Understanding Options Trading Terminology: An In-Depth GuideUnderstanding Options Trading Terminology: An In-Depth Guide
Embarking on the journey of options trading requires a solid grasp of key terms. Let's delve into the intricacies of these terms to equip you for successful trading.
# Call Options (CE) and Put Options (PE)
**Call Options (CE):**
- When you buy a Call option (going Long), you're betting on the stock's upward movement.
- Selling a Call option (going Short) means you're betting on the stock's downward movement.
**Put Options (PE):**
- Selling a Put option (going Short) is a bet on the stock's upward movement.
- Buying a Put option (going Long) means you're betting on the stock's downward movement.
# Expiration Date
The expiration date is when the option owner must exercise their right to buy or sell the underlying asset. After this date, the option becomes worthless. Indian markets usually see monthly expiries on the last Thursday, though weekly or daily expiries exist.
# Options Premium
The options premium is the price paid by the buyer to the seller for the right to buy or sell the underlying asset. Influenced by market price, strike price, time until expiration, and asset volatility, it represents the cost of the option contract.
*Example:* Buying a call option on Reliance Industries with a strike price of 2,200 INR and a premium of 50 INR means paying 50 INR per share for the right to buy Reliance Industries shares at 2,200 INR before expiration.
# Lot Size
Lot size refers to the number of contracts traded in a single order. For NIFTY 50 index options in India, the lot size is typically 50 contracts. Understanding lot size is crucial, impacting trading costs and potential profitability.
# Strike Price
The strike price is where the option buyer can buy or sell the underlying asset. In India, NIFTY index options often have strike prices set at regular intervals, like every 50 points.
*Example:* If the NIFTY index is at 21,000, strike prices may include 20,950, 21,000, and 21,050. Buying a call option with a strike of 21,050 bets on the index rising above that level.
# Spot Price
The spot price is the current market price of the underlying asset. It's essential in determining the intrinsic value of an option, which is the difference between the spot price and the strike price.
# Breakeven Points
Breakeven points are critical for traders. Let's illustrate:
- Selling a BN 6th Dec. 47400 CE (call option) with an expiry on 6th December.
- If BN closes at 47400 on expiry, the contract is valued at 0.
- If BN closes below 47400, it's valued at 0.
- If BN closes at 47401, it's priced at 1, and so on.
Understanding breakeven points is key to managing trades effectively.
Armed with this terminology, you're better prepared to navigate the dynamic landscape of options trading. Stay tuned for more insights into mastering this exciting financial realm!"
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Topic - Option Trade and Trading 💸💸💸💸👑🤑
#If u Buy stock without stop loss that mean U are weak in Physiology
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How to make Big Profit💸 With Small Account
In this video we try to Identify Trend and Entry By Big Bull👑🤑🤑💸💸
How market really work with number's
How important is option chain analysis?
The option chain analysis data provides a very comprehensive view for all the available options for any particular underlying asset. This helps in understanding and selecting the correct option for trading or investment purpose.
Difference between technical analysis and option trading
Technical analysis and options trading can go hand in hand. Many of the best practices for options trading come directly from technical analysis concepts. Technical analysis focuses on price. Fundamental analysis does not solely focus on price.
why we learn option chain?
Option chain is a chart that will give in-depth information related to all stock contracts available for Nifty stocks. The best thing about the option chain is that it provides valuable information about the current security value and how it will affect it in the long term.
What is the purpose of option chain?
It can be used in creating an option strategy at several strike prices. It can be used to analyse and draw noteworthy insights about the stock and its probable movements. It helps the traders in evaluating the liquidity and the depth of the option contract.
Technical trader
Technical trading is a broader style that is not necessarily limited to trading. Generally, a technician uses historical patterns of trading data to predict what might happen to stocks in the future. This is the same method practiced by economists and meteorologists: looking to the past for insight into the future.
NOTE
#We Are Not Promote Anything
#This channel Purpose to share market ideas.
Thanks for Watching🙏
"Mastering Options Trading: A Comprehensive Guide"Welcome to the exciting world of options trading, where every move counts and knowledge is your strongest ally. As the renowned Indian investor Rakesh Jhunjhunwala wisely puts it, 'Risk comes from not knowing what you're doing.' So, let's unravel the intricacies of options trading, breaking it down into easy-to-understand steps.
What Are Options?
Think of options as your special toolkit in the financial universe. These tools give you the power to choose (without the obligation) to buy or sell assets like stocks or currencies at a fixed price before a specific date. It's a game-changing tool for making strategic financial moves.
Getting to Know the Basics
In the realm of options, a single ticket is called an 'Option,' and if you have a bunch, they're simply 'Options.' It's like having your own set of magic keys to unlock opportunities in the market.
Real-Life Application
Let's bring this down to everyday scenarios. Imagine you're Rahul, dreaming of owning a home but uncertain about prices and loans. Enter options! You talk to the seller, like Mrs. Kapoor, and strike a deal that gives you time to decide if you want to buy the house – a trial period for your dream home.
The Magic of Token Money
Now, what's this 'Token Money'? It's a small deposit showing you're serious about a deal. In our case, the money you pay for an options contract is like saying, 'I'm genuinely considering buying this.'
Unveiling Your Superpower
Options give you superpowers in the financial world. You have rights, but you're not obliged to use them – a special skill indeed.
The Game Begins
Now that you know the rules, let's dive into the game of options trading! It's like navigating through a chessboard of financial opportunities.
Exploring the Practical Uses of Options
Options, those versatile tools we discussed earlier, serve multiple purposes in the market. Let's understand them further, using relatable examples.
**1. Speculation:**
Options let you take a bet on where prices are heading. Imagine you believe an Indian company's stock will rise soon. Instead of buying shares, you can get call options on the stock, potentially making a profit without a big upfront investment.
*Example:* You predict XYZ Company's stock will rise from Rs. 100 to Rs. 120. Instead of buying 100 shares at Rs. 100, you buy call options at a lower cost, say Rs. 5 each. If the stock hits Rs. 120, you can use your options to buy and make a profit.
**2. Hedging:**
Options act as a shield against potential losses. If you own a stock and fear its price might drop, buying a put option puts a limit on your potential losses.
*Example:* You own shares of ABC Ltd., but you're worried the market might dip. You buy a put option at Rs. 95. If the stock drops to Rs. 90, you can still sell it at Rs. 95, minimizing your losses.
**3. Income Generation:**
Options can be your financial side hustle, generating income while managing risk. Techniques like volatility spread theory or max pain theory allow traders to collect premiums regularly.
*Example:* You sell options contracts and earn premiums regularly. If all goes well, you pocket the premiums. However, if the market moves against you, there's a risk of potential losses.
