investment strategies.
👉 Do Your Own Research: Lynch encourages investors to conduct thorough research and analysis of companies before making investment decisions. He emphasizes the importance of researching companies and understanding their products and services.
👉 Invest in What You Know: According to Lynch, it is crucial to focus on industries and companies that individuals can relate to or understand. He believes that individual investors have an advantage when they invest in businesses they are familiar with or have personal experience in.
👉 Focus on Fundamentals: Lynch places a strong emphasis on the fundamental aspects of a company, such as earnings growth, cash flow, and balance sheet strength. He emphasizes the correlation between a company's earnings and its stock performance over the long term, dismissing the significance of external factors (such as money supply, political events, or economic predictions).
👉 Long-Term Perspective: Lynch advocates for a patient and long-term approach to investing. He suggests that investors should be willing to hold onto their investments for several years to allow for the realization of the company's growth potential. Instead of trying to time the market, regularly invest a fixed amount of money each month.
👉 Ignore Market Noise: Peter Lynch advised people to ignore short-term market fluctuations and to hold onto their stocks during rough market periods. According to him, the key to making money in stocks is to avoid being scared out of them by short-term volatility.
👉 Contrarian Approach: Lynch often looked for investment opportunities in companies that were overlooked or undervalued by the broader market. He believed that being contrarian and investing in companies with strong growth potential before they became widely recognized could lead to significant returns.
👉 Ten Baggers: Lynch is famous for identifying companies with strong growth potential before they become widely recognized. He popularized the concept of "tenbaggers," stocks that increase in value by ten times or more, and emphasizes patient investing and long-term thinking. This term was coined by Lynch in his book “One Up on Wall Street”.
Top 10 Investments
From 1977 until 1990, the Magellan fund averaged a 29.2% annual return and as of 2003 had the best 20-year return of any mutual fund ever. Lynch found success in a broad range of stocks from different industries.
According to Beating the Street, his top 3 profitable picks while running the Magellan fund were:
1. Fannie Mae
2. Ford
3. Philip Morris
Peter Lynch's Categorization of Companies
✅ Slow Growers:
Slow growers are companies that operate in mature industries with limited prospects for significant expansion.
They have stable and mature businesses that generate consistent but slow growth rates.
These companies often have a large market share and a well-established customer base .
Slow growers are known for their stability and reliability , and they typically provide dividends to their shareholders.
They are considered relatively safe investments , particularly for conservative investors who prioritize steady income and capital preservation.
✅ Stalwarts:
Stalwarts are large, well-established companies that have a solid track record of consistent performance.
They are dominant players in their respective industries and exhibit reliable earnings and cash flows.
Stalwarts may not experience rapid growth rates like fast growers, but they have the potential to grow steadily over time.
These companies often have strong competitive advantages , such as brand recognition, economies of scale, or established distribution networks.
Stalwarts are favoured by investors seeking consistent returns and a lower level of risk compared to more volatile stocks.
✅ Fast Growers:
Fast growers are smaller companies that exhibit rapid earnings growth and operate in industries with high growth potential.
These companies often operate in emerging sectors or niche markets that offer significant opportunities for expansion.
Fast growers prioritize reinvesting their earnings back into the business to fuel further growth and gain market share.
While fast growers can provide substantial returns to investors, they also carry higher risks .
Their success is contingent upon maintaining a competitive edge, executing growth strategies effectively, and navigating market challenges .
Investors interested in fast growers should carefully assess the company's growth prospects, industry dynamics, and management team's ability to sustain growth.
✅ Cyclicals:
Cyclicals are companies whose earnings and stock prices are closely tied to the economic cycle.
These companies' performance tends to be sensitive to changes in the overall economy , resulting in fluctuating earnings and stock prices.
Industries such as automobiles, housing, manufacturing, and consumer discretionary goods often fall into this category.
During economic upturns , cyclicals tend to experience increased demand and higher profitability. Conversely, during economic downturns , these companies may face reduced demand and lower profitability.
Investing in cyclicals requires careful timing and analysis of the economic conditions. Cyclicals can offer significant opportunities for profit when purchased at the right point in the economic cycle.
✅ Turnarounds:
Turnarounds are companies that have experienced a significant decline or financial distress but have the potential for a successful recovery.
These companies often undergo management or operational changes to reverse their fortunes.
Turnarounds can result from various factors such as poor strategic decisions, operational inefficiencies, or changes in market dynamics. Investing in turnarounds can be highly rewarding but also carries significant risks.
Successful turnarounds require a comprehensive analysis of the company's financial health, an understanding of the management's turnaround strategy, and the ability to identify catalysts for positive change.
✅ Asset Plays:
Asset plays refer to companies that possess undervalued or underutilized assets , such as real estate, intellectual property, or unused land, which can be unlocked to create value .
These companies may not have strong operational businesses but possess valuable assets that can be monetized or utilized in a strategic manner.
Investors interested in asset plays should thoroughly assess the value and potential of the company's assets, along with the management's ability to capitalize on them.
The success of asset plays relies heavily on effective asset management , strategic partnerships, or the sale of assets to unlock value and generate returns for shareholders.
Peter Lynch's investment philosophy revolves around understanding natural advantages, focusing on industries within one's expertise, and simplifying the decision-making process . His approach encourages investors to prioritize knowledge and comprehension of individual companies rather than being swayed by external factors . Lynch's approach highlights the correlation between a company's earnings and its stock performance, undermining the significance of fundamental analysis over external factors.
I hope that this article has provided you with valuable insights into the investing world through the lens of Peter Lynch. 🙂
If you found this article helpful, I encourage you to share it with your family and friends because sharing knowledge is a great way to empower others and contribute to the growth of financial literacy.
Disclaimer: This is NOT investment advice. This post is meant for educational purposes only. Invest your capital at your own risk.
Community ideas
How to get started with tradingNew to Trading? Dive in head-first with our comprehensive guide, drafted especially for beginners! 💼💡
With so many markets and strategies to choose from, it's easy to feel lost. In this post, we'll guide you through the essential steps to get started with trading and set you on the right path.
