Types of participants in the derivatives marketHey everyone!
Last week we talked about the basics of derivatives and what all different derivative instruments are available in the markets. In this post, we will talk about the types of people who use derivatives and why they exist.
There are broadly three types of participants in the derivatives market:
→ Hedgers
→ Traders (also called speculators)
→ Arbitrageurs.
An individual may play different roles at different times.
Hedgers
→ They employ derivatives to mitigate the risk they suffer from fluctuations in the pricing of the underlying assets.
→ Institutions such as investment banks, central banks, hedge funds, etc. all use derivatives to hedge or reduce their exposures to market variables such as currency exchange rates, interest rates, equity values, bond prices, and commodity prices.
Speculators/Traders
→ The speculators are primary participants in the futures market.
→ They try to predict the future movements in prices of underlying assets and position themselves accordingly.
→ Speculators can be individual traders, proprietary trading firms, hedge funds, or market makers.
Arbitrageurs
→ Arbitrage is a deal that produces profit by exploiting a price difference in a product in two different markets.
→ Arbitrage occurs when a trader executes a simultaneous purchase and sale of the same asset in different markets in order to gain from tiny price differences between them.
→ The arbitrage trade is often short lives because the arbitrageurs would rush in executing these transactions, thereby closing the price gap at different locations.
Thanks for reading! Hope this was helpful.
See you all next week. 🙂
– Team TradingView
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Community ideas
One chart, different trading systems!Hi all, hope you guys are doing well.
We retailers spend a lot of time in searching for that "holy grail" in trading. The majority of the time our search is centered around different strategies. However, in my opinion, "Strategy is overvalued whereas risk management is undervalued" .
A chart can be analyzed in different ways by different traders. A trader using patterns will analyze the same chart with a different perspective as opposed to a trader using pure support-resistance levels or a trader using indicators such as moving averages.
The aim of this post is just to make you understand that you shouldn't run after different systems. Rather, focus on managing the risk.
Exhibit 1: The Cup and Handle system
Exhibit 2: The Support-Resistance system
Exhibit 3: The Triangle pattern system
Exhibit 3: The Moving averages system
Thanks for reading. I hope you found this helpful! 😊
Disclaimer : This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Happy learning. Cheers!
Rajat Kumar Singh (@johntradingwick)
Community Manager (India), TradingView
Nifty calculations & projectionsWhat I have tried to explain is Nifty complete cycle structure:
cycle (1):
wave 1, has been completed @1380 (sept 94)
wave 2, has been retraced to@ 810 (nov. 98)
Now against there is a good impulse ended 1816 (Feb 00) but next wave retraced below the origin of wave 1 (this could be sub cycle) sub cycle wave 2 got completed 847 (oct 01)
link:
Now sub cycle wave 1, 2 already completed, now its turn for wave 3 which eventually got stretched & completed @6300 (dec 07), wave 3 got corrected in form of wave 4 got completed above sub wave 1 region @ 2260 (oct 08)
Wave 5 against got completed as a extended wave and got completed @ 12300 (jan 20) sub wave marking for wave 5 also mentioned in below chart
Now on the completion of sub wave cycle entire structure got corrected in form of 2020 crash 7500 (Mar 20)
and from 2020 nifty is in its final leg of cycle wave 5.. still uncompleted.
Here also sub sub cycle wave 3 & sub cycle wave 3 is in extended mode as marked in chart
Here, wave numbering can be done in multiple ways, however, I have chosen one as per my understanding.
Here, wave 3(5) got completed @ 18600 (oct. 21) & corrective 4 completed as a complex correction as mentioned in chart 15100 (Jun 22)
It's look like we are on the final leg for wave 5 (5) for nifty, where, no one can say either wave 3(5 of 5) completed or not.
Until nifty is trading above mid line of wave 3 channel we don't recommend to shot it.
chart shared
I have covered the detailed post on channels, any one interested can check it out in my old TW post..
Happy Independence Day 2022Happy Independence Day!
(For all the Flag patriots, know that these flag-drawings are just symbolism.
These are not Indian National Flags, since they dont hv Ashok Chakra! nor official correct dimensions.)
Weekly / hourly Flag patterns ! Pick your Winners!
