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What is option  trading?

Before knowing how to trade option we have to know what is option  trading. Option is a contract between buyers and sellers which gives the buyer right to buy (for call option) or right to sell (for put option) at a specific price (Strike price / Exercise price ) in future.

Please don’t get panicked by the terms already has been used like call / put option strike price etc. We shall look into every minute details about option theory and strategy so that every every learner who is new to the concept get clear idea about the facts. First of all we shall take an example of call option from the perspective of stock market. Options are of two types 1. Call Option: Gives the buyer right to buy an instrument at a pre specified price. 2. Put Option : Gives the Buyer of the option right to sell at a pre specified price.

Explanation of call option with Example:

To know what is option  trading now we dig dipper with an example below. To explain what is call option lets take an example of stock lets say TCS trading at 4000 now. Lets assume Zeeshan is a option trader and as per his analysis he find price of TCS to shoot up high with in one month duration. But he has also some doubt if stock price move against him this may cause big loss to him. Similarly Shankar is also a trader and he find as per his analysis that price of TCS is not going anywhere and likely to stay around 4000 or below and he wants to sell. If you want to know how to analyse stocks learn our demand supply strategy. Now here both Zeeshan and Shankar make a deal / contract as follows: Both agrees that Zeeshan will pay some token money say Rs - 50.00 per share to Shankar as security and he will get right to buy the TCS stock at 4000 irrespective of the price it trades after one month. This gives flexibility to Zeeshan to buy or not to buy after the time period depending upon the last traded price. But Shankar have obligation to respect the deal and as result he gets the security money to keep. Now clearly three out come may happen:

First Case : Price of TCS shoots up and trading at 4400 at the month end.

Second Case : Price of TCS fall down and trading at 3800 at the month end.

 Third Case : Price of TCS remain flat at 4000 at the month end.

This the 6th article of our Elliott wave learning series which is a price action based technical analysis method. Here we shall discuss on Application of Fibonacci retracement and fibonacci projection in Elliott wave theory. Application of  Fibonacci retracement in Elliott wave theory We have learned about Fibonacci ratio in previous articles. Now it’s the time to apply them in EWT. Also it is suggested to learn Fibonacci retracement before learning Fibonacci patterns for better understanding. Projection is used for wave 3,5 and C after completion of a corrective wave. For the below mentioned cases projection is used.

Wave 3 is projection of wave 1

Wave 5 is projection of the whole move from 0 to 3

Wave C is projection of wave A

Retracement is used for wave 2,4 and B after completion of an impulse. For the below mentioned cased retracement is used:

Wave 2 is retracement of wave 1

Wave 4 is retracement of wave 3

Wave B is retracement of wave A

Now we shall discuss each retracement /projection in detail: Fibonacci retracement Calculation for wave 1: Wave 1 is the base for any wave cycle and it is the first wave in the cycle, so there is no base for calculation of projection or retracement for wave 1. Fibonacci retracement Calculation for wave 2: Wave 2 retraces wave 1 by 38%-61% most of the times. But sometimes it can be less than 38% also. Wave 2 at max can retrace up to 100% of wave 1 i.e. it cannot break below the starting point of wave 1. Generally 61% is the best entry point for any trade because here risk reward is favorable. Stop loss point should be starting point of 1 and minimum target will be 100% projection of wave 1. [caption id="attachment_360" align="aligncenter" width="402"]📷 Fibonacci retracement for wave 2[/caption] Fibonacci Projection for Wave 3 [caption id="attachment_361" align="aligncenter" width="368"]📷 Fibonacci Projection for Wave 3[/caption] Minimum projection for wave 3 is 100% of wave 1. If wave three projects 100-161% then it is called normal wave 3 and if project more than 161% then it is called extended wave 3. Normally wave three project 161-461%.It may be even more. This is the reason it is said that if you can catch wave 3 you will be rich. Fibonacci retracement Calculation for wave 4: [caption id="attachment_362" align="aligncenter" width="439"]📷 Fibonacci retracement Calculation for wave 4[/caption] Wave 4 retraces wave 3 by 23-38% normally. It sometime may be smaller than 23% and may be even smaller than 10%. For small no of cases it retraces more than 38% , but it can retrace maximum up to end point of wave 1 . That means wave 4 cannot overlap wave 1(exception is Diagonal Triangles that will be explained later.) Fibonacci Projection of wave 5:

Projection of wave 5 is calculated based on whole length from 0 to end of 3. Wave 5 retraces minimum 38% of length of 0 to 3 and must complete after the end of 3. These two conditions are minimum requirements for wave 5.

Generally wave 5 projects up to 38-61%, if it is greater than 61% then called extended wave.

Wave 5 rarely extends more than 100-123%.

[caption id="attachment_363" align="aligncenter" width="498"]📷 Fibonacci projection for wave 5[/caption]

Also read other topic covered under our free Elliott wave theory course :

Concept of Elliot Wave Theory- Wave cycle

Rules of Elliott wave Theory

Fibonacci Ratio.

Component of EWT

Elliott Wave Personality

Application of fib ratio in EWT

Elliot wave patterns

Different Patterns in EWTImpulse Leading Diagonal Triangle Ending Diagonal Triangle Simple Zigzag correction 3-3-5 Flat Correction Irregular Correction Formation of Irregular Correction Complex correction.

Extended and failure wave

Rules of alteration

Combining patterns with Fibonacci ratio

Importance of 38% retracement ,alternate wave count and reflex point.

