Introduction and Installation NinjaTrader Algo Trading add on "AlgOto NinjaTrader Bridge"

AlgOto NinjaTrader Bridge Installation :

1. In order to use this Ninja Trader (NT) bridge with AlgOto you need perform some simple steps as explained below , go through below proceedure step by step and you are done !

Download NinjaTrader Bridge (KiteBridge.exe)  Click here 

2. Open the downloaded "KiteBridge.exe" , once opened you will see by default install path will be selected to "C:\Users\username\Documents\NinjaTrader 7\bin\Custom" which should not be changed !, but make sure you have such a folder and Ninja Trader 7 free version installed , Click on Install button

3.  Now open NinjaTrader or if already opened navigate to it , and go to Tools > Edit NinjaScript > Strategy..

4. Select any of the available Strategy and click ok button

5. Right click over any blank area on NinjaStrategy window and select References..

6. Click on Add button and navigate to C:\Users\YourUserName\Documents\NinjaTrader 7\bin\Custom and select KiteBridge.dll and click open, then click OK

7. After completing above step you are done with the KiteBridge referencing , now its time to code to pass orders generated by Ninja to AlgOto !

Place below line of code to your strategy exactly below the  

Place below line of code to your strategy exactly below  

8. Now to Place Orders use below codes inside your strategy conditions :

Example Buy Order:

Example Sell Order :

Introduction of Algo Trading with NinjaTrader on Indian MCX

1. Trading account with India’s leading discount broker Zerodha.

2. Need to register for Zerodha’s Kite API which will cost you Rs 2,000 Per Month.

To know more about Zerodha Kite API, Click here

To enable  Zerodha Kite API, Click here

3. Download and install free NinjaTrader7.

Click here

4. Download and Install our AlgOto application to interact between Zerodha Kite API and NinjaTrader.

Click here

5. Download and Install KiteBridge to interact between AlgOto and NinjaTrader

 Click here

 6. Develop your trading strategy in NinjaTrader and relax. No emotion will ride you to wrong trades anymore!!

Algo Trading Testing with NinjaTrader on Indian MCX Market

What is AlgOto ?

AlgOto is a trading platform developed on top of Zerodha Kite API , which lets Zerodha clients to use world's leading charting applications with Indian market data without paying or subscribing to additional market data service provider.

How AlgOto works ?

It works as a trading platform with functions allowed by Zerodha Kite API and it feeds market data to charting applications such as NinjaTrader. AlgOto by default comes with NinjaTrader bridge which lets you place orders from Ninja Strategies to Kite API.

What are the features of AlgOto ?

• Built-in NinjaTrader bridge
• BO, CO orders with limit price
• BO, CO orders at any market !!
• Bucket Order
• Auto Pre-Open Order firing

Trading with ichimoku clouds on MCX Copper

Trade with Ichimoku Clouds on MCX Crude on 13.09.17

Different Platforms Ichimoku default settings Chart on 12.09.17 (MCX CopperM)

Trade with Ichimoku Clouds on MCX (Compare Study of 2 different Brokers default Ichimoku Settings on MCX CopperM

How to trade with Ichimoku Clouds on MCX Crudeoil on 12.09.17

Bullish:

Price should be above the cloud.

Chikou Should be above Cloud

Bearish:

Price should be below the cloud.

Chikou Should be below Cloud

How to trade with Ichimoku Clouds on MCX Copper on 12.09.17

Actual Valid Short initiated @ ??

Rules for Short :

• Price Should be below Cloud 

Impulsive Vs Corrective…

If you have ever come across Elliot wave theory, you might have heard about these two words, ‘Impulsive moves’ and ‘Corrective moves’. I’m not a great fan of other aspects of the EW theory, but Impulsive moves and corrective moves forms some foundation of my trading. Let me introduce some theory behind these two. Don’t some complicated rocket science. They are pretty straight forward.

1) Characters of Impulsive moves/swings :-

• Strong and powerful.
• Quick
• These swings are made up of candles with relatively larger bodies.
• The candles in the swing are overly bullish/ bearish. ie. most of the candles in the swing are of the same color.
• These swings generally breaks the recent swing high/low.

