Month: July 2010

 
A little bit about Me
 
A Professional index futures trader. Have traded at the NSE and the NYSE as also a few Middle Eastern bourses.Made my first trade in 1998.
 
 
Work synopsis:
 
  • Full time professional Trader– First and Foremost. All other things come next.
  • Manage a Professional trading room dealing in index futures and commodities.
  • Owner of a proprietary futures trading firm
  • Counsellor and mentor to a few select accounts.

 

How I got there:
 
  • Proprietary trader– Training mostly received through trading with other professionals in different exchanges
  • Analyst– Not the kind you see on TV. But have spent hours testing systems, setups, indicators and strategies to have a fairly good idea on what works and what does not in different environments.
  • Trainer– Have spoken to and worked with a lot of newbie traders to understand the psyche and the pitfalls

 

The Vtrender advantage:
 
  • Simple system– Over the years have found a simple way to understand the markets and buyer seller behavior.Trading is a business and has to be treated as one.
  • The Teaching– No holding back. The business of trading is learnt only by sharing what you know.Give what you would like to get more of.
  • Communication– In this fast moving world and an even faster market, you have to reach out quickly to get correct answers. We have the medium to get you the answers as soon as you have the question.
  • Community– Trading cannot happen in a vacuum. Reach out to other opinions and ideas whilst trading your own plan.

 

Other aspects:
 
 
Operate mostly through the handle- Vtrender. People I have interacted with know me by my first name Shai.I am not one to want my picture front and center.I prefer that traders focus on what I am trying to share rather than who I am and what I have or have not.
 
Most traders think the important element in success is knowledge. In my trading career I have found that correct knowledge and the ability to change behavior are the most important parts of successful trading. Correct knowledge without behavior modification projects improper execution of an otherwise perfect trading plan.
 
Even if Sachin Tendulkar walked you through every step from facing the ball to executing the shot, you would still not score like him. It's always in you. If that makes sense, why care who I am? 
 
Having said that, I'm here to provide you part 1 (the correct knowledge) – for you to modify your behavior and tweak it to your advantage.
 
 
 
Purpose:
 
  • Journal-The website is a journal for me to review my train of thought and approach.
  • Link– To provide a good understanding on the role of the "big boys" as they operate in an environment as your own.If you can't beat them, join them!
  • Illustrate– To illustrate that trading is a business. There are no winners or losers here or even rights or wrongs.Every trade is an opportunity and the best part is that the next one will still knock on your door!.
 
 
 
 
 

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Who Am I ?

I want to take the opportunity to clarify one aspect of the Vix formula.

In the last two expiries, the Vix formula has not come close to meeting it’s targets as we had in Feb, March, April and May.Why?

Quite simply,because the calculation is based on the VIX and the Open Interest, with the open interest being the dominant partner.The VIX is a measure of the volatility of an index or any script. Through it we can get an idea of how much our asset can move in a day or any other time-frame of our choice.The formula we have breaks down this time frame for you.Now on expiry day, when options have to be settled ( as these are European) the Open Interest can be used along with the range to get a fair idea of where we close. It will work 10/10 times, provided the Open Interest is resolved.

Today I was watching the 5400 strike all day, but showed no sign of resolution. In the end we had two winners with the PE writers as well as several CE writers ending in profit.

Along with the Vix and the Open Interest, we have added another potent tool in Market Profile. Two days back in this post here I had called for 5382 to be defended. Quite simply because it was the monthly Point of Control or the place where buyers and sellers agreed on value for the month.

When options become more liquid here and we have a strike price every ten points instead of the current 100, as we have for the US SPX Index in the SPY, our tools will be more reliable. Promise!

Here’s a look at the August future, from where we have to take levels from tomorrow :

The best trade today was in the bank Nifty, but there were several others like Axis bank, Tata Motors, SBI which were having very good market profile set-ups.

I made 15 points in a Nifty trade all day today, but made 17 points in Axis bank and 14 points in tata motors in minutes all in high probability trades.

We looked at the Nifty and the Bank Nifty so far, but it is clearly time to unleash our wonderful methodology on other setups and on a new platform too !!

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July Expiry-2

The expiry day in the Indian markets is always a special day and tons of analysis has been done on the importance of the closing price on the activity of next month futures.

It is a commonly held belief that the expiry closing price acts as a support or resistance to next month’s price and action.

