A Perfect Trading Setup for Part Time Traders in Business/Job.
Hello friends, I am Vivek Bajaj, co-founder, StockEdge, Elearnmarkets. I welcome you to another face2face video this is almost the 76th episode, I hope you have watched every episode, learnt from it, made notes, practiced in the market with it this was a fun journey, it started offline in this setup, then we went online because of covid, now I am trying to go offline and do a real face2face with my guests Market is at all time high, there is lots of excitement and a wish to enter the market, right? If you haven't entered yet, a FOMO must be bothering you. I remember something like this happened with me in 2008 and there was so much hysteria in the market, with money making everywhere I was able to establish myself well from 2006-08 but I know many who were in that rally but are now lost Friends today's guest joined the market in 2008, we are of the same age, he's a CA, and working in the market part time very well he's from Kolkata and has a jute business, and he's involved in it but he wants to work more in market for an extra edge so he participated, friends, I welcome my friend, Amit. I'm very thankful that they called me to this platform and gave me this opportunity, there are 2 things I want to add here before we begin, Vivek ji is doing a very good thing, there is a webinar that comes out every saturday and the knowledge being given at this price, and experts being called to the platform, you won't get this anywhere, so he's doing a good job, you can learn about technical analysis from the ELM app Secondly, I appreciate StockEdge as well, because I have been in the market since 2008, my first software was metastock, the kind of scans being provided were available at subscriptions for 35000/year and you still wouldn't get the kind of data you are getting today.
I'd appreciate this more because I've been in the stock market for more than 10 years and a new person wouldnt be able to understand the worth of such data at such prices so i'd say please take full advantage of this scanner to get benefits in your trading. friends this wasnt a part of the discussion so this is just something good from his side, thank you so much thank you so much, but today, it's about you, see the unique thing about our face2face is that I decide guests after thinking about it. Those who I believe can add value, and since you're from an industry background with the edge of part time stock market work So will you share this edge with our users? Thank you. First let's find out about you and your journey, then we'll discuss technicals
Like Vivek ji said, I am a CA, and I cleared CA in 2000. After that i was in the top 4 firms for consulting, and worked a lot in mergers and acquisitions. The I joined the family business around 2002. My market exposure began in 2008 As I was discussing, there was euphoria in the market back then. I went to the office once and saw people going crazy over a magazine It was a busy thursday and everyone wanted a dalal street magazine, I couldn't understand what was happening the same pattern happened next thursday, I realized that whichever company was mentioned in dalal street would rally by monday Then my friend showed me an expensive software with an end of the day version, and showed me a banking stock in it then they told me about the subscription and I realized that whoever is making money is because of this software so this is what it is. I dont remember the stock but this was for 60 and I picked it up delivery based
after that I didnt see it and time passed, the stock became 30, because the Elliot wave count changed and reversed, then i realized that this wasnt as easy as the markets are dynamic. In the period of 2008-11, I saw that there was a euphoria for IPO, you put your money in any IPO and you were guaranteed to make money it's not guaranteed now but then if you put 1 lakh then 30-50,000 allotment was guaranteed so I earned income like this for 3-4 years and it ended with Indiabull power I put 45 in it, it opened at 36, then it became ratan power and it stands at Rs. 9 now things like these work short term only until you have the proper knowledge, after that period I started studying technical analysis there are 2 screens - the upper one where you see bars, price, support resistance, below you can see indicators for 3 years my full focus was on indicators, I never focused above because indicators like MACD did all the work for me i didnt want to focus much plus there wasnt a guide for it either. there were more limited losses than profit
in those 3 years I tried at least 100 indicators and I would hope for the best indicator for me but the understanding of market structure and dow theory, even after buying a book from martin pring with everything in it, but I focused on indicators so that I use one indicator to make money but that didnt happen I studied and relied less on indicators to see my journey begin. By 2012-13 I was reasonably comfortable, profitable and I built a system which kept developing, it's not complete at any point but there was a basis on which I could trade system is still evolving and no one in the market can say their system is complete and they've learnt everything in the market friends usually people have a journey like this. Thre is something I want to share with you, there is Kali Mandir in Kolkata, when you enter there will be lots of pujaris on the gate. I observed that technical indicators are also like pujaris and the god is the price, so when we come to the temple that is stock market, we meet the indicators, the pujaris till we reach price we realize that it is all we need to be successful in the market, this is what happens to a lot of us, but we eventually realize it through f2f, what takes 10 years to learn will be learnt in 10 days and indicators should be taken with a pinch of salt but price is most important and in this video we will discuss the language of price and how Amit sets up with price in focus today i would like to address the newcomers, and those who are in the market for long but they havent made money & they're not able to understand what to do everyone in the market dreams of earning money, but only 2% succeed and the rest dont and that 98% bring in their hard earned money which they lose in the end and feel that this isnt for them so with my trading experience if i am able to help even 5% for those people, I will feel that this f2f is successful so today for newcomers and for most people who have small capitals with