📚 Educate Yourself
Initiate your trading journey by absorbing the essentials. This includes understanding various types of assets, familiarizing yourself with market terminology, discerning different trading strategies, and grasping risk management principles.
Utilize a combination of mediums for learning. These could range from books, seminars, and online courses, to YouTube tutorials and our educational section . Get involved in online forums and groups where like-minded individuals share their trading experiences and insights. This can help cement your understanding of trading fundamentals.
💰 Choose Your Market
Once you have a basic understanding of trading, the next step is to choose a market to trade in. You have a lot of choices like the stock market, foreign exchange (forex), or the crypto market. Consider what you like, how much volatility you can handle, and what are your financial goals. This is not an easy decision to market as global markets are massive - do your research and find the market that’s perfect for you.
🖥 Practice with a Demo Account
Before you start trading with real money, it's a good idea to practice with a demo account. A demo account is a simulated trading account that allows you to practice trading without risking any real money. Use this account to test your trading strategies and get a feel for the market before you start trading with real money. This way, you get to know how to use the platform and how trading works.
We at TradingView even have a special feature called Paper trading, made just for practice. Open the Trading Panel and select Paper Trading to get started.
📖 Develop a Trading Plan
A trading plan serves as your personal guideline for conducting trades. It outlines your trading approach, your objectives, and risk management, and specifies when to enter or exit a trade. Implementing a trading plan helps in taking better decisions and avoiding emotional trading.
📑 Open a Trading Account
Once you've educated yourself and gained some understanding of the mechanics, you need to open a trading account. There are many online brokers that you can use, and you should research them to find the one that best fits your needs. Take into account factors such as fees, platform usability, interface, and the available set of tools and resources.
🕹 Start with a Small Amount
Avoid investing your entire life savings at once. Instead, start with a small amount and gradually increase it as you gain experience and develop confidence in your trading abilities.
😎 Choose Your Trading Style
There are different trading styles, and each has its own advantages and disadvantages. You can be a day trader, a swing trader, or a position trader. Day trading involves buying and selling within the same day, while swing trading involves holding onto a position for a few days or weeks. Position trading involves holding onto a position for a long time, sometimes months or even years.
✅ Manage Your Risk
Proper risk management is crucial in trading due to its inherent uncertainties. You should never risk more than you can afford to lose. Implementing stop-loss orders can help limit potential losses, and it is advisable to have a predefined exit strategy in case a trade doesn't unfold as anticipated.
📒 Journal Your Trades
Once you start trading, it becomes imperative to consistently monitor your performance. Regularly keeping tabs on your trades, analyzing your performance, and making necessary adjustments to your plan are all vital aspects. Remember that trading involves risk, and you should be prepared to accept losses as part of the process.
Getting started with trading can be intimidating, but you can use this guide as a reference to chalk out a plan for you. Remember that trading requires patience, discipline, and constant learning. By consistently educating yourself, honing your trading skills, and diligently monitoring your trades, you can progress towards becoming a profitable trader.
Thanks for reading! Hope this was helpful. 🙂
– Team TradingView
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When to adjust Options - 5 Guidelines to stop your lossesIn this video, I discuss 5 Options selling guidelines which you can use to exit your option trades when they go wrong.
Selling options come with the risk of unlimited losses . That's why, the main aim of adjusting options is to put a cap to the losses , reassess the situation and increase profitability.
Follow @piyushrawtani for more!
Cheers =)
Turbo Breakout Setup: High-Probability Trades with Precision.NSE:CNXFINANCE
Hello Traders,
In this video, I have explained a Breakout trading setup that will generate only high-probability breakout trades, that have high success rate than another breakout.
The setup is based on a pure price action structure and does not require any indicators just we are using volume as a confirmation tool.
Why does this setup work?
The logic is very simple
let's talk about the 1st variation of this setup:- Fake Breakout
as you can see in this setup most of the time the structure completes after a fake breakout.
So that fake breakout means the short sellers in the correction phase trying to defend there stop loss and make prices go down but what do you think for how long they will be able to defend that zone when buyers' strength is increasing? so after that when buyers push the price a little above-failed breakout zone the price hits short sellers stop losses and include new buying at that level to push prices toward the sky.
What about scenario 2nd:- NO failed breakout but horizontal range inside trend resistance line.
When the trend Resistance line and horizontal line break at the same price point it invites many traders to put a limit order above that horizontal line and most of the short sellers also have put their stop loss when that zone hit the price again and start moving towards the sky.
Other factors and detailed setup have been explained in the video.
Any setup is useless without a pre-defined stop loss cause you need to focus on capital protection first then you can aim for profits.
Always take calculated risks and use proper position sizing.
This is only for educational purposes only.
Always trade with stop-loss.
I hope you found this idea helpful.
Please like and comment.
Share with Your Friends.
Keep Learning,
Happy Trading!
Zig Zag corrective pattern and the Case study of Natural GasHello Friends,
Here we had shared some major points and characteristics of Zigzag Correction pattern of Elliott waves.
Also we had shared real example chart study of zigzag pattern as a case study of NaturalGas, in which their are some principles and guidelines, which are perfectly going through in chart of NaturalGas.
Principles and Guidelines of Zigzag correction pattern
1) Zigzag correction pattern is a 3 waves structure which is labelled as A-B-C
3) Subdivision of wave A and C is 5 waves, either impulse or diagonal
4) Wave B can be any corrective structure as 3 subdivisions
5) Zigzag is a 5-3-5 correction structure
Fibonacci measurements
Wave B is always contra trend which generally retraces near 50% or 61.8% of wave A, and can also retraces up to 85.4% to 90% of wave A
Wave C can generally be expected near 100% of wave A, but sometimes if it is extended then it can show 123.6%, 138.2% or up to 161.8% also.
Sometimes if wave C is truncated then it can be near 61.8% of wave A.
But ,If wave C is going more than 161.8% of wave A, then we should be cautious, because it can also be some kind of impulse wave instead of corrective wave.
Case Study of Natural Gas
Natural Gas almost done as expected till now as per zigzag corrective pattern, it would not be wonder if it looks to be doing a double correction higher in wave (ii) bounce & can see 2.786 level sometimes in next week before turning down as a wave (iii) of 5 of (C), On lower time frame if it doesn't crosses high of March 2023, then it can show some down moves to complete wave (iii), (iv) and (v) of 5 of bigger degree wave (C).
