Tuesday, June 26, 2012

Nifty: Trends with Corrections

In this blog, I have often written about cycles of contraction and expansion. If there is one living truth in the markets, this is it.

Yet, money is made in trends. So, how does the trader look at trends?

Trends result in price moving in one direction. There can be any number of variations in the formation of a trend. Therefore, the pattern of how a trend develops is not easy to forecast (It is much easier to forecast that expansion will follow contraction and vice-versa).

In the Nifty, we are in some kind of an uptrend. A normal trend, should see corrections in between. If this is a normal trend, then the Nifty will undergo a correction after a 400 point rally which saw resistance at 5200. But, suppose this is a strong trend? Then, we may not see any meaningful correction at all. And, suppose, this is a weak trend? Then, we may see a deep correction.

My point is: corrections are not easy to predict. Which is why, we try to go with the flow, assume that conditions will be normal unless proved otherwise.


Shash said...

Dear Sir,

I like you thought about market. I am one of the student of this great teacher called "Market" . I really agree with most of your posts. I want to put my own personal thought about market.
I wonder, I too do many mistake while trading, learning every day through experience. But the best parameter is when we are uncomfortable with any positions. Whenever we are uncomfortable and had feeling of discomfort, it means that I done something wrong with my portfolio. I rectify my error just in next trading session. Which I surprisingly always work. So the best parameter is to make yourself comfortable and prepare for worst outcome of market.
Second, I never try to look for profit, I just try my best to hedge my portfolio for most unexpected move and in process I collect some good points.

I will be oblige if you place some comment over my thought. Though there is lot to be told.

Thank-you for giving you precious time to read it.

Shashank Semwal

Jitender Yadav said...

Respected Sir,

Most of the problems we face in trading are due to our emotions and indiscipline and we can profit if we just stick to our rules.
So those "Black Boxes", "Grey Boxes" are being developed where the computer will always follow the set rules for profitable trading without showing any emotions.
My question is sir, is it possible that while a trader is holidaying, his system is spitting money for him. Off course the system will need occasional changes for changing market conditions and only brilliant traders can develop such systems. I hear most of the trading volumes are now being contributed by 'quants' and 'algos'

Your Fan
Jitender Yadav

wanderer said...

And, what is normal condition? trend with minor corrections on the way ?



Is inverted H&s formation is taking place in Tisco? A close over 432 has a tgt of 460?

Nitin Damle

shabsaif said...

Dear Sir,

On Monday 25 june, After fall of Nifty from 5200, you said on CNBC, that nifty will touch 5000 before it will go up, may be it will go down in 2-3 days or next week. I would want to know what is the technical analysis involved for this correction, please reply , thanks

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