Time frame to use in Elliot wave analysis

Identifying multibagger stock

This the 5th article of our Elliott wave learning series which is a price action based technical analysis method. Here we shall discuss on Elliott Wave Personality - personalities of different waves. Eliiott Wave Personality [caption id="attachment_358" align="aligncenter" width="424"]📷 No 1 Article on Eliiott Wave Personality - Read Now[/caption] It is important to know the personalities of different waves to mark wave counts confidently in difficult conditions and to get out of confusion of alternate wave count. Elliott Wave Personality : wave 1: Wave one has no specific personalities. Some time it takes months / years to complete wave 1 of main wave. Wave 1 is like a new born baby which has no specific behavior. Generally it is created during extreme negativity in the market and we have to wait for wave 1 and 2 to complete before taking trading/investment decision. During wave one market sentiment is severely negative put price do not go down and try to make a base because accumulation happens in this phase. Elliott Wave Personality : Wave 2: After completion of wave 1 wave 2 starts and it’s a corrective phase during which profit booking happens at upper level and accumulation happens in the lower level. As this is a corrective wave its behavior is confusing and we should not trade it. After wave 1 when wave 2 starts major market participant think that market is going to make a new low but surprising every one wave 3 starts when wave 2 is completed. Elliott Wave Personality : Wave 3: Wave 3 is the most important wave in the wave cycle. Sir Elliott said “If you are able to catch wave 3 you will be rich”. Why he said so will be clear once we fully grasp the knowledge of EWT. During the starting of wave 3 every trader and investor are convinced that previous phase is complete and this is the start of a new trend. Wave three is normally steeper, sharper, fastest and largest wave in the wave cycle. It normally moves very fast creating gaps because every trader and investor are confident about the trend and want to participate at every level instead of waiting. Experience says we should not estimate the top of the wave three and book profit because most of the time wave 3 is extended and best strategy is to trail the stop loss to get the maximum profit. Sometimes wave 3 is so sharp that it becomes difficult to identify its top and to identify its inner waves. During wave three trading volume increases and most of indicator becomes stretched, still price moves sharply in the direction of the trend. Elliott Wave Personality : Wave 4: Wave 4 is a corrective move after wave three and its characteristics is similar to wave 2. Wave 4 is a consolidation phase after big run of wave 3 and who missed the wave 3 now buy in dip. So after completion of wave 4 price moves up again. Elliott Wave Personality : Wave 5: Wave 5 is the last wave in the direction of main trend. Sometime it’s become difficult to identify its inner wave because it may end as diagonal. We have to be experience enough to identify the wave 5 . New/common traders and investors is now more convinced that market is in strong bull run looking at the sharp up move of wave 3 and participate in the market to get penalized. In this phase price moves higher with low volume which is an indication of trend reversal. Also read other topic covered under our free Elliott wave theory course :

Concept of Elliot Wave Theory- Wave cycle

Rules of Elliott wave Theory

Fibonacci Ratio.

Component of EWT

Elliott Wave Personality

Application of fib ratio in EWT

Elliot wave patterns

Different Patterns in EWTImpulse Leading Diagonal Triangle Ending Diagonal Triangle Simple Zigzag correction 3-3-5 Flat Correction Irregular Correction Formation of Irregular Correction Complex correction.

Extended and failure wave

Rules of alteration

Combining patterns with Fibonacci ratio

Importance of 38% retracement ,alternate wave count and reflex point.

Time frame to use in Elliot wave analysis

Identifying multibagger stock

This the 4th article of our Elliott wave learning series which is a price action based technical analysis method. Here we shall break down elliott wave theory in its components so that in next articles we can concentrate on each parts.

Components of Elliott wave theory[caption id="attachment_356" align="aligncenter" width="469"]📷 No 1 Article on components of Elliott wave theory - Read Now[/caption]

From the explanation of previous article we have understood that any wave cycle can be subdivided into 8 waves 1,2,3,4,5 and A,B,C either the wave is Bigger/Inner. Out of these 8 waves 1,3,5,A and C is impulse towards main trend and 2,4 and B is correction towards opposite direction of main trend. Having this basic idea of Elliott wave now we shall move to learn the theory in more detail. Study of Elliott wave theory can be subdivided in four parts as mentioned below:

Wave cycles – We have already learnt what wave cycle is.

Wave’s Personalities

Fibonacci calculations

Wave patterns

With the use of these four principles we can use EWT to predict the market move and missing any one of these will make us confuse to use this wonderful method. We shall cover wave’s personalities in the next article.

Also read other topic covered under our free Elliott wave theory course :

Concept of Elliot Wave Theory- Wave cycle

Rules of Elliott wave Theory

Fibonacci Ratio.

Component of EWT

Elliott Wave Personality

Application of fib ratio in EWT

Elliot wave patterns

Different Patterns in EWTImpulse Leading Diagonal Triangle Ending Diagonal Triangle Simple Zigzag correction 3-3-5 Flat Correction Irregular Correction Formation of Irregular Correction Complex correction.

Extended and failure wave

Rules of alteration

Combining patterns with Fibonacci ratio

Importance of 38% retracement ,alternate wave count and reflex point.

Time frame to use in Elliot wave analysis

Identifying multibagger stock

This is the third article of our Elliott wave Learning series which is a pure price action based technical analysis method.

What is Fibonacci Ratio:

Before moving deeper into modules of Elliott Wave Theory we have to learn what is Fibonacci ratio because it has huge usage in calculation of wave length wave projection and wave retracements. We shall also see that these ratios are repeated again and again in EWT patterns. Here we shall discuss only the required part of the Fibonacci ratios which is relevant in respect to Elliott Wave Theory. 1,2,3,5,8,13,21,34,55……this series is called Fibonacci series and each number of series is called Fibonacci number. In the series if we add two consecutive number we shall get the next number in the series. If we divide randomly any number in the series by another we shall get below mentioned rations or percentages-

.236=23.6% .50=50% .618-61.8% These are the most repeated ratios in the financial market and as well as in EWT. 23.6%,38.2%,50%,61.8%,78.6%,100% are the most repeated ratios in correction /retracements. Sir Elliott mentioned 61.8% as the most important and called it golden ratio. Some times it has been observed that 70% ratio is also repeated again and again. For projections 38.2%,50%,61.8%,78.6%,100%,138.2%,161.8%,178.6%,200%,238.2%,261.8%,300%.......etc is used. Ratios from 100% - 461.8% is used for wave 3 and 38.2% to 100% is used for wave 5. We shall discuss in detail about projection/retracement of different waves later.

Also read other topic covered under our free Elliott wave theory course :

Concept of Elliot Wave Theory- Wave cycle

Rules of Elliott wave Theory

Fibonacci Ratio.

Component of EWT

Elliott Wave Personality

Application of fib ratio in EWT

Elliot wave patterns

Different Patterns in EWTImpulse Leading Diagonal Triangle Ending Diagonal Triangle Simple Zigzag correction 3-3-5 Flat Correction Irregular Correction Formation of Irregular Correction Complex correction.

Extended and failure wave

Rules of alteration

Combining patterns with Fibonacci ratio

Importance of 38% retracement ,alternate wave count and reflex point.

