Circadian Rhythm For TradingHello traders 👋 how are you?
As we know it is not just chart analysis or strategies that bring success in trading but there are other physical-psychological 🦾 factors also that silently act in the background and can enhance trading efficiency.
In this post I have tried to throw some light on the daily schedules ⏰ that can help traders to improve their trading performance ✈
✅ After-Market Slow Down 😌
>>Traders burn their veins watching every single candle and every tick on the chart. This leads to eye strain as well as brain fatigue.
>>A two-hour rest after the market close is essential to rejuvenate yourself for family keeping.
✅ Evening Preparation 👀
>>Its difficult to search and plan your trades during live market. Therefore you need an hour or so to look into your charts, before supper.
>>You may take help of screeners or shuffle through every chart on your watchlist to plan your trades.
✅ Deep Slumber 😴
>>Sleeping improves memory, boosts immune system, strengthens heart and increase productivity.
>>For having a sound sleep of 7 hours or so, stay away for your mobile and laptop screens after 9 O'clock. Spend quality time with your family and kids.
✅ Overnight Adaptations 🙃
>>Wake up early and move out in the fresh air if possible.
>>Do some jogging, stretching, exercising.
>>After morning activities, watch out for any change in sentiment that happened overnight due to western markets and see if you need to modify your plans.
✅ Meditation 👼
>>Now that everything is almost done and there are still 15minutes or so in the market open, just sit in a relaxed physical state and concentrate on your breathing.
>>Meditating this way for a few minutes may help for more effective execution of your plans.
✅ Plan Execution 🤺
>>The market opens and its now time to put your plan into practice.
>>If your analysis was correct, there should not be any hesitation in executing your trades.
>>Always mind trade management and risk management.
Thanks for reading. Hope this was helpful!!
Do like and comment for more such posts in the coming days 🙂
Bravetotrade
Community ideas
What is Fibonacci extension?Hey everyone! 👋
Last time we explained some of the basics to know when it comes to understanding the Fibonacci retracement tool. If you haven’t read that post, be sure to check it out here:
In this post, we are going to look at the Fibonacci extension along with a few exhibits that may help you solidify your understanding of this unique trading tool.
Please remember this is an educational post to help everyone better understand investing and trading tools. In no way are we trying to promote a particular style of trading!
Table of Contents:
1. What are Fibonacci extension levels?
2. What is the significance of extension levels?
3. How to find extension levels?
4. Difference between the Fibonacci retracement and Fibonacci extension
Without further ado, let’s jump in!
What are Fibonacci extension levels?
A Fibonacci extension is a tool that can be used to find price targets or estimate how far a price may move after the retracement/pullback is over.
Extension levels are also possible areas of interest where the price may stall or reverse.
It can be used to find projected areas of support or resistance when the price is moving into an area where other methods of finding support or resistance are not applicable or evident.
Fibonacci extension levels can be calculated to give the trader ideas on profit targets.
Significance of Fibonacci extension levels
Different traders use this tool differently but the most common usage is as follows:
Fibonacci extensions can be used for any timeframe and in any market- stocks, commodities, cryptocurrencies, etc.
Fibonacci extension levels indicate a price area that will be significant for the stock after the pullback/correction is over.
Extension levels can be drawn on different price waves over time. When levels from these different waves converge at one price, that could be a very important area.
For example , A stock may be in an uptrend. After a move up, it retraces to the 61.8% level. Then, it starts to go up again. In this case, the extension tool can be used to find the optimal targets after the price moves above the swing high level (100% level).
How to find Fibonacci extension levels?
In order to find the Fibonacci extension levels, you have to find the recent significant swing high and swing low and then plot the Fibonacci extension accordingly.
For uptrend: First, select the swing low and then the swing high. Then go to the Fibonacci settings and select reverse.
For downtrend: First, select the swing high and then the swing low. Then go to the Fibonacci settings and select reverse.
Exhibit: Fibonacci extension in an uptrend
Exhibit: Fibonacci extension in a downtrend
Difference Between Fibonacci Retracements and Fibonacci Extensions
Fibonacci retracements provide levels for a pullback whereas Fibonacci extensions provide levels in the direction of the existing trend.
For instance, a stock goes from 50 to 100 and then falls back to 75. The move from 100 to 75 is a retracement. If the price starts rallying again and goes to 150, that is an extension because the price moved past the previous swing high which is 100 in this case.
Conclusion:
Adding Fibonacci analysis with other common methods of technical analysis can be useful for adding confluence to a trade.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
A beginner's guide to trading - Chapter 4This question has been asked before. It has been asked now. I will be asked in future. What question is that? It is nothing but, “How to select stocks to trade?”
From beginners to expert traders, everybody knows stock selection is important. Especially for intraday it is very important as same stock won’t give movement daily.
There are two methods. One is to trade on active stocks and another is selecting a stock which has formed trade set up as per your strategy. Ok, now how to select stocks? For intraday, the stock you trade should be an active stock. If the price is above 400 rs means, generally the movement will be good. The price will move with momentum & show trend strength.
The stocks you select should be
-- Active
-- Above 400 Rs
-- No spikes in movement (very long upper & lower wicks).
Let us take an example. Beml is in my active stock list.
In the above chart on June 9th price was narrowing within a narrow range forming a symmetrical triangle. It means we can expect break out any side. I selected this stock to trade on June 10th. Next step is to prepare a trading plan. Bearish below 1330, I can go short if the price showed bearish strength with 10 points as stop. Bullish above 1350, I can go long if the price showed bullish strength with points as stop.
When you have a list of active stocks, you can filter them by pattern formation like the above example and trade.
Below is another example.
In the above example, I have selected the stock because of the consolidation. I have expected consolidation break out once the price moves out of the zone. The levels are marked in the chart.
Another method to select stocks is based on the strategy you use.
I have posted the strategy used already. Please refer the link below if you have not read it.