After big correction as zigzag pattern which had already reached extreme levels in wave (C) which is more then 123.6% of wave (A), so now anytime it can start fresh impulse moves towards north directions, so instead of finding selling opportunities, one should try to find buying opportunities only after confirmation, and confirmation is price crossing high of march 2023, once its crossed peak point of march 2023 then no selling is recommended, then its only buy on dips with invalidation levels of Low of April 2023 as a stoploss, because it must be ending the bigger correction from last year peak, and can be taken as fresh impulse is started.
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/u/RK_Charts/ 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.
EXPANDED / IRREGULAR FLAT CORRECTIONHello Friends,
Here we had shared some major points and characteristics of Expanded Flat Correction also known as Irregular Flat Correction in Elliott waves.
Principles of Irregular / Expanded Flat correction pattern
1) 3 waves corrective pattern which is labelled as A-B-C
2) Subdivision of wave A and B are in 3-3 waves
3) Subdivision of wave C is in 5 waves
4) Wave B of the 3-3-5 pattern completes beyond the starting level of wave A
5) Wave C completes beyond the ending level of wave A
Fibonacci measurements
Wave B is always 123.6% to 138.2% of measurement of wave A
Wave C completes at least 123.6% to 161.8% of wave A which starts from end of wave B
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.
Hope this post is helpful to community
Thanks
RK💕
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...!
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.
7 Important Tips for Risk Management Hey everyone!
While trading and investing offer the opportunity for profit, there is always the potential for loss.
Here are a couple of time-tested tips to help you in understanding and managing your risk better.
📝 Develop 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 prior to engaging in any trades.
─ Your plan should include essential components such as the entry point, a strategically defined stop-loss level to mitigate potential losses, and target levels to define your anticipated profit points.
─ Having a well-structured plan equips you with a roadmap during stressful trading situations and ensures that your trades are consistently aligned with your risk tolerance threshold.
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🧘♂️ Understand your Risk Tolerance
─ Risk is subjective. Different traders have different personalities and systems, hence a different risk tolerance.
─ Start with self-reflection: Begin by reflecting on your own attitudes, beliefs, and emotions towards risk. Consider how comfortable you are with the possibility of losing money, how patient you are with market fluctuations, and how much stress or anxiety you can handle when investments don't go as planned. Understanding your own psychological and emotional response to risk is crucial in determining your risk tolerance.
─ Consider your financial situation: Take into account your current financial situation, including your income, savings, debts, and expenses. A thorough understanding of your financial resources and obligations will help you gauge the amount of risk you can afford to take.
─ There is no “One-size-fits-all” approach . Find out what suits your needs based on your account size, age, long-term plan, and other key variables that are specifically unique to your circumstances. Then, implement it accordingly.
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📚 Follow your Trading System
─ Develop a clear and comprehensive trading system that outlines your approach, rules, and criteria for entering and exiting trades.
─ A well-designed system provides structure and discipline, helping you avoid impulsive decisions driven by emotions or short-term market fluctuations.
─ A trading system is essential because it requires you to think deeply about your approach to markets before you begin risking real money.
─ Backtest and research your system: Validate the effectiveness of your trading system by backtesting it against historical market data. This allows you to assess its performance and identify any potential flaws or areas for improvement. Additionally, research and analyze your system under various market conditions to understand its adaptability and resilience.
─ Evaluate your system's performance in different scenarios: Simulate your system's performance in different market environments, including bear markets or periods of increased volatility. By assessing how your system would fare in adverse conditions, you can gauge its robustness and make necessary adjustments to enhance its overall effectiveness.
─ Some traders keep hopping strategies after a series of losses. This usually leads to more losses and is unproductive in the long term.
─ Stick to your system with a verifiable edge: If your trading system has been thoroughly tested, backtested, and proven to have an edge, have confidence in it and adhere to its rules consistently. Consistently following a system that has demonstrated positive expectancy over time increases your chances of generating consistent profits in the long run.
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🚨 Use a Stop-Loss
─ A stop-loss order is an order that is placed at a predetermined price level and can help in limiting your losses if the trade goes against you.
─ In general, this predetermined price level is the level at which your trade idea gets invalidated.
─ A stop loss helps in protecting against emotional decision-making and allows you to maintain discipline in your trading system. Implementing a stop-loss order ensures that you have predefined risk parameters, allowing you to quantify and control your downside risk.
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✂️ Manage your Position Size
─ Effectively managing your position size is crucial in mitigating risk and maximizing potential returns.
─ By carefully determining the appropriate position size, you can avoid excessive exposure in any single trade.
─ Trading is a game of probabilities. Hence, a trader should never put all his eggs in one basket and if he does, then he should be well aware of it.
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❌ Don't Overtrade or Revenge Trade
─ Resist the temptation to overtrade or engage in revenge trading, even in the face of losses.
Attempting to recover losses through higher-risk trades is never a good idea and can lead to even bigger losses.
─ It's easy to feel strong emotions while trading. However, making decisions based on emotions rather than rational analysis can be a recipe for disaster.
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📔 Maintain a Trading Journal
─ A trading journal can help you in identifying the shortcomings in your trading.
─ By documenting your trades, you gain valuable insights into your strengths and weaknesses as a trader. Regularly reviewing and evaluating your journal allows you to identify patterns, mistakes, and areas for improvement.
─ This self-reflection enables you to fine-tune your strategies, refine your risk management techniques, and enhance your overall trading approach.
─ Moreover, a trading journal helps instil discipline and accountability by keeping a record of your trading actions and outcomes. It serves as a reference point for future analysis and learning, enabling you to continuously evolve as a trader.
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Thanks for reading! I hope you enjoyed this post. Please feel free to write any additional tips or pieces of advice in the comments section below!
Trade safe. Be smart. I’ll see you in the next one. Cheers!