Time frame to use in Elliot wave analysis

Identifying multibagger stock

This is the Second article in our Elliott wave learning series which is a price action based technical analysis methods. Rules of Elliott Wave Theory: We already explained about Elliott wave cycle. Now it is the right time to know about the rules of elliott wave theory which are the heart of Elliott wave theory. These are as follows:

Wave 2 can never correct more that 100% of wave 1 i.e. wave 2 never break below the starting point of wave 1.

Wave 3 can never be the shortest of wave 1, 3, 5.

Wave 4 can never break below the end point of wave 1 i.e. wave 1 and 4 cannot overlap. There is an exception to this rule which will be discussed in later articles.

Beside these three rules there are two more mandatory rules: Rules of alternation for Extension: At least one of wave 3 or wave 5 must be extended. That means either wave 3 or wave 5 must be extended. Also both may be extended. Please note here there is a misconception that both wave 3 and 5 can’t be extended simultaneously. Rules of Alteration for Correction: Wave 2 and 4 cannot be similar type correction that means if one is simple correction then other must be complex or irregular correction.   These two rules of alternation will be discussed in detail in later articles and also there are many other rules which we shall cover later. Also read other topic covered under our free Elliott wave theory course :

Concept of Elliot Wave Theory- Wave cycle

Rules of Elliott wave Theory

Fibonacci Ratio.

Component of EWT

Elliott Wave Personality

Application of fib ratio in EWT

Elliot wave patterns

Different Patterns in EWTImpulse Leading Diagonal Triangle Ending Diagonal Triangle Simple Zigzag correction 3-3-5 Flat Correction Irregular Correction Formation of Irregular Correction Complex correction.

Extended and failure wave

Rules of alteration

Combining patterns with Fibonacci ratio

Importance of 38% retracement ,alternate wave count and reflex point.

Time frame to use in Elliot wave analysis

Identifying multibagger stock

This is first article of our Elliott Wave Learning series which is purely price action based technical analysis method. What is Elliott Wave and What is Elliott Wave Cycle? Here we shall discuss on What is Elliott Wave and What is Elliott Wave Cycle which require to be understood before jump into the other topics. These are about few simple rules which are the heart of Elliott Elliott theory . We shall discuss the concepts with the assistance of few imaginary chart patterns, afterward after getting the image clearer we shall crawl to real charts. The father of Elliot Wave theory Sir E.N. Elliott observed that each stock market or every financial instruments move in forming a pattern i.e. called Wave’s cycle. This Cycle consists of 5 waves within the direction of Primary/Main/Bigger trend followed by 3 waves within the reverse direction of main trend.

The 5 waves towards the main trend are called Impulse / Motive

The 3 waves towards reverse direction of main trend are called corrective wave/Correction.

We shall consider upward direction as the direction of main trend and downward direction as the direction of corrective wave in our discussion. But opposite of this is equally possible and all rules can be similarly applied. Inner/Lower Degree Wave : Every wave consists of a set of smaller/inner waves; in other words we can say every smaller wave combine to create a bigger wave. The small inner waves are called Inner/Lower degree waves and biggest wave is called Main / Higher Degree Waves. Also read other topic covered under our free Elliott wave theory course :

Concept of Elliot Wave Theory- Wave cycle

Rules of Elliott wave Theory

Fibonacci Ratio.

Component of EWT

Elliott Wave Personality

Application of fib ratio in EWT

Elliot wave patterns

Different Patterns in EWTImpulse Leading Diagonal Triangle Ending Diagonal Triangle Simple Zigzag correction 3-3-5 Flat Correction Irregular Correction Formation of Irregular Correction Complex correction.

Extended and failure wave

Rules of alteration

Combining patterns with Fibonacci ratio

Importance of 38% retracement ,alternate wave count and reflex point.

Time frame to use in Elliot wave analysis

Identifying multibagger stock

Practical use of the theory

Rules of Numbering / Marking the Waves :

To mark the 5 wave of an impulse/motive wave number 1,2,3,4,5 or I,ii,iii,iv,v can be used.

To mark 3 wave of a correction A,B,C or a,b,c can be used.

After learning previous articles now we are in a position to explain about trade setups. Here we shall discuss what is best long term trade, positional trading and swing trade strategy depending up on demand supply zone and trend analysis in different time frame. In this article we shall explain below mentioned points:

What is multi time frame analysis?

Three standard trade setup:

Swing trade Strategy

Positional trading Strategy

Mid/Long term trade

What is multi time frame analysis? To use demand and supply zone efficiently we have to do multi time frame analysis of a stock and also have to mark demand and supply zone in each time frame. Here is how to do multi time frame analysis using trend line and D&S zone: As a standard process we shall analyze daily, weekly and monthly time frame. Depending on the status in different time frame we shall get three type    of trade setup.

Swing trade: When trend in all the daily, weekly and monthly time frame is up.

Positional trade: When daily trend is down and weekly and monthly trend is up.

Medium/long term trade: When weekly and daily trend is down and monthly trend is up.

Our first task is to mark Demand and supply zone and draw latest trend line (as per the concept described in Trend line article) in all the time frame. Below images shows the trend line and demand supply zone in the daily, weekly and monthly chart of HDFC bank. 📷 📷 From the above chart we can say that monthly trend is up, weekly trend is broken and daily trend is down. This is how we have to analyze multi time frame charts using D&S strategy. Three standard trade setup:Depending upon the trend in daily weekly and monthly timeframe we shall get three type of standard trade setup as mentioned below:

Swing trade: When trend in all the daily, weekly and monthly time frame is up.

Positional trade: When daily trend is down and weekly and monthly trend is up.

Medium/long term trade: When weekly and daily trend is down and monthly trend is up.

Now we shall discuss each setup in minute details: swing trade strategy This type of trade generally last few days to one week. Before entering into a swing trade setup below process may be followed:

First we have to check latest trend in daily weekly and monthly chart should be up.

Then we have to mark the demand and supply area in all the mentioned three time frame.

We have to search for the quality demand zones like zones aligned with Fibonacci levels, trend line, moving averages etc (as described in D&S zone article).

Have to wait until price fall to these levels and bounce back with reversal candle.

Volume should support the reversal.

Most important point here is the daily uptrend should be intact and should not be broken.

