Retracement strategy, a must for traders.

 Trading strategy that works wonders besides the supports & Resistance is "Retracement strategy":

The strategy that has worked consistently well with low risk-high reward ratio is:

"Initiating a trade at 50%-61.8% retrace with 80% as SL".

Understand its workings.

A trade is not complete once an opportunity is spotted & it is initiated.

A trade needs managing, monitoring.

a. After a trade is initiated at the key retrace point, you keep SL around 80%.

b. Once the prices start to move from your trading point generating profits, you monitor
the "key retrace of that rise, if up move OR the key retrace of that fall, if down move" and

trail your position.

This important part helps you "lock-in the profits as well as points to your new exit points in case of adverse reversals".

c. You manage your trade by part booking and holding the rest with the trailing number that keeps changing based on the price advances or declines.

Follow prices using HH & HL or LH & LL. Do not look for perfections.
Trendline helps to identify end of a move so that you can choose a "retracement".
Ideal is 61.8%; but 50%-61.8% is the zone; 80% is the SL

Do these above and see how your trading results improve substantially during every month.

Trend following has its utility and makes trading easy for the patient followers...

Nifty, uptrending, recovers all the "lost ground" but yet to display momentum..

Nifty Pre-Market View.

The moment we try to standardise our approach to market, we invite many whipsaws. Guidelines are fine but following needs understanding market behaviour.
I stress the need to understand this behaviour of market by using a combination of studies such as EW, TA patterns, TT, FII's flow and OI tendency. Markets are never the same due to the combination of various t/f working & EW cycles. Though repetition happens, the intensity varies.
We noticed a sideways market when prices closed below DHEma on 03rd April. A JNSAR trader should have sold the next two days and covered before EOD; on the 2nd day prices reached DLEma less 20(6648) and reversed. A JNSAR trader should have held on to their position towards DHEma+20(6768) and seeing the strength in the upmove, the position should have been trailing for which we keep updating the "last rise retracements".
Writing CE & holding it should be for a very small time period when Day is down & week is up. Give weightage to week till it develops weakening signals such as a pattern or a divergence or a close below WHEma.
If you find yourself unable to reverse a counter trend trade at the appropriate time, do not do such trades. We have stressed repeatedly the nature of this uptrend that prices have broken out after a 4 years consolidation. And that means some strength. Take advantage of this trend till it is spent.
We have also suggested that the 1st rise gave 1300 points from 5119 to 6360/6405 and the next will give a min. of 1300 to much more...1.618x1300 or 2x1300or 2.618x1300....
Many JNSAR traders have ignored the "prices continually closing above JNSAR" except those strong-belief-followers while others get carried away by intraday swings.
To follow consistently, one needs to understand this market and stay in the direction..trade in the direction..
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Taking into BN's price pattern which is not "corrupted", we treat the rise from 6650 as the "v"th wave of the rise from 5933. It is possible that waves could be sub-dividing for much more highs. Hence, take this view with a little caution..
We have seen 40-75 pts hour correction and we have seen 120-130 pts day correction and we are "likely" to see 200-250 pts of weekly correction once this "v"th wave is done and prices close below WHEma...
(i) done at 6734 and the same should not be breached when the (iv)th unfolds after the completion of (iii).
Has the (iii)rd completed ? Following the retrace(pref.38%) of the rise from 6705 would guide..

Nifty Pre-Market View.

We don't receive wisdom; we must discover it for ourselves during a journey that no one can take for us or spare us. - Marcel Prous.
A part of such a journey will unfold here and you'll discover all kinds of riches along the way.
It was a pleasant sight to see Dinesh Rishi and RajaGopal who have contributed immensely and triggered many enlightening discussions.
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Prices have held within the 75 points correction-quantitative analysis-and poised for its "v"th wave.
"6487" would be a critical number and if it breaks, ivth continues to 6465-55, approx.
Prices held approximately the 80% of last rise from 6487 to 6546 and moved higher, managing a close above HrJnsar.
"6522" acted as a resistance during yesterday's trading; hence, sustaining the same is crucial for today's upmove.
The "v"th would take the prices to 6576 and if momentum persists to R1 of week, 6639.
Look at the Hour chart below: the uptrend is clear once the prices moved above 6107 and since then they have been making higher high and higher lows. The higher low making is called the corrections lasting 2 to 3 days so far and in price terms 45 to 75 points. Ones who have the patience to wait it out gets rewarded with the "Higher Highs". This is also called "Trend Following". Following does not require us to know the "possibilities or various scenarios".
And this is only the Hour chart; imagine the results by applying the same principle to week/ month charts for delivery based trading...
Boring stuff....Get Rich Slowly and Quietly...