2) Characters of Corrective moves/swings:-

• Slow in pace
• These swings are made up of candles with relatively smaller bodies
• Not overly bullish/bearish. Sometimes we can see same color weak candles, and sometimes we see a mixture of bullish and bearish candles.
• These swings generally just retraces some portion of the previous impulse move.

There is nothing new I have explained till now as you might have already come across these concepts by now. The real question is, how can we use this information in our trading?

1) Defining a trend:-

• An impulsive move, followed by a corrective move and which is followed by another impulsive move. The trend is in the direction of that impulsive move.

• An impulsive-impulsive combination or a corrective-corrective combination generally ends up as a range. Check the trend structure when you see these combinations, because trying to trade the ranges thinking that it is a trend is the reason behind most of the failures in day trading.

The philosophy

Have you ever heard this quote, ” You don’t trade the markets, you trade your beliefs. ”

MY TRADING PHILOSOPHY:-

“In a news free environment, market reverses at a price level that causes a supply/demand imbalance. It travels in the new direction until it hits a level that cause a supply/demand balance again. “

The reversal can be that of a swing or a trend. That depends on how strong the level is and how weak trend is.

I know defining a good bias is easier said than done in real time, But it is simple and gets better and better with experience. Once you identify the trend structure and the strength of the trend, everything is pretty straight forward.

Once that bias is identified, I relax and watch the price action to see whether the newly added candles are supporting  bias or there need to update anything about the trend structure and bias. I don’t do anything until a counter bias move starts. Why?? Because I want to snatch the money from those traders who are fighting the high probable bias, when they realize that they are wrong. So I want them to take a position before I take a position. Also I would like to benefit from those traders who try to enter late into the swing . These two groups of traders gives my bread and butter.
Here it comes. How long will I wait when market is moving against my bias?

What does the philosophy say? Market reverses it’s direction when it hits a level that can cause some supply/demand imbalance.  So I wait until market reaches the level that can cause some supply/demand imbalance.  The level can be HTF S/R while looking for a reversal, or it can be minor S/R or trap level from LTF while looking for a with trend trade, or a range boundary when market is ranging. During that waiting, I also make sure that the trend structure in TTF remains intact. Change of trend structure, changes the bias and also changes the tactics. Without any doubt, I am a contrarian.

We don’t know whether the market respects the level that we are looking at or not. That’s the reason why I don’t place blind limit orders.The price interaction with the level will let us know whether it’s time to give an entry or wait for some more time,

Does that mean the reversals always happen at the HTF S/R, and the pulbacks always end at LTF levels? 

Definitely no. There is no statement that has the word ‘always’ in the markets. If someone uses that, he/she must be lying. It’s not about what it should do and what it shouldn’t do. It’s all about where the odds will be in favor and risk will be less.

If you need only odds, go with the breakouts. But the risk will be huge.

If you need lesser risk, trade with the blind limit orders at good levels with a volatility based stop. But the odds will be less.

Trading is all about balancing these two. Nothing else. Both the above methods will not suit my personality. So I wait until price reaches the level, gives  a price level to hide the stop and then  fire the entry as close to that stop as possible.  Stop always comes before the entry. (I used always here. But it’s not a lie.. )

What if the market reverses in air without reaching my level?

Who cares!!! Let it do whatever it wants. Move onto the next opportunity. We need not trade each and every swing. Just update the trend structure and bias if that is needed and then wait for another counter bias move to start.

But the positive thing about sticking to the SD(supply/demand) levels is, historic charts prove that most of the big moves start at good levels irrespective of the timeframe. I am sticking to those good levels, so I don’t miss much of them unless I hesitate and miss an entry when the setup builds up or when the exit is early out of some emotions. Missing out of hesitation and early exits happen when we slip out of zone trying to catch every 5 or 10 tick movement or because of the fear of missing out and stuff.

During Entry:-

Once everything  in the pre trade analysis are in place, entry will be on the rejection from that level. It can be TST or BOF of that level. I don’t want to talk about that in this article as this one is not about entries and exits. I will skip this to the future articles as well.

While setting the targets:-

This one doesn’t need much explanation. Expectation is that the market move atleast to the next SD level once it reverses. That is where I like to take half of the profits,manage the second half when market is piercing the levels on it’s way in the direction of the trade.