To increase success rate we should not enter the trade in the first reversal candle. We should wait for the day after to see if the price move is supporting reversal (making green candle) and enter the trade after 3 PM.

Stop loss: Stop loss should be set below the previous swing low. Sometimes stop loss may also be set below the current swing low provided it satisfy other risk assessment criteria. Detail stop loss setting method has been discussed in separate article on stop loss.

Target: Initial target should be set at the immediate daily supply zone. Later we can trail the stop loss.

Risk to reward ratio should be above 1:3.

Other risk aspects have been explained in our article on Risk management and position sizing.

Below we shall discuss a swing trade setup in real charts: We shall analyze the chart of Vedanta. Daily chart is as below- 📷 📷 Analysis of weekly chart is as follows:   📷 Here also weekly trend is up; supply and demand zone has been marked in the chart. Monthly chart is as follows:   📷   Here also trend is up and monthly demand and supply zone has been marked. As the trend in all the three time frame is up, we can look for swing trade setup in Vedanta. In the daily chart we can see price is trading far away from trend line. So we have to wait until price fall near the trend line and then any reversal pattern created above the daily trend line.  Then we can enter into the trade if risk reward is favorable. Stop loss may be placed below the previous swing. We can see that in all the time frame supply zone starts from 275. So we can set 275 as immediate target.   📷 Also Learn the other topics of Demand Supply trading strategy below: Technical Analysis Basics What is Dow Theory Candlestick Charts Bullish Candlestick patterns Bearish candlestick patterns Indecision and continuation candlestick patterns How to use Volume in trading Method of moving average RSI Indicator ATR Indicator Trend line analysis Support resistance Demand Supply zone Chart patterns Trading channels gaps Trading strategy Trade management and stop loss Position size and risk What is positional trading strategy This type of trade generally lasts one to 2 months. Before entering into a positional trade setup below process may be followed:

First we have to check latest trend in daily weekly and monthly chart. Monthly and weekly trend should be up and daily trend should be down.

Then we have to mark the demand and supply area in all the mentioned three time frame.

We have to search for the quality demand zones like zones aligned with Fibonacci levels, trend line, moving averages etc (as described in D&S zone article).

Have to wait until price fall to these levels and bounce back with reversal candle.

Volume should support the reversal.

Most important point here is the weekly uptrend should be intact and should not be broken.

To increase success rate we should not enter the trade in the first reversal candle. We should wait for the day after to see if the price move is supporting reversal (making green candle) and enter the trade after 3 PM.

Stop loss: Stop loss should be set below the weekly demand zone. Detail stop loss setting method has been discussed in separate article on stop loss.

Target: Initial target should be set at the immediate weekly supply zone. Later we can trail the stop loss.

Risk to reward ratio should be above 1:3.📷

Other risk aspects have been explained in our article on Risk management and position sizing.

Below we shall discuss a positional trade setup in real charts of TCS: Here is the daily chart as described below: 📷 Here daily trend is down as mentioned in the image. Demand and supply zones have also been marked. Next we shall move into weekly chart. Here trend is up and demand supply zone has been market.   📷 Monthly trend is also up here.   📷 To analyze the trade setup we shall explain the weekly chart in more detail.   📷 Here price trading around weekly trend line. We have to wait for if any indication of reversal is formed here. Once we see this type of condition we should return to daily chart to look for if any new daily up trend line is established or and new demand zone is created. If any new daily uptrend line or demand zone created, we can enter into trade keeping stop loss below the demand zone and setting target as immediate weekly supply. This type of trade last almost one to two months and gives good profit potential. Long term trade/Medium Term Trade setup

This type of trading opportunity arises when weekly and daily trend is down and monthly trend is up.

This type of trade generally last for few months to year. Before entering into a swing trade setup below process may be followed:

First we have to check latest trend in daily weekly and monthly chart. Monthly trend should be up and weekly and daily trend should be down.

Then we have to mark the demand and supply area in all the mentioned three time frame.

We have to search for the quality demand zones like zones aligned with Fibonacci levels, trend line, moving averages etc (as described in D&S zone article).

Have to wait until price fall to these levels and bounce back with reversal candle.

Volume should support the reversal.

Most important point here is the monthly uptrend should be intact and should not be broken.

To increase success rate we should not enter the trade in the first reversal candle. We should wait for the day after to see if the price move is supporting reversal (making green candle) and enter the trade after 3 PM.

Stop loss: Stop loss should be set below the monthly demand zone. Detail stop loss setting method has been discussed in separate article on stop loss.

Target: Initial target should be set at the immediate monthly supply zone. Later we can trail the stop loss.

Risk to reward ratio should be above 1:3.

Other risk aspects have been explained in our article on Risk management and position sizing.

Now we shall discuss this type of trade setup in real charts of bajaj finance: Daily chart is as below: 📷 In daily chart trend is down and demand and supply zone has been marked. Below is the weekly zone:   📷 In weekly chart also trend is down and demand supply zone has been marked. Below is the monthly chart: 📷 Here trend is up and price has taken support at the daily demand zone aligned with monthly trend line. Once we see this type of condition we should return to daily chart to look for if any new daily up trend line is established or and new demand zone is created.   📷 Here new daily uptrend line created and we can enter into trade keeping stop loss below the demand zone and setting target as immediate monthly supply. This type of trade last few months and give good profit potential.   Here we have explained about three types of long trade setup. The process can be applied when trend is down also for short trade as bellows:

Swing short trade: When trend in all the daily, weekly and monthly time frame is down.

Positional short trade: When daily trend is up and weekly and monthly trend is down.

Medium/long term short trade: When weekly and daily trend is up and monthly trend is down.

Position Size & Risk Management for trading

In the previous article on trade and stop loss management we discussed on how to manage risk on specific trade and how to manage a trade. Here we shall discuss on how to manage risk on overall capital. Below points will be discussed here.

Few points to be internalized.

Importance of trading journal.

How to calculate position size / what is position size calculator?

Position size and risk management is independent of trading strategy and it must be maintained by traders.

1.Few points to be internalized regarding risk management for trading

Below we shall discuss few points which is very much crucial in respect to risk management for trading.

Never put all of your money in a single trade.