Just put one foot in front of the other, and enjoy the walk.

"Try and if you don't succeed, try and try again". But then you've also heard the converse,
"Try, and try again, and if you fail, then stop. Don't be a damn fool about it!".
On the one hand you hear, "Go with the flow", and on the other hand,

"Only a dead fish goes with the flow."So, understandably, people are often confused, unsure when to persist and when you realign goals and strategies. The answer to your question is found in the famous "Serenity Prayer":

Nifty Pre-Market View.

Prices are heading towards 5971 after getting resisted @ 6073-78 and breaking "6047".
There are critical averages in the zone of 5920-65. And this is the "decisive moment" whether wave 2 ends @ or near 200dsma or the correction/ fall gets deeper.
Remember, there are three "Ds"(Downtrends) are at work..Month-D; Week-D & Day-D.
Let every trade of yours have these in the back ground..

Nifty Pre-Market View.

Nifty "paused" for one day....and another day..;
Such pause should not distract the "Trend followers"..
Markets are never identical; each set up has different combinations; the risk-reward changes in your favour as the TT becomes more Red during downtrend or more green in uptrend.
"Reading Oscillators" has stressed the point of reading them in context to "Trending" & "sideways market".
Learn to differentiate these two and learn patience.
Wednesday, January 29, 2014 Nifty Pre-Market View:
There are two clusters in the chart below: 6162-71( & 6189-2 DH) and another @ 6222-25.
6098-6108, 61.8% - 80% of last rise are immediate supports.
"6189" being week's 26ema would signal strength/ weakness for this week..
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Nifty stopped @ 6170 and fell to 6110.
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Ilango said...January 29, 2014 at 12:17 PM
Since the rise from 6086 to 6170 is a 3-wave structure, it could be a "Flat" which would mean a trading range of the same. Besides these, 6130-40 provided crucial support on 2 recent occasions.
Now the attempt to stay above "it" is on. There will be sellers between 6163-89, last two day's highs. hence, break below 6130-40 could be taken as weakness.
Trading during "pause" requires very careful trading....as in a "b" wave.
If not, simply flow with the trend till it bends.
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Be daring to state the truth..the truth derived objectively from your studies. A failure here & there owing to market's unpredictablity should not deter you in your application of your studies.
This world needs more & more of "truth seekers" to be bold and forthcoming...
Shun the "attention seekers" for their "ways" are not built with dependability.
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For today/ tomorrow: Holding below 6145-6158, correction would attempt initially 6071, and then 30wk sma @ 6002/ 200dsma-5971 in a day or two..

Nifty Pre-Market View.

Prices breaking the channel @ 5929 and getting back into the channel again suggests the completion of "iv"th wave and unfolding of "v"th wave.
Aggressively one would sell at the completion of "v"th or wait for the channel to break again to initiate a sell.
There is an alternative "more bullish scenario" wherein the "v"th wave is extending from 5868 which will be confirmed by the impulsiveness of today's price structure with its shallow retracements.
DHEma would be rising above 6015-20 today, a good trailing number.
The Hour chart below shows distinctively HH & HL since the 5477 rise, once made a HL @ 5500 & moved past 5611 to make a HH. That is the most elementary "Trend following"  technique.

Applied & Objective Technical Analysis - the Basics.