There will be times, where I don’t exit the first half with a strict order at the immediate level, when the move has a lot of potential. I don’t recommend this to the beginners as it needs some experience to take exit decisions when market is printing candles at the right edge.

While managing the trade:-

Use the levels within the swing you are trading, that are formed by the market when it is moving towards the targets, to trail the stop. I don’t trail the stop if there is no level to support it unless I want to scratch the trade or don’t want to take a loss anymore or I want to manage the trade very aggressively.

This is what I meant when I said that the  trading philosophy comes in everything I do in trading. It might look simple, but let me admit it honestly, finding a single statement as simple as this that encapsulates everything in trading, and preparing a trade plan that is consistent with that one statement from the scratch is not as easy as it appears.

In spite of all these, market has the potential to surprise and that is when you have to take precautions like decreasing the position size, or moving back to SIM or totally moving your ass out of the computer Whatever it takes, make sure you are financially and psychologically ready for the opportunities that will come when the markets start to behave the way you can understand. Keeping a philosophy like this and reminding yourself about it often while trading tells you whether the market is conveying it’s information in your language or not. The moment you realize it is not your language, the best thing is to stay flat. Saying flat is also a position in trading.

Trend Transitions…

What is Trend Transitions?

Up-trend to downtrend,
downtrend to uptrend,
up/down to sideways,
sideways to trending.

You already know that uptrend is a series of higher SHs and SLs, downtrend is a series of lower SLs and SHs. Sideways is a contraction between a support and resistance.  But the transition from one trend structure to the other is not an easy task to do in realtime. But unfortunately, the whole trading completely depends on this. So, you must work on this. There is no other way.

I have a suggestion for you. You might have heard this saying, 

” You will go to the place where you want to only when you leave the place where you are right now.” 

The same is true for trend structure. A trend is said to be transitioned into a new trend structure only when the previous trend structure in not intact anymore in the timeframe you are looking at.  Let us say, you were in a ranging environment, that gave a upside breakout and moving up without completing the transition process , that range is still intact and the range boundaries are significant until the trend transition completes. Also, I don’t treat that as an uptrend (even if forms higher SHs and SLs) as the previous sideways range is still intact.

Update.. Step1 :- Triple Timeframe Analysis and Construction of structural framework Support and Resistance

Why do I need a support and resistance framework to operate in markets? 
What are my expectations from a support or resistance?

To provide necessary order flow to reverse a weak move with a TST/ BOF
and to provide necessary order flow to push prices in the direction of the strong move after breakout (a BPB).

Now what exactly do you mean by ‘move’ in the above answer?Trend? or Swing?

It can be any of those two. So, this forced me to classify the S/R levels into two types.

a) Major S/R (HTF frame work), which are capable of reversing the weak trend. I use these to look for CT trades, for TST and BOF.

b) Minor S/R (Using LTF chart), which are capable of reversing the weak swings. I use these levels to look for with trend trades, for PB and CPBs.

No CT trades within the HTF S/R framework and I must only look for CT setups when the trend is weak while approaching the HTF S/R levels.

So far so good!! Forget about the minor S/R levels for some time. My job now is to identify those levels that can reverse the trend as the first step in my analysis and discard the levels that are not capable of reversing the trend.

I only play(CT BOF/TST or WT BPB) the first interaction with the levels. In a different way, I only focus on the virgin levels and discard them after the first interaction when the price got accepted beyond the level or when the level is not behaving as per my expectations

Step1 :- Triple Timeframe Analysis and Construction of structural framework Support and Resistances…

By now , you know

1. What  the structure is,
2. What are Support and Resistances,
3. What are Pivot highs and Pivot lows
4. What is a Trend, Three possible directions of trend and Trend violation Pivots.

If you are clear with the above 4 points, you are ready to hit the charts.

How will these be identified on a chart?
How can we use them to extract profits out of the markets?

Before going into the details of the above two questions, first let me talk about the different charts you need to perform your analysis. Here, I mean charts of the same stock in different timeframes .

Triple Timeframe Analysis

(HTT) Higher Timeframe - To define the structural framework of support and resistances,(60 minutes)
(TTF) Trading Timeframe - To identify the trend and Low risk High probable (setup) areas.(3 or 5 Minutes)
(LTF) Lower Timeframe - To fine tune the analysis and to find the better entries and exits, (1 Minute)

you have to decide the timeframe you trade as per your decision taking speed. Its always better to start with the larger timeframes, as you get enough time to take a decision. You can jump to smaller timeframes once you are comfortable with the process of interpreting the information fast and taking decisions accordingly. This is how I use these three timeframes.

