Trading a stock and trading a INDEX

How many stock’s are there on the NSE ?

You must know that there are about 2000 stocks listed on the NSE , and
6000 stocks listed on the BSE
You think it is possible to trade all of them together ?
Obviously a big NO , you are a human , and you have your own limitation’s
And henceforth to trade stock’s all you got to know is supply demand zone
and range breakout’s
However when it comes to index trading , we got to concentrate only on
NIFTY / BANK NIFTY ( I predominantly trade on nifty bank )
Since we’re focused here , it is quite possible to trade multiple setup’s
Since market moves in cycle’s , having a multiple setup will give you an edge
And this is one reason , I prefer stocks for swing trading , and Index for Day
Trading.
Now we will learn how to trade NIFTY / Bank NIFTY
 What is NIFTY / BANK NIFTY

They are like the Indian Families – “ Gupta’s , the sharma’s , the
kapoor’s , the shah and so on.
Stock’s – “ They are like the Family member’s “
Similarly in the market ,instead of trading each stock individually ,we
can trade the index itself.
I believe index trading is easy as your Focus is on one thing , instead of
focusing on too many thing’s at one Time.
You must have already received a video on what is index .
Most important – Nifty / bank nifty are like the tyres of a two wheeler.
They tend to move together.
Even when it comes to trading , don’t trade the entire day , choose
your zone. ( zone 1 , zone 2 or zone 3 )
 Index – “ Location Based Trading’’

Remember the basic rules of trading , “ Trading is

nothing but buying at a support , and sell at a
resistance.
When a support is broken , it becomes a resistance.
And when a resistance is broken , it becomes a
support.
There are three types of trading styles – “ Pullback
trading , breakout’s and reversal’s “
When you combine 3 setup’s , you’re assured of
coming out profitable in any type of market.
 Marking Important locations on the chart

Previous Day high

Previous day low
Supply and demand zone ( On a daily Time frame )
Swing high / swing low ( Hourly Time Frame )
SUPPLY DEMAND ZONE
BANK NIFTY
 Where to put the stop loss ?

There are two ways to put a stop loss , but one must always
respect the risk to reward in order to make the best of
trading decision’s.
 Support and resistance ( Logic – as and when your view goes
wrong ), I prefer this one.
 Below / above the candlestick. ( however at times candlestick
may be way too long , then we may have to adjust)
 Retracement as a SL ( Safe SL )
 Target – “ we will take this in position sizing and risk
management , but yeah as a beginner trader , prefer R2R ,
atleast a 1:1 for your first 50 trades “
Stop loss
 Trading zone

There are 3 trading zones –

 Zone 1 – ( 9:20 to 10:30) – Good for office goer’s . You’ll be
done with the day in an hour or so in most cases , however
the first hour is also very Volatile causing a lot of Stop’s.
 Zone 2 – ( 10:30 to 12:30) – Shanti Wala Market.
 Zone 3 – ( 12:30 and later on ) – for breakout trading ,
relatively easy to trade as you get time to prepare yourself ,
and also it is easier to run profit’s with EMA.
 Note – “ You must one zone , it is literally imposiible to
trade the entire day with sane mind , one trade a day is
enough to give you massive return’s “
 TRADING SETUP’S

PDH / r1 and PDL / s1

Consolidation and breakout’s
M / W
Day low reversal’s
RCBO / GCBO ( outside range / inside range )
Consolidation and breakout’s
 PDH R1 / PDL S1 breakout

Range breakout is simply trading previous day high breakout

along with R1 pivot
Range breakdown is simple trading previous day low breakdown
with S1 pivot
PDH / r1 and PDL / s1 acts as a zone
We enter once this zone is taken , with stop loss above / below
the zone
Remember PDH / PDL is an inflection point , that decides the
trend of the Day.
The only rule is that the market should open within PDH / PDL
Note – “ If previous day has been a one sided rally ( upmove /
fall ) , then it’s best to trade with less quantity ( half )
RANGE BREAKDOWN
RANGE BREAKDOWN
RANGE BREAKOUT
RANGE BREAKOUT
 PDH / PDL ( acts as a rejection area )

PDH / PDL breakout’s as discussed leads to trending

days
PDH / PDL also acts as a strong supply and demand
zone
Look for days , when market reversed sharply from
PDH / PDL
In such cases , PDH / PDL is likely to act as a strong
rejection
Please note this is discretionery as , not everyone may
agree that PDH / PDL is a strong supply / demand zone
 RANGE BREAKOUT

We’re already aware that market moves from a tight

range , to a big range
A range represents balance in the market , and once
this range is taken out , one of them ( buyer / seller )
would panic and this leads to a big move.
We also know that range can be of different type ,
starting from parallel range to slanting range
The key here is the timing of the range , and entry
once the range is taken out
Types of range
 Timing of the range

As a trader , first thing first , define your trading

zone
Pick either the morning zone ( 1 ) , or pick later
afternoon trades
For range breakout trading , it prefer to trade the
late afternoon trades as I have enough data for the
day , and running your trades in the late afternoon is
easy with the moving average.
The key is to to not force a range , and ensure entry
with proper risk management and position sizing
Bank nifty
BANK NIFTY
Bank nifty , 5 mins
Nifty , 23rd july
Nifty bank , 23rd august
Stop loss ( DO REMEMBER THIS )
 Live market Dilemma ?

