Trading Discipline

One aspect of universal agreement among the successful trades is importance of discipline. This is probably the most worn out term in futures trading. Saying the word is one thing, truly understand its definition on an operational or behavioral level is another.

Discipline is not just the ability to develop a trading plan and to stay with it; it is also the ability to know when your plan is not working and therefore when to abandon it.

Discipline is the ability to give your futures trading positions sufficient time to work in your favour or, for that matter, sufficient time to work against you.

Discipline is the ability to trade again once you have taken a loss, to ignore extraneous information and to avoid inputs that are not related to the system you are using.

Discipline is the ability to maintain reasonable position size and to avoid over trade.

Discipline is the persistence required to follow your trading system.

Discipline, above all, is the ability to come back to trading arena every day with empty mind, regardless of whether you won ,lost or broke even the day before.

As you can see, discipline consists of many different things. Discipline is not any one particular skill. It is not  limited to placing stop loss.

Source : ‘Market Masters’ written by Jack Berstain

Market Updates for 11/06/2012

Nifty Hourly Chart

It was a volatile session. Nifty tested important support level at 5000 and bounced back. Nifty closed at 5068 up by 18 points. Capital goods and banking sector led the rally.

Nifty is forming a higher high,higher low in hourly chart and it is managing to break every esistance. Even though Nifty came down to 5000 it was supported by trend line (as shown in the chart). As per hourly chart trend reversal can happen only below 5018 and this level will be changing as the market goes up. This market is a buy on dip market so avoid taking short position.

Nifty Daily Chart

Nifty has closed above 200 DMA which is at 5063. When the Index closes above 200 DMA it indicates a major reversal of the trend. Now market is expected to be bullish from short trem to medium term. There is a hurdle at 5100 which is the next target and once Nifty breaks this level we can expect the levels of 5200 and above. 

Chart of the day

Yes Bank

Yes Bank is trading in a triangle pattern. The peaks are Rs.389-379 and bottoms are Rs.293-309. It has pierced the resistance at Rs.341 and now it is trading above 100 DMA which is a bullish sign. CMP of YES Bank is Rs. 345 short term target is Rs.360 and stop loss is closing below Rs.329. If it breaks the upper trend line then we can expect the target of Rs.370-380.

Open Position

Scrip	Type	Qty	Price	CMP	P/L
Hindalco	Long	300	120.5	120.4	-30
Jub Food	Long	65	1206	1208.95	191.75

 

Todays Trade

Bank Nifty Fut	25	9737	9712	-625
Bank Nifty 9400 PE	25	253	261	200
Infy Fut	125	2417	2435	2250
Infy 2400 put	125	56	45	-1375

 

Nifty Medium Term View

Nifty Medium Term Trend	Down
Targets	4780-4680
Reversal if closes above	5090

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This view is based on higher time frame and different parameters. Traders should not get confused with other updates.

HNI Column

Recommended Price	120.5
Recommended Date	06/06/2012
Quantity	2000
Investment	241000
Recommended Price	4.5
Quantity  (Lot size 2000)	1 lot
Investment	9000
Total Investment	250000
Upper Break even	124.95
Max Loss(Rs per share)	4.95
Maximum Profit	Unlimited
CMP of Hindalco	120.4
CMP of Put Option	4
Unrealised P/L	-800

Thought for the day

I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans -- and human nature never changes - Jesse Livermore

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Market Update for 08/06/2012

Nifty Hourly Chart

It was a sustainable breakout. Nifty made a gap up open which was supported be global cues. There was a minor fall in the Nifty and we also noticed that Nifty struggle for a while to breakout above 5023. The breakout was followed by improved momentum and Nifty closed at 5049 up by 52 points.

Today's rally was led by Banks,Auto,Real Estate and Telecom. Reliance Ind was one of the top gainers as AGM was conducted today. But it couldn't continue the rally.

Nifty has finally come out of the trading range and now it is likely to test 5070 which is 200 DMA.

As per hourly chart, if Nifty sustains above 5070, the the next targets will be 5095-5150-5200. Reversal below 4970.

Nifty Daily Chart

Here is an interesting observation in daily chart. Nifty has tested 200 DMA many times. Sometimes it was support, sometimes it was acting as resistance and sometimes Nifty managed to break 200 DMA which was followed by significant rally.

 Will it break 200 DMA ?  Yes it can. Even though Nifty has bounced back 200+ points from the bottom RSI is not over bought indicating that there is a greater possibility of continuation. But let us not jump in to buy call option. Wait for the breakout and then add/buy new long position with correct hedging technique to protect the capital against any negative surprises.

Chart of the day

Reliance Infrastructure

Reliance Infra was bearish phase from past two months. Now there are signs of reversal. Reliance infra had formed a falling channel pattern and yesterday it came out of the channel and today it closed above 200 DMA. Traders should note that if any index or stock closes above or below 200 DMA is a sign of greater weakness or strength and significant rally can follow the breakout. However this method is not free from 'whipsaw'.

The estimated target for Reliance Infra is Rs.518-548 and reversal is closing below Rs.450 which provides good amount of risk-reward ratio. Always remember that size of the trade should be according to size of the capital.

