Sunday, 24 July 2016

Trading Stocks

This post is about how to select the stock to day trade out of Nifty 50 stocks and a method (using existing knowledge base) with which we can trade.  I have been trying to explore different methods to trade stocks for last few months and I thought about sharing this method which I found most reliable and beneficial with all of you.

What I do is, I try to find the stock (out of Nifty 50 stocks) which has been in a range for last few days.  So I would scan these 50 stocks and pick the stocks which have been stuck in a range.  The range extremes will serve as a Decision Point for us. At some point, they will try to break out of the range and whenever they do that, we can find a good breakout or breakout failure trade setups at the range extremes.  We can trade other DPs also, but here the main objective is to find the stocks and the levels where we can look for high probability trade setups.

This method is only for Nifty 50 stocks. You can explore it for good quality midcaps, but I have not done that. Also this is for educational purpose only and not a recommendation or advice in any form.

Before the beginning of last week, on Saturday I prepared a list of 4 to 5 stocks this way and I am sharing here charts of ITC and Sun Pharma from that list.

As you can see, ITC was stuck in a range for last five trading sessions between 252.5 and 245.  Now lets see what happened after that.

It tried to break out on July 21st and failed giving us a nice BOF trade setup.  It reached till 246.5 the same day.  Possible short entry could have been taken around 251.  Area around PDL (248) could have been the target generating a profit of 1.3%.

Now lets take an example of Sun Pharma.

As you can see, it was stuck in a narrow range for last 2 sessions and this is what happened afterwards.

Here the prices broke out of the range, generating a profit of around 0.75%,

So, this way scan for the stocks that are stuck in a range and wait patiently for the prices to reach the range extremes.  Once they are at range extreme, they will do something.  Try to read the prices and take your trade keeping a reasonable risk reward ratio.  Around 0.5% of risk or stoploss works well.

Now I am posting few charts where I have already marked the levels for next week.  You can put an alert at these price levels so that you get prompted once prices reach these levels. Once the prices reach the level, you can start observing the chart and look for setup. I may write in brief just to follow up at the end of week.

1) Tech Mahindra

2) HDFC Bank

3) Idea.  Ahead of results tomorrow.

Now 3 stocks which have been close to its short term resistance/support.  Indusind Bank, M&M, and HCL Tech.

Instructions:  Click on chart images for a magnified view of the charts.  

Keep a note of these stocks and the levels and observe this week. Your views and comments are always welcome.

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  1. Excellent read URD on a lazy Sunday evening ! You are exploring every aspect of trading. Applying the strategy at every counter. Thumbs up to your endeavour.

  2. Sir main nifty future me 3 month se demo trading kar raha hu sir main real trading nifty future se start karu ya nifty option se

    1. Hiralal

      You have demo traded Nifty Future. So you can start with Future. Manage your risk well.


  3. sir , I am a regular follower of blog; this is a very good read and very sound strategy. Will keep a track of such stocks and study the price movements once price is broken out of range or there is a breakout failure. God bless you for providing such an excellent strategy. Look forward to your next post on the same subject.

    1. Thank you to both you and Sourish for appreciating my efforts. It is all your support and affection that keeps me going.