1. Defining the Structural Framework of support and resistances 

Recall the two principles I have written while explaining the structural framework,

Price moves in a structural framework of support and resistances.
If the framework is broken, price moves to the new framework of support and resistance using the concept of polarity change of support/resistance.

So, we need to draw the support and resistance lines to define our structural framework. It is the battlefield that we are going to lay our plans to make profit. Define the battlefield, wave the plan as a spider web inside that batllefield, let the losers fall into the web we have made, then attack them. This is how profits are made. We are at the first step , i.e defining the battlefield.

Drawing Support/Resistance Framework

Every pivot is a potential support or resistance for the future price movement. We are using higher time frame to define our framework. As per the ytc price action book, you have to consider all the swing highs and lows as structural support and resistances.

I have modified it slightly with my observations, and you can use whatever works for you. First I will explain what’s written in the book and later I will explain how I define the framework in my trading.Its always better to draw two supports and two resistances below and above the current price respectively. The more recent the levels, the more effective they are.

Step 1 – Open your higher timeframe chart. 60minute chart in my case.

Step 2 – Identify the current market price,

Step 3 – Identify  two recent pivot high/lows above the current market price and two recent pivot highs/lows below the current market price.

Step 4 – Draw horizontal lines at those points.

You are done with the framework construction. Open the trading timeframe (3minute chart in my case) with those levels drawn on it.

How I am defining the market structure in my trading

Open your higher timeframe chart.
Mark recent pivot highs and lows on the chart.
Identify those pivots, the movement from which has broken the previous pivot of opposite polarity.(Courtesy - JCK)

Structure Continued… Trend and its types..

What is the trend?

It is the direction in which the scrip that you are trading is moving. There are 3 directions in the market. Up, Down and Sideways.

Higher pivot highs and Higher pivot lows. Recent pivot high is higher than the last pivot high and recent pivot low is higher than the last pivot low. This is what we call Uptrend.

Lower pivot highs and Lower pivot lows. Recent pivot high is lower than the last pivot high and recent pivot low is lower than the last pivot low. This is what we call Downtrend.

There is no particular sequence of Higher pivot highs and lows or Lower pivot highs and lows to name it as an uptrend or a downtrend respectively. This is what we call Sideways trend.  Sideways trend moves in between a support and a resistance.

Market shifts from uptrend to downtrend, downtrend to uptrend, uptrend/downtrend to sideways, sideways to uptrend/downtrend or it continues to remain in the trend it is currently moving. Your profitability depends on deciding when to trust the trend and when to take a trade in the opposite direction of trend.

There are 6 steps to be considered before entering the trade.

1. Drawing the structural support and resistances to define the framework.
2. Identifying the trend and trend violation point
3. Finding Strength and weakness of bulls and bears within the trend
4. Identifying high probable future direction.
5. Visualizing the future price action.
6. Identifying High probable trade locations. We call these as setup areas or wholesale areas.

You know by now what are the first two steps

Structure Continued….Swing Highs and Lows / Pivots Highs and Lows..

Now you know the necessity of  Structure and  Support/Resistances.

This article explains how to identify the swing highs and lows, which helps us to draw support and resistance lines. The identification of swings highs and lows are our first step into the practical stuff of trading. You need to train your eye to identify them perfectly.

What are the Swing highs/Lows?

These are the turning points in the price.

A candle high is said to be swing high if the highs of two consecutive candles on the right and left of that candle are lower than the high of the considered candle.

A candle low is said to be swing low if the lows of two consecutive candles on the right and left of that candle are higher than the low of the considered candle.


There is always room for subjectivity in trading. Understand the objective definitions of pivot highs and lows first. You will know when to apply subjectivity once you enter into the market.
You can only find pivots in the past. You will never know the future turning points in the markets, as we need two candles on the right side to validate it. We never know what is going to happen on the right side of the chart as it is future. 

Structure continued…… Support and Resistances..

Some say that the support and resistances are a self fulfilling prophecy. Self fulfilling prophecy is defined as follows:

“ If a greater proportion of the crowd say something is true, it will become the truth irrespective of the background information“.