This is a very important point to always remember especially for beginner. Sometimes we find trade setups which look very attractive. In such situation beginners jump into the trade and pour into whole capital in a single trade in the hope of big profit. But there is no guarantee that the trade will move in our anticipated direction and it may move reverse direction. If the trade moves in reverse direction they become more nervous and can’t exit the trade at stop loss point. They continue to hold in the hope of reversal which rarely happens and as a result they wipe out their capital. So the bottom line here is how attractive the trade maybe we should never put our all money in a single trade.

Never do Revenge trade/trade

to recover the loss. Sometimes market behaves abnormally and our stop loss gets hit repeatedly. In this type of situation we should close our trading terminal and relax for few times and can come back to trade once market back to normal. But in this scenario beginners get irritated and lose control over emotion and take repeated trade to recover the loss. As result they make huge loss.

Never be fooled by greed.

There is a famous saying in the market “Be cautious once all others are greedy.” It is really true in real sense. A quick profit in the market makes the common traders greedy and they often are carried away by the parabolic moves. Instead of booking profits in such cases they continue to pour money into the market at the unreasonable high price and as result get trapped once market reverses. So the best idea is to follow the rules and stick to the rules and take action as per the rules.

Never depend on tips provider/ news.

Be self-independent to analyze and select trade. No one has win in the market in long run depending on tips providers. Tips providers provide tips but if one has no idea how to manage trade, cannot profit from it. Sometimes due to change in market conditions traders has to change his decisions but tips follower don’t have idea about such situations. Tips or trade recommendations may be correct but who follow it might not execute it properly (Such as holding trade after hitting stop loss). Due to that instead of following tips we have to learn the art of trading and make ourselves a seasoned trader. Generally news is published after actual action happened in the market. In such situation entering trade based on news is only a process of getting trapped. There is a common saying in the market “Buy on rumor and sell on news.”  Instead of following news if we follow charts we can predict price action more accurately.

You have to survive the difficult phases in the stock market.

In good market condition profit will flow easily. This is really true in trading. If we follow proper risk management we can survive in difficult phases very easily. We have to remember that there is nothing like daily / monthly / yearly target to earn from trading. If we set such target we will be fooled by our emotion. We have to trade as per our rules and even if there have reaped losing months still we have to follow our rules. We should not change our rules frequently. We should follow same strategy for at least six month to get proper result. If still we are not getting desired result then we have to review our strategy. It happens vary often when we get huge return in good market that can very well compensate the losing period.

Also Learn the other topics of Demand Supply trading strategy below:

Technical Analysis Basics What is Dow Theory Candlestick Charts Bullish Candlestick patterns Bearish candlestick patterns Indecision and continuation candlestick patterns How to use Volume in trading Method of moving average RSI Indicator ATR Indicator Trend line analysis Support resistance Demand Supply zone Chart patterns Trading channels gaps Trading strategy Trade management and stop loss Position size and risk

2.Importance of trading journal.

Trading journal is name of the log of our trading activity. In this log sheet we have to record all details of our trades we take. Trading journal may help in various ways in our trading journey. From the journal we can analyze which type of trades we are losing and which type of trade we are winning. This can help analyze our strategy and also points out our weak points. Also recording the trades makes us more disciplined because if we are breaking any rules that is also being recorded. We shall discuss about trading journal in more detail in a separate article.

3.How to calculate position size /  calculator position size?

So far in the article we have learned we have to take calculated risk. Now we shall explain how to take calculated risk.  To do that we have to take our positions by correct quantity. Below we show an excel sheet which is the calculator of position size as per our risk. 📷 Now we shall explain the excel in detail: Date to be entered:

Net worth: This is the overall value of the trading capital.

Entry price: This is the price at which we enter the trade.

Stop loss: This is the price where we have to book loss if trade goes in wrong direction.

Other charges: These are the charges like brokerage, stt tax etc.

Output result:

Risk on investment (%): This is the percentage loss that can happen in the trade. For swing trade it should be around 5-6% and for positional trade it should be below 10%.

Risk on capital (%):This is the risk in percentage over our whole capital. This should be 0.5-2%. As per our risk appetite we should choose a risk profile like 0.5% or 1% and follow the same for each trade. For example if we have Rs 1000000 capital and we choose 0.5% risk profile then on each trade we can afford to lose Rs 5000 at max. For beginners 0.5% risk profile is recommended.

Risk on each trade: This is the amount that we can afford to lose in each trade as explained above.

No of shares: This is the number of shares we should buy as per chosen risk profile.

Capital Invested: This is amount required to buy the designated no of shares.

Today we shall discuss on Bank nifty prediction for tomorrow 19–07–2021 based on elliott wave theory and demand supply trading strategy. We shall start analyzing monthly candle stick chart and then will check weekly daily and 4hourly and 15 min chart.

Bank nifty prediction for tomorrow 19–07–2021 in monthly chart📷

Here we can see that repeated sub wave (1),(2); [1],[2] and (i),(ii) completed in monthly chart. Last wave (ii) was an irregular correction. Move after 16116 we shall discuss in lower timeframe chart.

Demand supply wise monthly trend is up and immediate demand zone is at 30996–32613 and next demand zone is at 13407–16282.

Now we shall check weekly chart.

Also read our best articles below.

Demand-supply-trading-course-free

Elliott-wave-theory-course-free

Nifty-prediction-for-tomorrow

Sbi-share-price-prediction

Bitcoin-price-prediction

ethereum-price-prediction

Eur-to-inr-forecast

In-future-gold-price

Bank nifty prediction for tomorrow 19–07–2021 in weekly chart

[caption id=”attachment_450" align=”aligncenter” width=”1246"]

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Best Bank nifty prediction for tomorrow in weekly chart[/caption]

Here in the weekly chart we shall not check wave structure because wave structure is more clear in daily chart.

Demand supply wise trend is up and immediate demand zone is at 31963–32613. Next demand zone is at 29987–31507.

Here we shall discuss some other patterns that is useful in trading. We shall learn way of Trading Gaps and Trading Channels.

Price channels and channel breakout and trading channels

A price channel is a price pattern which is formed when price move between two parallel line. Depending upon the slope of the channel it may be three types. If the channel is sloped upward then it is called ascending channel and if it is sloped down ward then it is called descending channel. If the parallel lines are horizontal then it is called horizontal channel.

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Below mentioned points may be discussed regarding channels:

Main trend Line: It is the trend line which is drawn in the direction of the ultimate price movement. It determines the slope of the channel. For ascending channel two higher low is connected to draw the main trend line and for descending channel low lower high is connected to draw the main trend.

