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Tuesday, 12 September 2017
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
Monday, 11 September 2017
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 :-
2) Characters of Corrective moves/swings:-
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.
Tuesday, 5 September 2017
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.
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.
Monday, 4 September 2017
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.
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
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
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