Dear Gauresh Panchal....Many, many happy returns of the day.
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Beginners as well as the drifters would do well to focus on these two studies to make their trading life rewarding as well as satisfying. The intention here is to demonstrate that the basics are good enough to deal with the markets efficiently.
Trendlines: Read here
Follow this simple strategy in all your trading/ investing strategies and let it be part of your plan. The tendency to ignore is strong here as it is the "simplest one". One should call it the "supply-demand equilibrium Line". After all, our, traders' job is to exploit the imbalances in demand & supply.
Trend Following: Read Here
This is the oft-repeated statement of most experts in stock market field and oft-ignored by the "hurrying-kind" who outnumbers the disciplined. Change your side soon to become a habituated winner.
How could you have applied these two basic, simple to comprehend strategies in recent times.. and in the coming days? There are minor trends and major trends. For the "glued to the screen trader", even an hour would look like a major trend unfolding.
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Major trend(UP) indicating channel support is @ 5305 while the minor trend (Up by channel/Down by avgs) struggling below 21 & 34 Hr sma.
We'll focus on the Day and Hour to make it simple and easy to follow to
get rich slowly and quietly.

Nifty Pre-Market View.

Nilesh Patil asks: Kindly confirm the death cross of nifty. If you find it useful then post in JN group.

Ans: Death cross is one of the indicators that shows the underlying weakness. It could whipsaw too and the current uptrend may continue.
Since we follow 5DEma and/ or Day JNSAR to show us the trend, it will get us in a "bearish mode" if there is going to be one.
A death cross happening when prices are below 200 & 50 sma is more potent than the one happening when prices are above it. Presently prices are above it. Hence, the signal to sell would be when the prices close below 50sma (5072)& 200 sma (5067) whereas 5 ema is already above these two averages and JNSAR too will climb above these two averages in a day. Thus, sell signals would come to those who follow "trend indicators" in quicker time.

Nifty Pre-Market View.

A trending market with higher T/F in confirmed downtrend(week) needs to be treated differently and "lots of patience" is required to make big money.
EOD prices remain same on some days but "intraday rallies" get sold into. As a trader, you make "more money", playing those moves.
We have shown in the past few days-7th May, 8th May, 9th May, 10th May- how to initiate such trades using developing resistances along with fibonacci retracements. And they definitely are not "peanuts". Infact, they improve your "SAR performances" in a significant way.
Aren't we all traders? Rising market in downtrend offers you "Juicy opportunities" and you need to be like the smart farmer who identifies ripe fruits & pluck them. Identify those amazing opportunities to initiate trades and that is called "catching a running train at junctions till the engine is put in reverse direction".
In such downtrends, I still strongly recommend you to "Sell on rises", leaving out the "counter trend rallies" till a reversal signal emerges.
Just as "Dinesh Rishi" prefers to "Only buys in an uptrend", you could adopt "Only sells in downtrends".After all, a trend is a trend...whether "Up or Down" and a trader would do well to know the trend and play along.
5 sma is like the "Indian rope trick in a trending market" that prices keep coming back to it and moves away. It did so on the "GARR day and yesterday" and that is 2 great opportunities. Similar thing happened in BN & many stocks too.This is also called "catching up with averages".
Take advantage of the steady, disciplined contributors: "Mynac"(KST/ OI), "Sanjay Jaiswal(OI)", Cooldent(JNSAR), Shriram(Google 30min TA),J.R.Julius(Camarilla)& DineshRishi(Disciplined TA) and others to be identified once consistency is visible.

Nifty, uptrending in the short term, asserted itself when it mattered most.

Knowing that there are many technicals working at all time...month/ week/ Day and Hour, etc.. will help you to be prepared for the most important aspect of "Technical Analysis" which is "Trend asserts itself when it matters most which is - at the close period of month/ week/ day & Hour, etc". This is the reason why prices may behave contra to the trend most part of the hour but go back towards the trending side at the closing of the hour. Similarly for day, week and month. Intra week upmoves get fully retraced on the last day of the week. Intra month rallies are retraced towards the last part of the month. Intra settlement moves are well settled in favour of the trend at the close of the settlement.
Believe in this most important characteristic of technical analysis, the most practical one. The prices will make you most uncomfortable with their counter trend moves during the "intra period but within the permissible levels" but will go back to their trending direction when the said period (Month or week or Day or Hour) comes to a close.
If you can believe in this, and make it a part of your strategy, you'll then look at the counter trend moves as opportunities to initiate the most rewarding trades and if you are already in the trending trade, you will learn to "sit through the counter trend moves with amusement".