their hard earned money from their jobs and salary, we dont have to look at others, we have to focus first on how can we become successful in the market. So I wont say that F&O is bad, you can do F&O, to anyone who is new, I would request you to not do F&O trading this is because someone who has 5 lakhs capital, and this is the range for a lot size value, everyone like earning money fast, but if 2-3 trades go wrong, considering the recent spike in volatility in the market, every month feels like an event, be it because of algo or whatever, but there is a lot of volatility in the market in one day both stop losses disappear, long and short side, so if someone with 5 lakhs capital buys a lot for 6-7 lakh, gets 2% loss, he is losing 25000 in minutes for 2-3 trades, there can be 50% loss, they'll lose 60-70,000. there will be disappointment, if there's no one to help they'll eventually lose their entire capital so first understand what the market is, so my advice first would be trade in blue chips in the beginning like in the banking sector, HDFC, Kotak and now ICICI, focus on some stocks from nifty, dont create a big list instead of midcap focus on blue chips and I'll tell you the reason for that. With 5 lakhs capital i will teach how to trade later,
You want to take HDFC, take it for 25000. Allocate only 5%, because you're in a learning mode, you can make mistakes also technical analysis also focuses on probabilities of a setup, to hope that the trade goes in our favour no one knows if the trade will be successful or not, ultimately without risk management there wont be a stop loss so if your trade in hdfc is successful you will learn and it will become a trading experience and even if there is a loss in your positional trade you are barely losing 1000-2000, you will learn without any emotional loss too, bigger than the market loss is the emotional loss emotional loss can never be recovered in the market, until you become an expert who understands the market and its trends, you'll never know when to buy. Paper trading wont work, to learn, buy small amounts in the cash markets, How much time? as per my view, at least 2 years, because in 2-3 years, you see all kinds of markets bull, bear, sideways - you will get an experience of all kinds of markets. This is my first request. Why did I say this? sometimes you cant exit even if you want to, this happens to everyone. Suppose you go to a sector with Larsen with IVRCL you invest with disposable loss, and you see after the cycle ends the stock prices for most stocks returns most blue chips like M&M have come back to pre-covid price levels. but companies with questionable governance dont get their prices back. so with blue chips even if you werent able to execute stop loss
you will earn in it at some point, even for HDFC, no matter what price you are at, even if it loses value in a crash you'll end up making profits so i want to say deal in the best stocks, not in all stocks, make a list of 15-20 stock, check market leaders and deal accordingly this is very relevant for newcomers and first timers, not just young people, for the first few years trade in blue chip stocks and stay with them, loss probability is less but after 1-2 years you will want to venture into the stock market. I wont say dont do F&O at all but understand the structure first if you take so much loss first you wont move ahead. Once you are comfortable, you will get a feel of the market and know what it's like with small losses and time you can rethink and work. Next I want to tell newcomers that technical analysis is about probabilities. there are no certainties, irrespective of setups, etc, there are always probabilities, like this will be successful 40% of the time, you can try all you want but you wont get the perfect setup. you can get perfect probability with a perfectly reasonable setup with 50-60% success rate after that there is risk management. the world's best trader, Mark Minervini
even if you read his profile today, i think he is a US investing champion, and the books that he has written, i consider him, in the recent times, in old time there was O’Neil, Wyckoff, i believe that the most successful traders in the recent times is Mark Miniverni even today if you will read his profile, he mentions that he is right only 50-55 times only, so if someone is saying that i am right 70-80-90times that that person is lying when Mark Miniverni is saying that he is successful 50-55 times only, then you should accept this fact, forget that you will get a perfection of 80-90%, if you will go for that perfection then you will not get that anyway second thing is, the set up whose success probability is 40-50 times, you will have to see the risk reward of that and and you are managing risk well then it will give you more money then a set up which is 70 times successful, but you are not managing risk well in this case. you are not adhering to the stop loss, so we have to see that the set up which works 50-55 times, also it may happen that we have placed a stop loss and it has hit for all the four times so you don't have to become sad, you need to see that you have a system which works over the period of time, 4 times it did not work, so you changed the system, select a new indicator, so that this does not work in that way give your system time, as it will not work according to your wish, it will work according to the probabilities, and if it does not work, then you need to adhere to the stop loss which you have defined, and don’t change it. but tell me one thing, that suppose i started a system, not that system can be someone else’s or i thought and created the system, and i back tested, did paper trading and did front test, and i got to understand that this system is logical, now when i went to trade, the first 5 trades went bad and my money also got wasted that time my psychological frame says that on paper everything was fine, it may also happen that market condition was like that at that time, that the first 5 trades went wrong so to trade the 6th time, obviously i will be hesitant, so what to do at that time, see you will have to take up trade there is no need to feel scared in market because that won’t work, give your system time because if it is working in the past, system is fine, the give that system time Ultimately one day market will be in your favour, and your two trades will cover the loss of all your 5 trades. Provided that in the 5 trades you have adhered the risk, and not that in those five trades there have been phenomenal losses.