**4. Risk Management:**
Options serve as a safety net, helping you set limits on buying or selling assets, ensuring you won't lose more than you're comfortable with.
*Example:* You own a bunch of shares in a tech company and worry about a market downturn. You buy put options at a strike price of Rs. 150. If the stock falls below Rs. 150, the put options kick in, limiting your losses.
Options are like versatile tools in your financial toolkit. They offer flexibility and can be tailored to fit your goals and risk tolerance. However, it's crucial to understand them well before diving in.
Meet the Key Players: Buyers and Sellers
Now, let's meet the main characters in the options market – the buyers and sellers. Their roles are pretty simple, so let's break it down without the jargon.
**Option Buyers:**
These are folks who buy options hoping to make a profit. It's like getting a special ticket to potentially buy or sell something later.
- No Obligation: Buyers have the ticket but aren't forced to use it.
- Unlimited Profit Potential: If things go well, the sky's the limit.
- Limited Risk: They only risk what they paid for the option.
- Common Strategy: Buying options is like taking a guess on where prices are heading.
**Option Sellers:**
On the flip side, these are the sellers – they sell options hoping to pocket the premium paid by the buyer.
- Obligation: Sellers promise to sell or buy if the buyer decides to use the option.
- Limited Profit Potential: Sellers' earnings are capped at the premium.
- Unlimited Risk: Depending on the market, risks can go big.
- Common Strategy: Selling options is often about making regular income or safeguarding against potential losses.
Now, if we throw in Put Options and Call Options, we get four types:
1. **Call Buyers:** These buyers bet on prices going up.
2. **Call Sellers:** Sellers here aim to make money from the premium, predicting stable or falling prices.
3. **Put Buyers:** Buyers in this category anticipate prices going down.
4. **Put Sellers:** Sellers here collect premiums, hoping for stable or rising prices.
Stay with us as we explore this fascinating world together, keeping it simple and crystal clear.
If you found this guide helpful, give it a thumbs up 👍 and share it with your friends who might also be intrigued by the magic of options. Let's demystify finance together!
How TradingView is redefining the chart-analytics spaceIf you are a stock or options trader, you might not have taken the trade without analyzing the charts. Gone are those days when traders punch orders just by looking at the prices. All professional traders prefer to take the shot after viewing the chart and that too after analyzing multiple timeframes.
There is one player who has made a heck of a difference in this space, it's TradingView (TV). When I started trading in 2010, I used the broker’s chart platform - it was okay, but I did not know what was missing. Later I switched to a new gen broker and for a while, I was stuck with the ChartIQ platform which the broker provided free of cost.
I had heard TradingView’s name then, and also visited their website and compared the plans. I thought, who in their senses would opt for a paid plan of TV when the broker is providing it free of cost? I said to myself - I would never pay for it.
Back then I had 5 to 7 indicators on my chart - MACD, Bollinger bands, RSI, EMAs, ADX-DMI, SuperTrend to name a few and my chart was pretty complicated. Just like a handwritten prescription by the doctor, I could not even read what came out from my chart. And predictably the streak of loss-making trades continued. Time passed and maybe I got mature enough to realize that the indicators were not the issue, my interpretation was.
The first thing I did was to switch to the free plan of TV. Since it had a limitation of 3 indicators per plan - I had to narrow down my selection of indicators. I was left with 2 EMAs and 1 ADX-DMI that I could use with the free plan. And that restriction became a blessing, my charts were not crowded anymore & the price stood out loud and clear.
My loss-making days ended there and I possibly matured as a trader. I did not switch to TV’s paid plan then - because I had no special need for it. That restriction of 3 indicators was what worked for me, a blessing in disguise.
Early this year, I switched to one of their platinum brokers - Dhan . This was to get my webhooks experimentation going and it required me to upgrade to a paid plan of TV. Even though I was hesitant, I took that leap of faith and upgraded. Seems like that was the 2nd best decision that I took this year, after switching the broker.
Few additional things come to you when you take a paid plan. I got access to add more watchlists and segregate them by themes. One of my recently added watchlists contains more than 249 stocks which I analyze over the weekends. These companies are with Mcap less than 3000 crores and I secretly believe 10 of them could become multibaggers over the next decade. Weeding them out is a pain though.
There are 2 features TV provides even on their free plan.
Publish Idea
Minds
Publish Idea - This is where you share your chart, analysis, or idea with the public. You need not be a professional chartist to do it - you can start at an amateur level. As your work inspires others and helps them in their trading, you start gaining their respect. Few of them may even follow you and subscribe to your ideas.
You get to choose the directional bias too. If you are long on a scrip, you can mark the “long” green colored button on the last page. If you are bearish, you could select the “short” red button.
Minds - TV Minds is a new feature that they introduced, it is like a room where you post commentary while trading. Other traders who are watching the same chart as yours can view, and comment on your mind and it can get pretty interactive.
Once posted, it will appear on your public page under the “minds” navigation. I love both these features as they immediately notify your followers via email too. TV minds give the exact feeling of entering a trading room. You get to interact with the experts, take their opinions, and debate a bit.
I am not quite sure if these can be done via their mobile app, I use it on their desktop version. And it may take a while for real deep penetration as the majority of traders in India are on a mobile device.
What is the feature you liked about TradingView the most?
HOW-TO apply an indicator that is only available upon request?Recently, I've realized that my typical day involves constant encounters with indicators. For example, when the alarm clock rings, it's an indicator that it's morning and time to get up. I am checking the phone and once again paying attention to the indicators: battery charge and network signal level. I figure out in just one second that such a complex element of the phone as the battery is 100% charged and the signal from the cell towers is good enough.
Then I’m going out on a busy street, and it's only because of the traffic light indicator that I can safely cross the road to reach the parking lot. Looking at the on-board computer of my car, with its many indicators, I know that all the components of this complicated mechanism are working properly, and I can start driving.
Now, imagine what would happen if none of this existed. I would have to act blindly, relying on luck: hoping that I would wake up on time, that the phone would work today, that car drivers would let me cross the road, and that my own car would not suddenly stop because it ran out of gas.
We can say that indicators help to explain complex processes or phenomena in simple and understandable language. I think they will always be in demand in today's complex world, where we deal with a huge flow of information that cannot be perceived without simplifications.
If we talk about the financial market, it's all about constant data, data, data. Add in the element of randomness and everything becomes totally messed up.
To create indicators that simplify the analysis of financial information, the TradingView platform uses its own programming language — Pine Script . With this language, you can describe not only unique indicators, but also strategies — meaning algorithms for opening and closing positions.
All these tools are grouped together under the term "script" . Just like a trade or educational idea, a script can also be published. After this, it will be available to other users. The published script can be:
1. Visible in the list of community scripts with unrestricted access. Simply find the script by its name and add it to the chart.