The Multi Dollar Question is , post market this

seems very easy , but how to engage with tight range
during the live market
As during the live market , there is a lot of noise on a
5 minutes time , with upper and lower breakout’s
Well we have a easy trick , to identify tight range in
the market
We will use a concept called , INSIDE BAR on a 15
minutes Timeframe
 UNIVERSAL APPLICATION

 The concept of range breakout is applicable across all segments

 You can apply the same concept in stocks
 However make sure you limit yourself to applying the concept on
3 Stocks max
 Identify the trend of the stock , on a hourly timeframe as per
Price action
 Once you have identified the trend , wait for inside bar on a 15
mins timeframe , and look for a good structure on a 5 minutes
time frame.
 The key to not be confused is to have a view about the trend , and
then looking for opportunity as per the trend of the market along
with sector components
INSIDE BAR
INSIDE BAR
Breakout / breakodown / confusion / overtrading
 Conclusion

Range breakout trading is discretionery trading.

It’s advisable to pick a zone , and trade the zone
instead of trading the entire day
We have seen examples of breakout happening in
late afternoon , but on should note that breakout
happens in the morning too , it’s just a matter of
choice.
Same breakout trading is applicable in stocks as
well , but it is Advised to have a stick to 2 to 3 stocks ,
and engage with them only
 DAY HIGH REVERSAL ( M )

The logic – “ the market open and goes up one way , and then faces
resistance at day’s high , and then almost retraces to day’s low. Again at
day’s low , demand is created and prices touches day high and faces
rejection , this is a point where you can sell. It’s a reversal pattern.
Remember we learnt the concept of reversal’s , retracement’s and
breakout.
These setup’s give huge risk to reward , but difficult to find very often.
However here the retracement should be good enough to call it a supply
zone. The more the fall the better .
In order to make it rules based we have added a pointer that here the first
candle should be a green candle , and the fall should be near to day low.
However as you get some experience , you can tweak it as per your
convinience and understanding
NIFTY
NIFTY
 Day high reversal

Day high reversal is a late afternoon setup , that is being used by a lot of
our learner’s
I believe that , selling is more probable , in day trading , and buying is
more probable in swing trading
Day low reversal is not a very high probable setup in stocks ( it does work
though ) , as a beaten down stock tends to fall even sharply.
There are learner’s who are just trading day high reversal’s only ( Which
means , they’re on sell side only )
The question must be , well index is fine as it’s just one , but what about
stocks ?
Well you can manually scan through your nifty 50 stocks at 12:30 and put
alert’s , or you can use the below scanner in order to find stocks trading
near day high
https://www.nsewin.in/2017/11/f-stocks-near-day-high.html
 DAY LOW REVERSAL ( W )

The logic – “ the market open and goes down one way ,
and then find’s support at day’s low , and then almost
retraces to day’s high. Again at day’s high , supply is
created and prices touches day’s low and find’s support ,
this is a point where you can BUY. It’s a reversal pattern.
Remember we learnt the concept of reversal’s ,
retracement’s and breakout.
These setup’s give huge risk to reward , but difficult to
find very often
Here the first candle should be a red candle , and the rise
from day low should be near to the day high.
NIFTY
Nifty bank
BULL TRAP ( outside range )
 BULL TRAP

This is a sell setup.

This is a reversal in day trend.
The first candle has to be a green candle
And the opening should be beyond previous day range ( Exception will
be discussed later on )
Now either it will be a continous uptrend or it may lead to a pull back
trade.
However if the seller’s are able to close below day’s low . Then this will
lead to a bearish turn around.
Stop loss of all the buyer’s will be hit leading to aggressive selling
This may lead to one sided selling movement.
Stop loss will be above the breakout candle.
Target is 2R here
Nifty
Bank nifty
Bank nifty
Red candle breakout ( outside range )
 Red candle breakout

This is a buy setup.

This is a reversal in day trend.
The first candle has to be a red candle , and it should open beyond
previous day range ( Exceptions will be covered later on )
Now either it will be a continous downtrend or it may lead to a pull
back trade.
However if the buyer’s are able to close above first candles high .
Then this will lead to a bullish turn around.
Stop loss of all the seller’s will be hit leading to aggressive buying.
This may lead to one sided buying movement.
Stop loss will be below the breakout candle.
Target is 2R here or one may use moving average to exit the trade.
Bank Nifty
Bank nifty
 Think about probable Entry points

Try to think about the trades in terms of the first

opening candle , it’s location and what’s your
understanding of the trend
If your view is bullish , look for long only trade
setup’s
If your view is bearish , look for short only trade
setup’s
This will work in your favor , and ensure that you
don’t overtrade.
 Option’s and futures

Now one must note that index can be traded only

through Futures and options
The position sizing is critical in Futures and options ,
as we’re trading in lot size , and not Fixed quantity
Further options buying , and option selling has it’s
own dynamics
So you’re first requested to paper trade over the
upcoming days , get a hang of the setup’s and then
do real trades with Futures and options
Use the app stox or Frontpage for paper trading.