Axis(w)-->
Nelco (w)-->
Sbi (w)-->
Bajaj Electrical (4h)-->
Airtel (w)-->
Jindal Stainless(1h)-->
ARVIND FASHION (w)-->
Jubil food->(4h)
cnx_pse (w)->
HDFCBANK (w)-->
EnginnersIN (4h)-->
Deepak Nitrate(w)-->
Polycab (w)-->
Canara bk (1H)-->
Godrej Consumer(2H)-->
Titan(15)-->
Kotak bk(1H)-->
RBL bk (1H)-->
M&M FIN (15)-->
infy (15)-->
Adani Power (15) -->
HDFC bk (15)-->
ABC Pattern- Optimal Entry TechniquesHi,
This idea is about the very promising ABC pattern and the most optimal ways to enter into this pattern.
✅ABC Pattern
This is considered as a continuation pattern.
There has to be a strong trend up/down in the background.
Wave A: Minor correction against larger trend, usually not more than 5-10%
Wave B: Another attempt to push the price higher but could not break the previous highs
Wave C: breaks the low A but has less momentum than wave A. Weak stops are taken below A
I am presenting four techniques of entering into this pattern, in the anticipation of a continuation of the prevailing trend. The techniques used, however, depend upon the traders' appetite and temperament.
Let's start..
✅Minimum Risk Entry
>The entry point is near the low C
>C should have less momentum than A
>Price barely breaks the low A
>There are wicks at the low of Candles at C
>Stop is placed under the low of C, so less risk more reward potential
✅Confirmed Entry
>Entry is at the break of swing high B
>The price makes a higher-high so structural change is confirmed
>The break often comes with good volumes & strong closing candles
>SL under C is wider than 1 in this case
>This technique is used when, in wave C, there are few weak candle closings below A
✅Trendline Entry
>Entry is at the break of TL
>The break often comes with good volumes & strong closing candles
>SL is wider than 1 but lesser than 2. So less riskier
>This technique is used when, in wave C, there are few weak candle closings below A
✅ABC-W Entry
>A unique entry technique
>The price breaks deeply below B and then retests at W
>At this point it seems that price will continue down but
>The price could not hold down and again breaks out of W, giving us a breakdown failure entry
>You would see a usually sharper continuations as many traders, who entered short positions, would start exiting in a hurry
Stop loss in all the cases is placed under the low of wave C and trailed as per traders' time horizon. These are relatively small corrective patterns so you can expect sharp continuations and take targets measured equal to the strong impulsive move in the background.
I hope it was useful.
Thanks for reading.
@Bravetotrade
Basics of DerivativesEver wonder what derivatives are? Check out this handy guide! 😉
A derivative is a contract or a product whose value is derived from the value of some other asset known as underlying. A variety of underlying assets serve as the foundation for derivatives.
These include:
→ Financial assets such as Shares, Bonds, and Foreign Exchange.
→ Metals such as Copper, Zinc, Gold, Silver, etc.
→ Energy resources such as Crude oil, Natural Gas, etc.
→ Agricultural products such as Wheat, Cotton, Sugar, Coffee, etc.
Cotton Futures
Gold Futures
Derivative Instruments
Forwards
It is a contractual agreement between two parties to buy/sell an underlying asset at a certain future date for a particular price that is pre-decided on the date of the contract.
Both the contracting parties are committed and are obliged to honor the transaction irrespective of the price of the underlying asset at the time of delivery. The terms and conditions of the contract are customized to cater to the needs of both parties. These are Over-the-counter (OTC) contracts, meaning they are a deal you make directly with a bank or a dealer. As a result, there is always counterparty risk involved.
Futures
Futures are standardized contracts similar to a forward contract, except that the deal is made through an organized and regulated exchange rather than being negotiated directly between two parties. The arrangements come with a fixed maturity date along with uniform terms for all the parties involved.
In simple language, futures are exchange traded forward contracts. The futures contract has little to no counterparty risk since the exchange is acting as a mediatory.
Options
An Option is a contract that gives the right, but not an obligation, to buy or sell the underlying on or before a fixed date and at a stated price. While the buyer of the option pays the premium and buys the right, the writer/seller of the option receives the premium with the obligation to sell/ buy the underlying asset if the buyer exercises his right.
There are two types of options:
→ American
→ European
American options can be exercised at any time prior to their expiration while the European options can only be exercised on the expiration date. In India, European options are used.
Swaps
A swap is an agreement made between two parties to exchange cash flows in the future according to a prearranged formula. A random variable (such as an interest rate, foreign exchange rate, commodity price, etc.) is used to determine at least one of these series of cash flows at the moment the contract is initiated.
Swaps are, broadly speaking, a series of forward contracts. They help the participants manage risk associated with volatile interest rates, currency exchange rates, and commodity prices.
Thanks for reading! Next week we’ll talk about the types of people who use derivatives and why they exist. Stay tuned!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Instagram , YouTube , and Telegram for more awesome content! 💘
Banknifty> The global market marks a neutral start.