correct, i will give an example and you have told something very relevant, there is a system which started a week before budget and a lot of stop loss did hit under that, because just a week before budget, market was unable to understand what is to be done because the mind was saying to sell, but the heart was saying how can you sell, after the budget, that system only continued, though lot of losses got booked, out of 10 trades, almost 7-8 trades were losses on the day of the budget, and within those 2 days, all the losses, got recovered, and that system gave such profits, that if you see the window of 10 days, so i find that system correct if i would have seen the window for the first 7 trades, i would have thought the system to be incorrect, reason is that you believed in your system you believed in the probability of the system and you did not jump from one system to another, this is the crux the next point, which i want to tell the new traders, is that you cannot predict top and bottom in market, someone who comes new in technical analysis thinks that he will pick top, will take divergence, will see bullish divergence in RSI and will see top and bottom that can also be done, but after a certain point of time, after you gain experience, in starting this is not possible, the moment you realize that you need to go with the trend 50-80% problems is solved, there itself, because you are aligning with the probability, we join small chings to increase the probability, afterwards you get success or not that is complete luck but our objective should be that we should create a system which increases the probability, so the first thing that we should do is to align with the trend you will have to identify the trend, i have seen this in many people that they don’t understand as to how to identify the trend, they don’t understand trends i receive lot of DMs, daily says something else hourly is different, so what do i do, i will discuss about that also, so the first thing is in dow theory we have studied that lower highs, lower lows, means downtrend, higher highs higher lows, means uptrend, everyone knows this and this is what is taught in books then you apply the same thing in charts, now you see that the trend has changed, higher high has become higher low and you have purchased, then next day it makes lower high correct and this has happened a lot of times, then you think that in book what was written and that these are bookish words and do not apply in real markets, it is not so, everything works, but you will have to define buying point so how will you define trend, according to me the simplest way to define trend is moving averages, you plot on a chart, 10 day, 50 day and 200 day, simple exponential which is your choice, so as a newbie trader you have to filter that any stock which is 200 day lower, you will not go long on that we will not invest in it either, this is a basic filter, also it is not that it will cross 200 day filter and you will buy immediately, but the initial point is what is the trend so let the moving averages align, higher highs are making but let the moving averages also align after that only, when the trend is defined then we will go forward, under this i would like to show few examples, for example, first i will show you the chart of SBIN, friends this is trading view software, i also follow this software and amit is also following the same i am removing the indicators from here, see this is a kind of chart that everyone is tracking the chart, you will not find anyone who is not tracking the chart of State Bank, whether he is a newbie or any experienced trader there was a lot of talk regarding SBI, now here you can see Vivek ji, that there was a head and shoulder pattern here, an it was the talk of the town, everyone was talking about this chart, one of the famous chartist, had also posted this chart, that a head & shoulder pattern is formed and it will take a break out here so everything was thinking the same, but the breakout did not happen, after that if you see this particular point see there is a series of higher lows, and a breakout also happened, so classically, before a head & shoulder pattern formed, which did not work, after that a series of higher lows, if you here, you can also call it an ascending triangle, everything was in place, but why did the chart flop at this point, so if you see here there is an oops moment, where there was a breakout and the again it came down, so how could we had filtered out a simple thing, now if you see this blue line is a 200 Day moving average, and this is my moving averages, other moving averages, are also not aligned to the 200 Day moving average, so this is a simple concept, anything which is below the 200 Day moving average, we will not take it on long side, if you see here, you can get short term funs here, 200 to 230-232, so for short term it is fine, so i am talking from an investment point of view that this chart did not work there, the moment there was a gap up after crossing 200 day, there was a good trend after developing, so i want to say that our trading area is this, how are we going to do this, that i will tell, we will come to that point also, but the initial thing is let the moving averages align, one more chart i want to show you, same thing happened in ICICI, same structure, here there was a breakout attempt which failed, once it goes about 200 day moving averages, its aligned and it starts working perfectly, it