Instrument: nifty futures or at-the-money options
Time frame: intraday
- Identify the trend
- buy AFTER a dip when nifty is in uptrend
- short AFTER a bounce when nifty is in downtrend
- breakout failures.
The "AFTER" is a very important part of the trade and is identified using candlestick patterns.
Entry checklist/ strategy:
- Identify trend using 5 min charts... read this for examples
- Identify market bias or path of least resistance... where is pressure coming? Are supports holding? Is there selling at higher levels? How does the chart look on a higher timeframe? Who will get trapped? bulls or bears? If the current candlestick reverses, who will get trapped?
- In case of gap up/ gap down events... focus on how price reacts AFTER the gap formation
- Check for Master candle (min size 20 points) ... if present, check next 2-3 bars for signs of buying or selling pressure.
- If trend is up, buy when a candlestick indicates end of minor correction or when short positions start getting trapped.
- If trend is down, short when a candlestick indicates end of minor rally or when long positions start getting trapped.
- Trade AFTER completion of decision bar/ candlestick
- Confirm stoploss BEFORE placing a trade.
Exit checklist/ strategy:
- Check if trade is profitable
- If market is not doing anything after you have taken a position, your trade may be wrong. Exit if predetermined stoploss is hit.
- Update trailing stoploss regularly when in profit.
- Alternatively consider exiting a trade only if your system gives a signal for the opposite trade.
- Cover positions by market close.
Bias is down on open... 2nd circle show failure of longs and invitation to short... last circle hints at end confirmed by next candlestick
Bias is down.. first circle gives sell signal while 2ndis profit booking
Bullish breakout... despite first bar giving mixed signal
Bullish breakout in first circle... thereafter use trailing SL.. last circle indication of possible short trade.. confirmation came after 2 candles.
First candle bullish despite gapdown.. no follow through buying ...Sell on new low... take profit at trailing SL (this is also a trap area for new shorts)
First bar is bullish but shows selling at higher levels... first circle breakout bar fails... clear short... use trailing SL
Breakout bar fails... clear indication to short around 10.15-10.30 ... use trailing SL
First circle shows selling (upper tails)... 2nd circle shows trend reversal... use trailing SL
First circle bullish breakout... 2nd circle shows inability to continue trend meaning look for short positions