Profit, for one week

Proft for the week 26 April 202 to 2 May 2024

  • Nevertheless, I stayed committed to my analysis and chose to exercise patience for another day.
  • With the passage of time and a shift in market sentiment towards the positive, my losses slowly evolved into gains.
  • Today’s profits represent one of the most rewarding results I’ve experienced in my trading journey.
  • The Nifty index exhibited a positive turn today, falling within my anticipated range.
  • This favorable development enabled me to secure significant profits.

India VIX

The India Volatility Index (India VIX) is a measure of market volatility and investor sentiment in the Indian stock market. It is computed by the National Stock Exchange of India (NSE) based on the implied volatility of NIFTY 50 index options

  • Implied Volatility: Implied volatility is a key concept in options pricing. It represents the market’s expectation of future volatility of the underlying asset, as implied by the prices of its options. Options prices tend to rise when investors expect higher volatility and fall when they expect lower volatility.
  • NIFTY 50 Index Options: The NIFTY 50 index is a benchmark index of the National Stock Exchange of India, comprising the 50 largest and most actively traded stocks across various sectors. The NSE computes India VIX based on the implied volatility of near and mid-term NIFTY 50 index options.
  • Volatility Index Calculation: India VIX is calculated using the Black-Scholes model, a widely used mathematical model for pricing options. The formula takes into account the prices of call and put options on the NIFTY 50 index, along with their respective strike prices and time to expiration.
  • Time Frame: India VIX represents the expected volatility over the next 30 calendar days. It provides a forward-looking measure of market volatility, helping investors gauge potential market moves in the near term.
  • Interpretation: Higher values of India VIX indicate higher expected volatility, suggesting increased uncertainty and risk in the market. Conversely, lower values indicate lower expected volatility, implying a relatively stable market environment.
  • Market Sentiment Indicator: India VIX serves as an important indicator of market sentiment and risk appetite. When investors are fearful or uncertain about market conditions, India VIX tends to rise. Conversely, during periods of confidence and stability, India VIX tends to decline.
  • Trading and Hedging: Traders and investors use India VIX to manage risk, hedge portfolios, and make informed trading decisions. It helps them anticipate potential market movements and adjust their strategies accordingly.

Overall, India VIX plays a crucial role in the Indian financial markets, providing valuable insights into market volatility and investor sentiment.

My Trading, Indicators

Indicators I am using in my kite API

  • Central Pivot Range (CPR)
  • Pivot Points (Standard)
  • 26 EMA (Exponential Moving Average)
  • 12 EMA (Exponential Moving Average)

Use of CPR

  • Support and Resistance: CPR helps in identifying crucial support and resistance levels, which are essential for making entry and exit decisions.
  • Pivot Points: It provides a central pivot point along with upper and lower levels, which can be used to gauge market sentiment and potential price reversals.

Use of Exponential Moving Average (EMA)

  • Direction: An upward-sloping EMA indicates an uptrend, while a downward-sloping EMA indicates a downtrend.Crossovers: EMA crossovers (e.g., when a short-term
  • EMA crosses above a long-term EMA) can signal potential trend reversals.

Price Action in Trading

Price action refers to the movement of a security’s price over time, typically represented on a chart. It is the study of past price movements to forecast future price direction. Here are key elements of price action trading.

  • Candlestick Patterns: Price action traders often analyze candlestick patterns to identify potential market reversals or continuations. Common patterns include engulfing patterns, pin bars, and inside bars.
  • Support and Resistance: Traders identify support and resistance levels on a price chart, representing levels where buying or selling pressure is historically significant. These levels can help traders make decisions about entry, exit, and stop-loss placement.
  • Trend Analysis: Price action traders analyze the direction and strength of trends by observing patterns of higher highs and higher lows in uptrends, and lower highs and lower lows in downtrends. Trendlines are often drawn to visually represent trend direction.
  • Price Patterns: Traders look for recurring patterns in price movements, such as triangles, flags, and head and shoulders patterns. These patterns can signal potential breakouts or breakdowns in price.
  • Market Structure: Understanding market structure involves analyzing the relationship between swing highs and swing lows to determine the current state of the market, whether it’s trending, ranging, or consolidating.
  • Volume Analysis: Volume is often used in conjunction with price action to confirm the strength of a move. High volume during a price breakout, for example, can indicate strong market conviction.
  • Trading Strategies: Price action traders develop various trading strategies based on their interpretation of price movements. These strategies may include trend following, breakout trading, and reversal trading.