This trade set up forms in live market. So you have to wait for 15 minutes to know whether your trade set up has formed. These are just examples. Your strategy and trade set ups can have unique features depending on your trading style. It does not matter whether it is intraday or short term trading, always trade on stocks which is active and which forms the trade set up as per the strategy you use.
Nifty: A Study through Time CyclesNifty is in consolidation phase. This may or may not lead to a bear market and let’s not discuss it as of now. I will try to analyze Nifty, on the basis of support and resistance levels and time cycles, for the next possible swing and its direction.
Support and Resistance levels
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It can be seen on the chart that Nifty made a high in Oct21 and faced resistance, followed by a sharp reaction of 11%. It rallied till mid of Jan22 and again faced a sharp larger reaction of 14%. It then rallied 15% throughout Mar22, faced a trendline resistance and reacted 13%
If we draw important support and resistance lines through this price action we get three major levels
-Dynamic resistance level through the trendline
-16780 to 16850 multiple support zone which is now a potential resistance zone
-15670 to 15750 support zone which also coincides with a prior area of consolidation
Time Cycles
----------------
If we look at peaks, there is a 62bar high cycle followed by 51 bar cycle.
In this sequence, the next cycle could have been a 40bars for the market to test trendline resistance. But that is not the case and here the market is at 16780-16850 zone after 40 bar cycle.
This clearly reflects some weakness in Nifty as it was able to cover roughly half the distance on the upside compared to January and March rallies, in almost same number of days. It’s clear that the prior support zone is acting as resistance.
At the valleys, there are 53 and 43bar cycles. The next cycle could be a 33bar cycle where Nifty can either breaks the recent support 15670-17750 or retests it. The 33bar cycle coincides with June expiry so there is need to take a cautious approach on the upside until 16850 resistance is taken out.
I hope this idea will help you to understand the markets another non conventional perspective.
Keep liking and sharing your thoughts.
Disclaimer: This post is for educational purpose only and not a trading/investment advice.
CANDLE PATTERN 2 - BEARISH ENGULFINGPattern name: Bearish Engulfing
Pattern Type : Bearish Reversal
No. of Candles : 02
How to Identify it ?
1)There must be a preceding Uptrend.
2)A short Green candle followed by a long Red candle.
3)The Red candle should opens higher & closes lower than the Green candle.
4)The Green candle should be completely engulfed by the Red candle.
Psychology behind it :
1)The Bulls lose momentum & the Bears take charge and managed to close below the Green candle.
2)It implies the bears have fully override the bulls.
How to trade it ?
1)Look for the Bearish Engulfing at the Top of the Uptrend.
2)Upon confirmation, open a Short position in the 3rd Candle.
3)Place a Stoploss above the high of the Red candle.
How to create high quality trade ideas?Hey everyone! 👋
This week, we will be taking a look at the ingredients that go into creating and posting high-quality trade ideas.
While many think that a good trade idea begins and ends with finding a high probability chart setup in a liquid, volatile asset, the *best* trade ideas often combine multiple disciplines - which could include macroeconomic analysis, fundamental analysis, technical analysis, or some combination therein - into one cohesive unit. Getting in the habit of incorporating all of these factors into your thought process can lead to much higher quality setups, whether or not you choose to share them with the community.
Let’s jump in!
There are a couple of questions that you should ask yourself when trying to come up with high-quality ideas, and they boil down to the familiar five:
Who, What, Where, When, and Why.
Let's start with Who.
WHO:
Who is this trade idea meant for? When posting a trade idea, don’t assume that the idea is one-size-fits-all. The most obvious way TradingView helps in this regard is by categorizing posts by asset class, so FX traders are looking mostly at FX ideas, and crypto investors aren’t constantly exposed to commodity futures spreads. However, there are more subtle ways this happens as well. Different traders and investors often have different styles of trading, and so even within a single asset class, a long-term investment idea may not be applicable to a short-term trader. When creating a trade idea, it may make sense to identify to readers (and yourself) who this idea is for, and within what strategy it might best fit.
WHAT:
Most ideas do a great job at answering this question! It’s very simple: at its core, what does this idea want to do? Whether that idea boils down to shorting the stock market or building a long/short cryptocurrency spread, make sure that your idea clearly identifies what the core thrust of the trade is.
WHY:
This is the crux of any good trade idea. Why should someone commit capital and risk money according to your vision? It is common for traders, especially new traders, to think that answering this question comes down to building up a confluence of price patterns, indicators, and chart drawings until they line up and it is all systems go. In some cases, this serves as a reasonable answer to the “why” question - especially when assets have strong momentum.
However, oftentimes this approach may not go deep enough. What if the long technical setup on your chart is in a stock where the company’s business outlook is worsening? What if the descending triangle you’re looking at trading occurs within a larger bull market? This is where incorporating multiple disciplines, whether it’s fundamental analysis or macroeconomic understanding, can improve the quality of your trade ideas. Understanding some of the context surrounding the asset you’re trading can serve to layer probability in your favor.
Here’s the bottom line: the current price in any market is a reflection of the consensus view of the future. It’s important to illustrate *why* that pricing might be materially incorrect.
WHERE / WHEN:
It’s important to illustrate why *right now* is the right time to act on the idea, and this is where technicals can come in very handy. Broadly speaking, fundamental data on most assets only comes out once every couple of weeks, if that. It’s even longer between fundamental data releases for stocks. Because of this, utilizing price patterns, indicators, candlestick charting, and other technical analysis can be extremely helpful in defining risk, pinpointing entries, and trading more efficiently overall.
This is also where clean charting comes in. It’s important to identify how trader positioning, supply and demand zones, and other factors (that technicals help illustrate) affect the timing and risk of the idea. In addition, when publishing an idea on TradingView, the chart is one of the most visible and prevalent ways of communicating this information. Making these items clearly defined can significantly improve the quality of a trading idea and ensure clear communication of the important information.
