Tuesday, March 16, 2010

The Nifty gets a Breakout

Trading ranges are meant to be broken, one side or the other. In a trending market, a range should , normally be broken in the direction of the trend.

The Nifty moved in a narrow range, roughly between 5100 and 5150, for well over six days. I say, over six days, since today morning it was doing the same thing.

By afternoon, the market decided it wanted to go up. The range was broken, and Nifty futures rallied from 5130 to 5215 before closing at 5210. Good enough!

Now, points of breakout are points of highest risk. (This one is my own, comes from trading thousands of breakouts!). If the trade is to fail, the trader will end up having bought / sold at the worst possible trade location. Each trader can have his own rules for trading breakouts. So far, he is consistent, each set of rules would lead to the goal - successful trading.

8 comments:

mynac said...

Dear Sudarshanji,
"points of breakout are points of highest risk." Particularly a day trader must write this on paper and must keep this in front of his/her eyes everyday on their trading table,because it is rather more required/necessity for trading purpose than a positional trader/investor.The Timing(I mean at what time,in the morning,afternoon or after 2.30-3.00p.m. it is taking place.)The volume,the percent wise intraday trading range and most importantly impartial market analysis of one self by him self are also required for the same.Thanks for reminding this important rule on this occasion.

amitkbaid1008 said...

Sir,

I Bought NIFTY 5100 CALL @ 95
Whats your opinion for that

Niftic said...

Sudarshan Sir,
If we see the Reliance Line Chart from 1st Feb 2010 till 16thMarch2010, it seems that relaince have given a Head & Shoulder Bottom Reversal Breakout,crossing 1040 with high volume.The target hence become (1040-960)+1040= 1120.
Please let me know is this correct?
Also some trading strategy for positioning to catch the Head & Shoulder Bottom Reversal Breakouts,as it happens...

Student Of Market said...

Sir,

while the point of breakout is also the point of significant risk ( maximum risk?), I have learned from you that the first pull back is has reduced risk and still good risk reward ratio.

In fact the indicator that suggested going long is likely to give a false indicator the very next time when it says go short!!! The reason is just when an indicator says that the a new trend ( down ) is starting, the chances are high that the correction or pullback is over. This works only for strong breakouts. (An important exception to the rule of always trusting your indicators and systems?)

I wrote about this in my blog, in case it helps anyone.

Warm regards, ....

subbu said...

Dear Sudharshan sir,
I am holding following stocks and are down by -23%. pls advise, should i book the loss or buy on dips..

Manali petro
buy price: 12.85 - current: 9.90

Vijaya bank
buy price: 58.57 - current: 48.20

spice communica
buy price: 62.91 - current: 56
no trade past 5 days.

pls advise: subrahmanyaam@gmail.com

shan said...

Thankyou sir for sharing the soul of the wit of handling the breakout so beautifully and briefly!

tushki said...

sir pls suggest me levels for bank nifty...i had short sell it at 8500

NPT said...

DEAR TUSHKI

THANKS FOR KEEPING SOME FAITH IN ME RIGHT NOW I HAD NOT SEEN THE LEVEL OF BANK NIFTY, BUT ONE THING IS DEFINATLY THERE, THAT MARKET IS LOOKING COMPLETLY ON SELL OFF MODE FROM 30/032010 & ONE CAN ONLY COVER THEIR SORT POSION ON 8/04/2010, SO U CAN COVER U R BANK NIFTY AT THAT TIME

THANKING YOU
NIREN P. TIMBADIA, 9969420599

nirenptimbadia@gmail.com