Rajat Kumar Singh (@johntradingwick)
Power of 25, 75, and 125-Minute Timeframes in the Indian MarketSelecting the right time frame for technical analysis is a crucial decision for any technical analyst. In the Indian market, the trading session lasts for 375 minutes, starting from 9:15 AM and ending at 3:30 PM. While many traders commonly use the 30-minute, 1-hour, and 2-hour time frames, these intervals often result in incomplete candles, which can distort the accuracy of the analysis. Instead, opting for the 25-minute, 75-minute, and 125-minute time frames can provide more complete data, leading to more informed trading decisions.
Drawbacks of traditional time frames:
When using a 30-minute time frame, there are 13 candles formed, with the last candle representing only 15 minutes of trading. This disrupts the technical analysis process. By switching to a 25-minute time frame, traders can overcome this issue and work with 15 complete candles per trading day.
Traditional 1-hour time frames produce 7 candles, including a final 15-minute candle, which interrupts the smooth flow of technical analysis. By adopting a 75-minute time frame, traders can obtain 5 complete candles, offering a more comprehensive perspective on price movements.
Instead of confining analysis to a 2-hour time frame, which results in an incomplete final candle, traders can harness the power of a 125-minute time frame. With 3 complete candles per trading session, each representing a 125-minute interval, a more comprehensive understanding of price dynamics can be achieved.
Benefits:
Enhanced accuracy in analysing price action, as each candle represents a complete interval of 25, 75, or 125 minutes.
Reduced gaps in price action, as each candle becomes a complete unit of time.
Clearer depiction of trends with fewer distractions from incomplete candles.
Improved visibility of trends, as each candle provides a more representative snapshot of the price action.
A more holistic view of the market, aiding in the identification of key support and resistance levels. If you utilize concepts like RBR, RBD, DBR, and DBD, it is recommended to use these time frames, as the presence of an incomplete candle can inadvertently impact your analysis. You may mistakenly consider the last incomplete candle as a base or leg candle, which can affect your overall analysis.
Conclusion:
In the Indian stock market, precision and accuracy are vital for successful trading. By embracing unconventional time frames like 25 minutes, 75 minutes, and 125 minutes, traders can enhance their technical analysis capabilities and gain a competitive edge. Although these specific time frames are available through TradingView's paid plans, traders without access can still utilize traditional time frames. However, it is essential to recognize the limitations and potential disruptions caused by incomplete candles. Embracing the power of these alternative time frames unlocks a clearer and more comprehensive view of the market, empowering traders to make confident trading decisions.
This article is written by Afnan Tajuddin with the aim of encouraging Indian traders to adopt powerful timeframes commonly used by professional traders, to enhance their technical analysis skills.
If you found this article helpful, please consider following me for more analysis and educational articles. Your likes and comments are appreciated, as they motivate me to provide more analysis for you. If you have any questions, feel free to ask in the comment box below.
Thank you for reading this educational article.
Determining trend and consolidation through wave cycles.MCX:GOLD1!
In past, we have discussed how to know the quality of a trend and how to know a chart pattern's extrinsic nature according to the market phase.
If you haven't read that then I want you to read that before to have a better understanding of this idea.
Let's get started!!
How to determine the trend or consolidation through the wave cycles and degrees.
The trend moves in 3 different wave degrees:- For example , think of it like a multi-timeframe analysis.
1. Higher wave cycle (HWC) - This is a 1-month time frame trend.
2. Medium wave cycle (MWC) - This is a 1-day time frame trend.
3. Lower wave cycle (LWC) - This is 30 min time frame trend.
So Without knowing which wave cycle is being traded one can encounter these problems:-
1. Inability to select consistent breakout levels.
2. Inability to select effective stop loss levels.
3. Inability to apply effective stop sizing.
4. Inability to distinguish between trend and consolidation mode.
5. Inability to determine the direction of the predominant trend.
How can we eliminate these complications?
1. Consolidation and Trend Action in Terms of Wave Cycles and Degrees.
A market may be both in trend and consolidation modes at the same time, depending on the wave cycle being observed.
2. We may also define breakouts via the degree of the wave cycles.
Different degrees of waves help in determining whether a breakout will gonna be valid or not as a range formation near the higher wave cycle resistance zone will likely fail.
In the above figure:-
we have breakouts based on waves of lower, medium, and higher degrees. In other words, the breakout level will depend on the wave degree being traded. Being aware of the wave degree being traded will allow the trader to size the stop-loss effectively, according to the average wave amplitude and volatility associated with that particular wave degree.
3. Significance of higher wave degree reversals
When big market trends change direction, it affects smaller trends as well. This is because all the smaller trends are part of the bigger trend. So, when the big trend changes, the smaller trends also change in the same direction. This is important to understand because it means that when you see a change in a big trend, it's a sign that many smaller trends are also changing. However, smaller trends changing doesn't necessarily mean the big trend will change too.
Conclusion:- Always know which wave cycle you are trading and at what point you stand in that wave cycle.
Note: In upcoming Ideas, we will cover how Waves are used in the Elliott Wave concept.
I hope this short idea on trend or consolidation determination has added some knowledge and helped in improving your trading.
please like and comment with your views on this idea.
Keep learning,
Happy trading.
Thank you for reading.
Price/Earnings: amazing interpretation #2In my previous post , we started to analyze the most popular financial ratio in the world – Price / Earnings or P/E (particularly one of the options for interpreting it). I said that P/E can be defined as the amount of money that must be paid once in order to receive 1 monetary unit of diluted net income per year. For American companies, it will be in US dollars, for Indian companies it will be in rupees, etc.
In this post, I would like to analyze another interpretation of this financial ratio, which will allow you to look at P/E differently. To do this, let's look at the formula for calculating P/E again:
P/E = Capitalization / Diluted earnings
Now let's add some refinements to the formula:
P/E = Current capitalization / Diluted earnings for the last year (*)
(*) In my case, by year I mean the last 12 months.
Next, let's see what the Current capitalization and Diluted earnings for the last year are expressed in, for example, in an American company:
- Current capitalization is in $;
- Diluted earnings for the last year are in $/year.
As a result, we can write the following formula:
P/E = Current capitalization / Diluted earnings for the last year = $ / $ / year = N years (*)
(*) According to the basic rules of math, $ will be reduced by $, and we will be left with only the number of years.
It's very unusual, isn't it? It turns out that P/E can also be the number of years!