So there you have it - the key questions that are at the core of any good trading idea! We look forward to seeing how this framework is incorporated into future posts.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
Action & Reaction move Analysis in simple way.Simplicity Is the Key to Success . The simpler we keep things, the more successful we will be. It's as simple as that. Therefore, Action & Reaction is very simple to understand and act. Let's move ahead.
Two types of movement in the market: Consider an uptrend and, bulls are in charge. The first major move in trend is the Actionary move . when finally pause to catch their breath, the bears take over and send the price lower. The lower is counter to the over uptrend and what we call a Reactionary move . Typically, the reactionary move can be weak(1/3) or deeper(2/3). Sometimes a reactionary move can sideway and, some people call it a pullback also which is part of a larger trend. when it could end up and new actionary move in the opposite direction. Trade and Trend is your friend, so we can say here take a position in direction of actionary move.
1 to 2 is an actionary move
2 to 3 is the reaction of 1 actionary move.
3 to 4 is the subsequent actionary move.
4 to 5 is a new reaction.
5 to 6 is unclear which has not still made a lower low. It could be bottoming out. No one really knows what will happen next. In this case, we will think about both sides. The first side, seems to be a new actionary move up and if 5 to 6 actionary move is exists, the price remains actionary for looking lower low.
What will be your trade action?
1. Up (long)
2. Down (short)
Type in the comment section.
TimeCycle Analysis is looking for the up move on weekly timeframe:
What after a heavy Loss ?Different types of emotions, questions, doubts arises in our mind when we see our capital depleting overall , we see a big portion of our capital is gone now ,we left with very less compare to initial capital.
_________________________________
Different concussions made by different traders
_________________________________
1) They loss because of manipulator , operator , promoter , fraudsters etc ...
This type of thinking is obvious because there are manipulators , operators , insiders who are always at advantageous position than you ... It is just like that your army trying to fight with a king where his army is equipped with better weapons.
Your chances of winning is less , obviously . Am I right or wrong.?
See why I took this example because in trading profession one's loss is another's profit. It is not very different with ancient war where one king use to fight with other risking the life of his soldiers for looting wealth of opponent.
There are professionals, Institutions, prop desks, Fiis ,Diis , mutual funds , different portfolio managers serving their clients. Many players playing at the same time.
Now main point is do we not take trades as our chances are less ?
See yes big players make money but you can too make money you need to understand your strength.
Now at this point you will surprise what is retailer's strength , in front of big players . Let me list it out.
1) Less capital . You do not need very much liquidity to trade efficiently. Big player cannot trade scrip which do not have very much liquid.
2) Smooth Entry and Exit : If I say you have to enter or exit 10Lac shares of Reliance today can you execute it at a small price range no , but with a small capital it is possible.
3) We can stay away from market for long time if we do not see a clear trend. But what about big players he have to trade every market condition and they trade and bear the existence cost their.
4) You can change your trading style much to get better results but they can't do much changes .
This is just like small armies comparing with big armies , small armies have better less conflict within ,Management have less difficulties in handling , Less Budget. etc...
See you can blame big players for your loss but introspect within is this the only reason. ?
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2) They lost because they do not have big capital :
I remember a quote .
"A trader is never under capitalised his mind is underdeveloped "
First learn to grow small account. There is no guarantee that if you have a big account you will perform good.
____________________________________
3) There is problem with their strategy . (search for holy grail)
See if you think a strategy formed with mathematical calculations can alone make you rich . I do not think this business is for you ... it is harsh but true.
"" It is just like the search of god outside but it is siting inside ""
Work with your trading mindset will give more results than working with strategies.
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4) Fear for losing money again
This fear is there in every trader whether you lost money made money or just starting , but what happens when you had a big loss experience this fear starts growing bigger and bigger , your decision making get affected with this fear. You get very fearful with open position when it shown some profit you just try to book ass soon as possible. You start booking small and lose big, with this derailed trading style no progress is expected.
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5) You think you should join expert traders.
Now at this point you are thinking constructively ,but this gives opportunity for fake trainers , tip providers , brokers running their own agenda. For them to convince you for their services is very easy. They clearly know how to convince. I do not say there are only fraudsters their are genuine guys too but their percentage and willingness to help you is very very less.
"It is just like in search of peace , satisfaction, god people end up in the trap of fake babas , gurus so called god messengers."
I will further explore more about the possible psychological situations after a big loss and about Loss recovery strategies in my next post.
Stay tinned .....
What is Fibonacci retracement?If you have been in the market for some time, you may have heard of “Fibonacci retracements” . Today we are going to share an informative write-up along with a few exhibits that may help you solidify your understanding of this concept.
Table of Contents:
1. What are Fibonacci levels?
2. What is the significance of retracement levels?
3. How to find retracement levels?
4. How to use the retracement levels?
Without further ado, let’s jump in!
What are Fibonacci Retracement levels?
The retracement levels are horizontal lines that indicate areas where the price could stall or reverse.
These horizontal levels can act as potential support or resistance levels.
They are based on Fibonacci numbers. Each level is associated with a percentage which means how much of a prior move the price has retraced.
The retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%.
While 50% is not a pure Fibonacci ratio, it is still used as a support and resistance. This is because people regard it as an important level.
The price won’t always bounce from these levels. They should be looked at as areas of interest. Hence, the Fibonacci retracement should be used as a confirmation tool.
Significance of Fibonacci Retracement levels
Different traders use this tool differently but the most common usage is as follows:
Place entry orders
Determine stop-loss levels
Set price targets
For example, A stock may be in an uptrend. After a move up, it retraces to the 61.8% level. Then, it starts to go up again. Since the bounce occurred at a retracement level during an uptrend, long positions can be initiated with an optimal stop loss.
Finding Fibonacci Retracement levels
In order to find the retracement levels, you have to identify the recent significant swing high and swing low and then plot the Fibonacci accordingly.
For uptrend: First, select the swing low and then the swing high.
For downtrend: First, select the swing high and then the swing low.
Exhibit: Fibonacci retracement in an uptrend
Exhibit: Fibonacci retracement in a downtrend
How to use the retracement levels?