If 90% of the traders believe that the support and resistances work, they will take the decisions depending on their beliefs and hence generate the net orderflow to drive the price in a particular direction.

No mater what the reason is, we know support and resistances work and we can use them to our advantage.

Just remember the following points,

Resistances are the roofs for the stock. They oppose the upward movement.

Supports are the floor for the stock. They oppose the downward moment.

Assume you are there in a room and trying to jump up. What is the maximum height that you can reach?? Of course the roof as it opposes the further movement to the upside. The same is true for the floor.

Now you must ask this question. Is there a possibility for the support and resistance to break. Of course there is. Lets get back to the above room example once again. But now, instead of you, assume the incredible hulk is jumping inside the room , There is no way that the normal roof can oppose his strength. The roof will be broken and he continues to move in the upside direction.

The same happens in the market. If the net orderflow that is trying to push the price of the stock higher is strong enough, the resistance will be broken. Similarly, if the net orderflow that is trying to push the price down is strong enough, the support will be  broken. And the support or resistance once broken changes its polarities, ie. support becomes a resistance in future and the resistance becomes support in the future.

Now lets get back to the base concept where we have started all this. ie. Structure.

I restate that here again as a review and information consistency,

Price moves in a structural framework of Support and Resistance

1. If the framework is broken, it will enter into the new framework with a polarity shift in support/resistance.

2. Just understand what are supports and resistances for now. Don’t go deep into the construction of them as I have not explained it yet.

Summary:-

Resistances act as roofs for the price movement.
Supports act as floor for the price movement.
Support once broken turns into resistance for the future price movement.
Resistance once broken turns into support for the future price movement.

Structure.. It’s necessity in the uncertain environment

What is the structure? Why do we need it ?

Structure is a thing constructed. A complex entity constructed of many parts.

There is a famous saying in trading. “ Trading is 10% strategy, 20% money management and 70% psychology“. That 70% part includes understanding your own psych and also the psych of the other traders. It is impossible to predict what’s going on in other’s mind and how they will react with 100% accuracy. Of course we can predict that to some extent but it is not cent percent accurate. So we can predict how market might go, but we can never say how market will go. 

So, we need a structure to understand that and to keep the odds in our favor before taking a decision. I think you understand the necessity of defining the structure. Simply said this is the battlefield where we are going to plan and fight with other traders.

Many theories tried to define the structure of the market. We have Elliot Wave theroy, Gann theory etc. I heard somewhere that people use planetary movements to take trading decisions  But it is not wrong guys. When the environment is uncertain, there is no wrong and right theories. If something works for you, use it. If something doesn’t work for you, discard it. But don’t judge it.

According to YTC price action trader book,
Market moves in a framework of support and resistance and when the framework is broken, it enters into a new framework of support and resistances. 

Before going into the explanation of the above point, I have few things to explain. I said that market is a collection of traders taking trading decisions. Those decisions results in the net orderflow and the net order flow drives the market in a certain direction.


The core reason of the market movement is traders taking decisions. Traders are humans and they have memory. We humans don’t like to change a habit so easily. So does the market. Market has memory and it behaves in a certain fashion when price approaches a certain level where it has felt some unexpected force in the past.

 Market has inertia and it resists the change of environment and it tries to continue the same behavior. Until market shows clear evidence of reversal, don’t take decisions against the direction. I hope you are clear with the explanation till now. If you aren’t, please read this article again before proceeding further

Discretionary-trading Levels of Supply/Demand Imbalance

This is the first article in the series of concepts of  discretionary-trading

It might look like spoon feeding at the start as I want to explain everything I use as detailed as possible so that it gives a clear idea about how I see the market and how I identify low risk and decent reward opportunities. And let me say that again, every single point that I am going to write in this series is important and don’t underestimate the .power of simplicity.

So what are these supply/demand levels? Are they same as support and resistance levels? 

Yes.. They are almost the same. But I would like to call it with a different name so that I can differentiate how I pick levels from the chart to deal with markets, which is a bit different to what a lot of other traders do. I never take levels from the future like Fibonacci retracements and extensions, pivot calculations of S/R etc. as I strongly believe that the future in the market cannot be predicted. I am not saying that they don’t work. They might work for you.