1. JustNifty TA(09th Jan)

Nifty has all the makings of a (iii)rd of iii wave - the deep cut.

Read through some of our earlier observations here. And especially this one. Going over our earlier approach to markets while downtrending helps.

Nifty "pauses" in its weekly downtrend with a close above 5445.

Let us not strain to look for wave labels, especially in the short term. Remember to combine technical studies to add weightage to your observations. Feel the pulse of the market with the force with which prices rise or fall. The best place to gauge Bull-Bear's strength is during corrective phase. The undercurrent is known during such phases.Elliott, himself, would exclud3e certain topping and basing waves out of his counts as whipsaws would cloud one's assessment of waves.
While reading through the comments, beaware of the "Calls" being given out by other readers - know in advance the time to wait for the targets, stop losses (whether you are willing to risk this much money on a trade), the weightage of the observations as reflected by the prices and above all "Know your Time frame of trade - Hour/ Day or weeks and whether you are willing to have a SL as per such a T/F". Why this alert..? Though the reader may give away the calls, they may not be around to monitor it for you or urge you to book profits or exit. You have to do it confidently. Markets have a way of "freezing" even the professionals with its sudden changes. You simply trade your plans.
It is darkest before dawn and it is very bearish before a reversal. The bearishness witnessed wasn't so severe like a med. term bearishness but like a short term bearishness. Accordingly expect the reversal too to last in that much intensity & time until proved otherwise.
Tech table shows you what trend is currently on. Presently, the day trend is up with momentum but the weekly downtrend has only paused. Bulls would attempt a close above 5555 and accordingly an attempt towards 5555 is likely. A close below Day High ema will put the market back into a sideways mode.

Nifty's shallow correction continues.

Volumes have been high during the last 3 days of correction.
The last pivot low of 5160(+/-30) should be held by "bulls" for further up moves.
As indicated earlier, false moves on both sides are possible.
Option writers are already reaping in the benefits.
The correction so far has been orderly & within a channel with
channel boundaries being 5230 to 5280.

If a trader can recognise a "trading range' from a "trending move", his expectations will be reined in and he/ she can go about harvesting methodically. Knowing when to press the pedal and when to put the breaks makes a lot of sense in a trader's life.

"Being closed" below the "high ema" is one such method to identify a trading range.
A close below "Low ema" could be a downtrending move and a close above the "high ema" the resumption of the uptrend.

Nifty's "Make or Break" week made it..!

A trendline watcher would have benefited immensely by this weekly channel support @ 4945. Holding above the weekly pivot, Nifty is poised for higher levels(R1, R2). Now keep the levels of each week's channel top for "Booking out".( and may be to "Sell" at an appropriate future time when internals show weakening undercurrents). This weekly rising trendline gains significance having three points of supports.

A pause candle after a sharp upmove.Macd has come into positive zone. The pause can continue with a sideways move before heading higher provided any corrections are limited to 5100 or 5080. After a brief LH & LL, Nifty has started with a big HH.

At 11.00AM, Hour high ema indicated a correction and the same ended at Hour low ema and Nifty moved strongly then on. A trader who changes to "Buy on dips" once the reversal to "UP" was established would have benefited immensely. As long as the Daily close is above "Daily High Ema", the momentum will carry it higher. Closing below the same, "sell on rise" for a correction will be in place.

Trend following - the most basic of all.

The direction of the stock/index price movement is called a TREND. Prices either be rising or falling or moving narrowly(flat). "Trend is your friend"-the often repeated phrase carries its weight in gold. Pay heed to this phrase all the time to become an unbeaten market player.

The most basic Trend analysis:
Uptrend: Prices are rising and making higher tops and higher bottoms.
Downtrend: Prices are making lower bottoms and lower tops.
Sideways or Flat trend: Prices are moving in a narrow range with choppiness.
The terms bull market and bear market describe upward and downward market trends, respectively.