Yes, indeed, we can say that P/E is the number of years that a shareholder (investor) will need to wait in order to recoup their investments at the current price from the earnings flow, provided that the level of profit does not change .
Of course, the condition of an unchangeable level of profit is very unrealistic. It is rare to find a company that shows the same profit from year to year. Nevertheless, we have nothing more real than the current capitalization of the company and its latest profit. Everything else is just predictions and probable estimates.
It is also important to understand that during the purchase of shares, the investor fixates one of the P/E components - the price (P). Therefore, they only need to keep an eye on the earnings (E) and calculate their own P/E without paying attention to the current capitalization.
If the level of earnings increases since the purchase of shares, the investor's personal P/E will decrease, and, consequently, the number of years to wait for recoupment.
Another thing is when the earnings level, on the contrary, decreases – then an investor will face an increase in their P/E level and, consequently, an increase in the payback period of their own investments. In this case, of course, you have to think about the prospects of such an investment.
You can also argue that not all 100% of earnings are spent paying dividends, and therefore you can’t use the level of earnings to calculate the payback period of an investment. Yes, indeed: it is rare for a company to give all of its earnings to dividends. However, the lack of a proper dividend level is not a reason to change anything in the formula or this interpretation at all, because retained earnings are the main fundamental driver of a company's capitalization growth. And whatever the investor misses out on in terms of dividends, they can get it in the form of an increase in the value of the shares they bought.
Now, let's discuss how to interpret the obtained P/E value. Intuitively, the lower it is, the better. For example, if an investor bought shares at P/E = 100, it means that they will have to wait 100 years for their investment to pay off. That seems like a risky investment, doesn't it? Of course, one can hope for future earnings growth and, consequently, for a decrease in their personal P/E value. But what if it doesn’t happen?
Let me give you an example. For instance, you have bought a country house, and so now you have to get to work via country roads. You have an inexpensive off-road vehicle to do this task. It does its job well and takes you to work via a road that has nothing but potholes. Thus, you get the necessary positive effect this inexpensive thing provides. However, later you learn that they will build a high-speed highway in place of the rural road. And that is exactly what you have dreamed of! After hearing the news, you buy a Ferrari. Now, you will be able to get to work in 5 minutes instead of 30 minutes (and in such a nice car!) However, you have to leave your new sports car in the yard to wait until the road is built. A month later, the news came out that, due to the structure of the road, the highway would be built in a completely different location. A year later your off-road vehicle breaks down. Oh well, now you have to get into your Ferrari and swerve around the potholes. It is not hard to guess what is going to happen to your expensive car after a while. This way, your high expectations for the future road project turned out to be a disaster for your investment in the expensive car.
It works the same way with stock investments. If you only consider the company's future earnings forecast, you run the risk of being left alone with just the forecast instead of the earnings. Thus, P/E can serve as a measure of your risk. The higher the P/E value at the time you buy a stock, the more risk you take. But what is the acceptable level of P/E ?
Oddly enough, I think the answer to this question depends on your age. When you are just beginning your journey, life gives you an absolutely priceless resource, known as time. You can try, take risks, make mistakes, and then try again. That's what children do as they explore the world around them. Or when young people try out different jobs to find exactly what they like. You can use your time in the stock market in the same manner - by looking at companies with a P/E that suits your age.
The younger you are, the higher P/E level you can afford when selecting companies. Conversely, in my opinion, the older you are, the lower P/E level you can afford. To put it simply, you just don’t have as much time to wait for a return on your investment.
So, my point is, the stock market perception of a 20-year-old investor should differ from the perception of a 50-year-old investor. If the former can afford to invest with a high payback period, it may be too risky for the latter.
Now let's try to translate this reasoning into a specific algorithm.
First, let's see how many companies we are able to find in different P/E ranges. As an example, let's take the companies that are traded on the NYSE (April 2023).
As you can see from the table, the larger the P/E range, the more companies we can consider. The investor's task comes down to figuring out what P/E range is relevant to them in their current age. To do this, we need data on life expectancy in different countries. As an example, let's take the World Bank Group's 2020 data for several countries: Japan, India, China, Russia, Germany, Spain, the United States, and Brazil.
To understand which range of P/E values to choose, you need to subtract your current age from your life expectancy:
Life Expectancy - Your Current Age
I recommend focusing on the country where you expect to live most of your life.
Thus, for a 25-year-old male from the United States, the difference would be:
74,50 - 25 = 49,50
Which corresponds with a P/E range of 0 to 50.
For a 60-year-old woman from Japan, the difference would be:
87,74 - 60 = 27,74
Which corresponds with a P/E range of 0 to 30.
For a 70-year-old man from Russia, the difference would be:
66,49 - 70 = -3,51
In the case of a negative difference, the P/E range of 0 to 10 should be used.
It doesn’t matter which country's stocks you invest in if you expect to live most of your life in Japan, Russia, or the United States. P/E indicates time, and time flows the same for any company and for you.
So, this algorithm will allow you to easily calculate your acceptable range of P/E values. However, I want to caution you against making investment decisions based on this ratio alone. A low P/E value does not guarantee that you are free of risks . For example, sometimes the P/E level can drop significantly due to a decline in P (capitalization) because of extraordinary events, whose impact can only be seen in a future income statement (where we would learn the actual value of E - earnings).
Nevertheless, the P/E value is a good indicator of the payback period of your investment, which answers the question: when should you consider buying a company's stock ? When the P/E value is in an acceptable range of values for you. But the P/E level doesn’t tell you what company to consider and what price to take. I will tell you about this in the next posts. See you soon!
What are Bollinger Bands and How to Use themBollinger Bands are a widely used technical analysis tool traders rely on to gauge market volatility and identify potential entry and exit points. Developed by John Bollinger in the 1980s, they provide a simple yet effective method to analyze price trends and determine potential movements.
In this post, we'll cover the fundamental concepts of Bollinger Bands, including how they work and how you can use them to your advantage . This post will also lay the groundwork for future posts about more advanced topics on Bollinger Bands.
Please remember this is an educational post to help all of our members better understand concepts used in trading or investing. This in no way promotes a particular style of trading!