is not that it crossed, so you should not take, that is not the thing, we will come on that structure also later, now i will show the chart of reality sector also to you, everybody was having a look at it, DLF, everyone was looking this stock, lot of attempts were taken for breakouts, i guess everybody was tracking it, so if you see, one attempt it took here not successful, another attempt it took here, not successful, and here, it became successful, there is one thing common in all these charts, that it was above 200 by moving average, more or less aligning so a new trader should align with the trend, basically the trend which is defined by the moving average. despite the wrong trades, what you did is increase your probabilities, it's not that it crossed so we will trade it, we'll take it step by step. So unless we dont align moving averages, we dont trade, thats not true. Some traders can trade these levels also All these levels are tradable, but people have their own expertise for it, but i wouldnt expect a newbie to trade these levels because we need to increase our success probabilities. I have a question - suppose today someone comes in the market
they will get all stocks above 200 day moving average, this means there will be an automatic buying biasness and if the market is on top this can become negative. Yes, we will discuss. We can't buy at every stage I'll show you a tata steel chart where it topped, there are topping patterns also, step by step. This is why i am saying there was a chart before the crossing as well, there were moving averages before the covid crash as well we have to decide where to buy it despite the topping pattern, and we will discuss all that step by step we are aligning our probabilities, this is step 1.
We have to choose an outperformer, dont confuse it with RSI performer, well Vivek ji has done a webinar and I have learnt a lot from it as per relative strength your stock should outperform the market, the stock has to go higher than the index if the index is falling, the stock falls less, this is basically what relative strength is First I will talk about sectoral relative strength, what happens is after a bear market the leaders bottom out first as per RSI you can see the sectors which bottomed out, except IT and pharma, banking outperformed later so we will see a sectoral and an individual chart to see how to judge underperformance, so here there is an IT chart this red line is the nifty, it crashed after covid then touched above breakout point, I have plotted that here the line below is relative strength line, I'm not smoothening it with moving averages, how did you do this? There is a code, so I divided cnx IT by nifty, my benchmark is nifty, so i havent smoothed it at all, I see it differently, everyone has their own method, so you see this line, lets go to the weekly chart first If you draw a line on this ratio of cnx IT divided by nifty, it gave a breakout, lets go back to daily so this is nifty, gave top at 11 november considering the horizontal setup, So we have to select an outperformer, my main point is that the leader will bottom out first. in a bear market you never know who the leader can be, here it was IT after the covid fiasco. You will see that from 21 July onwards this CNX IT started.See this a relative strength line and it started moving up. After the breakout, this is continuously moving upwards But when did our Nifty start outperforming? Around 11th November. But my sector started outperforming much before Nifty. Now this concept is a bit difficult but with practice you will understand and for those who are not able to understand, they can look at the Vivekji’s Stockedge where its written as to whose relative strength is good.
So this was the relative strength concept, now come to stocks as to how to choose stocks. So first we defined the trend, second is the relative strength If trend and relative strength are in our favour, then our probabilities of success will increase. I have a question You had defined a trend in which you had benchmarked 200 moving averages. But the rest of the trend lines for which you had given us the average like 10, 20, 50, for those how will you use it? First let's get ourselves cleared on these 2 points as to what is trend and relative strength. Whether my stock or sector is outperforming or not.
Sorry I am interrupting. No no, this is good! You are asking on behalf of all the readers who are watching. And I will like it if you ask because in a way people who have this recording their doubts will also get clarified. Nothing is wrong in it. See this is my role. Even my role is that whatever mistakes I have made, people don't repeat those mistakes and they should understand the market properly and trade properly. See this is a similar chart of INFY. One normal trend line here. This was in IT also. This is the breakout.
This is not very difficult. And this chart is of Relative strength line, infosys divided by Nifty. Here why have you taken Nifty and not NIFTY IT? No, my personal experience is that (you can check sectoral also) Nifty is working well on all the NIFTY stocks. I have a bias in this. See, there is trading happening here which is not happening in IT so that is also a criteria. Even i think so! If there is no trading happeninghow can you consider it a benchmark. Yes, this the correct logic! Look there is a kind of breakout here. This is double. See in trending, resistance is never a point but a range.