If the price is approaching a Fibonacci level, you should look out for the following things at the point of interaction or in the vicinity of the level.
Reversal candlestick patterns
Rising volumes
Moving average
RSI divergence
Previous support/resistance level
Conclusion:
Adding Fibonacci analysis with other common methods of technical analysis can be useful for adding confluence to a trade.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
Shooting Star - Complete GuideWhat is the Shooting Star candlestick pattern?
A shooting star candlestick pattern is a chart formation that occurs when an asset’s market price is pushed up quite significantly, but then rejected and closed near the open price. This creates a long upper wick, a small lower wick and a small body.
The upper wick must take up at least half of the length of the candlestick for it to be considered a shooting star. And, it must appear at the top of an uptrend. As a result, the shooting star candlestick pattern is often thought to be a possible signal of bearish reversal. This means an uptrend might not continue (prices may fall).
Traders should be careful not to confuse the shooting star pattern with an inverted hammer candlestick pattern. They both have a longer upper wick and small body. But the inverted hammer indicates bullish as opposed to bearish reversal. Also, the inverted hammer is often seen at the bottom of a downtrend.
How to recognize it:
i) Little to no lower shadow
ii) The price closes at the bottom ¼ of the range
iii) The upper shadow is about 2 or 3 times the length of the body
What does Shooting Star tells you ?
i) Shooting stars signals a potential downside reversal
ii)A shooting star opens and rises strongly during the trading session, showing the same buying pressure that is seen over the last trading sessions. At the end of the trading session, the sellers push the price down near the open.
or
At the buying climax, huge selling pressure stepped in and pushed price lower. The selling pressure is so strong that it closed below the opening price.
In short, a Shooting Star is a bearish reversal candlestick pattern that shows rejection of higher price.
Before trading with the shooting star, one should remember the following points:
Trade Entry: Before you enter a shooting star trade, you should confirm that the prior trend is an active bullish trend. Entry is below the Shooting Star candle low.
Stop Loss: Place Stop Loss just above the high of Shooting Star candle or above recent high.
Taking Profits: Minimum target is the size of the Shooting Star candle. I generally prefer 1:2 as first target. Best way to ride the move is to sit till any bullish signal is sensed. You can target previous swing lows or support zone.
Examples-
TATAMOTORS
NIFTY
NAUKRI
High Probability Scenario:-
i)Focus on the major Resistance levels, that’s where traders get trapped
When you trade The Shooting Star candlestick pattern, you want to focus on trading the major Resistance levels (the ones which can be seen on the higher timeframe).When a level is obvious and the price breaks out of it, many traders will hop on the bandwagon and buy the breakout (hoping to catch a piece of the move).However, if the price makes a false breakout, this group of traders is trapped, and their stops will trigger strong selling pressure.
Now, this is to your advantage because The Shooting Star candlestick pattern allows you to trade the false breakout and profit from “trapped” traders.
So the more obvious the level, the more traders will get trapped — and you make more money.
Conclusion
So here’s what you’ve learned today:
The Shooting Star candlestick is a bearish reversal pattern that shows rejection of higher prices.
Just because you a spot a Shooting Star candlestick pattern doesn’t mean you go short immediately because you must also consider the context of the markets. Confirmation to go short is always below shooting star candle's low.
Set your stop loss slightly above shooting star candle or above previous highs.
Learning Stages in TradingIn my opinion learning in any field is connected to the "Four stages of Competence" and trading is no different. This post also answers why most traders lose in the stock market.
Following are the four stages which every trader has to pass before attaining success.
Unconscious Incompetence
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This stage belongs to the newbie traders who ignore all the knowledge part. They don't think that they need any kind of knowledge to make money. Their greatest desire is to make money in shortest possible duration so they rely on tips/news for trading. Ultimately they lose and i think more than 50% traders quit at this stage only.
Conscious Incompetence
--------------------------------
At this stage the trader realizes that ignorance is not a bliss. He has already lost in the markets so he thinks that may be he lacks knowledge. He starts reading books; attends online webinars; and attend courses/classes.
Although he is gaining knowledge yet he confused with tons of indicators and strategies etc. He still loses because due to these confusions their is no solidarity in his plans. He has got a poor risk appetite. His ego of being right and urge to win every trade widens his losses. I think less than 30% traders survive up to this stage.
Conscious Competence
------------------------------
Finally after so many losses the confusion leads to simplicity. The reader gets more systematic with setups and all, but still struggling with psychological issues like fear, greed, lack of discipline, insufficient capital etc.
At this stage, I suppose 85% traders would lose their entire capital and give up scolding themselves for choosing a wrong career. Left with less than 15% traders.
Unconscious Competence
---------------------------------
A very few who reach at this stage and still left with funds make money from money. Trading selective setups becomes an involuntary action for them. They have realized the hardest truths of trading so psychological hurdles disappear from them. They belong to that <10% successful traders.
Which stage do you belong? Do write in the comment section.
Keep liking for more interesting stuff in the coming days.
Strong Bearish Reversal Candlestick PatternPattern: Bearish Reversal
1) There must be a prior uptrend.
2) Price opens above previous day close/high and makes a high higher than previous day.
3) The Red candle closes below previous day open/low
Trading this pattern
1) Look for this pattern after a big upmove.
2) Upon confirmation, open a short position on 3rd candle.
3) Place a stoploss above the high of the big red candle.
Part 1: Equity Derivatives - A Beginner's GuideWhat are derivatives?
Basic interpretation : something which is based on another source.
A derivative is a contract or product whose value derives from the value of the base asset. The base asset is called the underlying asset.
i.e., Sugar prices will rise if sugarcane prices increase due to low production. It means sugarcane is the underlying asset of sugar because the value of sugar is associated with sugarcane.
There is a broad range of underlying assets:
Metals: lead, gold, silver, copper, zinc, nickel, tin, etc.
Energy: coal, natural gas, etc.
Agri commodities: corn, cotton, pulses, wheat, sugar, etc.