> Market nature is bullish. If the market opens a gap up, the market will continue to the rally. The important point here is that the market should not break the previous day's low (Nifty) (Bank - 38813).
> On the other hand, an advancing wave is a supply wave, so watch carefully, if the market experiences a sharp decline, it is a sign of a correction.
GBPUSD bulls step back from key resistance ahead of UK GDPGBPUSD retreats from the 11-week-old descending trend line as the traders await the first readings of the Q2 2022 UK GDP. In addition to the trend line hurdle, the 38.2% Fibonacci retracement of the March-July downside, near 1.2345, guards the pair’s immediate upside. Following that, the 100-DMA hurdle surrounding 1.2435 will be in focus. In a case where the quote remains strong past 1.2435, the odds of witnessing a run-up towards May’s peak of 1.2665 can’t be ruled out.
On the contrary, GBPUSD sellers can aim for the 21-DMA support near 1.2075 during further weakness. It’s worth noting, however, that the quote’s downside beneath 1.2075 will have the two-month-old resistance-turned-support line, around 1.1955, as the last defense for buyers. In a case where the quote remains weak past 1.1955, the odds of its south-run towards the yearly low near 1.1860 can’t be ruled out.
Overall, GBPUSD bulls are in the driver’s seat ahead of the key UK GDP data. It should be observed that the British economy is likely to witness recession and hence positive surprise will be welcomed with zeal considering the pre-data bullish bias.
The Cup & Handle patternHey everyone! 👋
Today we are going to share an informative write-up about the “Cup and Handle” pattern along with a few exhibits that may help you solidify your understanding of this chart pattern.
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!
The post will shed some light on the following topics:
→ Basics and identification of the pattern
→ Components
→ Important aspects
What is a Cup and Handle pattern?
• The Cup and Handle is a bullish continuation pattern that resembles a cup with a handle.
• The cup is visualized as the alphabet "u" and looks like a rounding bottom pattern.
• The handle is formed as a range or a smaller “u”.
• The cup marks a consolidation phase whereas the handle has a slight downward move, which marks a retest phase.
• The handle is meant to signal a buying opportunity. When this part of the price formation is over, the stock may reverse the course and resume the prior uptrend.
Components of a Cup and Handle pattern:
The cup and handle chart has 3 main components:
• Cup
• Handle
• Neckline
Important aspects:
1. Prior Trend: The cup and handle pattern is a bullish continuation pattern, hence the prior trend should be an uptrend.
2. Cup length : In general, the cups with longer and more "U" shaped bottoms that resemble a rounding bottom, provide a stronger signal. This ensures that the cup is a consolidation pattern with valid support at the bottom of the “U”. The perfect pattern would have equal highs on both sides of the cup, but this is not always the case. In general, cups with sharp "V" bottoms should be avoided because there is almost no consolidation in this case.
3. Cup depth: Normally, the cup should not be overly deep. In practice, the cup depth can be up to 60-70% of the last swing move. (This can vary widely, though.)
4. Handle: The handle can occur in the form of a flag, a pennant, or a rectangular consolidation. This is the final retracement phase before the impulsive move higher. By and large, the handle can retrace anywhere between 40-60% of the depth of the cup.
5. Breakout: Bullish confirmation comes when the pattern breaks above the neckline (made using the prior highs) with a good volume.
6. Volume: In general, the volumes should decrease during the formation of the base of the cup as well as during the formation of the handle. Conversely, the volumes should pick up when the stock begins to make its move higher, back up to test the previous high.
7. Target: Using the measurement objective, the target comes out to be equal to the depth of the cup. It can be measured by calculating the distance between the bottom of the base and the neckline.
8. Stop-loss: Ideally, the stop loss is placed at the lowest point of the handle. But if the price oscillated up and down a number of times within the handle, the stop-loss can also be placed below the most recent swing low.
Exhibit: Cup and Handle pattern with a failed breakout
Thanks for reading! As we mentioned before, this isn't trading advice, but rather information about a tool that many traders use. Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter , Instagram , YouTube , and Telegram . 💘
Godrej Properties: Elliott Wave Viewodrej Properties has been bearish from 2021-10-14, As seen from wave structure it looks in primary wave 2] and may have completed its correction near 1133 level. We are assuming ABC of correction has been finalized and it has started an impulsive move towards its all time high. The 1133 will be an invalidation point for this impulsive move. Long can be initiated near 1280-1300 levels or we can hold the instrument for much higher targets. Note it has not reached the desired level of 61.8% retracement.
Please take the advise of your financial advisor for any trade or investment.