This never happens that a particular point is a breakout point. So this weekly. Why i am taking weekly is so that i get the correct levels to track on the trend line. So, i have drawn a simple trend line- Relative strength of INFY divided by Nifty. he has just said a very good thing which he is unaware of. first we look at the weekly data, draw the trend line and then we come to daily data Even you have no idea that you have given such good learning. You know sometimes what happens is that you miss out on the support and the resistance i will show you the chart of Tata Chemical where there was a breakout. Even I thought that there was a breakout and it got plotted. But, when I went back and looked at the weekly data, I saw that there was a resistance Left Side of the chart we cant see so at least we should go back a little to see what actually happened. I understood sir!
From then I also understood that we should go to the weekly to see where there is resistance. So Friends, first look at weekly charts and draw your trend lines and then come to the daily charts. This is a very good lesson that we have learnt today and the time sent to you was so worth it I have learnt from my mistakes only and from losing money. You realize this when you are not successful and you go back to the table and see where all you have made a mistake and how to improve those.
So anyway, Vivekji,here we will see that again on 17th july, there is a gap up and here pre covid level is being crossed and my relative strength line gave a break out. And where is my NIFTY giving a Breakout? It was on 12th November. So this became my outperforming stock and it has been since then an outperforming stock only, this and WIPRO. So, like we just spoke, we have to look at the trend and then we said that we have to look at the outperformance. There are a lot of examples here but since there is a limited time I will limit myself on the subject here. So we have seen that the Infosys and the IT sector, see pharma has never gone downtrend so if you look at their relative strength, it has underperformed in the short period but then it has started moving up. Anyways, i would like to show you the bank Chart, this is my favourite chart!
See i want to come directly to Nifty Bank and then i shall come to stocks also. See this is the chart for Bank Nifty. I don't need to say that this red line is nothing but Nifty. This is my resistance level here. If you take Bank Nifty then? I even trade in Bank Nifty This is bank Nifty and not stocks. So what if you compare a bank to something, then Nifty or bank Nifty?
First with Bank Nifty! First sectoral then if possible with Nifty. Is this because there is so much trade? I compare it with the bank Nifty! Right So you will see that Nifty is already outperforming, bank Nifty again wasn't crossing 200 but here when it crossed my probability increased ook at this big line,i had done a lot of pair trades also, this was the breakout area around 2.11 In fact, i had taken this lower portion also but that was on a different basis. That is the concept of pair trading which we will talk about on some other day.
So look here we got this breakout, the relative strength line of Bank Nifty by Nifty. After that you see, wherever it broke out it was at 2.11 level. I will tell you the ratio also. I have done so much pair trading that it is not very difficult for me. So here, roughly, the ratio is 2.11. Now, what does this mean? So when this trend line broke at the relative strength, you can see non stop outperformance. Look Vivekji, last week the trend broke a little at this point Even I had gotten a bit confused. Last week, this relative strength line of bank Nifty had broken and it felt that Bank nifty will start underperforming But the important thing was how much would it underperform. There was support already at 2.11. Because of the budget, there was a problematic market. No see, Bank Nifty here in a new way has given a different kind of breakout on relative strength. So it has started outperforming once again.
So i have showed you for Bank Nifty also that how will we look at outperformance from relative strength Now, i am going to cover 2 things in short about the relative strengths that why am I not going to select stocks which had good relative performance. See this is a simple chart with no confusion. See this is Maruti. I am, for one time Vivekji, going to remove this red line of Nifty for easy understanding Now you see that during this period of outperformance, we had some sort of a rising relative strength line. Of late, people are giving are by calls on Maruti I will not say this wrong, but this doesn't come in my selection criteria. You see that Maruti has a falling relative strength line.
so i believe that it will not outperform the market. If you want good money and good gains, then it should be an outperformer. Currently, Maruti is not an outperformer. It's not that it's not tradeable. Here, there is a support area where a bullish candle is being formed so we can trade like i have said, i want to align with higher probabilities. Look here friends, did you catch a very good lesson from this talk. I caught that. Its divergence.
