Thursday, 8 February 2018

How to follow price action and benefit from it

Successful DP trading is never just putting DPs on charts and taking trades around those DPs on BOF or BPB setup.  If it was that easy, every Tom Dick and Harry would have been making money with it.  Successful DP trading requires us to put efforts on reading prices, interpreting it, understanding what exactly is going on there and then finding proper way to follow the prices. Also we will need to wait patiently for proper trade setup to develop, often skip mediocre setup, lose less on loss making trade and make maximum out of the winning trade.

As you are aware, everyday I share charts with marking of good setups only but today I decided to make an effort to demonstrate my way of reading the price action.  So here I am sharing how I tried to read price action, follow it and benefit from it.

Intraday Charts of Nifty Future dated 8th Feb, 2018.

Below are chart snapshots taken at important price levels with reading of price action.  (click on charts to zoom)

Chart 1:  Soon after market open.

It opened with gap at BRN 10500.  Larger timeframe trend was down, so we can expect it to move towards PDC or PDL after open.  But it did opposite of that.  Instead of going down, it reversed and broke BRN 10500.  Now breaking out of BRN and sustaining above it turned bias into positive.  Also prices were at this point trading above all 3 DPs, i.e. PDC PDL BRN which means prices are going up only.

So now with the prices confirming positive bias, we can look to go long and for that ideal setup here would be BPB of BRN after first pull back.  Lets see if that happens and allows us to enter.

Chart 2:

As you can see, it is now giving us first pull back and our ideal BPB setup, but it does not make sense risk reward wise to enter here as prices have already moved away a lot from the BRN.  So it will not allow us to hide our SL at our comfort level.  Hence, letting go such setup will never harm us.

Chart 3:

Chart 4:

It moved a lot in one direction and made an attempt to break BRN 10600, but failed.  Now trading this BOF of BRN for a short trade is not an ideal setup due to following reasons.  1) Prices rarely reverse in V shape when they move strongly like this.  2) After such directional move, there is always more likelihood of prices remaining range bound rather than reversal.  So lets better wait for the range to develop here.

Chart 5:

Chart 6:

Chart 7:

Now here BRN 10600 is acting as a barbed wire.  We need to wait and allow the prices do something at range extremes and/or PDH for any good setup to occur.

Chart 8:

Now when we wait for the setup to occur, lets analyze possible order flow above range high and PDH.  You might be aware of the fact that higher timeframe traders would tend to dominate at such good location.  Also last time when the prices hit the same location they dominated and sold it off.  Hence this time around we can expect the same to happen.  If they continue to dominate, prices may find it difficult to get accepted above PDH and give us BOF setup to go short.  On the other hand, with this consolidation, it may have gathered strength to break the level.  Also if higher timeframe traders give up here, the breakout may turn out to be furious.  In that case, BPB of PDH is the setup to go long. It does not matter to us as a trader which party wins and takes the prices away from here.  Our job is to wait and let the prices make us clear who is winning.  Once we know who is winning, we will be able to join them.

Chart 9:

Chart 10:

Day timeframe traders made an attempt to break going with the intraday trend/bias but larger timeframe traders came there and absorbed all the order flow, making prices to go below important trade location.

Chart 11:

Now lets join the winning party and short at break of MSP or upon crack of BRN 10600.

Chart 12:

It moved nicely and yielded a lot by reaching to the target level.

Hope I could demonstrate properly how I read the prices with valid reasoning behind trade setups.  If you want to trade successfully with this wonderful trading method, start your learning with Champion Day Trader video tutorial.  You will learn a lot like how to gauge strength and weakness of the price move, how to identify trading timeframe trend and bias and confirm it, how to draw correct established ranges and different ways to trade them, how to confirm acceptance and rejection of price, how to use volatility in our favor, how to use volume correctly, how to read order flow, when to skip the setup, when to scratch, where to book and hide SL, and lots and lots more.  It will cost only a profit of one single small trade which I showed here.  Go ahead and grab it before it is too late.

14 comments:

  1. Have you trading real-time or just hindsight analysis?

    ReplyDelete
    Replies
    1. You can assume it as hindsight analysis.
      URD

      Delete
  2. Superbly Demonstrated URD Ji.

    Everything matches with my reading.. except i failed to take short trade below MSP.. i waited for a PB toward PDH.. which didn't happened & missed the trade.

    While BOF trades works wonderfully.. the hesitation of whether to wait for PB to confirm our bias or pull trigger below recent swing point or DP instead of waiting for PB (like in today's case) is always a Q to me.. I am mostly waiting for PB to confirm bias.. in that process missing some good setups.

    ReplyDelete
    Replies
    1. Thanks. Use crack of MSP to confirm it when pull back doesn't happen.

      URD

      Delete
  3. Sir ji in this chart why no long PDH ?
    Pls Guide

    ReplyDelete
    Replies
    1. It seems you did not read the post properly. I already said in Chart 8 this, " On the other hand, with this consolidation, it may have gathered strength to break the level. Also if higher timeframe traders give up here, the breakout may turn out to be furious. In that case, BPB of PDH is the setup to go long."

      URD

      Delete
  4. great work, you have been popularizing DP system, Kudos. :)

    ReplyDelete
    Replies
    1. Thanks Sri for comment. My efforts alone towards making it to reach out to other traders are not enough. You and all others who appreciate this wonderful system need to put efforts in spreading the word.

      URD

      Delete
  5. Dear sir,As you said you trade with SAS Online,Please clarify on this.Let's say I bought 3 lots of nifty options with bracket order and order got executed 3 times for 1 lot respectively. Then what will be the brokerage? 9rs or 27 rs per order?I read that they charge on order executed for bracket order.?I hope you got my point.Thanks.

    ReplyDelete
    Replies
    1. They charge brokerage on executed trade order. So in you example, it will be charged Rs. 27. If you trade frequently, then go for monthly brokerage plan which is Rs. 999.

      URD

      Delete
  6. great analyse sir
    i could do one trade today in nifty at 2 pm BOF of PDH and BRN ENTRY LEVEL WAS 10515.50 and booked at 10538 how is my trade sir

    ReplyDelete
  7. So if you place an bracket order for 20 lots and exchange fills your order in 5 trades of 4 quantity each then you will pay 45 rs brokerage to sas?I hope this is not true.because many time order get executed in many trades of different quantities.

    ReplyDelete
    Replies
    1. You are hitting the wrong bush. Brokerage is not an issue as a trading cost. Problem is STT and other charges & taxes.

      To trade in options with SAS best option is to go for monthly brokerage plan.

      URD

      Delete