Regards
Like if you like the analysis.
Multiple Reversal patterns in Nifty IT !!!As visible on charts CNXIT has given a breakout from multiple reversal patterns
which are Island Reversal, Double Bottom, Inverse Head & Shoulder.
CNXIT has formed double bottom around 26450 along with RSI divergence
and finally given its breakout at 28600.
The index fell with a gap and also reversed with a gap hence, leaving
behind an island and showing an island reversal pattern.
Along, with above two patterns, inverse head & shoulder are also visible
which further conforms to a reversal in the IT sector.
Himadri Speciality forming probable flag and pole patternHimadri Speciality is forming flag & pole Pattern in a daily chart frame.
If today's candle close above 88 range, then we can see a clear breakout and it should confirmed by next day candle.
After this breakout stock will test 93 range first, once it break 94 range, it has a potential to reach 112 range as per the pattern.
Ideal SL will be below 78.
Wait for supply zone breakout for the confirmation.
This is just a View, not recommendation to trade, do your own analysis before taking any trade.
NSE:HSCL
What is moving average?If you have been in the market for some time, you may have heard of an indicator called the “moving average”. Today we are going to take a deeper look at the indicator, along with a few examples of how pros use it. This post will also lay the groundwork for future posts about more advanced moving average topics.
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!
The post will shed some light on the following topics:
- What is a moving average?
- How does moving average work?
- Correct usage along with exhibits
Introduction
A moving average (MA) is a technical indicator that is commonly used to determine the direction of the trend. By continuously recalculating the average based on the most recent price data, a moving average assists in smoothing out the price data. This helps in reducing the impacts of random short-term variations of the price over a given period of time.
Working with moving averages
- Moving averages are typically calculated to determine the direction of the trend and are sometimes used as dynamic support and resistance levels for a given time period.
Exhibit: Moving averages acting as a dynamic support
Exhibit: Moving averages acting as a dynamic resistance
- Since a moving average is derived using historical prices, it is a lagging indicator.
- The lag increases with the length of the moving average. As a result, a 200-period moving average (which includes prices for the previous 200 periods), will lag significantly behind a 100-period MA.
- Likewise, a moving average with a shorter period (faster MA) will be more sensitive to price changes as compared to a slower one.
Usage
- Faster moving averages are typically employed for short-term trading, while slower moving averages are more often utilized for understanding longer-term market dynamics.
- Moving averages are applicable to all time frames. Therefore, experimenting and testing several settings over a range of time frames is the best approach to determine which one works for you.
- A rising moving average indicates strength, while a falling moving average indicates weakness. Hence, in general, a stock is said to be in an uptrend if its moving average is increasing, whereas in a downtrend if MA is decreasing.
- In general, a stock may show bullish momentum if there is a bullish crossover, i.e. when a faster moving average crosses above a slower moving average.
- Conversely, bearish momentum may be expected on a bearish crossover, which occurs when a slower-moving average crosses below a faster-moving average.
Thanks for reading! As we mentioned before, this isn't trading advice, but rather information about a tool that many traders use. Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter , Instagram , and YouTube for more awesome content! 💘
TATA STEEL APPROACHING TO ITS CRUCIAL RESISTANCEAfter split the stock has rallied, almost 12% which now has put the prices at resistance zone (106-110) which was acted as a strong support.
The zone is around 106 - 110
-------------------👎🏻👎🏻👎🏻
Some bad about this stock
1) prices trading below 200 day moving average.
2) Price corrected recently 45% which is huge.
3) The volatile metal prices, making business projections , dismal.
4) On chart we are seeing that it is trading below 110 level which was support earlier.
+++++++++++++👍🏻👍🏻👍🏻
Some Good about this stock
1) Stock prices has shown a big rally recently
2) Overall market sentiments shifted slightly bullish , as after expected FED policy.
3) Metal sector overall on chart is bullish in short term.
4) RSI crossed 70 on daily chart , many will argue at this point that it is overbought case, but I don't think so.
5) Quarterly results were average.
=============
Conclusion : Stock will be bullish above breakout of resistance zone , so plan accordingly.
👇🏻👇🏻👇🏻👇🏻👇🏻👇🏻
Comment below if you want to add or correct anything.
GodrejCP price action studyPrice action only to watch.
Having buy bias as seen in chart
Aggressive entry CMP till moving average.
SL - candle close below trend line.
(entry 850, SL 840)
Conservative entry near next channel bottom and demand zone.
SL - below zone.
(entry 825, SL 815)
In both cases, SL is 10 points. Target 30 points.
----
No trade in case of huge gaps.