Financial assets: Stocks, bonds, forex, etc.
There are two types of derivatives:
1. Exchange-traded: A standardized derivative contract, listed and traded on an organized exchange.
2. Over-the-counter/off-exchange trading/pink sheet trading:
A derivative product in which counterparties buy or sell a contract or product at a negotiated price without exchange
Instruments of derivatives market:
There are four instruments in the derivatives market:
1. Forward:
Forward is a non-standard agreement or agreement between two parties that allows you to buy/sell the asset at the agreed price for a pre-decided date of the contract.
Forwards are negotiated between two pirates, so the terms and conditions of the contract are customized.
These are called over-the-counter(OTC).
2. Future:
Future contracts are similar to forwarding contracts, but the deal is made through an organized and regulated exchange rather than negotiated between two counterparties.
A futures contract is an exchange-traded forward contract.
3. Options:
A derivative contract that gives the right but not the obligation, to buy or sell an underlying asset at a stated strike price on or before a specified date.
Buyers of options- Pays the premium and buys the right
Sellers of options - Receives the premium with the obligation to buy/sell underlying assets.
4. Swap:
A swap is a derivative contract between two counterparties to exchange for the cash flows or liabilities from two different financial instruments.
It is an introduction article. I will cover all these topics in detail.
Swap helps participants manage risk associated with volatility risk interest rate, currency exchange rates, & commodity prices.
Index:
Index = Portfolio of securities
An Index shows how investors experience the economy. Is it progressing or not?
A Stock market index gathers data from a variety of companies of industries. The data forms an overall picture and helps investors compare market performance through past and current prices.
Financial indices represent the price movement of bonds, shares, Treasury Bills, etc.
Importance of Index:
1. An index is an indication of a specific sector or gross market.
2. It helps investors to pick the right stock
3. An index is a statistical indicator. It represents an overall change or part of a change in the economy.
4. In OTC & exchange-traded markets, It used as an underlying asset for derivatives trading
5. An index helps to measure for evaluation of portfolio performance.
6. Portfolio managers use indices as investment benchmarks.
7. Index illustrates investor sentiments.
Types of index:
There are four classifications for indices:
Equal Weighted Index:
Each company is given the same weightage in the composition of this index. Equal-weighted indexes are more diversified than market capitalization-weighted indexes. This index focuses on value investing.
Free-float index:
In finance, equity divides into different among various stakeholders like promoters, institutions, corporates, individuals, etc.
A tradable stake for trading is called a free-float share.
i.g, If XYZ company has issued 5 lakh shares with the face value of Rs 10, but of these, 2 lakh shares are owned by the promoter, then the free-float market capitalization is Rs 30 lakh.
Free-float market capitalization: Free-floating shares * Price of shares
Index: BSE SENSEX
Market capitalization-weighted index:
In this index, each stock is given weightage according to its market capitalization.
High market cap = High weightage
Low market cap = low weightage
Market Cap= Current market price * total number of outstanding shares
i. e, if XYZ company has 1,000,000 outstanding shares and a market price of 55 rs per share will have a market capitalization of 55,000,000.
Index: Nifty 50
Price Weighted Index:
High price = More weightage
Low price = Low weightage
Popular price-weighted index: Dow Jones industrial average & Nikkei 225
I will upload second part soon.
Thank you :)
Money_Dictators
How to add multiple charts in Tradingview ideas?Hey everyone! 👋
If you are new or have recently started posting ideas, you may have noticed that a lot of people put multiple charts in their posts. This makes their ideas more thorough and resourceful. So, the question arises, how do you put multiple charts in a single idea?
Don’t worry, we’ve got you covered. This short visual guide will help you in understanding the complete process of creating exhaustive ideas containing multiple charts.
1. When you are on the idea publishing interface, you will notice a chart-like icon. This option is used to insert ideas and chart snapshots in your post.
2. If you click on this icon, it will open up a blank field with an option labeled “insert”. All you have to do is, insert the links to your secondary charts in this field.
3. To get the link to your charts, click on the “camera icon” at the top right-hand of the screen, and then click on “copy link to the chart image”.
4. Then come back to the field mentioned in point 2. Paste your link and click insert.
5. Your chart will automatically get inserted into the post along with relevant syntax. You can repeat the process as many times as you need to insert the charts.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
WHAT IS OPTION GREEKS ?NSE:BANKNIFTY
Introduction
Option trading is an exciting process and almost every market participant has at least experienced the thrill of trading options, almost all the time with unsatisfactory results.
To avoid such accidents an option trader seeks different tools to trade sucssessfully,
The most important of tools are the Option Greeks and they are usually the first metric looked upon by option traders.
What are Option Greeks?
Options are derivatives of underlying assets ( curd is a derivative of milk, so the change in the quality of milk will result in a change in the quality of the curd derived ) similarly, Greeks are a way to measure the sensitivity of the price of the option to various factors.
The price of the option premium does not always move in conjunction with the price of the underlying asset and it is important to understand the different factors that affect the change in the price of the premium. With the help of the option greeks, a trader will be able to measure the rate of change of different factors affecting the option premium.
# You can check the option greeks by using zerodha option chain or any other trading platform
What is DELTA?
The first Greek is Delta, which quantifies how much an option's price is projected to fluctuate for every $1 that the underlying securities or index changes in price.
For example,A Delta of 0.50 indicates that the option's price will fluctuate 50 point for every 100 point movement in the price of the underlying stock or index.
#Delta for call option ranges between 0 to 1 and for put option ranges between -1 to 0.
>ATM options have a delta of 0.5
>ITM option have a delta of close to 1
>OTM options have a delta of close to 0.
Delta = Change in option premium/ Unit change in the price of the underlying asset.
#The following example should help you understand this better –
Nifty is currently trading at 16000
Option Strike = 15900 Call Option
Premium = 150
Delta of the option = + 0.60
Nifty is expected to reach 16200
What is the likely option premium value at 16200 ?
