Chart Reviews

In this section, we will review the Charts of various instruments such as Nifty Futures, Bank Nifty Futures, Future Stocks, Options, etc. It includes the past movement of price, its future trend, etc.

Remember the trades taken in the past and the future trading decision will be intraday as well as positional i.e. swing trading. It is recommended to be in a position not more than 5 trading sessions. It’s because though we have defined Stop Loss and Target, we must take the profit whenever it’s presented. That’s the nature of this business.

I will keep adding the charts on these pages and will keep you updated on the calls via various channels.

Lets take a look at the outcome of SUNPHARMA FEB FUT contract positional call taken on 3 Feb. 
Bought @413.80, Stop loss @408.20 & The Target is @435

As you can see, the Target has been achieved in 4 trading sessions.

Now come to the most important aspect of this winning trade. The reason we gained a handsome profit in this trade is just that by following our trading plan rigorously. When a trader or investor set out to initiate their trading journey they have 3 important feature of trading they have to master on. They are Risk, Reward and Probability. This RRP is most important when you plan an upcoming trade. You need to assess these 3 aspects of this business. Let’s go deep into these three key areas.

Risk
Measuring the risk on a trade is simply a calculation of the amount of money exposed between the entry and the stop loss. A nice example would be in a trade of BOSCHLTD FEB Equity Future Contract. In this particular derivative contract, every one-point move is worth INR 40. This value is derived by the fact that every contract in BOSCHLTD has 40 quantities of Shares. Thus there is 40 rupee gain or loss in a single point move. If a trader buys 1 contract at a price of 14,050, with a stop loss order of 13980, his/her risk would 70 points (70 x INR 40) would equal INR 2800 of risk per contract.

Reward
The next phase of trading is the reward. Since trading is about putting your hard-earned money at risk, the reward should compensate a trader at a favorable ratio, at least 3 times the risk. In this Future trade example, the market must rally at least a 210 point profit potential. This can be predicted by knowing where the price is likely to turn against the trade after it starts to move in a favorable direction. In the long future trade example, a trader must objectively find where the real Supply/Resistance is found on a price chart to know where price might turn against the long trade. The Target price for our trade is projected at 14300, because this is where the sellers are seating to sell their next batch of the lot.

In the Hourly chart below, we see a recent setup in BOSCHLTD FEB FUT Contract that fits these two parameters.

In this first chart, we see a quality Demand/Support zone that would likely produce a turn in price.

Bosch Future contract swing positional trading method

In the second chart below, we see that price has started rallying from our pre-determined entry point and reached at our Target zone in 2 trading sessions.

We can see the outcome in the chart above as price rallied into the supply level.

However, though we’ve achieved our Risk to Reward Ratio, we identified that there is a possibility the price will move further. The bigger picture chart indicates there are more 360 points upward move possible. The next target is 14660 and it may reach in the next 2-3 trading sessions. See the longer term chart below. Click here for the outcome of Bigger Picture Target.


Probability

Probabilities are the most challenging aspect for traders/investors to evaluate. One way to think about probability is to look at it as the place where the odds would favor buying or selling.

In the BOSCHLTD FEB FUT example, buying was a more favorable opportunity as the price of the contract had fallen more than 150 points and was approaching a quality area where buyers had arrived and bought lots of contracts a day ago. This, coupled with the fact that BOSCHLTD had fallen well over 1000 points for the last 9-10 trading sessions and had fallen from the top perimeter to the lower boundary of the range, made this a high probability set-up. This is seen in the first chart.

In conclusion, for a trader to experience the consistent result, the first step is to create a process that can clearly assess risk, reward, and probability. After setting up a clear process, he/she must develop a habit of repeating it. Those who fall short of doing that are not likely to see desirable results.