Channel line: Channel line is drawn after establishing main trend line. Once main trend line is drawn, and then channel line can be drawn by joining high points and drawing parallel line of the trend line for ascending channel. Similarly for descending channel lower points are connected to draw channel line. Channel line act as resistance for ascending channel and act as support for descending channel.

Bullish/Ascending price channel: If price advance and trade with in a channel then the channel is bullish or ascending channel. If the price falls short of the channel line then it’s the first sign of trend weakness. In the later phase if the price break below trend line then it is the signal that trend is reversed. If price break above the channel then it indicates bullish trend may accelerate.

Bearish/Descending channel: If the price decline and move inside a channel then the channel is bearish or descending channel. If the price falls short of the channel line then it’s the first indication of weakness in bearish trend. If the price breaks above the channel with high volume then its further indication that trend would reverse. If the price breaks below the channel then bearish trend may accelerate.

Scaling: Trend lines seem to match swing highs and lows best when semi-log scales are used. It may be a matter of personal choice. Semi-log scales represent price in percentage terms. A run from 500 to 1000 will appear the same length as a move from 100 to 200.

Trading channels:

Channels most of the cases provide very good trading opportunities in both of the directions. Below mentioned rules may be used while trading a channel

Enter short or book profit when price hit the upper line of the channel.

When price is at the middle nothing to be done if has any position. If have position then simple have to hold it.

When price hit the lower line of the channel then have to cover short and initiate long position.

If price break outside the channel i.e. breakout happens then we have to apply other techniques discussed in separate article to validate if breakout is valid and accordingly we can take positions.

If the price trade inside a channel for long time then a narrow channel may be established inside it. In this case the narrow channel may be used to validate entry and exits.

Setting Stop loss and target: during long position stop loss may be set below the lower line adding proper buffer area and once the channel hit the upper line profit should be booked.

During short trade stop loss may be kept above the upper line adding buffer and once price hit the lower line profit should be booked.

Role of Volume: When price trade near the middle of the channel then volume are generally low. But during breakout volume must be high. If the volume is low during breakout then there is high chance that the breakout will fail and channel will continue.

As a rule of safety we should not shot at the upper line of ascending channel because main trend is up here and should not initiate long at the lower line of descending channel as the main trend is down here.

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Reliability of the channel:

Older the channel more reliable the channel is. When the channel becomes older it touches more the lines more times and the levels become more reliable. Below is guide line for the reliability of the channel.

1–2: Weak channel (not tradable)

3–4: Adequate channel (tradable)

5–6: Strong channel (reliable)

6+: Very strong channel (more reliable)

Also Learn the other topics of Demand Supply trading strategy below:

Technical Analysis Basics

What is Dow Theory

Candlestick Charts

Bullish Candlestick patterns

Bearish candlestick patterns

Indecision and continuation candlestick patterns

How to use Volume in trading

Method of moving average

RSI Indicator

ATR Indicator

Trend line analysis

Support resistance

Demand Supply zone

Chart patterns

Trading channels gaps

Trading strategy

Trade management and stop loss

Position size and risk

Gaps and Trading Gaps

Gaps are the blank area in the price chart where no trading happens. Gaps occur between the close of a trading day and opening in the next morning. Depending upon the direction of the trade gap there are two main kinds of gaps — Up gaps and down gaps.

In technical analysis reversal from bullish trend to bearish trend and vice versa is most of the time is signaled by different price patterns. Price patterns is an identifiable series of price movement which is defined by the use of multiple trend lines and curves. In this article we shall explain 13 most profitable continuation patterns and reversal patterns found in candlestick chart.

In this article we shall learn below mentioned topics.

Types of price patterns

Continuation Patterns

Symmetric/ Ascending triangle/Descending Triangle

Pennants

Flags

Wedges

Rectangle

Cup with handle

Round bottom/Cup

Reversal Patterns

Head and Shoulder

Inverted head and shoulder

Double Bottom

Double top

Triple bottom

Triple top

Types of price patterns

Price pattern can be divided into two types depending upon the continuation of trend or reversal of trend after completion of the pattern.

Continuation pattern

Reversal pattern

Continuation Patterns

This is a type of price pattern after completion of which main trend continue. In the uptrend bulls take a breather during formation of this type of pattern and in down trend bears take rest during this time before continue further.

Below are some examples of continuation pattern which we shall explain one by one.

Symmetric/ Ascending triangle/Descending Triangle Patterns

Pennants

Flags

Wedges

Rectangle

Cup with handle

Round Bottom/cup

Symmetric/ Ascending triangle/Descending Triangle Patterns:

A Triangle Patterns is formed when price of a stock becomes more and more compressed over time. Here two converging line can be drawn joining the highs and lows. Triangle may be of three types as describe below:

Symmetric triangle: Here if we connect highs we get a descending trend line and if we join lows we get an ascending trend line and both the line converges to form a symmetric triangle.

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Ascending triangle: This is formed when highs are at same level when joined horizontal line created but line joining the lows become ascending. Normally breakout happens from the upper horizontal line.

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Descending Triangle: This type of triangle is created when lows are at the same level and when joined creates horizontal line. Lines joining highs create a descending line. Generally breakout happens from the lower horizontal line.

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For all the triangles if breakout happens from the 2/3 area of the triangle then it has been observed that the breakout becomes effective. During formation of the triangle pattern during initial big move volume remains high, then during consolidation volume also reduce and final breakout happens with big move associated with burst in volume.

Pennant

A pennant is a continuation pattern which is formed after a big move called flagpole. After the up move there is consolidation containing the price with in two converging lines and pennant is formed. After the price breaks out from the pennant it moves again sharply.

Trading volume during the flagpole is high and volume during pennant formation dries up and finally during breakout again volume is very high.

This is a smaller version of triangle. Here unlike triangle swing high and lows are not clearly visible and it appear as a small triangle during the consolidation period.

📷Flags:

Bullish Flag pattern is a continuation pattern which is formed after an up move called flag pole. Then price consolidate between two parallel lines having downward slope.

Once breakout happens upper line is broken with big move with big volume and price again continues to move higher. Here volume dries up during consolidation and again increase during breakout.