2. Visible in the list of community scripts, but access is by invitation only. You'll need to find the script by its name and request access from its author.
3. Not visible in the list of community scripts, but accessible via a link. To add such a script to a chart, you need to have the link.
4. Not visible in the list of community scripts; access is by invitation only. You'll need both a link to the script and permission for access obtained from its author.
If you have added to your favorites a script that requires permission from the author, you'll only be able to start using the indicators after the author includes you in the script's user list. Without this, you will get an error message every time you add an indicator to the chart. In this case, contact the author to learn how to gain access. Instructions on how to contact the author are located after the script's description and highlighted within a frame. There you will also find the 'Add to favorite indicators' button.
The access can be valid until a certain date or indefinitely. If the author has granted access, you will be able to add the script to the chart.
Illustration of Divergence and Hidden Divergence Normal divergence can provide insight into a potential market reversal ahead of time. Hidden divergence can provide insight into the potential trend continuation ahead of time.
How to trade in option market 💸🙏😊 👑Royal Trend👑
Topic Trading Things
Topic - Option Trade and Trading 💸💸💸💸👑🤑
#If u Buy stock without stop loss that mean U are weak in Physiology
#Train Your self To take small trade with Stop-loss
How to make Big Profit💸 With Small Account
In this video we try to Identify Trend and Entry By Big Bull👑🤑🤑💸💸
How market really work with number's
How important is option chain analysis?
The option chain analysis data provides a very comprehensive view for all the available options for any particular underlying asset. This helps in understanding and selecting the correct option for trading or investment purpose.
Difference between technical analysis and option trading
Technical analysis and options trading can go hand in hand. Many of the best practices for options trading come directly from technical analysis concepts. Technical analysis focuses on price. Fundamental analysis does not solely focus on price.
why we learn option chain?
Option chain is a chart that will give in-depth information related to all stock contracts available for Nifty stocks. The best thing about the option chain is that it provides valuable information about the current security value and how it will affect it in the long term.
What is the purpose of option chain?
It can be used in creating an option strategy at several strike prices. It can be used to analyse and draw noteworthy insights about the stock and its probable movements. It helps the traders in evaluating the liquidity and the depth of the option contract.
Technical trader
Technical trading is a broader style that is not necessarily limited to trading. Generally, a technician uses historical patterns of trading data to predict what might happen to stocks in the future. This is the same method practiced by economists and meteorologists: looking to the past for insight into the future.
NOTE
#We Are Not Promote Anything
#This channel Purpose to share market ideas.
Thanks for Watching🙏
Professional Trading 👑💸🙏🤑💲👑Royal Trend👑
Topic Trading Things
Topic - Option Trade and Trading 💸💸💸💸👑🤑
#If u Buy stock without stop loss that mean U are weak in Physiology
#Train Your self To take small trade with Stop-loss
How to make Big Profit💸 With Small Account
In this video we try to Identify Trend and Entry By Big Bull👑🤑🤑💸💸
How market really work with number's
How important is option chain analysis?
The option chain analysis data provides a very comprehensive view for all the available options for any particular underlying asset. This helps in understanding and selecting the correct option for trading or investment purpose.
Difference between technical analysis and option trading
Technical analysis and options trading can go hand in hand. Many of the best practices for options trading come directly from technical analysis concepts. Technical analysis focuses on price. Fundamental analysis does not solely focus on price.
why we learn option chain?
Option chain is a chart that will give in-depth information related to all stock contracts available for Nifty stocks. The best thing about the option chain is that it provides valuable information about the current security value and how it will affect it in the long term.
What is the purpose of option chain?
It can be used in creating an option strategy at several strike prices. It can be used to analyse and draw noteworthy insights about the stock and its probable movements. It helps the traders in evaluating the liquidity and the depth of the option contract.
Technical trader
Technical trading is a broader style that is not necessarily limited to trading. Generally, a technician uses historical patterns of trading data to predict what might happen to stocks in the future. This is the same method practiced by economists and meteorologists: looking to the past for insight into the future.
NOTE
#We Are Not Promote Anything
#This channel Purpose to share market ideas.
Thanks for Watching🙏
Volume near the Earnings TimesWe can see that Earning time there is "High Volume" & stocks move as volume comes.
1st - heavy buying, price moves⬆️afterward
2nd-heavy selling, price 🔻afterward
3rd- lets see.
Search other charts & U will be shocked by result
Exceptions are always there.
#StockMarket
Risk, reward, and our absolutely EPIC Black Friday dealWorld-class climbers require the best equipment, gear, and preparation - they can't scale the most difficult mountains without anything else. For the world' best traders, they too must have access to the best tools and features. To climb to the top of modern markets, great research is a prerequisite.
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Treat yourself to a plan and keep following us as we publish educational posts throughout the week. We'll show you several tips about using your new plan as each post will be designed to help you take full advantage of our epic Black Friday sale.
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Risk and Opportunity . . .Risk in simple term means possibility of unexpected outcome ie "Something happens as A Surprise..!". Surprises are positive as well as negative.
Negative surprises are known as risk. However, positive surprises are opportunities
So we must always speak our risk and opportunities at same time when discussing risk.
We invest in risky assets for positive surprises, but we can not rule out occurrence of negative surprises.
So, how can individual investor deal with this situation?
To deal with risk we need to understand " what can possibly happen to our portfolio/investment? ".
Some of outcome of risk can be
a. Temporary decrease in value of portfolio.
b. Not able to sell (liquidate) portfolio when needed.
c. Delayed return on portfolio.
d. Total loss of capital.
e. Returns lower than expectation(inflation)
Once this is known, we can take relevant actions to deal with these outcome.
Actions are of two types:
1. Action taken before surprise has happened. These may be one of many of following
- Limiting amount to 5% in any of the stock
- Diversification of portfolio among debt/equity/gold/Real estate
- buying put option against our long position
- buying medical insurance to avoid untimely selling of portfolio in case of medical emergency
- invest in income generating asset (rental / high dividend yield stock)
2. Action taken when the surprise event has occurred. Such as
- Booking minor loss at SL to avoid higher losses on wrong decision
- Rebalancing portfolio allocation when there is major down/up movement in one of asset class
We need to understand and accept that: we can not know how much return will be made on equity/risky investment, also we do not know when this return will come.
Chart I have put here is of 4 very robust investible instruments. This shows how multiple robust assets behave over longer periods.
By rebalancing among such diversified instruments in portfolio can help generate returns while mitigating risk and taking advantage of opportunities.
Hope after reading this post you will have better insight on risk.