Prices do not rise or fall in a straight line but gets interrupted with counter moves in the opposite direction. These counter moves can be of zigzag or flat or some kind of triangles giving rise to minor tops & bottoms against the main trend.
For eg: If the trend is up, prices after a significant upmove will pause and make minor lower bottoms & lower tops- called corrections/ counter trend rally. Once this correction is over, the main trend will assert itself by taking the prices to new highs.

A top: is nothing but a price level from which the stock reverses direction to move downwards.
A bottom: is that level from where the scrip reverses the downmove and starts to rise.
A TREND: is the position of these tops and bottoms that determines the trend at any given point of time.
At any given point of time an investor or a trader has three options - to buy, sell or stay away from the market. If the trend is rising, he would do well to buy. If the trend is falling, he should be selling, and if the trend is flat, it is best to stay away unless you are capable of handling micro movements. Most of a trader's losses arise from trading in a flat market . Patience plays a vital part when market moves in a sideways, choppy mode.
Trend following for Medium to Long term Investing:

This weekly chart shows the benefit of trend following for the maximum gains requiring highest amount of discipline and patience.
A falling market cannot keep falling and at one point of time it is vulnerable to change. This change in the direction of the trend is called a trend reversal. Once reversed, the new trend will make higher tops & higher bottoms until exhaustion sets in and it starts to make lower top and lower bottom.
Technical Analysis is this process, whereby one can spot trend reversal at an early stage and can ride the trend till the weight of evidence proves that it has reversed directions.
Trend following for short term Trading(Hour):
Short term traders will do well to follow closely these minor price tops & bottoms and plan their trades. Many traders mix up the time cycle while following the trend and end up holding a losing position. For eg: One goes long spotting a trend change in the hourly time frame but hold on to it in spite of a continuation of the downtrend in the daily time scale. Every trading position has an "Expiry date" to it. If the anticipated price does not unfold within a set of time frame, exit thereby protecting the capital.

Trend following for short term Trading(Day):
This simple concept of observing tops and bottoms posted by the stock can help the investor/ trader in riding the trend and spotting trend reversal.The short term trader must keep the daily trend as the main factor but use the hourly trend for entry & exit.

I label all the critical pivot points in numbers(tops & bottoms) which help me tremendously to follow the market as numbers stay on in my mind longer and number is what I see on the trading screen.
Price: One of the first rules of trend following is that price is the main concern. Traders may use other indicators showing where price may go next or what it should be but as a general rule these should be disregarded. A trader need only be worried about what the market is doing, not what the market might do. The current price and only the price tells you what the market is doing.

Money Management: Another decisive factor of trend following is not the timing of the trade or the indicator, but rather the decision of how much to trade over the course of the trend.

Risk Control: Cut losses is the rule. This means that during periods of higher market volatility, the trading size is reduced. During losing periods, positions are reduced and trade size is cut back. The main objective is to preserve capital until more positive price trends reappear.

Though this concept appears very simple, it is probably the most important concept that can be quite profitably employed in trading the market. In using this concept, one may use either a bar/candle chart or the close price chart. Find the time cycle that best suits your time and nature and follow that trend to find your treasure.
Get rich slowly.