Well, this is fairly easy to calculate. We know the Delta of the option is 0.60, which means for every 1 point change in the underlying the premium is expected to
change by 0.60 points.
We are expecting the underlying to change by 200 points (16200 – 16000), hence the premium is supposed to increase by
= 200*0.60
= 120
the new option premium is expected to trade around 150 + 120 = 270
What ia gamma?
Gamma is used to measure the delta’s change relative to the changes in the price of the underlying asset.
If the price of the underlying asset increases by 1point, the option’s delta will change by the gamma amount.
The gamma value will also range between 0 and 1.
Gamma = Change in an options delta / Unit change in the price of the underlying asset.
What is Theta?
The Theta or time decay factor is the rate at which an option loses value as time passes. Theta is expressed in points lost per day when all other conditions remain the same.
theta is always shown as negative number because option value is depriciating as the time is passing.
Theta is the biggest enemy of option buyer cause it reduces the favourable outcome of option buyer by depriciating the option price.
for example,A Theta of -15 indicates that the option premium will lose -15 points for every day that passes by.
if an option is trading at Rs.290/- with a theta of -15 then it will trade at Rs.275/- the following day when other factors remain constant.
Theta = Change in an option premium / Change in time to expiry.
This is the graph of how premium erodes as a time to expiry approaches. This is also called the ‘Time Decay’ graph.
What is Vega ?
It is intended to tell you how much an option’s price should move when the volatility of the underlying security or index increases or decreases. It is the change of an option premium for a given change (typically 1%) in the underlying volatility.
1. Vega measures how the implied volatility (IV) of a stock affects the price of the options on that stock.
2. Volatility is one of the most important factors affecting the value of options.
3.A drop in Vega will typically cause both calls and puts to lose value.
4. An increase in Vega will typically cause both calls and puts to gain value.
Vega = Change in an option premium / Change in volatility.
What can option Greeks do for you?
1.Help you measure the possibility that an option will expire in the money (Delta).
2.Estimate how much the Delta will change when the stock price changes (Gamma).
3.Get a feel for how much value your option might lose each day as it approaches expiration (Theta).
4.Understand how sensitive an option might be to large price swings in the underlying stock (Vega).
“With the help of Greeks, an options trader can make more analyzed decisions about which options to trade, which strike price to trade and when to trade.
Since there are a variety of market factors that can affect the price of an option in some way, assuming all other factors remain unchanged,
we can use Greeks and determine the impact of each factor when its value changes.”
I Hope you found this helpful.
Please like and comment.
Happy Trading!
How to use the heatmap on TradingView? Hey everyone! 👋
You may have already seen plenty of cool TradingView heatmaps floating around social media. In case you haven’t, here is what a heatmap looks like:
This short visual guide will help you in accessing and customizing our awesome heatmap feature.
1. When you open TradingView, you will see a toolbar at the top with various options, including “Screeners”.
2. If you hover over it, you will see 5 options, namely:
- Stock screener
- Forex screener
- Crypto screener
- Stock heatmap
- Crypto heatmap
You can choose the heatmap as per your preference.
3. Let’s assume you want to check the “Stock heatmap”. So, you just click on it and it will display the heatmap of the US market by default. There is an option at the top-left corner to change the “source” of the heatmap.
4. When you click on the source option, it will open a list from which you can select your desired source.
5. As soon as you change the source, the heatmap will automatically get updated. You can customize the heatmap by change %, sectors, market capitalization, or performance.
6. Last but not least, you can also save and share your heatmap directly from the social sharing button.
7. If you need more help, you can check out this short video tutorial - How to use the heatmap on TradingView?
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
MOST RELIABLE CANDLESTICK PATTERN Pattern name: Bullish Engulfing
Pattern Type : Bullish Reversal
No. of Candles : 02
How to Identify it ?
1)There must be a preceding Downtrend.
2)A short Red candle followed by a long Green candle.
3)The Green candle should opens lower & closes higher than the Red candle.
4)The Red candle should be completely engulfed by the Green candle.
Psychology behind it :
1)The Bears lose momentum & the Bulls take charge and managed to close above the red candle.
2)It implies the bulls have fully override the bears.
How to trade it ?
1)Look for the Bullish Engulfing at the bottom of the Downtrend.
2)Upon confirmation, open a Long position in the 3rd Candle.
3)Place a Stoploss below the low of the Green candle.
Happy Trading :)
-Divyaa Pugal
A beginner's guide to trading - Chapter 2In Chapter – 1, we have seen about candlesticks. Today we are going to see about supply & demand concept with candlesticks. Lets first see about the normal concept people follow for supply/demand zone. I have used numbers 1,2,3 and 4 to mark supply and demand zones in this post.
In the above chart 1 acts as demand zone as price had good upside move from it. When price reach 2, as per normal demand zone concept, people think there will be pending orders to buy from big institutions at that level and we can buy. At 2 buyers were trying to take charge and we had a big bull candle. That was not institutional buyers, but from retails traders. It was proved as price did not move much from that. At 3 price was broken downside by a big bear candle. And at that level demand zone became supply zone. At 4 price had a nice fall. This is an example about how a demand zone becomes supply zone. Trend strength determines whether a particular level will act as supply or demand zone. Now we will see another example to understand trend strength.
In the above chart, price had good move from 2 and becomes demand zone. When price reach 3, there was small upside move, but price fall from 4. Look at the arrow marks.
When bearish strength increases, the demand zone becomes supply zone. Simply buying whenever you see a demand zone wont work. It wont give you consistent money. But understanding the trend strength and trading according to it will help you to make consistent money.
In the chart above, at 3 price showed bearish strength & there was not even a small fight from bulls, instead bears won without much competition and price fall down.
In the chart above, before price break down @ 3, note how bull strength was reducing which I have marked.
Always trade with the knowledge of trend strength.
Always trade with stop loss.
Always trade with the knowledge of trend direction.