TIME CYCLE AND FIBONACCI SPIRAL" GOD MUST BE A MATHEMATICIAN " If we look at the construction of universe and movements of the planets & other celestial objects movements, flowering & fruiting cycles in trees etc. everything has a pattern and they are cyclical in nature. That very same assumption is applied and works well in stock market, commodities and forex as well.
Identifying the time zones of a stocks is a pure trial and error method where one needs to find the high and low making cycle of a particular stock manually. Here NLC INDIA LTD has been taken as an example and a Price and Time analysis has been done on monthly chart using Time Zones & Fibonacci Spiral for future support and hypothetical path identification.
The lows of the trend labelled as W, X,Y in rectangular spots. Point "X" has been formed 79 Months after the point "W". But magically Point "Y" has been formed after 79 months after Point "X"
The highs of the trend are labelled as A & B in circular spot. Point "B" has been formed 79 Months after Point "A". Looking at the cycle of 79 Months in the Lows and Highs Formation we can make an assumption that the next high ( Point "C" ) would be after 79 Months from Point "B" ie. Dec 2023.
Fibonacci Spiral is a natural pattern that can be seen everywhere in nature including flowers, pinecones, hurricanes and even huge spiral galaxies in space. This is rarely used but useful pattern in charts for finding expected supports and resistance. In this chart we can see that after the formation of low at Point "Y", with the help of Fibonacci Spiral we have a continuous expected support. Till now after 2.5 Years the monthly closing of a single candle has never been below the Fibonacci Spiral(try to adjust the X axis of the chart incase you don't see a perfect fit) .So the fact if Fibonacci Spiral used wisely can be a useful pattern for finding support and resistance levels cannot be denied.
Currently NLC INDIA LTD is at resistance of the trendline drawn from the previous 2 highs ie. Point "A" & "B". Hopefully it will breakout because stock increases at a increasing near its high, which hasn't happened yet with this stock. Till now NLC_INDIA is far away from its expected high according to the time cycle and Trend based fibonacci retracement level. The gann level of 1.33 is at 136.55 by Trend based fibonacci retracement and the expected time is Dec 2023 time cycle. Thus this is how a hypothetical conclusion can be drawn that NLC INDIA LTD will attain a price level of 136.55 by DEC 2023.
Recently a study was done on NIFTY, predicting perfectly the low making day and the target date for NIFTY proving that time cycles works very well with indices and stocks.Link has been given below.
STUDY & ANALYSIS
ADARSH KUMAR DEY
Mastering Trade Setup with simplicity of dow theorySimplifying Trade Strategies with Dow Theory Wisdom
Welcome to the world of trading, where the Dow Theory can be your trusty guide. Let's break down an easy trade strategy that suits different market situations.
Dow Theory Insights
Dow Theory, a key tool in technical analysis, says understanding trends is crucial. Figuring out the trend is where we start, setting the stage for smart trade decisions.
Bullish View
If we're feeling positive
Higher Lows: Check if prices keep going up.
Near Support: Make sure prices are close to a support zone.
Reversal Signs: Look for any candle patterns signaling a turnaround.
Buying Setup:
Stoploss: Think of it like a safety net, set it at the recent lowest point.
Execute a buy trade when these factors line up, always keeping an eye on that stoploss.
Bearish View
If we're feeling negative
Lower Highs: Check if prices keep going down.
Near Resistance: Make sure prices are close to a resistance zone.
Reversal Hints: Look for any candle patterns signaling a potential shift.
Selling Setup:
Stoploss: Your safety measure, set it at the recent highest point.
Execute a sell trade when these conditions come together, always mindful of that stoploss.
Sideways View
For a market that's just hanging out
Draw Lines: Sketch lines above and below the current prices (Support and Resistence Trendlines)
Be Patient: Hang tight until prices break above or below those lines.
Only jump into a trade when the market decides where it's going.
In the lively world of trading, Dow Theory keeps us wise. By using these strategies, along with clever stoploss placements, you can navigate the markets with ease
This post is for educational purposes only. Trading involves risk, and past performance is not indicative of future results. Always do your research and consider consulting a financial advisor before making any investment decisions. I am not sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
Ascending Triangle Pattern breakoutThe stock has recently broken out of an ascending triangle pattern on the weekly chart. The breakout candle, which represents the moment the stock broke out, is a powerful bullish candle, and the breakout was accompanied by substantial trading volume. This indicates a strong upward movement and suggests potential further gains. Traders and investors may find this breakout compelling, especially with the confirmation of a strong bullish candle and good trading volume.
Tutorial :
Certainly! Let's break down the importance of each signal in the context of technical analysis:
1. **Ascending Triangle Pattern Breakout:**
- *Description:* An ascending triangle pattern typically indicates a bullish continuation pattern, where the stock's price makes higher lows and approaches a resistance level.
- *Importance:* The breakout from this pattern suggests a potential acceleration in the uptrend, and it's considered a bullish signal. Traders often look for such patterns to identify potential buying opportunities.
2. **Breakout Candle Strength:**
- *Description:* The strength of the breakout candle refers to the size and decisiveness of the candle that marks the breakout from a pattern.
- *Importance:* A strong bullish breakout candle signifies robust buying momentum, supporting the validity of the breakout. It can instill confidence in traders and investors, indicating a potential shift in market sentiment.
3. **Good Volume During Breakout:**
- *Description:* Trading volume reflects the number of shares traded during a specific period. Good volume during a breakout means a significant number of shares were exchanged.
- *Importance:* High volume during a breakout adds credibility to the move. It suggests increased market participation and conviction, confirming that the breakout is not just a random fluctuation but a well-supported price movement.
4. **Retest of Breakout Levels:**
- *Description:* After a breakout, the stock may retest the levels it broke out from, checking the validity of the breakout.
- *Importance:* A successful retest reinforces the significance of the breakout. It demonstrates that the newfound support or resistance level is holding, providing additional confirmation to traders.
5. **Bounce with Good Volume:**
- *Description:* After retesting breakout levels, a bounce refers to a subsequent upward movement. Good volume during this bounce indicates continued strong market interest.
- *Importance:* A bounce with good volume suggests that market participants are actively buying at these levels, further supporting the bullish sentiment. It strengthens the case for a sustained upward move.
In summary, each signal plays a crucial role in confirming and strengthening the bullish scenario. The ascending triangle pattern breakout sets the stage, the strength of the breakout candle and good volume confirm the validity, and the retest followed by a bounce with good volume reinforces the bullish momentum. Traders often use these signals in combination to make informed decisions and manage risk effectively.
Option Trading By Professional's🤑💲💸✔✔👑Royal Trend👑
Topic Trading Things
Topic - Option Trade and Trading 💸💸💸💸👑🤑
#If u Buy stock without stop loss that mean U are weak in Physiology
#Train Your self To take small trade with Stop-loss
How to make Big Profit💸 With Small Account
In this video we try to Identify Trend and Entry By Big Bull👑🤑🤑💸💸
How market really work with number's
How important is option chain analysis?