Trending & Sideways market Trading

Every trader needs a trend to make money. If you think about it, no matter what the technique, if there is not a trend after you buy, then you will not be able to sell at higher prices..."Following" is the next part of the term. We use this word because trend followers always wait for the trend to shift first, then "follow" it.
One of the first rules of trend following is that price is the main concern. Traders may use other indicators showing where price may go next or what it should be but as a general rule these should be given less weightage. A trader need only be worried about what the market is doing, not what the market might do. The current price and only the price tells you what the market is doing.
Money Management: Another decisive factor of trend following is not the timing of the trade or the indicator, but rather the decision of how much to trade over the course of the trend.
Risk Control: Cut losses is the rule. This means that during periods of higher market volatility, the trading size is reduced. During losing periods, positions are reduced and trade size is cut back. The main objective is to preserve capital until more positive price trends reappear.
Rules: Trend following should be systematic. Price and time are pivotal at all times.
A Predictive market trading algorithm or Trading System is defined as a calculable set of trading rules that uses either technical analysis and/or Elliott wave analysis and results in entry, exit and stop loss trade price points. Trading algorithms are not exclusive to swing trading and are also used for day trading and long term trading. Trading algorithms/systems may lose their profit potential when their strategies obtain enough of a mass following to curtail their effectiveness: "Now it's an arms race. Everyone is building more sophisticated algorithms, and the more competition exists, the smaller the profits,"
The markets are said to be trending sideways most of the time. During this time they can be quite volatile. It is for that reason that many traders have come to loath them. However some traders actually prefer sideways trending markets over trending markets.
The bulls and the bears are in this together, scratching their heads and wondering what’s going to happen next. Up and down, down and up. As soon as you think you know where the stock market is going, it doesn’t…An increasing amount of money has been flowing into fast-trading (and often short-selling) hedge funds that may be whipsawing the market with their staccato trading patterns…What’s a small-time investor to do? Perhaps it sounds facile, but the best thing to do with a sideways trending market is “not much.”
Sideways trends can be found inside support and resistance levels that are near each other. Inside the trading trend line the price still fluctuates, but with rather small ups and downs. A sideways trend is said to be broken when the price goes outside the previous limitations of the trend line. You might like to make sure that the price goes outside the barrier of the trend line twice before being sure the sideways trend is broken.

Trend following & Tech. Table reading..

There are various time cycles operating in the market all the time like monthly, weekly, daily, hourly, 5-minute, etc and each has their own trend.
For eg.We have presently the weekly trend down, daily attempting & nearly achieving a reversal, hourly turning up on Thursday and so on.

To confirm a trend, market need to close above or below 5 ema. Why ema? Because they give more weightage to the recent price action unlike the simple moving average which gives equal weightage to the last 5 days closes. And also the slow macd (Difference between 12 & 26 ema) should be up and above its trigger (9 sma of macd).Why 5 ? 5 trading days a week..Besides, I have found it to be stable , though some use 3, 4 etc.

If I wait for a daily buy signal, I miss 200 points from the bottom before the trend turns up. And after the trend turns up , market pulls back as a correction before rallying further and you may end up holding at higher levels for a brief period of time. So we look for the hourly trend to take position but this should be done only when the daily is in oversold status.

Similarly when the hourly is in oversold status, look at 5 minute to give you a buy signal for a possible reversal in hourly.On the fateful 27th Oct, Nifty's low of 2253 was accompanied by an excellent +ve divergence which helped to take a buy call even before the hourly buy signal.

If you see the Tech table in which Market is shown to be down in weekly (always closing below 5 ema) and in daily (Closed above 5 ema but macd is yet to move above the trigger and still closed below the 5 high ema).

5 High ema tells you the upward momentum in Nifty. As long as it closes below it, it is sell on rises.(So for Monday, Nifty needs to close above 2750 (high ema) to sustain the Friday's momentum..Just intra rally above 2750 is not enough). If it closes above it, then buy on dips & hold longs.Use it in conunction with weekly, daily, hourly.

5 Low ema tells you the downward momentum in Nifty. As long as it closes below it, it is hold shorts.If it closes above it, it is buy on dips & sell on rises till it closes above 5 high ema.

In simple terms
....Up & buy on dips above 5 high ema
....dn & sell on rises below 5 low ema
....sideways & trade supports & resistances as long as it closes
inbetween 5 high ema & 5 low ema.

These are certain indicative tools and not an absolute one for trading.

Use always channels for your trading along with other supportive indicators. the primary guide should be prices and that travels within channels most of the time. Channels most often break during a 4th wave. So keep that in mind. (Eg. Say a downtrend develops in to a 5 sub waves. After 1 dn, then 2nd up, then a 3rd dn and now on its 4th up. Draw a line connecting 1st bottom and the 3rd bottom. Bring a parallel line touching the 2nd top and you will find the 4th wave breaking this top trend line briefly and move back into the channel and make a low and then rise breaking this channel decisively. Barring these, Channels offer excellent trading guides.
Observe in all the "SAR" charts posted here, how these channels have helped in intra days and even helped in avoiding whipsaws.

Finally, an interesting article about the recent financial meltdown...you may have read the first few paragraphs already elsewhere but the last few paragraphs are the surprising ones. don't miss them.