Price action trading emphasizes simplicity and focuses on the raw price movement of a security without relying heavily on indicators or other external factors. Traders who master price action analysis develop a deep understanding of market dynamics and are able to make informed trading decisions.

False breakout

Today Nifty 50 and Bank Nifty had false breakout.

  • The market initially exhibited an upward trend by touching the Critical Price Range (CPR), indicating a positive trajectory.
  • However, this turned out to be a major trap, catching many traders off guard and potentially triggering their Stop Loss (SL) orders.
  • In just one candle, the Nifty index plummeted by 280 points.
  • This sharp decline resulted in an overall fall of around 360 points.

Note: This is only in my view.

Losing money in intraday trading

Losing money in intraday trading can be frustrating and discouraging, but it’s a common experience for many traders, especially those who are just starting out. Here are a few reasons why you might be losing money and some tips to help improve your intraday trading:

  • Lack of a solid strategy: Trading without a well-defined strategy can lead to haphazard decision-making and inconsistent results. Make sure you have a clear plan for entering and exiting trades, managing risk, and controlling emotions.
  • Emotional trading: Emotions like fear and greed can cloud judgment and lead to impulsive decisions. Try to remain disciplined and stick to your trading plan, even when emotions are running high.
  • Overtrading: Trading too frequently or with too much capital can increase transaction costs and expose you to unnecessary risk. Focus on quality over quantity and be selective about the trades you take.
  • Poor risk management: Failing to manage risk effectively can result in large losses that outweigh your gains. Set stop-loss orders to limit potential losses on each trade, and avoid risking more than a small percentage of your trading capital on any single trade.
  • Lack of knowledge and experience: Intraday trading requires a solid understanding of market dynamics, technical analysis, and trading strategies. Take the time to educate yourself and gain experience through practice and observation.
  • Market conditions: Market volatility and unexpected news events can impact intraday trading outcomes. Stay informed about economic indicators, company announcements, and other factors that could influence the markets.
  • Unrealistic expectations: It’s important to have realistic expectations about intraday trading returns. While it’s possible to make significant profits, it’s also common to experience losses, especially in the short term.

Remember that losing money is a natural part of the learning process in trading. Take the time to review your trades, identify areas for improvement, and continue to refine your skills and strategies over time. If you’re consistently struggling, consider seeking guidance from experienced traders or consulting with a professional financial advisor.

Why option selling is safe in trading

Option selling can be perceived as relatively safer in trading for a few reasons:

  • Time Decay (Theta Decay): Options have a time value component, which diminishes as the expiration date approaches. Option sellers benefit from this time decay, as they can profit from the erosion of this time value if the option expires out of the money.
  • Probability of Profit: When you sell options, you can choose strike prices that are out of the money, meaning they have a lower probability of being exercised. This increases your likelihood of making a profit, as the option would expire worthless.
  • Limited Profit, Unlimited Risk Myth: While it’s often said that selling options exposes you to unlimited risk, this is typically only true for naked option selling (selling options without owning the underlying asset). However, many option selling strategies involve risk management techniques like covered calls or credit spreads, which limit potential losses.
  • Income Generation: Option selling can be used to generate regular income. By collecting premiums from selling options, traders can create a steady stream of income, especially in sideways or range-bound markets.
  • Flexibility and Control: Option sellers have more control over their positions compared to buyers. They can adjust their strategies by rolling positions, adjusting strike prices, or buying back options to close positions early if market conditions change.