The option chain analysis data provides a very comprehensive view for all the available options for any particular underlying asset. This helps in understanding and selecting the correct option for trading or investment purpose.
Difference between technical analysis and option trading
Technical analysis and options trading can go hand in hand. Many of the best practices for options trading come directly from technical analysis concepts. Technical analysis focuses on price. Fundamental analysis does not solely focus on price.
why we learn option chain?
Option chain is a chart that will give in-depth information related to all stock contracts available for Nifty stocks. The best thing about the option chain is that it provides valuable information about the current security value and how it will affect it in the long term.
What is the purpose of option chain?
It can be used in creating an option strategy at several strike prices. It can be used to analyse and draw noteworthy insights about the stock and its probable movements. It helps the traders in evaluating the liquidity and the depth of the option contract.
Technical trader
Technical trading is a broader style that is not necessarily limited to trading. Generally, a technician uses historical patterns of trading data to predict what might happen to stocks in the future. This is the same method practiced by economists and meteorologists: looking to the past for insight into the future.
NOTE
#We Are Not Promote Anything
#This channel Purpose to share market ideas.
Thanks for Watching🙏
Call and put strategy on Muhurat TradingMuhurat Trading is auspicious for trader, at this time people rushes to buy stocks and market creates a huge bullish candle, and next day most people sells that stocks and market goes bearish...
You should buy on Muhurat and sell next day
My advice to new tradersTo the new traders how are starting their new journey from today / tomorrow
you don't need to trade the full week and run behind profits. You just need to avoid sideways market and losses and save your profits. My suggestion is to trade only 4 / 3 days a week because there is always a range bound market once a week.
Enjoy trading. Happy diwali ✨️ 💕
BankNifty: RSI Divergence Impact on TrendsEarlier BankNifty experienced a trend shift, we can see it with respect to RSI divergence, pausing the downward movement and initiating an upward trend.
Caution advised now, as RSI indicates a possible sideways or downtrend until stabilization. Refer to the chart for details.
Learn Support Bounce- For Swing TradingSimply speaking a support is a zone where demand overcomes supply. There are more buy orders than the sell orders at this level, which could force the bids to go higher and hence the stock can rally.
I would like to discuss one of the efficient ways to trade support levels. This is not the only way and may not be the perfect one but still with good success rate.
There are a few simple points that needs to be followed.
🚀Step 1
There should be a support level from where the stock bounced significantly. Draw a horizontal line from the lowest point of the support.
🚀Step 2
Let the price pullback to this support zone and create a green candle. It could be a pin bar with long wick at the bottom or a full green candle that closes above support.
The setup may develop either at or near the support OR after the price breaks through the support and then fakes the break. Both ways we need a green candle above the support zone.
🚀Step 3
Buy few ticks above the high of the pin bar or full bar with stop loss few ticks below these candles.
Buying at the close of those bullish candles is another method to further reduce the risk (SL) but the first method will keep you from some awkward positions.
🚀Step 4
Here we are not looking for reversals. We are looking for 50% target of the previous down wave.
⚡Tip1:
Now we know the target and stop loss, before entering the trade please confirm that reward is 2 times, or more than the risk involved.
Ex if SL is 10 points, then target should be at least 20 points. So, the down wave must be more than 40 points.
⚡Tip2:
Once trade starts moving in your direction, keep trailing to bring your stop to breakeven or lock some profit on partial position if your like.
I will post some examples in the update section. One is right there on the SBI chart shown above. Two support zones and 3 buying opportunities that worked.
Keep boosting for more educational ideas in future.
Disclaimer: Examples shown in the idea are not an investment or trading advice. Apply your due diligence and backtest the strategy for good results.
Understanding CPR and its StrategiesWhat is CPR indicator:-
Central Pivot Range (CPR) indicator is used to identify key points of price levels. The previous day's high, low, and close prices are used to calculate the CPR levels for the current day. It is comprise of 3 levels – Central pivot point (pivot point/PP), Top central pivot (TC) and Bottom central pivot (BC). These levels remain constant throughout the day. CPR is a leading indicator.
Calculation:-
TC (Highest level) = (Pivot – BC) + Pivot
PP (Center level) = (High + Low + Close)/3
BC (Lowest level) = (High + Low)/2
Note: TC’s value may be lower than BC. But for understanding purpose the highest of the 3 values is typically termed as TC and the lowest is BC.
Logic of this indicator:-
A day's trading range captures everything about the market sentiment, So this range is used to predict the price movement of the next day.
CPR width:-
Once you add the CPR to the chart, You will see three horizontal lines.
Top line is 'TC', Middle one is 'PP' and the Bottom one is 'BC'.
Width of the CPR lines gives an idea of the expected price movement.
If today is sideways movement throughout the day (distance between TC and BC lines of CPR is less), tomorrow’s CPR will be a narrow ranged CPR. It indicates a trending market.
If today is trending movement throughout the day (distance between TC and BC lines of CPR is more), tomorrow’s CPR will be a wide ranged CPR. It indicates a sideways market.
So More the trend, wider is the CPR and viceversa.
Chart Timeframe:-
CPR levels are calculated based on the daily timeframe and is used in an intraday timeframe.
But CPR indicator works equally well on higher timeframes. If you trade on the EOD timeframe, then CPR should be calculated based on weekly price levels. The same can be extended to any timeframe. CPR is calculated on a timeframe higher than the timeframe it is used for trading. I recommended to use it on 5 minute or 15 minutes chart for high beta stocks or indices for intraday trading.
//-------------------------------------------------------------------------------------------------------------------
Strategy 1:- (CPR as Support & resistance Zone)
CPR can be used as Support and Resistance zone.
Any of the 3 CPR lines can be used for this purpose.
When price falling from up towards these lines, These lines can act as Support.
When price rising from down towards these lines, These lines can act as Resistance.
Target and Stoploss can be kept as per risk reward ratio.
//-------------------------------------------------------------------------------------------------------------------
Strategy 2:- (TC & BC as Resistance & Support Line for Reversal/Pullback trades)
Buy = When current price is Higher than ‘Top central pivot’ (TC), market is bullish, So look for buying opportunities.
Buy Entry = Wait for price to pull back to the 'TC' line before initiating a new Buy Position.
Buy Stoploss = Keep 'BC' as Stoploss.
Buy Target = Keep Target as per risk reward ratio, that can be 1:1 or 1:2.
Sell = When current price is Lower than ‘Bottom central pivot’ (BC), market is bullish, So look for selling opportunities.