The market action in the afternoon was expiry related and put a question mark on where we close tomorrow.However we have two parameters with us -the OI/Vix and Market Profile to see where we end tomorrow.

The range for the day tomorrow based on the Vix formula we know, works out to 5452-5342 on the spot and 5445-5340 in the future. This is just a range and not targets- the nifty should trade between these ranges tomorrow, based on today’s vix.

Now let’s see what Open Interest is telling us :

The 1.3 crore of unresolved OI at 5400 is a very large one and generally should point to a close right around today’s closing levels.

This is the best scenario and also right in the middle of the Vix range of 5445-5340.

However the market is not known to spend an entire day auctioning in a 10 point range! It will push and pull at the OI writers at this strike to wean them off their positions.Frankly speaking the 11 lacs written today at 5400 call, one day before expiry is downright stupid and goes against my belief of writing calls.These guys would have been better off purchasing the 5400 put today, if their view was that bearish.

Let’s look at what the volume profile chart says.

5386-5398-5421 are the value areas for tomorrow.

We already know that 5386 is a good support for the market and halted the downward momentum of the afternoon.If price manages to auction below this level tomorrow, then we get to the other end of the VIX range at 5340 and the 5400 call writers of today do not look that stupid!

However, should the Nifty hold value area low at 5386, then I’ve painted three yellow rectangles on the chart representing a low vol region which represents a chance for the market to auction there tomorrow.This zone between 5408-5428 should decide the OI at 5400 if it auctions for a while there.

The open should make things more clear..

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July Expiry

The real action today was in the Bank Nifty index with the RBI rate decision controlling tape movement before 11.30 literally.

But first let’s have a look at the Nifty.

A choppy day within the 5408-5465 zone or neutral land.

Value slipped a bit lower today, only a tad and once again we saw the seller emerge at 5460. But a test of 5411 was bought and took the market all the way to 5460.

We maintain that we will be bearish only when 5408-5411 is taken out on volumes, but the upward momentum will return only when 5465 is taken out. Incidentally profile gave us this level first on July 23 right here in this post. Till then let’s play this bracket.

Here is also a chart of the consolidated profile for this expiry :

5382 is what shows up as the POC and should be defended in the next two days.

For the Bank Nifty lovers, here is a chart of the profile today :

The larger value area shows the presence of larger TF participants. Notice the bounce from 9940 levels which itself is got a lot a value region lows.There will be good trade opportunities on this chart tomorrow.

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EOD 27th July

GM all.

The value areas for today are 5450-5439-5428 for the Nifty and for the Bank nifty they are 10064-10035-10004.

The markets have opened at 5435 within value.

We had mentioned 5423-5466 as a zone to watch (or 5408-5486) for changes in the momentum of the markets.

Quite visibly in the past two sessions the markets have chosen to rest between these two points.So we will be in for a period of some range bound moves till one of these two points is taken out.

For the past two days, the market has chosen to sell at the open and consolidate the rest of the day.Let’s see how today pans out.

—-

10.49

Today’s trade is different as the market waits for a news trigger.

Let’s wait for the event to get over. there will be adequate trade opportunities on the other side.

5408-5438 are very good ref points. Either side of which you can get 20 points.

Don’t push for a trade. Let the trade come to you.

—–

12.47

Rising interest rates pull the market up in the very short term but are the first in the process of an economic slowdown.

Infact they are an indicator to what the think tank actually feels about the economy–it is cooling off.

Next if we see falling commodity prices in the market, we have another indication that the slowdown has moved to a ‘slump’ before we get to the third critical stage which is a ‘gloom’.

http://3.bp.blogspot.com/_JyY_wsmZ5bI/S0Qvi-qBQSI/AAAAAAAAABY/a2GMQhoTmDo/s1600-h/cycle.gif

13.31

It’s been that day with a lot of movement around the market profile value area levels given in the morning.

First the market auctioned all morning below value low.

Then came the news trigger and a good rise straight to POC.

Then the market was deciding to stay between POC and VAH or go the other way.

At the moment it is trying to auction above value high, but has failed twice so far.

A break above value high at 1050 decides the day for the buyers.

—-

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Estimates for 27th July

Good Morning All.

The market’s have opened within friday’s value and have been quickly rejected near the 5466 level we have been watching.

On the lower side, 5423 is the first line of support.

As on friday, for the upward momentum to return, 5466 and then 5486 have to be taken out.

But also noted is the fact that there was no significant selling in the 5423-5430 zone.