What are Bollinger Bands?
Bollinger Bands are composed of three lines that are plotted on a price chart. The first line is a simple moving average (also known as the basis line), and the other two lines are standard deviation lines, one located above the SMA and the other below it.
When plotted, the SMA appears at the centre of the chart, flanked by the upper and lower bands. The width of the bands is determined by market volatility; the bands will expand as volatility increases and contract as volatility decreases
Components of Bollinger Bands
Basis line: The basis line is the middle line in the Bollinger Bands and represents the simple moving average (SMA) of the closing prices of an asset over a defined period.
Upper Band: The upper band is calculated by adding a specified number of standard deviations to the SMA. Typically, traders use two standard deviations from the SMA, making it the most common setting used. However, these settings are not universal and vary as per the trading style.
Lower Band: The lower band is calculated by subtracting the same number of standard deviations from the SMA. This results in a channel of three lines, with the upper and lower bands fluctuating around the SMA, reflecting volatility.
Usage:
👉 Overbought and Oversold Conditions
Bollinger Bands can help in the identification of overbought and oversold conditions. Generally, when the price of an asset touches or exceeds the upper band, it may suggest that the asset is overbought, and a pullback or reversal could be on the horizon.
In contrast, when the price touches or falls below the lower band, it may indicate that the asset is oversold and could be due for a bounce or reversal.
However, it's worth noting that in strong trends, the price may remain at the upper or lower band for an extended period. This occurrence is not a signal for a pullback or reversal, and traders should consider other factors to confirm the actual trend.
Exhibit: Strong Uptrend
Exhibit: Strong Downtrend
👉 Volatility Indicator
Bollinger Bands serve as a measure of volatility. As the bands widen, it indicates that the volatility is increasing, which means that price swings are likely to be more significant. Conversely, when the bands become narrower, it suggests that the volatility is decreasing, which could result in smaller price fluctuations.
👉 Bollinger Band Squeeze
A squeeze occurs when the bands contract and move closer together, indicating decreased market volatility. This phenomenon is often a precursor to a significant price movement or breakout, as periods of low volatility often precede periods of high volatility in the market.
👉 Trend Confirmation
Bollinger Bands can also be used to confirm the direction of a trend. During an uptrend, prices often stay within the upper half of the Bollinger Bands, while in a downtrend, prices tend to remain in the lower half of the bands.
In addition, when prices repeatedly bounce off the basis line or keep getting rejected from it, it could indicate the continuation of a trend.
Exhibit: Trend continuation in a Bullish trend
Exhibit: Trend continuation in a Bearish trend
Thanks for reading! Hope this was helpful.
As we mentioned before, this isn't trading advice, but rather information about a tool that many traders use.
See you all next week. 🙂
– Team TradingView
Be sure to follow us on Twitter , Instagram , and Telegram for more valuable content! 💘
Basics of Option's Delta: With ExamplesOption's DELTA represents the change in price of an option with respect to change in price of an underlying.
Let's understand briefly with the help of Nifty example.
1️⃣
In the above Nifty example,
17750 is an At the Money CE option.
Delta of ATM CE is near 0.5
Which means that if spot moves 10 points, 17750 CE will move 5 points.
Normally ATM options are highly volatile options.
2️⃣
17700 is slightly In the Money CE.
Delta is 0.7, means if spot moves up 10 points, the CE option will move up by 7 points.
Volatility is fairly high in this one too but less compared to 17750.
⚡If you open the chart of the above options, you will see spikes with lot of wicks above and below the candles (if market stays around these levels). Also, there will be a lot of breakout/breakdown failures over the swing highs and lows in the intraday. This is due to highly volatile nature of ATM options.
3️⃣
17650 and 17600 are deeper In the Money CE options.
You can see that the delta is around 0.9
It means that if index moves 10 points, these CE option will move 8-9 points also.
These options are less volatile compared to ATM options.
⚡The deeper the CE option, the higher would be the delta, but the value of Delta never exceeds 1.
You should note that deep ITM options just behave like the underlying Futures. Means a 1-point movement in the underlying equals 1 point move in the option.
So, if you don't want to trade futures for some reason, you can trade with deep ITM options.
⚡⚡Remember that Delta varies as the market moves.
Ex if market moves down by 100 points, in this example, then Delta of 17650 CE will become 0.5 as it will be ATM at that point.
This behavior along with higher Theta of ATM needs more attention.
⚡Needless to mention, the Delta of Out of the Money CE options remains less than 0.5 and it keeps on decreasing as we move deeper into OTM CE options.
Ex Delta of 17900 CE is 0.05 while publishing this post on the expiry day. This is the reason that an OTM CE will have bare minimum movement with respect to movement in the underlying.
Disclaimer: I don't call myself an option expert and I am not much into complex option strategies. But this is the least that one should know as an option trader.
Do like for more informative posts in the future.
Regards
How To Follow Market News Like a ProAs a member of TradingView, you have access to more than 100 news providers. Our excellent news providers cover every asset class. Learning how to manage market news is an important informational edge that takes time and practice - always know the latest stories about your favourite symbols and be in the know about what traders are talking about.
In this post, we want to share a few tips for managing your news flow. 🗞️🎯
Before we get started, let us remind everyone how we recently enhanced our news by giving our members access to one of the world's preeminent news organizations - Dow Jones Newswire including the Wall Street Journal, Marketwatch, Barron's, Dow Jones Commodity Trader, and more.
Where To Find News On TradingView 📰
To get started with news, first make sure you're logged into your account. Once you're logged in, there are several ways to access news. Let's take a look at each method.
- Symbol pages have dedicated news sections that cover that symbol in great detail. For example, here's every important story about Apple and here's the latest breaking news about Tesla . Go to any symbol page of your choice, click News, and start reading.
- Check out our global news flow page that brings all of our sources to one place. Once you've arrived, filter by the asset class of your choice.
- Our corporate news page brings insider buying & selling, company press releases, and official financial filings all to one page. As an equity trader or investor, this page will keep you updated about key events happening in the corporate world.