But absence of a rational reasoning about anything in trading doesn’t suit my personality and my way of trading with tight stops. Enough of this BS. So what are they?

The price point that had initiated the move, which has broken the  last pivot point is what I call a supply/demand imbalance level.
The pivot point can be a swing high, or swing low, or the high/low in a single candle retracements (which I call as trap levels). I repeat, I  don’t consider each and every swing high/low as a supply/demand imbalance level.
That’s it. Now lets look at some charts to spot those levels.

1.Swing highs and Swing lows as the levels:-

I explained long back how I identify swing highs and lows. If you miss that, feel free to read that first before moving forward in this article.

Now that you know how to identify the swing highs and lows on the chart, it’s time to filter which of them can create a huge imbalance in the next test so that we can use them either to take an entry, or to scale out the already existing position.

 The image is self explanatory and feel free to comment if you have any doubt regarding that. There are other levels(trap levels) in this chart that are not swing highs and lows,  which can cause some imbalance in the future,  I didn’t mark them intentionally as the primary purpose in this chart is to identify only swing highs and lows that has the potential to create a good imbalance in the future on first interaction.

2. Trap levels as imbalance levels:-

I call single candle pullbacks as trap levels. A trap level on 5min. chart might appear like a swing high or a swing low in  1min. chart. And a trap level on 1min might not appear at all on 5min chart.  Lets look at the following chart to make that clear.

Let me explain exactly how I use them for entries

In a trending market,

1. Levels from the higher timeframe – I use them for TTF trend reversal trades(constructing the S/R structure) on the first interaction. ie. BOF, TST when the trend is weak. Also for BPB trades when market is entering into the new framework of support and resistance.

2. Levels from the lower timeframe   – I use them while I am looking for pullback and complex pullback trades in TTF trend on the first interaction. Not for CT trades. Never!!

3. Levels from the trading timeframe – For trend definition in TTF. Series of demand levels is uptrend. Series of supply levels is downtrend.

3. Range Boundaires:-

Apart from these, you already know how I define the range boundaries and when I’ll call it a range basically. So I am not going into that again in this article. If you miss that, you can read it here..
These are the three types (and only ) of supply/demand levels I use in my trading.

If the level is below the current market price, it is a demand level. If it is above, it is a supply level.
Understanding the concept of these levels forms the basis of my trading philosophy. You can see there is nothing complex in finding these levels. No complicated calculations like Fibonacci, pivot points of S/R and all. Everything is straight forward and from the market data. And it is well known that market respects it’s own levels.

Know the opposition

I was asked a lot of times by my fellow traders, how I am maintaining my win% to such a good number, how I am identifying that the trade is not working and scratching it before getting into a full stop out, how can I sit patiently, blah.. blah.. blah….

There is only one answer to all these questions. I never sit idle in front of the charts. I watch every tick movement in my TTF and LTF and I try to maintain the feel for the market every moment whether I am in a trade or not.

You might already know by now the blue print of my trading plan. I will give a brief explanation of it as a quick presentation.

• First I structure the market using HTF and TTF.
• Then I find the future bias.
• Then the type of setup(s) to look for.
• Then the price level to initiate trade.
• Then I’ll wait until price approaches that level and then look for exhaustion or failure to continue beyond the level, to time the entry.

I follow the procedure in the same order. If I got stuck at a step, I will start again from step 1 and I don’t jump to the next step.

Simple, isn’t it??

If trading is that simple, the success ratio in this business would have been high. Let me try to explain why it is not that simple.

The first three steps, namely, structure, bias and the type of setup needs a hell lot of hard work to master. They demand a lot of understanding about the market dynamics and  understanding about the strategy you are using , especially when you use price action for trading.

Technically, you need a lot of screen time, reviews and exposure to different market environments which obviously needs a lot of clock time (say years). On top of that, if you approach the market with an idea  get rich quick, that learning curve will extend more. You need to find which structural boundaries work and which doesn’t, which trend definition work and which doesn’t, how to find the proper future bias in different scenarios in different market environments etc.

There is no way you can learn it without hard work and experience. So, the first thing you need to look for is to survive until you get enough experience to at least master these. There is no skill related stuff in these three steps. I repeat, it’s all about experience, reviews and the screen time. No other short cut. So, plan for the survival (at least 2 years) before actually thinking about making money in markets.