Sell Entry = Wait for price to pull back to the 'BC' line before initiating a new Sell Position.
Sell Stoploss = Keep 'TC' as Stoploss.
Sell Target = Keep Target as per risk reward ratio, that can be 1:1 or 1:2.
Note: Strategy 1 and 2 are almost similar except that in strategy 1 entire CPR is used as support zone or resistance zone. whereas in strategy 2 its TC and BC used as Resistance and Support Level respectively.
//-------------------------------------------------------------------------------------------------------------------
Strategy 3:- (TC & BC for Breakout Trades)
Buy = Any breakout above 'TC' indicates a probability of up (Bullish) movement. Also if the breakout candle has higher volume than the previous candles, it gives an extra confirmation of up trend.
Buy Stoploss = Keep 'PP' or 'BC' as Stoploss as per your risk appetite.
Buy Target = Keep Target as per risk reward ratio, that can be 1:1 or 1:2.
Sell = Any breakdown below 'BC' indicates a probability of down (Bearish) movement. Also if the breakdown candle has higher volume than the previous candles, it gives an extra confirmation of down trend.
Sell Stoploss = Keep 'PP' or 'TC' as Stoploss as per your risk appetite.
Sell Target = Keep Target as per risk reward ratio, that can be 1:1 or 1:2.
//-------------------------------------------------------------------------------------------------------------------
Strategy 4:- (CPR for judging Trend in the Market)
If the CPR lines forms higher high (HH) subsequent days and it looks like an upward ladder, it indicates strong bullish Trend.
Buy trades can be initiated using price action.
If the CPR lines forms lower low (LL) subsequent days and it looks like an downward ladder, it indicates strong bearish Trend.
Sell trades can be initiated using price action.
//-------------------------------------------------------------------------------------------------------------------
Strategy 5 (Bonus Strategy for Options Seller, Selling OTM CE & OTM PE on Expiry)
- Good way to eat premium (theta) on expiry.
- You can also build algo or strategy based on this.
Sell PE = On Expiry day wait for the price to touch "TC" level, When the price touch "TC" level Sell "PE" of strike price below "BC" level. keeping "PP" as SL.
Sell CE = On Expiry day wait for the price to touch "BC" level, When the price touch "BC" level Sell "CE" of strike price above "TC" level. keeping "PP" as SL.
//-------------------------------------------------------------------------------------------------------------------
Like other technical indicators, CPR also is not a holy grail. It can only assist you in building a good strategy. You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGIES OF CPR ARE ONLY FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
Hope you like it
Happy trading :-)
EMA, Envelope & Bollinger bands for Trend Trade with Small SLWhat is an EMA:-
An exponential moving average (EMA) is a moving average that measures the average price of a security and assigns more weight and meaning to the most recent data points. Compared to SMA, EMA responds more effectively to recent price changes and applies equal importance to all observations over the period.
What is an Envelope:-
Envelopes are technical indicators that are typically plotted over a price chart with upper and lower bands. The most common example of an envelope is a moving average envelope or an exponential moving average, which is created using two moving averages that define upper and lower price range levels.
What is an Bollinger Bands:-
A Bollinger Band is a technical analysis tool defined by a set of trendlines. They are plotted as two standard deviations, both positively and negatively, away from a simple moving average or an exponential moving average of a security's price and can be adjusted to user preferences.
Logic:-
We all have heard about Reversal trading based on "Bollinger Bands" and "Envelope" when upper and lower bands are far from the basis centre line. but these upper and lower bands can also be used for Breakout and Breakdown (Trend) trading with small/limited Stoploss.
Chart Timeframe:-
200 EMA is a standard EMA used by many traders and it can be used in any timeframe. 200EMA can be used in Envelope & Bollinger Bands also. I recommended to use it on 5 minute or 15 minutes chart on stocks or indices for intraday trading, on 4Hour or 1 Day chart on stocks for for Swing trading, on 1 Week chart on stocks for positional Trading.
//-------------------------------------------------------------------------------------------------------------------
Strategy 1:- (EMA high/close/low)
Three EMA's can be plotted with Length 200 for all three, but source different for all three high/close/low.
When price close above EMA (high) its a Breakout, Buy - keeping Stoploss as price closing below EMA (low) and Target as per 1:3 or 1:5 risk reward ratio.
When price close below EMA (low) its a Breakdown, Sell - keeping Stoploss as price closing above EMA (high) and Target as per 1:3 or 1:5 risk reward ratio.
//------------------------------------------------------------------------------------------------------------------
Strategy 2:- (Envelope - Upper Band/Basis/Lower Band)
Envelope can be plotted with Length - 200, Percent - 0.05 , Source - close, you may use Percent as per your risk reward and as per the setting which suits you. however i have used percent - 0.05 for 5 min and 15 minutes timeframe for intraday in index here in this idea.
When price close above upper band its a Breakout, Buy - keeping Stoploss as price closing below lower band and Target as per 1:3 or 1:5 risk reward ratio.
When price close below lower band its a Breakdown, Sell - keeping Stoploss as price closing above upper band and Target as per 1:3 or 1:5 risk reward ratio.
//-------------------------------------------------------------------------------------------------------------------
Strategy 3:- (Bollinger Bands - Upper Band/Basis/Lower Band)
Bollinger Bands can be plotted with Length - 200, Basis MA type - EMA , Source - close, StdDev - 0.3 you may use StdDev as per your risk reward and as per the setting which suits you. however i have used StdDev - 0.3 for 5 min and 15 minutes timeframe for intraday in index here in this idea.
When price close above upper band its a Breakout, Buy - keeping Stoploss as price closing below lower band and Target as per 1:3 or 1:5 risk reward ratio.
When price close below lower band its a Breakdown, Sell - keeping Stoploss as price closing above upper band and Target as per 1:3 or 1:5 risk reward ratio.
Note:- You may also keep Basis centre line as Stoploss in both Breakdown or Breakout trades but remember that in this case Stoploss will be smaller but will be more frequent as compare to the above situation when we are keeping upper and lower bands as Stoploss.
//-------------------------------------------------------------------------------------------------------------------
Like other technical indicators, These indicators also are not a holy grail. It can only assist you in building a good strategy. You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGIES OF EMA, Envelope, Bollinger Bands ARE ONLY FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
Coding Note:-
//you may do simple coding in tv to make an effective indicator with alerts using EMA/Envelope/Bollinger Bands.
//I feel Simple strategy or indicator is the best.
//As per me Indicator's are not good or bad. Its the Risk reward where most of the traders fail. Position sizing and Risk reward can make an indicator effective or ineffective upto an extent.
//Below is a simple code in "version 5" which can be coded.