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Bearish Flag pattern is a continuation pattern which is formed after a down. Then price consolidate between two parallel lines having upward slope.

Once breakout happens lower line is broken with big move with big volume and price again continues to move lower. Here volume dries up during consolidation and again increase during breakout.

📷Wedges:

Wedge pattern is formed by two converging trend line in the same direction joining highs and lows of the price pattern.

When the trend lines in slanted downward (at the top of an uptrend) it is called falling wedges and when the trend lines is slanted upward (at the end of a down trend) it is called rising wages.

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Also Learn the other topics of Demand Supply trading strategy below:

Technical Analysis Basics

What is Dow Theory

Candlestick Charts

Bullish Candlestick patterns

Bearish candlestick patterns

Indecision and continuation candlestick patterns

How to use Volume in trading

Method of moving average

RSI Indicator

ATR Indicator

Trend line analysis

Support resistance

Demand Supply zone

Chart patterns

Trading channels gaps

Trading strategy

Trade management and stop loss

Position size and risk

Rectangle:

Support & Resistance is one of the most important concepts in technical analysis. These two terms are used to refer the barrier to the price against movement to a certain direction that is found during chart analysis.

We shall discuss below mentioned points in this article:-

What is support and resistance?

Is support & resistance an area or line?

How to draw a support and resistance line?

When the support & resistance become weaker & stronger?

What is dynamic support & resistance?

How to get better risk reward ration using support & resistance?

How to set stop loss using S&R level?

How to predict if a support or resistance level will be honored or broken?

What is support and resistance?

Support: Support is defined as the area of price in the chart where price get barrier to fall further. It is the area where traders expect most of the demand / buying pressure to emerge. Support is placed always below the current price level.

Resistance: Similarly resistance is defined as the price area in the price chart where price get barrier to rise further. It is the area where traders expect most of the supply / selling pressure to emerge. Resistance is placed always above the current price level.

When price break above/below the resistance and support comfortably with volume then the resistance becomes support and support converts to resistance for the current price.

📷Is support & resistance an area or line?

In most of the article and books S&R has been mentioned as a line.

But actually this is an area in price chart. As price approaches to S&R area few traders take action before price enter into the area in the fear of missing out and few wait longer to get better price. Due to that price often reverse early and sometimes trade beyond S&R level. As a result support and resistance generally act as an area in the price chart. In the previous picture support and resistance level has been shown as an area.

How to draw a support and resistance line?

To draw support and resistance level we have to follow below mentioned rules:

i.First we have to zoom out the chart so that the chart becomes concentrated.

ii.Then we have to find out price action areas with below characteristics.

a.Where price movement is sticky or price hesitate to move beyond certain levels.

b.Where price take sharp reversals.

i.Then we have to draw lines connecting the zones in the same level as marked above. If time space between the zones is more then more reliable the S&R level is because it is time tested.

Next images describe how to draw support and resistance levels-

📷📷When the support & resistance become weaker & stronger?

There is a common myth that more a support or resistance is tested stronger it becomes.

But this is not true all of the time.

When the support or resistance area is tested repeatedly with in a short period of time then it becomes weaker and there is a high chance that it will be broken.

Conversely if a support or resistance area is tested after a substantial amount of time and it is honored then it becomes stronger because it becomes time tested and it support the notion ‘history repeats itself’ of technical analysis.

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Also Learn the other topics of Demand Supply trading strategy below:

Technical Analysis Basics

What is Dow Theory

Candlestick Charts

Bullish Candlestick patterns

Bearish candlestick patterns

Indecision and continuation candlestick patterns

How to use Volume in trading

Method of moving average

RSI Indicator

ATR Indicator

Trend line analysis

Support resistance

Demand Supply zone

Chart patterns

Trading channels gaps

Trading strategy

Trade management and stop loss

Position size and risk

What is dynamic support and resistance?

Demand and Supply zone zone is the key areas in the price chart where most of the price action activity happens. Determining the demand and supply zone is key of the demand supply trading strategy. At the demand and supply zone most of the traders take trading decision.

In this article we shall explain below mentioned points:

What is demand & supply zone?

Types of demand supply zone and how to determine the zone in the chart?

What is the difference between demand supply zone and support and resistance?

How to figure out quality demand supply zone?

Demand supply zone in different time frame.

How to enter in trade using demand supply zone?

What is Demand and Supply zone?

Demand and Supply zone is the key area in the price chart where most of the price action happens. It is known as the zone where price create a base and then give explosive move. Below are the characteristics of demand supply zone.

This is the zone where price create a base. Price should not stay for log time in this zone. Price should stay for at max 5 period in this zone for a good quality demand supply zone.

Candles in this zone should be smaller in size and compact.

Price should give explosive move from this zone with high volume for at least next two consecutive days. Length of this move should be at least twice of the length of the base.

Price should not fall back to the base immediately after two days.

All time high is always a supply zone.

When all time high is broken and new high is created then previous high becomes a demand zone.

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Interpretation of demand supply zone:

Demand and Supply zone is created by the actions taken by smart money (Big players, Institutions, smart investors etc.). Due to that associated moves are also very sharp. Being a retail investor we should follow the direction taken by smart money. So this D&S zone is very crucial to our trading strategy and detail analysis of this zone is required.

Types of Demand and Supply zone and how to determine the zone in the chart?

Depending upon the location in the chart where the zone is created demand supply zone can be divided in two types.

Two types of Demand zone:

Drop base rally type Demand zone: In this case price first drop from recent high, then create a base and finally give explosive move to create new high.

Rally Base rally type Demand zone: In this case price doesn’t drop from recent high. It rest at the high for few candle to create base and finally give large move and create new high.

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Also Learn the other topics of Demand Supply trading strategy below:

Technical Analysis Basics

What is Dow Theory

Candlestick Charts

Bullish Candlestick patterns

Bearish candlestick patterns

Indecision and continuation candlestick patterns

How to use Volume in trading

Method of moving average

RSI Indicator

ATR Indicator

Trend line analysis

Support resistance

Demand Supply zone

Chart patterns

Trading channels gaps

Trading strategy

Trade management and stop loss

Position size and risk

Two types of Supply zone:

Rally base drop type supply zone: Here price rally from the recent low, then create a base and finally fall sharply with high volume to create new low.