Identifying the price level also needs a lot of reviews and exposure as it depends on the context and the environment that the market is in. Let us say you are expecting a pullback setup.

To take that trade, you need to identify the price level where you expect that the pullback most likely ends before price actually reaches there. There will be a lot of such levels that can provide the orderflow to end the pullback.

To choose the best level between them, you have to consider the strength with which the trend is moving and the impact that the level you are examining has caused in the recent past. So, you must study a lot of samples of the pullback trades in different trending environments to know where they ended, test them in live and then make them a part of the trade plan.  For me, there is no trade if I failed to identify a proper price level to initiate the trade. This increased my win% to a significant proportion. It needs a little bit of skill while reviewing and also while identifying the levels in live as you have to consider the context to choose the proper level.

Then the next step is identifying the exhaustion, which is the main topic of this article. Trust me, it is not at all easy and I suggest you to stick to the stop entries 2 ticks away from LWP when price is trading at the level you are interested in until you train your mind to identify exhaustion properly. You might notice that I use the word feel for the market a lot of times. Even that comes under this category.

Then you need to know who are on the opposite side of your trade. I mean to say, if you are looking for a BOF setup, breakout traders and breakout pullback traders are on the opposite side of your bias. 

If you are looking for a PB/CPB setup, counter trend traders are on the opposite side. For TST, with trend traders. For BPB, counter trend traders.

To enter in a trade, first you need to make sure that those who are in the opposite side of your trade got into a position and are feeling emotions when price is not moving in their favor, beyond the level you have chosen.

I would like to talk a bit more about this. Let’s divide the traders into three categories..

• Gamblers, who don’t know what they are doing, not even a single word in technical analysis, but are trading for a random money and for adrenaline rush.

• Beginner traders, who know few basics about technical analysis like candlestick patterns, chart patterns, indicators, some price action related stuff etc, but with a very limited exposure to the markets (less than 3 years). They think that they can beat the market with the knowledge they gathered about the markets. Honestly, these are the guys who gonna suffer serious drawdowns as they trade with their arrogance, hope and belief without respecting the risk and the context that the market is in. They always pat their backs by looking at the hindsight charts and the way the market respected their analysis after the fact. As a matter of fact, these are the guys who pay our wages.  

• Professionals, who are skillful, disciplined, hard workers and have a decent exposure to different states of the markets. They know what they are doing and they always respect the risk.

In the above three,  we must always trade with the professionals. Never ever trade against them. So, the first question I ask myself before placing an entry order is, am I fading professionals? 

Between the gamblers and the beginners, most of the money professionals get is given by the beginners as they are arrogant and are controlled by the hope and the belief on the acquired knowledge. Gamblers on the other hand, don’t know anything about the markets.When they lose, they accept that they had lost as they don’t know anything about markets. 

But beginners think that they know everything about markets and hence take positions aggressively even after proving that they are wrong by the market, just to donate their money to the professionals.

To narrow down my on going analysis, I just assume that there are no gamblers against me and I am fading only beginners. With this assumption, I can name those traders who are taking positions in the wrong context as beginners. With a little knowledge on classical chart and candlestick patterns, I will know whether they have taken a position or not before my entry and against my bias. Then I assume myself as one of those beginners who took the position against the trade that I am actually planning to take. 

Then I will try to feel the emotions that they are going through when price is interacting with the level that I have chosen and then time my entry when the emotions completely takes over.

No candlestick patterns, no high/low breakouts, no indicator based entry triggers. This is what I do to time the entry and this is what I mean when I use the word feel for the market. 

I don’t have a problem to miss an entry while doing this process. I prefer to sit aside rather than hurrying into a trade without knowing what exactly is happening in the markets.

Your battle is half won when you identify who you are fading and how their emotions are at the given moment. This is a fantastic information to have to make your trading better.

I am a big fan of Sun Tzu’s book, The art of war. This quote will give the entire concept of this article.

"If you know about your enemy and know yourself, you don’t need to bother about victory.

 If you don’t know about your enemy,but you know yourself,  for every victory, you will face a defeat. So you win 50% of your battles.

 If you neither know about your enemy nor yourself, you are doomed to failure. " (Courtesy - JCK)