Friday, January 12, 2018

Getting the direction right

Here are my thoughts on the last 2 days of trading.

Markets are in a sort of range?, but also grinding upwards?.


Nifty M3 Price Action Chart (Wednesday)
Nifty M3 Price Action Chart (Wednesday)

Initially, the price traded within previous day's range. The price had been rangebound in the previous days. So, held back.

The first DP was the low of the day. I did not want to miss a potential sudden drop. So, went short. But then, it began to look like a Breakout Failure, and I immediately reversed. This second trade was the only trade that I got directionally wrong in the last 2 days. If I had kept the Initial Stop Loss of the 1st trade intact, I would have caught the fall.

The next trade was the Breakout Failure of 10600. Booked when momentum appeared later. Then went short when the momentum stalled.


Nifty M3 Price Action Chart (Thursday)
Nifty M3 Price Action Chart (Thursday)

Again, the price was dull at open, with a small range within previous day's range. Then, a Master Candle happened that covered the Day's High and the Previous Day's Close. I placed triggers at both ends of that Master Candle. When the long triggered, I tightened the Stop Loss. In hindsight, that was a mistake. Also, in hindsight, an aggressive entry with smaller Stop Loss within the Master Candle's range would have worked. The lower risk on the tight Stop Loss would perhaps have kept me from tightening the Stop Loss prematurely.

The next long worked. I was able to book at the momentum candle, even though my data feed painted the candle after some delay. Then, the long tails inspired me to go short. The Stop Loss just 1 point higher would not have been hit. Later, I went short again. This time it worked, but not before a scare that almost took my Stop Loss.

The fall was good and took out 10650. I reversed to long when the momentum stalled.


So, I only got one trade directionally wrong in the last 2 days, but still did not earn much. Now, would it have been wiser to keep the Stop Losses wider and avoid SL hits in many trades. But then, what would have happened if the direction was wrong. After all, at the point of entry, I never know if the trade is going to work out. The perpetual dilemma continues....

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