How To Find News On The Chart 📈
News can also be accessed directly from the chart. As everyone knows, breaking news can impact markets in a variety of ways. Open the chart and watch price, volume, and news all at once. This is an effective combination of tools that combines the biggest headlines with real trading activity. Here's how to get started:
- Open your watchlist, select a symbol, and then look for the latest news headline as demonstrated in the image below. Click the headline to open a dedicated news feed for that symbol. And just like that you'll have markets news and the chart open at once:
- Another way to add news to your chart is to open the Settings menu, click Events, and then check the box that says "Latest news." This box will display the latest market news directly on the chart you have open. Follow the instructions shown on the image below to get started.
Go Deeper With Specific News For Your Needs 🌐
Depending on your style of trading or desired asset class, there are additional news resources for you to harness. Check out the list below for more pages where market news can be found:
- Bond market news
- Futures market news
- Global market news
Read News From Anywhere With Our App 📱
The official TradingView mobile app for iOS and Android is free to download and market news is available to all members. Once downloaded, you can follow global market news or news about your favourite symbols. The app allows you to sort by top stories, asset class, and the world economy.
If you still don't have our app, get it here !
Thanks for reading!
We hope this post helps you become a market master for following the latest news. Please let us know if you have any questions or comments.
— Team TradingView ❤️
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The Ultimate guide to Market structure with 30+ Charts! Hey everyone!👋
In this post, we'll delve deep into market structure, presenting insightful examples to enhance your understanding of this concept.
Introduction:
✅ Market structure is a framework for comprehending the movements and behaviour of markets. In layman's terms, it is a basic form of understanding how markets move.
✅ It can be seen as the flow of the price between a series of swing highs and swing lows.
✅ The market moves in trends, which are the result of various patterns and structures that form and evolve over time.
Exhibit: Various structures and patterns evolving over time into different trends
The market structure allows you to be in sync with the market and avoid counter-trend trading, which enhances the probability of your setups.
Exhibit: Market structure favouring longs
There are broadly 3 types of structures:
1. Bullish (Uptrend)
2. Bearish (Downtrend)
3. Ranging (Sideways)
Illustration: Bullish market structure
Illustration: Bearish market structure
Illustration: Range market structure
📈 What is an uptrend?
✅ Characterised by a bullish market structure.
✅ Formation of higher highs followed by higher lows.
✅ For an uptrend to stay intact, it must preserve its ascending structure - higher highs must follow higher lows.
📉 What is a downtrend?
✅ Characterised by a bearish market structure.
✅ Formation of lower highs followed by lower lows.
✅ For a downtrend to stay intact, it must preserve its descending structure - lower highs must follow lower lows.
✅ Lower highs are allowed if the price goes into compression or re-distribution.
⚡ What is a range?
✅ A range is a zone where the price finds itself bouncing between two levels.
✅ These levels are - range high and range low.
✅ The size of the range is dependent on different factors such as asset class, demand-supply, volatility, etc.
A lot of times, the structure won’t be as clear as you want it to be. Conversely, sometimes the structure will replicate the textbook. Hence, you need to be flexible in your approach.
Sometimes, trading in range-bound markets can be challenging due to the choppiness in price movements. However, when the price action is more defined, some traders may prefer to trade the range by executing breakout trades or mean reversion trades from the range high to the range low or vice versa.
It is better to combine market structure with other concepts/indicators for better results.
Exhibits: Bullish market structure
ATUL Industries
Tata Consultancy Services
Rain Industries
Indian Hotels
Navin Fluorine
Delta Corporation
Gujarat Gas
Page Industries
Titan Company
ITC
Exhibits: Bearish market structure
Birla Soft
Tech Mahindra
Indiabulls Housing
L&T Housing
Grasim Industries
Biocon
Tata Power
Canara Bank
NMDC
Bharat Petrol
Exhibits: Ranging market structure
Granules
ITC
Syngene
Hindustan Copper
Thank you for taking the time to read this. I hope you found it to be informative and useful.
Much love, ❤
Rajat Kumar Singh (@johntradingwick)
Community Manager (India), TradingView
A FEW PARAMETERS TO FILTER STOCKS FOR INTRADAY TRADINGThere are few things to be considered before selecting a stock for intraday such as,
1)Volume
2)Price
3)Mimicking Stocks
VOLUME:
Always Select a stock which has a high liquidity, which means the stock should have at least average daily volume of above 1 million (10 lakhs).
PRICE:
Many would not consider this as a important parameter. but it must be considered. Choosing penny stocks for intraday is not a good choice at all. Always prefer stocks trading above Rs.100 for intraday
MIMICKING STOCKS:
Look for the stocks which move in sync with the index.
So when the index moves upward/downward, there is a high possibility for the stock to go up/down similarly.
Few such examples are
1)Nifty & Reliance,
2)Bank nifty& HDFC Bank,
3)Nifty IT & TCS.
SUMMARY
#Make a List of 10 stocks, which have good volume (>10 lakhs) & price above 100
#Try to Pick stocks from F&O category as they are the most liquid stocks & these stocks can't be manipulated easily by the operators.
#Make sure the 10 stocks are from various industries. Because if we pick stocks from same industries, they are likely to move in tandem.
#As a beginner, one should trade within only those 10 stocks every single day for at least 6 months. The reason behind is, every stock has a certain behaviour of its own & when we trade same stocks for a long time, one will get to know the in & out of the stocks & eventually be better at trading.
#Another good reason is, every stock is subjected to move according to its corporate action ( Earnings, AGM, Dividends etc.,) So it becomes easy to pay attention to the news related to a particular company, when we trade very few stocks.
SAMPLE 10 STOCKS LIST:
Finance
1)SBI
2)ICICI
Pharma
3)SUNPHARMA
4)BIOCON
Auto
5)MAHINDRA & MAHINDRA
6)TATA MOTORS
IT
7)INFY
8)TECHM
Fmcg
9)HINDUNILEVER
Metal
10)TATA STEEL
Disclaimer :
These are not rigid rules. All the above said are the things which am using for long time successfully.
If you are successful with any other method, please continue that.