 

Open Positions

Scrip	Type	Qty	Price	CMP	P/L
Bank Nifty Fut	Long	25	9737	9859	3050
Bank Nifty 9700 PE	Long	25	253	194	-1475
Hindalco	Long	300	120.5	120	-150
Jub Food	Long	65	1206	1202	-260

Today's Trades

Scrip	Type	Qty	Buy Price	Sell Price	P/L
Bank Nifty Fut	Buy	25	9737
Bank Nifty 9700 PE	Buy	25	253
Jub Food	Buy	65	1206

Strategy Update

We had recommended short strangle before a weak when market was direction less. We had short position in 5000 CE as well as 4800 PE. Sum of the premium was Rs.165 today after the breakout we have exited 5000 CE at the rate of Rs.120 and 4800 PE at the rate of Rs.35. Profit excluding all expenses is Rs.500.

 

Nifty Medium Term View (more than 1 month)

Nifty   Medium Term Trend	Down
Targets	4780-4680
Reversal if closes above	5090

This view is based on higher time frame and different parameters. Traders should not get confused with other updates.

HNI Column

Recommended Price	120.5
Recommended Date	06/06/2012
Quantity	2000
Investment	241000
Hindalco 120 put option
Recommended Price	4.5
Quantity  (Lot size 2000)	1 lot
Investment	9000
Total Investment	250000
Upper Break even	124.95
Max Loss(Rs per share)	4.95
Maximum Profit	Unlimited
CMP of Hindalco	120
CMP of Put Option	4.65
Unrealised P/L	-700

Thought For The Day

" Don't get depressed if everything goes wrong. Don't get over confident if everything goes fine. Always be in equilibrium position because nothing is permanent."

Market Update for 07/06/2012

Nifty Hourly Chart

 

What a rally!!

It was a mad bull rush and Nifty was surprisingly up by 133 points. All sectors are in green , however, market was led by capital goods,Banks,metals,auto and power sector.But as usual we the retail traders missed a major part of the rally.

4955 was the expected target but market was too strong and so this level was breached but Nifty is unable to close above 5000. Tomorrow's trading session is very important and we need to see whether Nifty closes above 5023 which is the previous peak. Given the strong global cues, we may think that it must be easy for Nifty to close above 5023. But trading is not as obvious as it appears.

If Nifty sustains above 5023 then we can expect 5070 which is 200 DMA. Nifty looks overbought in hourly chart and also it is near to previous peak. Short position in Nifty can be considered only if it trades and sustains below 4955. Otherwise taking a short position could be potential suicide.

 

Nifty Daily Chart

Once again Nifty has closed above 20 DMA and MACD,Stochastics are positive. Nifty has come out of the narrow range 4800-4955. If Nifty closes above 4923 Nifty short strangle should be squared off. After a single day rally of 133 points Nifty may consolidate for a while but tomorrow's trading session will give answer to many questions.

Traders should not think that 'we missed the rally'.Because it is practically difficult to catch every rally . We will get one more opportunity if Nifty closes above 5070.

Hindalco Daily Chart

Hindalco has closed above Rs.119.40 which is 23.6% retracement. Now it is expected to move towards Rs.128-135. Hindalco has also breached 20 DMA Rs.114 and 50 DMA Rs.119 and looking bullish from short term to medium term point of view. If Hindalco closes below Rs.109 exit the position.

Open Positions

Scrip	Type	Qty	Price	CMP	P/L
Nifty 5000 CE	Short	50	78.85	96.6	-887
Nifty 4800 PE	Short	50	86.6	54.5	1605
Hindalco	Long	300	120.5	120.45	-15

Today's Trades

Scrip	Type	Qty	Buy Price	Sell Price	P/L
Bank Nifty Fut	Sell	25	9428	9599	4275
Bank Nifty 9400 PE	Sell	25	269	199	-1750
BPCL	Sell	120		700.5	-960
Nifty Fut	Sell	50	4936	4926	-500

* Trade in BPCL was a  learning experience for me. I thought to share with you. We entered BPCL long at Rs.708.50 and the expected target was Rs.725-735. It made a high of Rs.720 and started sliding even when the market was breaking every resistance. Moral of the story is buy those sectors/shares which move in line with the market.

 

Nifty Short Term Trend (1 to 2 weeks)

One of the readers of this blog has sent a mail . He says that the short term view is confusing . Because while explaining hourly and daily chart it is said that trend is up and in this column it is said to be down!!.

All I can say is in this column I am using higher time frame. When the time frame is high traders will achieve higher accuracy, higher targets and lesser number of trades. The disadvantage is wide stop loss (so the loss will be high) and time lag is high.

Nifty Short Term Trend	Down
Targets	4780-4680
Reversal if closes above	5090

 

HNI Column

In HNI column we will recommend buying individual stocks with short term to medium term point of view. This can be used by those traders whose trading capital is more than 5 lakh.

Our short term pick is Hindalco .

Recommended Price	120.5
Quantity	2000
Investment	241000
Hindalco 120 put option
Recommended Price	4.5
Quantity  (Lot size 2000)	1 lot
Investment	9000
Total Investment	250000
Stop Loss (if closes below)	109
Upper Breakeven	124.95
Max Loss(Rs per share)	4.95
Maximum Profit above	124.95

Thought For the day

Look at the sky. We are not alone. The whole universe is friendly to us and conspires only to give the best to those who dream and work - Dr. APJ Abdul Kalam