Thursday, February 5, 2009

We have seen this before

In the month of July - September 2008, a trading range developed on the Nifty which lasted for seven weeks, between July 3 and September 12. The range was narrow. Boundaries were 4200 as support and 4550 as resistance. Eventually the Index fell down breaking support. This led the the eventual decline below 3000 (as we are now).

A similar range is now developing in the Nifty. Between Janaury 12 to feb 4, the Index has moved in a 175 point range, with support 2700 and resistance at 2875. For all we know, this process may continue on. Eventually, the Index will break out or breakdown. The move out of the trading range should provide a trend, whichever way it breaks.

Position Trading or Day Trading ?
Day trading is a difficult task, because of the rapid response required from traders to enter as well as exit positions. Day Trading also requires extrensive research and studies for the development of your trading systems.
Position Trading is less stressful since decisions are made less frequently (as compared to day trading). As a Position Trader, you probably rely on end of day charts for trades. Trades are analyzed and decisions made after trading hours (probably late evening or early morning).
Another category is that of a swing trader. You need access to intra day charts to swing trade. Trades last between a few hours to a few days.
Capital required.
Trading requires capital. Whatever style of trading you follow, you MUST be adequately funded. As a position trader, you will have less quantity (compared to a day trader) because your stops will be wider. In all trading styles, there are periods of opportunity, periods of drawdowns and stagnation. That's part of business.

3 comments:

Jagdish said...

There is one major difference in the trading range though - this time though the range is 200 pts, the period and the type of tightness is different. This pattern of either a one or a two day up/down move followed immediatedly by another one or two down/up move (with 80 point gap up/down thrown in for good measure) has not occurred for a long time. Moves earlier were slow but not sharp - so a trader could trade easily - this is not the case this time. Choppiness is clearly evident

GUNTAS said...

RESPECTED SIR,
AS MENTIONED BY YOU IN YOUR POSTS
THAT NIFTY IS STUCK IN A NARROW RANGE BETWEEN 2700-2900 FOR MORE THAN 2 WEEKS NOW.
VOLUMES TOO ARE ON THE LOWER SIDE.
DO YOU THINK THAT THE MARKET IS TRYING TO FORM A BASE AND THIS IS
PERHAPS THE LAST STAGE OF THE BEAR MARKET WHICH IS IN PLAY FOR 13 MONTHS NOW AND WHETHER PRICE CORRECTION IS DONE AND IT'S NOW
THE TIME CORRECTION BEING REFLECTED BY THE CURRENT MOVE OF THE MARKETS.

rakesh said...

SIR,
as past record indicate breakdown.last few days nifty range 2750-2850 if nifty break up tgt 3050 or down tgt 2550.as inflation,intrest rate,compney result,election day,global economic
all data suggest time be down. is anyone differ with me ? when we touch low?

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