The author is a SEBI Registered Research Analyst (INH000004796) and a NISM certificate holder in Equity Derivatives Market. The certification is provided by National Institute of Securities Markets.

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Sunday, May 10, 2015

How Trends Change!!

The above is a 15 min chart of Yes bank. Here I try to explain how trends change usually and which can be easily spotted using Price Action. The horizontal lines which are being drawn show the important swing highs and due course print lower thus forming a downtrend. Technically we enter a downtrend only below horizontal line 3. This Price Action(PA) confirms a downtrend. But we are alerted to slowing of the uptrend almost after the formation of a lower high at 2. Once in the trade we can trail the position with prior swing highs as SLs.
Now take a look at horizontal line 7. This is the swing high from where the move to the lowest low of 790 got originated. So technically as and when we trade above this swing high (line 7) we enter into an uptrend. Also look at how price behaved when price started trading above 7 with a gap.
Now again once in a trade we can trail using prior swing lows and trail our position till the market does not stop us out.

Disclaimer: I traded the move down by taking a positional trade. Did not take the uptrend trade.

Friday, May 08, 2015

The Convergence strategy!!

 Offlate I have been concentrating more on positional trades. These trades are a confluence of a few factors like price visiting a important moving average, pure price action , retracements et al.
One of the strategies which I am using is the convergence strategy where I use convergence of 4 and 5 moving averages to initiate a trade. The trade is initiated along with confirmation with other factors also, mainly price action.
The EMAs which are used are 5,10,20,50,200. Convergence happens if and when first 3 or 4 or all 5 EMAs converge at the same point which can be easily spotted without any strain to the naked eye.

Here's an example:

As can be seen in the above Nifty chart, the green and red arrows indicate convergence and a very steep move. I am not aware about the science behind the moves when convergence happens but the moves are impressive and blasting. Try the strategy at your end and share your results.
the strategy works on all time frames and all financial liquid tradable instruments. The results may surprise you!!