Thursday, December 8, 2011

Inside a Trading Range Again

The Nifty is back inside a trading range. A rally that started from 4640 is now over, with the Index moving into a fairly well defined range. Today's decline saw the Index define the range boundaries support around 4900 and resistance around 5100. This is a fairly wide range almost 200 points.

If the Nifty were to move below 4900, the range will breakdown with an initial target of 4700. A second possibility is for the Index to remain within 4900 and 5000 for a few days.

How do I trade this? Trading ranges are not easy to trade. Overnight positions can often result in losses since the market may open with gaps which go against the trader. The reason for such adverse gaps lie inside the trading range itself. Going with momentum, traders will often sell at levels which are support for the range. The support holds, hence a gap open which goes against the trader.

My own sense is to take day trades wherever possible and avoid carrying positions. All ranges will eventually breakout or breakdown. To take advantage of this imminent thrust, I often buy straddles when prices are inside the range.

8 comments:

shabsaif said...

You said 2-3 time on TV that one should buye 5000 CE and PE, premium around Rs 260, what is profitability of this call if market to be range bound and premium fall day pass

Akash said...

Hi, Sir My Query Friday Cnbc You Say"s Nifty Lower High ,,, Fust High 5450 & now around 5150 ,,{ Low High} ,, Nifty Low Is 4640 If now Nifty reverse from 4800 or 4750, Create Higher Low .. It" Goood Bull ?? Guide Me Sir....

daytrader said...

dear sir

one humble request to review or give ur comments and thoughts on taylor trading ,most of the time on cnbc u discuss ur short term view on nifty which would b used as a daytrade or swing trade ,

as u written ur comments on 3 period RSi from linda's book in past .

because many times its tuff to understand and having a view of
a buy ,sell or short day.
request u 2 discuss ,

regards
ur follower

Technotrader said...

As a student of TA and sir, as you like a Guru I try to follow you and analyze my views. Today I shorted Jain Irrigation and then saw your post regarding Jain. On Thursday I shorted Idea and saw your post afterwards. Sir its good to me that I following your foot marks. Thanks sir as always.

Vibhor Rastogi said...

Hi Sir,

Can you suggest some good book/books on developing trading systems.

Vibhor

Vasant kumar said...

Read the desciplined trader

Technotrader said...

Sir, please write your blog regularly. Its a humble request.

ramprasad said...

Hi sir,
CONGRATS SIR MOST OF THE TIMES MARKET MOVES U R WAY.
I AM CONCENTRATING ON THE NIFTY.
AND I OBSERVED THAT
1.WHEN IT CROSSES HIGH'S MIN IT WILL MOVE 20 POINTS.
2.SAME IN DOWN SIDE.
BUT HERE I AM UNABLE TO FIX STOPLOSS LEVEL.
SIR, MY HUMBLE REQUEST U & FALLOWVWRS OF THIS BLOG PLEASE SUGGEST ME ON THIS.
thank you,
ramprasad.