How to see idea statistics on TradingView?Hey everyone! 👋
Have you ever wondered how to check your post statistics such as views, comments, and likes, without going through each and every post? Today we wanted to drop this short visual guide to help you out in achieving this.
1. When you open TradingView, you will see a toolbar on the right side of the screen.
2. Click on the bulb-like icon (5th position from the bottom).
3. As soon as you click on the bulb icon, it will list all your ideas, along with all the statistics.
4. You can notice the likes, comments, and views listed on the side of your posts. You can use the “star” icon to set the post in the “favorite category”.
5. There is also an option to filter the posts based on favorite ideas or private ideas.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
Five Important Lessons to Learn From the MarketHere are a few important lessons that can help traders and investors to survive in the markets and become profitable over a period of time.
Risk Management
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Whether you are an options trader or cash market investor, risk management is the most important concept to deal with.
You should always prescribe our risk before entering the trade. Adjust position size so that the risk does not exceeds the prescribed limit.
After entering the trade, you can either go for reward which could be double, triple or more than your risk OR you can trail your stop loss to go for larger gains, in case momentum is strong.
Nothing Works All the Time
---------------------------------
A trader can utilize a custom system/strategy, can take discretionary decisions or use an algorithm to take decisions. But remember that nothing is going to work all the time.
You are bound to miss moves, exit early or get shaken out before the move actually starts. You need to think about longer term perspective. The opportunities that you missed were just a few of next 100 trades that you are going to take.
But if you are missing 6 out of 10 opportunities, you need to adjust your strategy.
All Strategies are not for Everyone
-------------------------------------------
You might have seen or heard about traders who made huge money using their own strategy. But trust me, even if you get that strategy for free there are higher chances that you are going to lose.
It is not just the strategy but years of hard work by the author that made it perfect for him. He would know all the nuances and the environments where it worked well.
Also, the nature of a strategy should be directly proportional to your personality. An aggressive strategy for one trader can be too slow for the others.
Start Small
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If you are not so familiar with the stock market then you need to start with small capital. This will automatically reduce your risk and position size. Your profit will also be small but learn to make your calculations in percentage terms.
First prove yourself that you are a profitable trader for at least three months, then increase your capital gradually.
Deal with Failures
----------------------
As I said nothing works all the time. There will be losing days and losing streaks. It is very difficult to deal with losses when you are new to trading. But to begin with, minimal losses are easier to deal with. Imagine you started trading with 1lac and lost 10K on the very first day. I am sure that soon you will lose it all and then become an investor.
Following risk management and developing strategy that suits you are not overnight processes. You have to develop discipline to follow them. Try to stay in the market for longer time and it will teach you how to deal with failures.
Before you leave don't forget to like and comment for more such writeups in the coming days.
Regards
Type: 2 Fear - Fear of Losing (Most Common)Type :2 Fear of losing
If you’re going to be a trader, you’re going to lose money at some point, and in case you are still in the phase of trying to avoid all losing trades and searching for a “Holy-grail” trading system with a 75% strike rate, you should forget about all that right now. As cliche as it may sound, losing really is part of winning as a trader; the two are inseparable. If you don’t learn how to lose properly you will never make consistent money as a trader.
Reality check…
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ALL pro traders lose money, and they understand that it’s just part of the “game”. Sadly, for many traders, every trade is accompanied by a tremendous FEAR of losing money and sometimes intense emotional attachment.
Some of the key reasons why traders become fearful about losing their money include the following:
1. They don’t understand that mathematically, over a series of trades, a trader can lose a majority of their trades and still be widely profitable, simple math proves this.
2. They are simply fearful of losing money in general.
3. They are trading positions that are too big (risking more than they really should be), causing fear, sleepless nights and huge emotional swings.
This is some pretty powerful stuff so make sure you actually read the whole article and re-read it if you have to. What you learn here should give you the power to eliminate your fear of losing money in the markets and will help you develop into a confident and emotionally collected trader.
Fear of losing money can be a good, natural emotion, but we need to transform its focus.
Fear of losing money is a good emotion to have in many areas of life, if we did not have it there would be evens more chaos in the world and in the markets. Humans are protective of their acquired wealth and property, and rightly so; they worked hard for it.
However, in trading, this natural energy to be defensive and emotional with money needs to be transformed and refocused into a different mental state…
Instead of being fearful of losing your money when trading, embrace the control you have on each trade; a trader has complete control over the risk management of every trade via stop losses and position sizing, . These risk management tools are your way of being in control of your money/funds, and instead of being “fearful” about losing money, you should feel empowered and confident because you can predetermine how much you are comfortable with potentially losing BEFORE you enter a trade by using these tools.
However, just using these tools to control your risk per trade is not quite enough to totally remove the fear of losing.
-------------------------
Ask yourself some serious questions
If you feel fear or any emotion at all when you place a trade, you need to “slap” yourself in the face and ask yourself 3 big questions (and answer honestly):
1. Do I really have the knowledge and confidence to be trading with real money in the first place?
If you’re trading your hard-earned money in the markets but you don’t know what your trading edge is and you don’t have 100% confidence in your ability to analyse and trade the markets…you probably should not be trading. One of the biggest reasons traders become afraid to lose their money is because they aren’t confident in their own ability to trade! It seems silly I know, but it’s very true; many traders simply don’t have a trading strategy mastered, they don’t have a trading plan, trading journal, etc…they simply aren’t prepared to risk real money in the markets yet…thus they feel fear when they trade.
2. Am I trading a position size that’s too large for my personal risk profile / per-trade risk tolerance?
If you don’t know what your per-trade risk tolerance is, then you need to figure that out first. It’s basically just the dollar amount that you feel like you are 100% comfortable with potentially losing on any trade; because you CAN lose on any trade…remember that. You have to take into account your overall financial situation and then determine how much money you should realistically and honestly have at risk in the market on any one trade…be honest with yourself here. You’ve got to think of yourself as a risk manager and as someone who is managing funds, rather than just a small-time guy trying to get lucky; your trading mindset will directly influence your trading results.