On another note, on expiry weeks Reliance Indutries generally does well at the start of the week.

Look to buy above 1062 as a swing trade set-up.

I will put up a chart shortly.

————-

10.30

Expiry week :

There are normal weeks for trading and then there is an expiry week.

I have always looked at the expiry week as a “special” week to trade and have made different rules for it.

Most of you would be familiar with our expiry calculations of the Nifty based on the VIX.

In expiry weeks, I also recommend the buying of stock and index options which I would not do on any other week simply because the NSE is not very liquid in stock options despite having the Nifty which is the No 2 traded future in the world.

In expiry weeks, time premium as a factor is out of the option math, and if you are clear on the direction, it is very easy to take a leveraged call ( or put).

I have also noted the behavior of certain stocks to be a bit different in this week, irrespective of the trend they may be in.

Now there are no certainties, only probabilities for us to take our trades.

One such stock is Reliance. It is my observation that a large percentage of times, the stock does well in the first part of the expiry week.A back test has yielded good results even when the Nifty has been drifting down.

Have a look at this chart too :

Notice the high vol region around 1057 levels.

Using that as a support the stock can move higher to 1074 and 1090.
Value area low for friday was 1062.

As mentioned, traditionally too the stock has done well at the start of the expiry week.

——-

10.57

Value areas :

10036-10060-10083 for bank nifty
5442-5453-5465 for Nifty.

—-

13.04

SBIN:

SBI was a very bad trade.

Trying to pick a bottom is in itself bad.

Perfect trend day in the stock.

My reasoning was that the consolidated value ( 2 yellow lines) would support the price at 2441-2444.Instead it moved swiftly in the other direction taking our stop at 2436.

The seller has been strong since morning in the stock and has been in control as what happens in a trend day.

Looking ahead 2418-2425 should be a reference level now.But not a candidate for longs at all.

In a trend day, we do not take an opposing view. Lesson learn’t again.

—————

3.20

US futures currently at 1099 levels, above the value area high of 1097 from friday.

1096.5 is also the level where the seller was overcome.

Looking for that level to hold up in day trade today over there for a target of 1129 and 1159.

Nifty has got strong supports in the 5408-5411 region.I won’t think of shorts till that level is broken down.

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Estimates for 26th July.

Good Morning All.

The markets seemed to be coiled up again this morning.

I missed the entire day’s action yesterday, and am back just looking at my charts.

Will post some charts and analysis in a bit.

————————-

10.16

Here is a chart of the Nifty future.

We can see that the market is auctioning currently below yesterday’s value implying that sellers are in control.

Incidentally yesterday was a classic action of 80% rule again, open below value went to hit the POC as we expected in the EOD post and went up all the way to touch value high, before meeting sellers again at 5408/ 5411.

Who says that the market action is boring–It is so damn predictable 🙂 .

Let’s look at the Bank nifty chart

If we look at the chart, we notice that that value is being created lower as also an auction below the 9968 zone which we have been marking out all of last week.

The chart wants to go and meet 9842.

———————

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Estimates for 22nd July

Here is today’s volume profile chart of the Nifty Future.

When the market comes off a balanced profile on a normal day, with a range extension that fails, there are enough clues for the market profile student that the previous range would be tested and the longer time frame participant is trying to exhibit control.

Viren commented in the comments as early as 10.00 in the morning that the range of the past two sessions would break.For the rest of the day, it was only a matter of which side the break would come.

Since we had a balanced profile the previous day, the market had not tipped it’s hand hence it was necessary to watch the previous days values especially the point of control, to see buyer/ seller influence.

Accordingly we lay out two possibilities an auction above POC and an auction below POC, based on the info the market was providing.

As can be seen from the ovals, the market auctioned above POC in the first half and sustained below POC in the second.Then it was just a matter of time before the levels of 5374 and 5355 were met, considering that we knew early on that it was going to be a wider range day.

For tomorrow, notice the POC of today’s profile has not moved down a lot from the previous POC, hence we can expect a move back to it in the first session.

Watch value areas at 5363-5382-5401 ( volume profile)

and listen to the message of the market.

I will be out in meetings tomorrow and may not be able to post. Have a great trading day.

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Profile chart

Good Morning All.

Yesterday’s print of 5415 in the NF formed an unfair high or excess in the hourly TF.

We also saw buyers yielding to sellers at this level of 5411 which we have been talking about on this blog for several days now.