Identify multibagger stocks or multibagger opportunity

The term Multibagger Stocks refers to the stocks which has potential to give multifold return. In this article we shall discuss one method to identify Multibagger stocks. This method is based on Elliott wave and for better understanding having concept of Elliott wave cycle will be beneficial.

We know that among the five waves in Elliot wave cycle wave 3 is sharpest and longest most of the time. Out concept of identifying multibagger stock is based on idea to catch the move of wave three before it starts.

It has been observed that though wave 3 is the fastest wave, it sometimes consolidates and take time to gain momentum. We have to identify such opportunity to get mulibagger return. Suppose major or highest order wave (1) and (2) completed and now we can expect wave (3).

This wave (3) must be minimum 100% of wave (1) because wave three can’t be shortest as per wave rules. But sometimes it has been observed that after completion of wave (2) one impulse completes which is shorter than wave (1), this denotes this is inner wave of wave (3) and we can consider this 1st degree wave as (i).

Also sometimes it happens after completion of wave (2) one impulse completes which is longer than wave (1), but wave next correction overlaps with wave (2). In this scenario also we have mark this impulse and correction as 1st degree wave (i) and (ii).

Similarly after completion of wave (ii) we can expect wave (iii), but we may get similar move like wave (i) and (ii) which is either shorter than wave (i) or overlap with wave (i). So we have to mark these moves as 2nd order inner wave [i] and [ii].

This process may continue and may get another 3rd order inner wave i, ii and so on…

When this sequence of wave one and two expand then get very sharp move and the instrument can move high.

We can visualize the scenario in below imaginary picture.

[caption id=”attachment_425" align=”aligncenter” width=”934"]

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No 1 article on identifying multibagger stocks[/caption]

To complete wave (3) inner waves (i),(ii),(iii),(iv),(v) has to be complete.

To complete wave (iii) wave [i],[ii],[iii],[iv],[v] has to be completed.

To complete wave [iii] wave i,ii,iii,iv,v has to be completed…..and so on.

We have to note one thing personality of wave three is very sharp and fast and this applies to all of the wave three (3),(iii),[iii],iii. As a result very fast and furious move is seen and this my give multi bagger return.

Practical example of multibagger opportunity in nifty:

After covid crash at the beginning of 2020 there is a huge run up in nifty 50 till date. But root of such a run up was planted through a multibagger pattern. Please go through the below image.

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Here we can see repeated sub waves of lower degree formed at the bottom. After completion of wave (1) and (2) again 1st degree sub wave [1], [2] formed and then again 2nd degree subwave 1 , 2 formed. Wave [3] completed once wave 1 , 2,3,4 ,5 completed. Similarly wave (3) completed once wave [1],[2],[3],[4],[5] completed.

In this way once repeated impulse followed by corrective completes and overlaps each other, a multibagger pattern is formed.

Also read our best articles below.

Demand-supply-trading-course-free

Elliott-wave-theory-course-free

Nifty-prediction-for-tomorrow

Bank-nifty-prediction-for-tomorrow

Bitcoin-price-prediction

Ethereum-price-prediction

Eur-to-inr-forecast

In-future-gold-price

Practical example of multibagger stocks:

Finding Multibagger stocks: As explained above we have to find stock which has potential to be multi fold like 5–10 times. If we analyze stocks of any chart we can see that there must be wave three in the life cycle of the stocks. We have to catch the wave three before it starts.

Bank nifty prediction for tomorrow 12–07–2021

Today we shall discuss on Bank nifty prediction for tomorrow (12–07–2021) based on elliott wave theory and demand supply trading strategy. We shall start analyzing monthly candle stick chart and then will check weekly daily and 4hourly and 15 min chart.

Bank nifty prediction for tomorrow 12–07–2021 in monthly chart📷

Here we can see that repeated sub wave (1),(2); [1],[2] and (i),(ii) completed in monthly chart. Last wave (ii) was an irregular correction. Move after 16116 we shall discuss in lower timeframe chart.

Demand supply wise monthly trend is up and immediate demand zone is at 30996–32613 and next demand zone is at 13407–16282.

Now we shall check weekly chart.

Also read our best articles below.

Demand-supply-trading-course-free

Elliott-wave-theory-course-free

Nifty-prediction-for-tomorrow

Sbi-share-price-prediction

Bitcoin-price-prediction

ethereum-price-prediction

Eur-to-inr-forecast

In-future-gold-price

Bank nifty prediction for tomorrow 12–07–2021 in weekly chart

[caption id=”attachment_408" align=”aligncenter” width=”948"]

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Bank nifty prediction for tomorrow in weekly chart[/caption]

Here in the weekly chart we shall not check wave structure because wave structure is more clear in daily chart.

Nifty Prediction for Tomorrow 12-07-2021

During last one year we are witnessing very bullish move in the market. Now we shall analyze nifty 50 chart as per Elliott Wave and Demand Supply trading strategy to explain what is going on. So, lets move on and find nifty 50 prediction for tomorrow (12.07.2021). As we predicted in our previous analysis report nifty 50 has taken support in the 23-38% range of wave [3] in hourly chart at 15532-15409. Nifty fall up to 15450 and then bounce back. We also mentioned for caution because there was RSI divergence in hourly chart. Now we shall analyze the current scenario as mentioned below.

Nifty Prediction for Tomorrow 12-07-2021 in Monthly chart:

📷 This is the latest monthly chart and here we can see that wave (1) and (2), wave [1] and [2] completed as sub wave. After completion of another sub wave (i) wave (ii) completed as irregular correction. Crash during covid period was irregular C of wave (ii). After completion of irregular wave (ii) surprising everyone market made new high and wave (iii) is in progress. This the characteristics of wave three. As per chart market recovered from the monthly demand zone during covid crash and now immediate monthly demand zone exists at 11464-10790.Monthly trend is clearly up. Now we shall analyze weekly chart to understand move after 7511. Also read our best articles below.

Demand-supply-trading-course-free

Elliott-wave-theory-course-free

Bank-nifty-prediction-for-tomorrow

Sbi-share-price-prediction

Bitcoin-price-prediction

Ethereum-price-prediction

Eur-to-inr-forecast

In-future-gold-price

Nifty Prediction for Tomorrow 12-07-2021 in Weekly Chart:[caption id="attachment_389" align="aligncenter" width="935"]📷 Nifty Prediction for Tomorrow in Weekly Chart[/caption]