3. Do I truly understand the maths behind trading?
-------------------------
When I say the “maths behind trading” I am mainly referring to risk reward and how it relates to your overall winning percentage. For example, on a series of 20 trades, you are likely to lose at least 35 to 45% of the trades, and most traders who are successful lose anywhere from 40 to 50% of the time, some even up to 60% of the time. But, through the power of risk reward you can lose more than you win and still come out very profitable. We will expand on this below.
Embrace the belief that losing is OK
Losing is good if you’re cutting your losses quickly and understand that by doing so you’re simply preserving capital and that your winning trades will pay for your losing trades with profit left over. This is the power of your average risk reward ratio over a series of trades coming into play; we will see this in action below…
Even very profitable traders typically lose more than they win, to prove this point let’s take a look at a case study showing 14 trades with a just a 43% win rate. To be clear, that means you are losing 57% of the time and winning just 43% of the time. It can be hard to associate “losing” the majority of your trades with making money, but as I discussed in one of my recent articles, you don’t have to be right to make money trading. You can make money with poor accuracy and decent reward to risk ratio.
How do Breakout traders get trapped?In the example above, note the following:
- Warning candles: Doji + Hammers + bearish candles indicating exhaustion and a lack of follow-up.
- A relatively higher volume on hammer & doji, which is never a good sign for a breakout because it indicates significant selling pressure.
- A bullish breakout must always be accompanied by a good follow-up, else it won't sustain. Bullish BO needs good bullish candles, NOT dojis.
Notice how a small wick (on the daily chart) looks like a clear liquidity hunt on lower time frames.
Underlying concepts:
1. The market was moving sideways and generating liquidity on both sides.
2. In general, when the market is ranging, different participants place orders with a different bias. Hence, there is liquidity on both sides.
3. For a bullish market, the price must form a series of higher highs and higher lows. Similarly, for a bearish market, the price must form a series of lower highs and lower lows.
4. Whenever the price reaches a resistance level, there are 2 types of traders that take positions:
- Those who short the level in anticipation of it acting as a resistance.
- Those who long early in anticipation of resistance being taken out.
5. The stop losses of these traders act as liquidity. A short position has a “buy order” as SL, whereas a long position has a “sell order” as SL.
6. In general, almost everyone is aware of how the retail participants place their stop losses. They are either:
- Above/below an important swing level such as a support, resistance, day high, day low, etc.
- Above/below a demand, supply candle.
- Above/below the candlestick pattern such as a shooting star, hammer, and doji.
- Above/below the charting pattern.
7. The market moves from one zone of liquidity to another.
8. As a retailer, you may not realize the importance of a small wick. The small wicks are more than enough to liquidate plenty of positions.
Psychology and Behind the scenes stuff:
1. When the price reached the resistance level, 2 types of traders started opening positions.
- Aggressive shorters who shorted in anticipation that the level will hold.
- Aggressive longers (those who don't wait for confirmation) who were waiting for the candle to close above the resistance.
2. Both of these traders opened their positions and placed their stop losses in the system.
3. The banks/institutions have fairly complex algorithms that can easily identify these positions.
4. The stops of these aggressive participants are taken out fairly easily and the market moves from one zone of liquidity to another.
Thanks for reading! Hope this was helpful. If you need a PDF of this post with all the charts and write-up, check out the signature section (under the post).
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
What is Bearish divergence?Hey everyone! 👋
Last week, we explained some of the basics to know when it comes to understanding bullish divergences in the markets. If you haven’t read that post, be sure to check it out here:
In this post, we are going to examine just the opposite: bearish divergences! Please remember this is an educational post to help everyone better understand investing and trading principles. In no way are we trying to promote a particular style of trading.
Table of contents:
1. What is bearish divergence?
2. Types of bearish divergence
3. Some examples
When the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, it is called divergence. Divergence warns about potential underlying weakness in the current trend.
What is Bearish divergence?
A bearish divergence occurs when the price rises to a new high while the oscillator fails to reach a new high (exception being hidden bearish divergence). It indicates that the buying pressure is decreasing and the bears may soon take over the market. Generally, a bearish divergence occurs at the end of an uptrend. It has two sub-types:
- Classic bearish divergence
- Hidden bearish divergence
What is classic bearish divergence?
The classic bearish divergence occurs at the end of a bullish trend and indicates that a trend reversal may occur soon. In this, the price and the oscillator always either form a higher high or an equal high. It can be subdivided into 3 types, based on the strength.
1. Strong Bearish Divergence
In strong bearish divergence, the price forms higher highs but the oscillator forms lower highs. This means that the buyers are not buying at the same momentum i.e. the buying pressure is decreasing.
Price : Higher highs
Oscillator : Lower highs
Exhibit: Strong bearish divergence
Exhibit: Strong bearish divergence followed by a reversal
2. Medium Bearish Divergence
The price makes double top (almost the same level as the previous high) and the oscillator makes lower highs. This indicates that at the same price levels, the momentum is decreasing.
Price : Equal highs
Oscillator : Lower highs
Exhibit: Medium bearish divergence
Exhibit: Medium bearish divergence followed by a reversal
3. Weak Bearish Divergence
In weak bearish divergence, the price makes higher highs but the oscillator has almost the same highs. This means that even though the price is increasing, the momentum is intact.
Price : Higher highs
Oscillator : Equal highs
Exhibit: Weak bearish divergence
Exhibit: Weak bearish divergence followed by a reversal
What is hidden bearish divergence
The hidden divergence occurs during the correction phase of a trend and is a possible sign of a trend continuation. In this, the price forms lower highs, but the oscillator forms higher highs. This indicates that even at an increased momentum, there is enough selling going on to push the price down. This type of divergence occurs with less frequency as compared to the other types.
Price : Lower highs
Oscillator : Higher highs
Exhibit: Hidden bearish divergence
Exhibit: Hidden bearish divergence followed by a reversal
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 and Instagram for more awesome content! 💘