Divergence in Price and relative strength. If relative strength is trending downwards and even then the price is saying to go up, then you should avoid this stock. A famous stock Reliance, I want to cover here. Everyday its coming on twitter that you should buy. I am also a bit guilty here that Reliance i am not able to sell because i am using it for long term wealth See long term wealth is a different concept, that is perfectly fine. See it has a good support area. There is confluence here, there is horizontal support also as well as 200 day. Everything is perfect in this chart And i am not saying that the stock will not go up, it can go up also! But for me , the thing that's missing is the falling relative strength line.
It's not like that it will not rise but I will look for better opportunities in the market where my relative strength line is aligning and is an outperformer See tomorrow maybe people start trailing me and reliance increases by 200 points. Then they will say that I told them not to buy Reliance. I am not saying that. I am saying that at this point of time, there is no relative strength in Reliance. So we will try to find stocks where there is a good level of relative strength. So i have shown you 2 stocks which do not come in my selection criteria because they do not have good relative strength
Let's look at one example with good relative strength also. Sir, look at NIIT. People will say that Sir had already seen this stock thats why he is discussing it, its my favourite also. It has a very good relative strength line. This is the 200 moving day average line that I have plotted. The relative strength line is going above the 200 day also So it is continuously making higher lows and higher highs. It is a good one. See, here also when it broke out, chances of success are high because if you draw a trend line on this here first it is outperforming here at higher lows and here it is giving a breakout at the relative strength. So the chances of being successful in these breakouts are high. So it meets my criteria at least. True! Friends, this relative strength indicator that he has put down here, many people would be thinking how to put this I think the RS that I have told in many videos how to put RS in trading view, I put 55 periods to smoothen it out I think you should put 1 instead of 55. If you put 1 then you will get the same data as of Sirs because he is taking yesterday's data only. It's continuous data and behaving like an instrument Price of the stock divided by NIFTY. No smoothening , nothing! So you replace 55 with 1 and if you want to learn more about it then Sir has said that he has a webinar
I am just a student, ,market is the real Sir. The market only teaches people. Now we are clear on 2 factors. One on the stock selection we have defined the trend and the second, we have defined the relative strength outperformer. Next thing that we need to see after defining these are, there are 2 things left:- one is breakout and other is pull back. Correct
Now we have to see if the breakout will be successful or not and that the pull back will be successful or not For pull back, what we have to do is, it doesn't mean that since everything is aligning so we can buy the stock. We have to define points, confluence points for pull back trading, I will come to breakout also. For pull back, you need horizontal support area and an anchored VWAP zone or a moving average support I will show you this with an example also and also Fibonacci. The more the confluence, the more the value zone will form for the purpose of pullback. It is very simple. We don't need any complicated indicators. See, I focus on RSI and ADX a lot but today i am explaining in the most basic way such that a basic layman can understand the market indicators.
I am not going towards indicators at all. I am not saying that indicators are useless but if you understand the market structure, then even indicators can create magic. If you combine them But before you come to indicators, you have to understand the market structure. So i had defined that whenever there is a pullback, we will have to look for a value area. The more the confluence, the more the value we get We have to wait for a bullish candle here. So let's look at 2 charts here. I have written it on a sheet of paper, I don't have a ppt. Whatever I have traded is here. It's impromptu. Whatever i have done is here Friends, Amit shares information on his twitter page so you can follow him on his twitter page. I will share his twitter handle down here. And now he spoke about RSI and ADX.
