Bumpy Moves Vs Smooth Moves

Nifty has moved 200 points from 5250 to 5465, but the kind of move it made was not easy to ride. For every 70-100 point upmove there was a 50-70 point of a pullback.

1) Moved from 5250 to 5341(91 points) then pulled back to 5269 from 5341, a correction of 72 points.

2) Moved from 5269 to 5412 ( 143 points) , then pulled back to 5354 from 5412, a correction of 58 points.

3) Then upmove from 5354 to 5425 (71 points), then pulled back to 5370 from 5425, a correction of 55 points.

4) Upmove from 5370 to 5442 ( 72 points), then pulled back to 5392 from 5442, a correction of 50 points.

5) Upmove from 5392 to 5465 ( 73 points), then pulled back to 5412 from 5465, a correction of  53 points.

Can you find some similarity of last three moves, it moved up approx 70 points and then pulled back around 50 points. Nifty was moving in a channel.

For Intraday traders - In a hindsight, It looks very easy that we should have gone long at every correction of 50 points and then book long and initiate short after every 70 point of upmove, But how many of intraday traders could have done it??

Now question arises - When do we get smooth rides and when do we get bumpy rides?
The answer is - When there are different trends in different time frames we get bumpy rides. And when all time frames synchronized to same trend we get smooth rides till next major support/Resistance.

In this whole bumpy up-move of 200 points, 5 min, 10 min were in uptrend but 30 and 60 min were in downtrend, so the bigger time frame players were shorting on rallies leads to the bigger corrections at every up-move, and the smaller time frame players were buying dips on any such correction of 50 odd points.

Another example is for 21st Aug, before it broke 5425, it was going up and down, because smaller time frames were in uptrend and bigger time frames were in downtrend.but once it broke 5425 it was a smooth ride till 5260. Because now smaller and bigger time-frames were all synced to the downtrend.

The bumpy ride of last 200 points up-move will be converted to a smooth ride once 5490 is taken out in nifty, when bigger time frames will also turn to uptrend.

Happy Trading
Pawan

Did I make Loss Today?

Today I am getting phone calls from many of my relatives and friends who knew that I have left my job and started doing Full time trading. They are concerned about today's Big Fall which has made a big news in all the news channels. They start with a conversation that how much loss did i make today?

And I can not stop myself laughing :), And when I tell them today was my best trading day ever , they can not believe that. It is difficult to make them understand that money can also be made when market goes down, Me and all of my subscribers went short as soon as 5703 was broken, Everyone of us is sitting on 200 points of profit.

On the Flip Side, I am still getting many emails from my critics saying that my party will be over soon, the kind of returns i am showing in Aug performance is just not possible :), To them its a plain lie. Tell me guys what should i do, If market is giving me money , Should i not take it? This is what a trend follower is supposed to do, to make maximum out of any position.

Today at 5540, I took an exception because of the enough money on table and the weekend , So asked everyone to be out from short but then one of my dear subscriber asked me ,"why are you booking emotionally, didn't you teach us to ride the trend to the fullest". I was touched and came out of that emotional booking and we all shorted again at around the same level. And not to mention Nifty came down 45 points down again from that shorting level.

I will leave it to my subscribers to reply this post and tell the actual truth if they were Short from 5703 or not?

Why do we traders tend to Over trade?

One of biggest mistake which every trader does in his initial days is Over Trading. We have heard it many times that avoid over trading. But Question Arises why do traders over trade? What force us do that? Answer is simple - Because Markets don't move in linear fashion and traders mistake small retracement for the trend change. And with every such small illusive move, traders tend to change their stand and converting short to Long so frequently,ending up with over trading. 

Lets take one hypothetical Example : 
Nifty is coming down from 5350 and now its trading at 5310 and looks stable. My thinking cap says that 5300 should give it a support.So I bought Nifty Futures at 5310 keeping 5300 Stop loss, As soon as I bought, Nifty went till 5320 making me happy, But I wanted it to go even further wishing to make few more points. But slowly It came down back to 5310 and then to 5302, I was disappointed and thinking why the hell i didn't sell at 5320, I could have made at least 10 points and now its going to eat my stop. And Yes it takes my stop at 5300 and then went down further 5 points to 5295. 
And Now something happens which no trader will like, It came back to 5300 and slowly started going up to 5310, now my mind will say market noise just ate my stop my entry was right, I just kept stop loss too tight!! Why not take one more entry again at 5310 keeping 15 points of stop loss this time. But Nifty has something else in her mind. She turned down immediately and took my stop again at 5295. 

Now I am just furious over non sense nifty moves and just want to take a revenge and wants to take back my 25 points which i just lost in two trades. My Mind went numb and this time I turned bearish and shorted double the quantity at 5295-96 levels to make up my loss . But Nifty Just made a double bottom reversal pattern with first bottom at around 5295 and second bottom at 5294 and now rallied back to 5310 and then it rallied another 50 points from there and I just closed my third trade at 5310 with another 15 points loss with double the quantity. And after loosing enough money and points in the market I am just feeling so helpless with the crazy moves of Nifty. But Nifty just made a double bottom and it does all the time.Why would she bother how much I lost and why I lost!!So even though my initial analysis of support at 5300 was right, I still lost money because of over trading. 


How can we avoid Over Trading : 
1.Start working on larger time frames and avoid whipsaws, You will get less entries and your trade will have wider stop which will be saved many times by small noises. Less Entries means less brokerage and taxes but more peace of mind. 

2. Trading is one of the most difficult profession in this world, and with in this profession Intra day trading is the most difficult to master. Not to offend successful Intra day Traders, But for new comers - Stop Intra day trading until you really understand all the moves and shift to swing or Positional Trading Systems so that your trades will not only get enough breathing space of wider stop points but also will get enough time to work in your favor because there is no compulsion to close the trade at the end of the day.