Sunday, August 23, 2015

Windows of Opportunity are often Small

The Nifty has been in a trading range for weeks. A well defined support existed around 8350. On Thursday, the Index fell dramatically, going below 8400, coming quite close to 8350. Then, on Friday, the Index opened with a gap down, around 8300.

If you are a trader watching the trading range develop, wishing to take a breakdown/ breakout from the range, you had a very small window of opportunity to take the trade when it actually came about. There was an aggressive entry on Thursday afternoon when the Nifty fell more than 140 points intra-day to come near 8370. Then, there was a clean breakdown entry on Friday morning.

Was a guarantee available that the trade will work out? No. Markets can do what they want so it was always possible that the Nifty could just make a small break below 8350, then begin a rally again.

Is this a fair breakout/breakdown trade. worth taking?  The answer has to be given by the trader herself.

But, if you were tracking this trading range, wanting to take a trade, then you had to take the trade as soon as it opened up. You were waiting for 8350 to be taken out, it was taken out so sell short. Often, the windows of opportunity are quite small. You have to be nimble and take the trade. Traders cannot think: okay, now let me study the breakdown, watch it and then decide.

'Watching' is a favorite word used by Anchors. I have never understood how a trader can ever 'watch' a market that has already given a signal. But this is a topic for another day.

1 comment:

Omkar Patki said...

Sir,
Nifty RSI is at 34 and Nifty charts showing good support at 8200 levels.
If Nifty opens negative on Monday morning will it be wise decision to buy that dip and hold position to play for the bounce back as this is a expiry week ?

Please send your reply at patkiomkar@gmail.com

Waiting for reply.