He has done a webinar with us which is a very good webinar. If possible do buy that webinar if you want to learn indicator driven work from Amit. I will share the link for the same. See this is the chart of Kotak Mahindra Bank. Ok Vivekji! It has given a breakout at this level. So when there is a pull back here, there is a horizontal support zone. Second is 38.2% Fibonacci retracement area. If this is a good trend then it will not break 38.2. Now apart from this, if I get an anchored VWAP See its has already broken the moving average , no problem. I am trying to explain. If we would have found a moving average confluence or anchored v vap, then it would have increased my value zone area. It was budget day yesterday, i will show you more charts. this is an essence of pullback. That area according to me is a confluence area. Like you had asked me as to how will I trade after defining all this, that area for me is tradeable because it is a confluence area Sir what is Anchored vwap? This is available in Trading View, you know everything, No I dont know, Mr. Amit, we will plot from the swing low, see it took support at the anchor, What is anchored VWAP
See this, we are taking weighted average price, HIgh, Low, Close divided by 3 of the price, see everything is given, Anchored VWAP earlier was not there in the Trading View, see it is the average price of the buyers who had brought from this price to this, so I have clicked here then from here the VWAP has started, I chose this point because it was swing low after some days this swing low may become irrelevant if you pull Anchor VWAP, then the prices will go up. So you can put in the next low, see I didnt even see this in the Bank, it took support on the anchor VWAP. So you need to combine these things, next chart we will see of SBI, or HDFC, Mr. Vivek- this is my favorite, what do you think of this
See first of all it gave the breakout here, change of polarity, this is the resistance, now it should become support if it works here see there is a bullish candle here so this is my pull back trade, once my trend is defined according to moving average I will look at the pull back opportunity. Second point see where I took entry at one compression has happened, range and volatility compression See from here to there there is a range, this range is small, this range is small, and you will see red candles volumes are going down, so here no one is selling, you have to put the concept of volume, when there's a breakout from this range see it is already in the uptrend, at every point it will sell to a buyer so it is an advance concept which you have need to study about. I did a face2face, I dont remember the name, it was Manas Arora who made this concept understandable the concept is actually of Mark Minervini I also follow him, this helps a lot when the supply is drying up Mark Minervini anybody who wants read his book, he is a legend guy, if you read his books then you will understand a lot of things It takes to time but gradually you will learn, now you can see from here to here is a range, the percentage is around 7% here 4-5% here, and the candle size range has gone down, volume has gone down, then suddenly volume went up so this is basically what Mark Minervini’s concept of VCP is Volume Compression pattern So here was the breakout point, then in the weekly chart here the resistance is see this candle there was a pullback we have 50 day average also we have a bullish candle also.
See a bullish candle because of budget but see I am trying to make a concept understandable, we have to see a confluence area structure we have defined earlier now we have to understand a simplified concept when you have identified trend and relative strength, you have to just keep two things in your mind Pivotal points, if you read the books of Livermore pivotal points are those market points from where you should buy and the stock rally so what are pivotal points, there is confluence in pullback and breakout happens see I cannot buy here After the trend and relative strength is defined, then either breakout or pullback. Which is the most rewarding? I really liked breakout, in your webinar in fact there was a mail also that 35% breakouts are successful, 65% are not, and I got nervous That is why I took a webinar to filter,I have discussed a lot in that webinar of how to filter. see there is nothing like 100%, we can only increase probabilities So in that webinar I have discussed what types of breakouts should be reasonably successful, none can be fully successful In many cases there is a bullish candle on the pullback and follow but the next day it breaks the support. There is no such thing as pullback will only be successful and breakout wont be possible. Now I will show you 2 charts, see Metal, Tata Steel if you see the trendline breakout at this point, relative strength is making higher highs and Tata Steel is giving breakout around 420 level So I keep very simple concepts then see when the stock crosses 200 ema here then according to my experience, validation is seen when at 200 ema other confluence moving average you will get and then it moves up after validation then that trade is very successful If it breaks 200 and till 30-40 where it confluences then according to me experience that will be a good support area if a bullish candle is formed then you can buy In this chart what happens, this is Tata Steel chart your viewers can see like this, here is a breakout at this point breakout happen, stock went up and started the next stage of base formation here continuously cannot go up or down. It will go up make a base after base completion it will go in stage.
So generally the question you had asked I will come to that also but here my first zone was see here this is also Mark Minervini’s pattern base is forming it is not completed stock attempts to move up from the support it goes down then it fails so again if it breaks then that is a valid pattern, the stop loss is the low of the candle and here you can see cup and handle is being made for this pattern technical analysis if you read books from O'Neil then you will be able to understand these patterns and you have to focus. See here is a sort of a cup and handle and then there are so many things, it should drift of, so the handle be below this level and should drift of so some kind of let me zoom it this is drifting but, in drift its shaking off that is why it is cup and handle. What you have to do see the red bars are very few shake off and when it is breaking out, can you see the gradual increase in the volume its increasing only but when it is shaking off from here then see the volume of the red candles are so low at the last what happens I am showing you calculating RSI Like you have said should we can buy at every point, the answer is no we should have little knowledge of divergence also ADX measures the trend strength of the move so what my trend strength was here on the basis of ADX, see here it is making higher peak at this level it is making lower peak so somewhere the trend is losing strength, not the stock Here you will see, so you can see there is a divergence here then you will see in momentum also there is divergence, in RSI so here it gave breakout and you could have traded that but the moment, in technical analysis at every move there is change in the view on the basis of fact and on the basis of formation. My view is breakout And then I will be stubborn about the breakout but you have to continually adjust how are chart is, breakout or pullback can fail and you have to adjust. So in the chart of Tata Steel when the topping is forming then here is divergence in ADX and momentum and if you dont want to short and you understand that that it's a long term performer so we should take caution. You should not invest or trade, these are overbought levels so reactions can come.