Once again our view remains that an auction above this zone puts the buyers back in control.

Yesterday was a normal day with a range extension which failed.So the tape is telling us that longer term participants are wanting to come back in, but at the moment the control remains with the short term participant.

On the downside again 5355 and 5367 EOD remain our levels to watch.

5403-5392-5382 are our values for the Nifty.

10032-10010-9989 for the banknifty.

——————

9.18

Sell Bank Nifty below 10030, Sl 10050, target 9990.

—-

9.33

Bank nifty at 10000. Book partial profit and hold bal with sl at cost.

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10.03

Yes I know it has been a minor 30 point scalp only. But what can you expect from this market which has moved in a 30 point range for the past 4 days now.

I wanted to give a sell in Nifty, but knew that yesterday’s value high at 5393 would come in the way. the low so far is 5393.2.Only a break of 5391 can take it to 5382 now.It’s overlapping values within a 5355-5411 which is a 55 point range.

——————

10.48

You are welcome to post anything on this blog–anything at all to help us better our trading.

The only exception I have is with blog salesmen and their ” Look at what I achieved ” statements without putting any reasoning/explanation to their achievements.

I also noticed EOD yesterday that I hadn’t responded to a few questions. Sometimes I do get absorbed in the flow of the markets. If you feel that i have skipped your question, please paste it again. I assure you that it is accidental.

———–

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Estimates for 20th July

Good morning all.

5374 is the open of the day and if bearish views are disappointed, it has to be an understatement!

I want to turn your attention back to a previous post: http://vtrender.blogspot.com/2010/07/eod-14th-july.html.

After the high vol downmove on the 14th, we were waiting for a confirmation or follow up action, which incidentally has not happened yet.

Just to refresh it is 5367 EOD or a break of 5355-5411 either side on the hourly, which will confirm or contradict that volume.

The value areas for today are : 5391-5382-5374 for the Nifty.
And 9982-9964-9947 for the Bank nifty.

—-

9.20

CME-

The Nifty has started trading on the CME from today.

The link to the action is : http://www.cmegroup.com/trading/equity-index/international-index/emini-sandp-cnx-nifty-50-futures_quotes_globex.html.

We will keep an eye on the volumes to see how it will impact the action on the NSE.

—-

10.30

Guys, I’ve started this blog as a platform to share and communicate ideas and not as a medium to take a potshot at other people’s views and analysis directly or indirectly.

I want everybody to take a leaf out of Girish Desai’s book and VJ and Mok, Daruma amongst others who foster the development of ideas.

It is human nature to be critical of things we do not understand or agree with.

We cannot be served well in sharing negative views.Instead let’s believe in the sharing of an idea to serve us all better.

Let’s focus on the markets, discuss what we are looking at and look at making money in the markets.

—–

12.15

Earlier I put out an alert for a long trade at 5411.

We had held the view that a break of 5411 and an auction above it would denote continuation to the upside.

Have a look at this chart :

From value high, the Nifty future made a very good move to 5415 on very good volumes.

The evidence pointed to a continuation.

However the profile started showing a slowing down immediately ( yellow Oval) with most of the auction being below 5411.

This was a first doubt. I still thought that the market would return to auction above that level, but subsequent action failed.

Hence the exit.

——–

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Estimates for 19th July

Some facts and some questions for you as I do a round-up of the week’s action in the Nifty as well as the US Futures the ES.

First the facts :

You and I trading between 1-40 lots of the Nifty Futures constitute only 3 % of the Volume generated at the exchange.

97 % of the volumes goes to mutual funds/DII’s, FII’s, P-notes, and institutional houses like UTI and LIC in that order. These guys have got professional knowledge,institutional analysis and uncanny execution styles.They plot every trade and scan the volume charts and the volume patterns.They don’t have magic indicators only a keen understanding of price and volume, backed with a strong knowledge of how the market operates.

Now the questions :

a)Are you as a trader aware and make use of these facts?

b)Do you spend time searching buyer/ seller patterns on a chart or is the time spent on looking at what your favorite indicator is doing on that chart?

c)Is your search for knowledge of the markets qualified as a search for knowledge of an indicator/system ( holy grail?) or that of the price-volume relationships of the markets?

There are no bulls and no bears only buyers and sellers- you have to be the right one at the right time.

Institutional level analysis should include knowing who is in control of the tape, when this control begins to change, where the volume is concentrated and where it starts thinning down.