//Condition (Amend conditions as per your requirement of Breakout/Breakdown trade).
Buy= ta.crossover(close,upperband)//Exit Sellposition//for Envelope or BB
Sell= ta.crossunder(close,lowerband)//Exit Buyposition//for Envelope or BB
or
Buy= ta.crossover(high,ema)//Exit Sellposition//for EMA
Sell= ta.crossunder(low,ema)//Exit Buyposition//for EMA
//Plot
plotshape(Buy,title='Buy',text='Buy',location=location.belowbar,style=shape.labelup,size=size.tiny,color=color.rgb(27, 130, 1),textcolor=color.new(color.white,0))
plotshape(Sell,title='Sell',text='Sell',location=location.abovebar,style=shape.labeldown,size=size.tiny,color=color.rgb(233, 7, 7),textcolor=color.new(color.white,0))
//Alerts
alertcondition(Buy, "Enter Buy Exit Sell", "Buy")
alertcondition(Sell, "Enter Sell Exit Buy", "Sell")
//For NonRepaint :
//you may use previous candle closing. So that indication appears on next candle. for eg. may use close.
//Soon will be posting strategies on Supertrend, RSI etc. which are simple and easy to code.
//Tc Happy Trading and Happy Coding.
Mastering RSI with 11 StrategiesWhat is RSI indicator:-
RSI is a momentum oscillator which measures the speed and change of price movements. RSI moves up and down (oscillates) between ZERO and 100. Generally RSI above 70 is considered overbought and below 30 is considered oversold. Some traders may use a setting of 20 and 80 for oversold and overbought conditions respectively. However this may reduce the number of signals. You can also use RSI to identify divergences, strength, reversals, general trend etc.
Calculation:-
There are three basic components in the RSI - Avg Gain, Avg Loss & RS.
Avg Gain = Average of Upward Price Change
Avg Loss = Average of Downward Price Change
RS = (Avg Gain)/(Avg Loss)
RSI =
First Calculation:-
RSI calculation is based on default 14 periods.
Average gain and Average loss are simple 14 period averages.
Average Loss equals the sum of the losses divided by 14 for the first calculation.
Average Gain equals the sum of the Gains divided by 14 for the first calculation.
First Average Gain = Sum of Gains over the past 14 periods / 14.
First Average Loss = Sum of Losses over the past 14 periods / 14.
The formula uses a positive value for the average loss.
RS values are smoothed after the first calculation.
Second Calculation:-
Subsequent calculations multiply the prior value by 13, add the most recent value, and divide the total by 14.
Average Gain = / 14.
Average Loss = / 14.
if
Average Loss = 0, RSI = 100 (means there were no losses to measure).
Average Gain = 0, RSI = 0 (means there were no gains to measure).
Logic of this indicator:-
RSI is an oscillator that fluctuates between zero and 100 which makes it easy to use for many traders.
Its easy to identify extremes because RSI is range-bound.
But remember that RSI works best in range bound market and is less trustworthy in trending markets.
A new trader need to be cautious because during strong trends in the market/security, RSI may remain in overbought or oversold for extended periods.
Chart Timeframe:-
RSI indicator works well on all timeframes.
Timeframe depends on which strategy or settings are you using.
Generally a lower timeframe like 1 min, 3 min, 5 min, 15 min, 30 min, 1 Hr etc is used for intraday trades or short duration trades
and higher timeframes like 1 day, 1 week, 1 month are used for positional or long term trades.
//-------------------------------------------------------------------------------------------------------------------
Strategy 1:- (Basis Strategy of Overbought and Oversold)
Overbought:(chart below)
Usually an asset with RSI reading of 70 or above indicates a bullish and an overbought situation.
overbought can be seen as trading at a higher price than it should.
traders may expect a price correction or trend reversal and sell the security.
but RSI indicator can stay in the overbought for a long time when the stock is in uptrend - This may trap an immature trader.
an Immature trader will enter a sell position when RSI become overbought (70), whereas a mature trader will enter sell position when RSI line crosses below the overbought line (70).
Oversold:(charts below)
An asset with RSI reading of 30 or below indicates a bearish and an oversold condition.
oversold can be seen as trading at a lower price than it should.
traders may expect a price correction or trend reversal and buy the security.
but RSI indicator can stay in the oversold for a long time when the stock is in downtrend - This may trap an immature trader.
an Immature trader will enter a buy position when RSI become oversold (30), whereas a mature trader will enter buy position when RSI line crosses above the oversold line (30).
Note:
so its better to wait for reversal signal.
traders may use 20 instead of 30 as oversold level and 80 instead of 70 as overbought level.
new traders may learn to use the indicator as per the prevailing trend to get better results.
false signals may be avoided by using bullish signals in bullish trend and bearish signals in bearish trend.
//-------------------------------------------------------------------------------------------------------------------
Strategy 2:- (RSI strength)
RSI crossing centreline 50 in the below chart showing strength and buy/sell signal.
Centre line is at RSI 50.
if RSI is above 50 its considered bullish trend. (increasing strength)
if RSI is below 50 its considered bearish trend. (decreasing strength)
RSI crossing centre line (50) upside may be a buy signal.
RSI crossing centre line (50) downside may be a sell signal.
//-------------------------------------------------------------------------------------------------------------------
Strategy 3:- (RSI 40 and RSI 60 Support and Resistance )
RSI 40 acting as support in the below chart
In an uptrend RSI tends to remain in the 40 to 90 range with 40 as support (buying opportunity at support).
RSI 60 acting as resistance in the below chart
In a downtrend RSI tends to remain in 10 to 60 range with 60 as resistance (selling opportunity at resistance).
Note:
These ranges may change depending on RSI settings and change in the market trend.
//-------------------------------------------------------------------------------------------------------------------
Strategy 4:- (Divergence)
Below chart shows a simple example of Bullish Divergence and Bearish Divergence.
An RSI divergence occurs when price moves in the opposite direction of the RSI.
A bullish divergence is when price is falling but RSI is rising. which means RSI making higher lows and price making lower lows (buy signal).
A bearish divergence is when price is rising but RSI is falling. which means RSI making lower high and price making higher highs (sell signal).
Divergences are more strong when appear in an overbought or oversold condition.
There may be many false signals during a strong uptrend or strong downtrend.
In a strong uptrend, RSI may show many false bearish divergences before finally reversing down.
same way in a strong downtrend, RSI may show many false bullish divergences before finally reversing up.
//-------------------------------------------------------------------------------------------------------------------
Strategy 5:- (RSI Swing Rejections or Double Top & Double Bottom)
Bullish swing rejection or Double Bottom: (buy signal) (see the chart below)
RSI goes below oversold (30).
RSI comes back above 30.
RSI falls back again towards 30 without going below oversold (30).