However, it’s important to note that option selling also comes with risks, including the potential for significant losses if the market moves against your position. It requires careful risk management and understanding of the market dynamics. Some traders find option selling to be suitable for their risk tolerance and trading objectives, while others may prefer different strategies. As with any trading strategy, it’s crucial to thoroughly understand the risks involved and consider consulting with a financial advisor before engaging in options trading.

Indicators for trading

Are you confused with many indicator? know more about it.

  • Trend Indicators:
    • Moving Averages (Simple Moving Average, Exponential Moving Average)
    • Moving Average Convergence Divergence (MACD)
    • Average Directional Index (ADX)
    • Parabolic SAR
    • Ichimoku Cloud
  • Momentum Indicators:
    • Relative Strength Index (RSI)
    • Stochastic Oscillator
    • Momentum
    • Rate of Change (ROC)
    • Commodity Channel Index (CCI)
  • Volatility Indicators:
    • Bollinger Bands
    • Average True Range (ATR)
    • Keltner Channels
    • Volatility Stop
  • Volume Indicators:
    • On-Balance Volume (OBV)
    • Chaikin Money Flow (CMF)
    • Accumulation/Distribution Line
    • Volume Weighted Average Price (VWAP)
  • Sentiment Indicators:
    • Put/Call Ratio
    • Market Breadth Indicators (Advance/Decline Ratio, New Highs/Lows)
    • Volatility Index (VIX)
  • Cycle Indicators:
    • Detrended Price Oscillator (DPO)
    • Schaff Trend Cycle
    • Hurst Exponent
  • Oscillators:
    • Williams %R
    • Money Flow Index (MFI)
    • Ultimate Oscillator
    • Trix
  • Chart Patterns:
    • Head and Shoulders
    • Double Tops/Bottoms
    • Flags and Pennants
    • Triangles (Symmetrical, Ascending, Descending)
    • Wedges (Rising, Falling)
  • Fibonacci Retracement Levels:
    • Fibonacci Retracement
    • Fibonacci Extensions
  • Support and Resistance Levels:
    • Pivot Points
    • Support and Resistance Lines

Are you still confused in selecting the right segment?

There are different types of segments, where you can trade, but not sure which is the best segment and which is the suitable. please understand the different segments before you invest your hard-earned money.

  • Equity Segment: This is the primary segment where shares of publicly listed companies are traded. It includes large-cap, mid-cap, and small-cap stocks. Equity trading in India takes place on two major stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
  • Derivatives Segment: This segment includes futures and options contracts based on various underlying assets such as stocks, indices (like Nifty and Sensex), currencies, and commodities. Derivatives trading allows investors to hedge risks or speculate on price movements without owning the underlying asset.
  • Commodity Segment: Commodity trading in India happens on exchanges like Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX). Commodities such as gold, silver, crude oil, agricultural products, and metals are traded here.
  • Currency Segment: This segment deals with the trading of currency pairs. The major currencies traded in India include the US Dollar (USD), Euro (EUR), British Pound (GBP), Japanese Yen (JPY), etc. Currency trading takes place on exchanges like the NSE, BSE, and Metropolitan Stock Exchange of India (MSEI).
  • Debt Segment: This segment involves trading in fixed-income securities such as government bonds, corporate bonds, debentures, and treasury bills. The debt market in India operates through both exchanges and Over-the-Counter (OTC) platforms.
  • Initial Public Offering (IPO) Segment: This segment involves the issuance of new shares by companies to the public for the first time. Investors can participate in IPOs to buy shares of companies before they are listed on the stock exchanges.
  • Mutual Funds Segment: While not a direct segment of the stock market, mutual funds play a significant role in the Indian financial ecosystem. Mutual funds pool money from investors and invest in a diversified portfolio of stocks, bonds, or other securities.
  • Alternative Investment Funds (AIFs): AIFs are a relatively new segment in the Indian market. They pool funds from investors for investing in different asset classes like private equity, real estate, hedge funds, etc.

Understanding these segments helps investors navigate the Indian stock market and choose investment avenues according to their risk appetite, investment goals, and time horizon.