I’ll leave you to hunt for the answers.

———

Let’s focus on the charts and the message they are giving :

First a look at the ES chart which broke down yesterday

The chart is that of the SPX futures for the past 5 days.As you can see from the high volume at the top of the chart, the seller tried repeatedly to break below the 1083 level and finally managed to break it on Friday.Notice the high volumes ( yellow ovals) on the breaks.

Sellers have again regained control now over this entire high vol zone between 1074-1096.This zone becomes a resistance point for that market going forward.

Let’s look at the Nifty Future.

This is a chart of the developing monthly value of the future for the july series.

The chart clearly shows a double distribution pattern developing with price currently at the upper high or above the developing value at 5375 levels.

A break below the developing high can mean a quick move to the point of control currently at 5308.This level should provide the first level of support.Below this price can make a move to 5251-5231 ( yellow ovals) which should be the second line of support, below which things turn decidedly bearish.

Purely the fact that we auctioned above value high all through this week, kept our bias positive for the week.

However the markets were on ‘hold’ mode all through thursday and friday, awaiting new information.

With the decline in the US markets, I feel market participants would get the impetus to come out of the “neutral” zone.

5355 on the hourly and 5367-5375 EOD continue to be our reference lines to the downside. 5411 will be the reference level to the upside for Monday action.

Bank Nifty :

Here is the weekly profile of the Bank Nifty future :

This one seems to be forming a P shaped profile with the point of control for the weekly shifting right near the top and large volumes in the 9970 region.

It points to sellers right at the top.

In my post last weekend here we had mentioned 9715-9756 as a reference level for the seller. Once that was overcome it was a straight one way march to 10024 reached this week.This next week, the profile shows that it will be not as easy and sellers should exhibit control early in the week.

Daily value areas are 9989-9969-9949.It’s clean sell below 9940 for 9840 and the previous consolidation region of 9765.

Enjoy your weekend.

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Know the Flow !

Those of you who read my post last night posted here would know the importance of 5408-5411 as a reference level for today’s action.

An auction above it would mean that buyers are back in control after yesterday’s downmove.

Lower down 5355-5367 still continue as important supports.

—————

10.30

HDFC

We had discussed HDFC as an earnings candidate two days back. Girish had pointed out that it was reporting earnings on the 14th, but I was unsure whether it was at the opening bell or close.

It did report yesterday but not at the open. The stock managed another “P” at the open.

Have a look :

Once the news trigger was out, the stock just had to respect the profile.

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10.56

Here is the updated version of the chart I posted last night:

The minus development region or the low trade zone between 5383 and 5408 is being addressed as we speak. I was wanting this auction to go a bit higher to 5408 rather than the 5402 we have at the moment.

We’ll not take trades here in this zone, but look to buy above 5411 as it is the previous day’s value area.

On the other side, you can short below 5380 for 5355, but I don’t rate it as a high probability trade.

15.26

I was expecting a resolution to it today, but nothing in today’s tape indicates a major change in the market pattern.

One can say that the sellers were unable to drive it down further, or the buyers were not able to take it above 5411.

My view is still positive as long as 5367 is protected EOD or 5355 is not taken out on the hourly.

But I’ll suggest to lighten up, as the move which we wanted today can unfold tomorrow also.

Let’s stick to our levels. The market is respecting them and we have no need to worry.

——

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Estimates for 15th July

Earlier this evening I had a longish discussion with Viren on the state of our Nifty, especially after the high volume downbar visible in the afternoon.

At one point I felt that it would take out 5367, but later felt that it was a shake-out designed to catch weak hands. You can catch my real-time reaction to that move in the comments section of the last post.

Viren and I felt strongly that as long as price closed above 5367 our reference level for the Nifty as well as the US futures closed above 1083 levels, there was no need to push for any shorts.

Incidentally the US futures are currently at 1093 levels, after having bounced off 1084 which is the low thus far.

Here is the chart of the past two days of action in the Nifty Future :

Even though the move today was a high volume downmove, price still needs to confirm it the next day. In profile we always look at close v/s open for a relationship from one day to the next

The chart shows the swift move down from 5408 to 5384 matching the intensity of the move up from the same levels yesterday.The arrows show that the profile here is not developed or a low trade facilitation zone.

Ideally the market should auction between these two levels tomorrow in the first half before deciding what to do at 5308 which is to go up or come down.

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EOD -14th July