Happy Profit Making,
Divyaa Pugal
Automatically identify chart patterns using built-in indicatorsHey everyone! 👋
This chart showcases a few of the Automatic Chart Patterns indicators recently announced in this blog post . If you are a technical trader who relies on chart patterns to make trading decisions and hold a paid TradingView plan, check them out. They automatically identify these popular technical setups:
Bearish and Bullish Flags
Double Bottom
Double Top
Elliot Wave
Head and Shoulders
Inverse Head and Shoulders
Bearish and Bullish Pennants
Rectangles
Triangles
Triple Bottom
Triple Top
Falling and Rising Wedges
You can add the indicators to your chart from the "Indicators, Metrics & Strategies" search window by selecting "Patterns" from the "Technicals" tab in the left pane and choosing an indicator from the list:
Once you have selected a chart pattern, the indicator will automatically draw it on the chart for you when it detects the pattern.
The chart pattern indicators are easy to use and customize. You can alter the pattern detection criteria and visible attributes like colour, line thickness, and style of the lines.
We hope you enjoy these new indicators.
— Team TradingView ❤️
Feel free to check us out on Instagram , Telegram , and Twitter for more awesome content! 🙂
Financial ratios: digesting them togetherI hope that after studying the series of posts about company financial statements, you stopped being afraid of them. I suggest we build on that success and dive into the fascinating world of financial ratios. What is it?
Let's look at the following example. Let's say you open up a company's balance sheet and see that the amount of debt is $100 million. Do you think this is a lot or a little? To me, it's definitely a big deal. But can we say the company has a huge debt based only on how we feel about it? I don't think so.
However, if you find that a company that generates $10 billion in annual revenue has $100 million in debt (i.e. only 1% of revenue), what would you say then? That's objectively small, isn't it?
It turns out that without correlating one indicator with another, we cannot draw any objective conclusion. This correlation is called the Financial Ratio .
The recipe for a normal financial ratio is simple: we take one or two indicators from the financial statements, add some market data, put it all into a formula that includes a division operation - we obtain the financial ratio.
In TradingView you can find a lot of financial ratios in the section Financials -> Statistics .
However, I only use a few financial ratios which give me an idea about the financial situation of the company and its value:
What can you notice when looking at this table?
- Profit and revenue are frequent components of financial ratios because they are universal units of measurement for other reporting components. Just as length can be measured in feet and weight in pounds, a company's debts can be measured in revenues.
- Some financial ratios are ratios, some are percentages, and some are days.
- There are no financial ratios in the table whose data source is the Cash Flow Statement. The fact is that cash flows are rarely used in financial ratios because they can change drastically from quarter to quarter. This is especially true for financial and investment cash flow. That's why I recommend analyzing cash flows separately.
In my next post, I'll break down each financial ratio from this table in detail and explain why I use them specifically. See you soon!
Types of Alerts on TradingViewHey Everyone! 👋
While alerts have a ton of potential applications when it comes to trading, they are often underutilized because it can take some time and ingenuity to build a system where they can work well.
Alerts can turn the experience of trading from a constant search for ideas - and always feeling behind - into a relaxing job of waiting for your own pre-approved conditions to trigger before taking action. In short, alerts can make you much more well-prepared for the market’s ups and downs. 🔍
In this post, we will look at the two distinct types of alerts available on our platform.
Our alerts are categorized into two types based on resource requirements:
➡ Price alerts
➡ Technical alerts
Each alert type has a separate limit on the number of active alerts based on the subscription. We are happy to announce that we have recently doubled the combined limit for both alert types. 🎉
The current limits for active alerts are as follows:
As shown in the table, the Basic plan includes one price alert and one technical alert, while the Premium plan provides access to a much higher number of alerts. Specifically, users on the Premium plan can enjoy up to 400 price alerts and 400 technical alerts.
Now, you might be wondering about the distinction between price and technical alerts. What sets these two apart? Let's dive into the specifics of each type to gain a better understanding of their unique features and benefits.
💸 Price Alerts
An alert is considered a price alert when the following two conditions are met:
1. Only a symbol is used in the alert (for any type of chart: Bars, Renko, PnF, etc) and a price value
2. One of the following is selected as the trigger condition:
• Crossing
• Crossing Up
• Crossing Down
• Greater Than
• Less Than
For example , the following alert on a candlestick chart would be considered a price alert:
👨💻 Technical alerts
An alert is considered a technical alert if any of the following conditions are met:
1. The alert uses an overlay symbol, indicator, drawing or strategy
2. One of the following is selected as the trigger condition:
• Entering Channel
• Exiting Channel
• Inside Channel
• Outside Channel
• Moving Up
• Moving Down
• Moving Up %
• Moving Down %
For example , the following alert will be considered a technical alert since the trigger condition is set as “Moving up %”.
We hope that this post has provided you with a clearer understanding of the distinct types of alerts available on TradingView. However, if you require further assistance with setting up or managing your alerts, we recommend visiting our Help Center .
Thanks for reading! Hope this was helpful.
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Instagram , and Twitter for more awesome content! 💘
Nifty2015-16 vs 2021-23Price has a habit of repeating historical pattern, as patterns are nothing but psychology of thousands of traders watching same charts. Nifty currently is showing very similar price pattern on daily timeframe which it developed in 2015-16, where previously it made a top and then was facing a resistance on falling trendline and sort of made triple/multiple tops. It finally broke out of it by making a double bottom on daily charts and then started another upmove.
This upmove got fizzled out and made a rounding top pattern, and potentially those who were active that time would have faced similar dilemma which traders are currently facing that if this rounding top sort of formation breakdown then what are downside target.
That didn't happened and Nifty made another double bottom around Dec 2016 and post which it rallied and rest is history where dream run of Nifty started and it went on to make a new high until 2020, when Covid crash came.
Similarly, in current chart of 2021-23 session (as of today), Nifty has shown similar price pattern of facing resistance at a falling trendline then breaking out of it via a double bottom formation and making a new high. Post which it has now corrected and is sort of making another rounding top.
Will Nifty survive the swing lows around 16750 or will it break and invite fresh aggressive shorts to trap them and then run away - only time will tell that, but these are just observations with an anticipations that potentially this correction will also get over very soon and we are may be near to bottom formation and then start a fresh up move.
There is no trade recommendation here and these are just observations for learning purpose
Nifty 2015-16
Nifty 2021-23