So little basics, see we dont have to see much, I am seeing only the three indicators moving average is not an indicator, defining relative strength, adx and rsi I am seeing. RSI and ADX is a big topic, time is short I wont be able to cover. See this stock,this is my favourite stock SAIL, this stock I had also posted in twitter one day before, Why I traded SAIL. I will show you why, see here first we will see lines in the weekly chart, this habit is very good, see there is mega confluence here everybody can see that it is a breakout, there was the case of FPO, then news and all but the stock was losing its relative strength that I will show you. I will wait for this zone so when it gave the breakout then the stop loss must have hit that depend on your trading every guy has different style of trading so in the pullback trade there is confluence, see there is horizontal support level 200 moving average like I had said in weekly, 200 will get test and then when you get a confluence like here it is 20 But there 200 days of confluence plus here 30 fibonacci retracement zone so we got 3 confluence, the many we get it will become a value zone so In SAIL what we have got, we will come in daily also, so there was horizontal support, 200 day support and 30.02 fibonacci support then we have to wait for bullish confirmation so I have identified a zone after the breakout and secondly I have to see in this chart See here the candles are getting narrow that means selling is getting absorbed and there is not much selling here and see the range of the red candle when the candles get narrow there is not much interest in the selling so this was the concept relative strength did not lose that much support see one fall came but relative strength was never wrong so this was like an opportunity for me pullback, relative strength, candlestick pattern is confirming what else do we need, then it depends on God if it moves or not, this chart’s pic I had posted on my twitter handle one day before the budget if it hold support levels then this chart can give good returns so in fact before the budget only it was up by 3% and after budget it was 10% so this is my simple system to learn charts, it is very effective I think in the market simple things work very well if you keep it simple and as you are simple you have kept your system simple so I wont take more time of yours because you have given so much time to me, he does another business His core business is jute industry this is so much excitement that he belongs to the jute industry and have so much knowledge of technical indicators means so much passion he has So friends from passion only money makes if you do not have passion and give 2 years to the market then you wont make money what Amit have done, I wish everybody does and the core business which people should analyse the market along with one small question, you dont do intraday. I can trade it does not mean that I have no knowledge of it but noise it does not mean I dont have view on Nifty
I trade in Nifty and that too options and I do pair trading, like I have told you pair trading Neutral strategy like ACC I brought and short Ambuja So there is no worry of Trump’s tweet or news at night as long as my long and short is performing. I am comfortable in pair trades because it does not get affected by news the long and short I have, most probably my hedge will go wrong, there will be loss of 2-3% but there is no unlimited loss this is a different concept which can be discussed next day. So this is my basic funda, what did you ask exactly I was asking that you dont do intraday how does you manage trade, like you analyze EOD, pair or options, you whole day is engaged in you business then how do you manage trade. I have been in the market for so many years and my stock universe is limited like 20 - 25 and that too nifty stocks, if you tell me midcap wont take, its my preference, actually all the ratios and levels I know If you ask me Reliance level I can tell you I am giving you an example like in between of my business I just see the price if it is in my favour or not, suppose if I take HDFC bank or any I know this is my support I dont have to look at the chart every time so stoploss is in the system so it is maintained and F&O, you had talked about intraday, I dont do it, it is just not I dont have knowledge I like to go for big moves like 10-15% In the cash market, I want HDFC bank to work and if I get HDFC bank in good level then i will keep it in my demat account then see the gain of 10-20% I dont go by the hourly charts in the Nifty also, if something is made in the hourly then I will see So, friends if you want to get involved in the market part time then this is the most right strategy you should adopt it, you can watch this video again 1-2 times Mr Amit thank you so much for recording it. I am thankful that you have given me this opportunity and the thing is this looks very easy also because everything is plotted but you have to put an effort of doing it but I am happy that whatever mistakes I have done I dont want new traders who have less capital do that They make a base and progress in the market to be successful. Good, so friends how did you like it, it’s very nice and one more thing
Punjabis are different and the passion of Punjabis is what everyone should learn, if you like the video then please share with everyone I want everyone who know Amit, adopt his studies and follow his twitter handle Be with our channel and keep loving us, please share our work with other people, take care of yourself, take care of your family, Namaskar, Bye!