RSI comes up back again and breaks above recent high.
Bearish swing rejection or Double Top: (sell signal) (see the chart below)
RSI goes above overbought (70).
RSI comes back below 70.
RSI rises back again towards 70 without going above overbought (70).
RSI comes down again and breaks below recent low.
//-------------------------------------------------------------------------------------------------------------------
Strategy 6:- (Trendline Support and Resistance)
Below chart shows RSI Trendline Resistance:
Connect three or more points on the RSI line as it falls to draw a RSI downtrend line (RSI resistance trendline).
Everytime it takes resistance from a RSI downtrend line its a selling opportunity.
Below chart shows RSI Trendline Support:
Connect three or more points on the RSI line as it rises to draw a RSI uptrend line (RSI support trendline).
Everytime it takes support on a RSI uptrend line its a buying opportunity.
//-------------------------------------------------------------------------------------------------------------------
Strategy 7:- (Trendline Breakout and Breakdown)
Below chart shows RSI Trendline Breakout:
Connect three or more points on the RSI line as it falls to draw a RSI downtrend line (RSI resistance trendline).
Whenever it breakout above RSI resistance trendline its a buying opportunity.
Below chart shows RSI Trendline Breakdown:
Connect three or more points on the RSI line as it rises to draw a RSI uptrend line (RSI support trendline).
Whenever it breakdown below RSI support trendline its a selling opportunity.
Note:
Correlate both the RSI and the closing price to ensure proper breakout or breakdown.
Challenge is to correctly identify if a breakout or breakdown is sustainable or its a false signal.
//-------------------------------------------------------------------------------------------------------------------
Strategy 8:- (RSI Crossover same timeframe)
RSI with two different RSI length crossing each other on same timeframe.
when lower RSI length crossing above higher RSI length its a buy signal.
when lower RSI length crossing below higher RSI length its a sell signal.
for example RSI with length 7 & length 14 on 15 Minutes timeframe.
//-------------------------------------------------------------------------------------------------------------------
Strategy 9:- (RSI Crossover Multi timeframe)
RSI with same RSI length but on two different timeframes crossing each.
when lower timeframe RSI crossing above higher timeframe RSI its a buy signal.
when lower timeframe RSI crossing below higher timeframe RSI its a sell signal.
for example RSI with length 14 on 5 Minutes and 1 Hr timeframes.
//-------------------------------------------------------------------------------------------------------------------
Strategy 10:- (RSI EMA/WMA Crossover)
RSI and EMA chart below:
RSI and WMA chart below:
RSI and SMA chart below:
when RSI crossing above EMA/WMA/SMA its a buy signal.
when RSI crossing below EMA/WMA/SMA its a sell signal.
//-------------------------------------------------------------------------------------------------------------------
Strategy 11:- (RSI with Bollinger bands)
Bollinger bands and RSI complimenting each other and giving a Buy signal in below chart:
Bollinger bands and RSI complimenting each other and giving a Sell signal in below chart:
if a security price reaches upper band of a Bollinger Band channel and also the RSI is above 70 (overbought), a trader can look for selling opportunities (reversal) (sell).
but in case price reaches upper band of a Bollinger Band channel but RSI is not above 70 (overbought), there may be chance that security remains in an uptrend, so a trader may wait before entering a sell position.
if a security price reaches lower band of a Bollinger Band channel and also the RSI is below 30 (oversold), a trader can look for buying opportunities (reversal) (buy).
but in case price reaches lower band of a Bollinger Band channel but RSI is not below 30 (oversold), there may be chance that security remains in an downtrend, so a trader may wait before entering a buy position.
so bollinger band with RSI can give a double confirmation on a reversal.
Note:
In this way you may use stochRSI or RSI with MACD for better accuracy.
RSI can be used with many other indicators to increase accuracy.
//-------------------------------------------------------------------------------------------------------------------
Limitations of the RSI:-
RSI works best in range bound market and is less trustworthy in trending markets.
So new traders may get trapped in an uptrend or a downtrend if they forget to see the overall long term trend of that security.
Traders should set stop loss and take profit levels as per risk reward ratio.
Note:
Don't confuse RSI and relative strength. RSI is changes in the price momentum of a security.
whereas relative strength compares the price performance of two or more securities.
//-------------------------------------------------------------------------------------------------------------------
Like other technical indicators, RSI also is not a holy grail. It can only assist you in building a good strategy. You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGIES OF RSI ARE FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
Coding Note:-
//you may do simple coding in tv to make an effective indicator with alerts using RSI/EMA/Bollinger Bands etc.
//I feel Simple strategy or indicator is the best.
//As per me Indicator's are not good or bad. Its the Risk reward where most of the traders fail. Position sizing and Risk Reward can make an indicator effective or ineffective upto an extent.
//Below is a simple code in "version 5" which can be coded.
//Condition (Amend conditions as per your requirement).
Buy= ta.crossover(rsi,X)//Exit Sellposition//X can be EMA, SMA, WMA etc (for example define ema as EMA=ta.ema(close,50))//X=EMA
Sell= ta.crossunder(rsi,X)//Exit Buyposition//X can be EMA, SMA, WMA etc(for example define wma as WMA=ta.wma(close,50))//X=WMA
or
//if want to use different rsi length but same timeframe
rsi1=ta.rsi(close,7)// RSI length 7
rsi2=ta.rsi(close,14)// RSI length 14
or
//if want to use same length on different timeframes
rsi1=request.security(syminfo.tickerid,'5',ta.rsi(close,14))// RSI length 14 on 5 min timeframe
rsi2=request.security(syminfo.tickerid,'60',ta.rsi(close,14))// RSI length 14 on 1 hour timeframe
Buy= ta.crossover(rsi1,rsi2)//Exit Sellposition
Sell= ta.crossunder(rsi1,rsi2)//Exit Buyposition
//Plot
plotshape(Buy,title='Buy',text='Buy',location=location.belowbar,style=shape.labelup,size=size.tiny,color=color.rgb(27, 130, 1),textcolor=color.new(color.white,0))
plotshape(Sell,title='Sell',text='Sell',location=location.abovebar,style=shape.labeldown,size=size.tiny,color=color.rgb(233, 7, 7),textcolor=color.new(color.white,0))
//Alerts
alertcondition(Buy, "Enter Buy Exit Sell", "Buy")
alertcondition(Sell, "Enter Sell Exit Buy", "Sell")
//For NonRepaint :
//you may use previous candle closing. So that indication appears on next candle. for eg. may use close instead of close .
//Soon will be posting strategies on Supertrend, Bollinger Bands etc. which are simple and easy to code.
//Tc Happy Trading and Happy Coding.
Hope you like it
Happy trading :-)
