Trending market's characteristic

Theses are excerpts from a post by  respected Mr. Ilango Sir at his blog Just Nifty

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Whenever Month/ week technicals turn down, the falls are steep, sustained in a way it makes the trader loose his/ her patience, anticipate bottom forming.
If you look at the hour charts, you could see many "consolidating patterns" such a flags, pennants, triangles, etc., only to be broken downwards.

A day's price move is shown as one single bar or candle in the day chart but it consists of 7 Hour bars or candles and 25 15-minute bars or candles. To develop patience in such strongly trending markets, one should view the 15-min chart with an Hour chart in the background and Hour chart with day chart in the background. Markets spend a lot of time trading sideways during the day(consolidations), only to resume the downtrend when it finds itself not being supported by buyers but being overwhelmed by sellers.

Always ask yourself this question - are you having an opinion against a trending market which is where the biggest losses are incurred and biggest opportunities are missed.

Waves are sub-dividing. That is a typical trending market's characteristic.

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Traders play both longs and shorts during the day. Once a downtrend is established, especially based on month/ week downtrend, one should look out for intra rises to sell into as the falls produce larger profits till one trade gets stopped out. There are also situations wherein markets gap down and for most part of the day trade sideways or climb gently higher during which time, small long trades are done but with a clear SL, rising the SL and profit booking at resistance points(derived from earlier supports)

Collection of valuable Notes posted by Mr. Ilango Sir at his blog Just Nifty

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Know these sequence:

When Nifty is trading below all the emas/ pivots etc.

1. It has to close above Hour pivot/ HLEma/ HEma & HHEma.

And in that process, if it manages to close above Day pivot,

that will be the first sign of strength.

2. Now it has to close above DLEma for a "Pause".

3. Once closes above DLEma, it should not go more than 20

points(filter) below DLEma for a "trading mode" to emerge.

4. Now closing between "DHEma & DLEma", it is trading time

in that range.

5. If it closes above DEma, a trend reversal likely but the

upward momentum comes only on a close above DHEma.

To avoid whipsaw, watch out for follow up action.

Knowing divergences help. But beware of the divergences

in "3rd waves" as they are traps.

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I do not say buy 20 points below DLEma if the previous day

had closed below DLEma.

Once Nifty closes below DHEma in uptrend, it becomes a

trading range of DHEma plus 20/30 points to DLEma minus

20/30 points. It has worked quite well.

Similarly in downtrend too, once closes above DLEma, you

could anticipate a trading range of DLEma minus 20/30 points

to DHEma plus 20/30 points.

Remember to adjust to the rising/ falling emas.

These are guidelines and with experience and with the

knowledge of diff. T/F technical strength/ weakness, you

could plan your strategies.

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When we hit the weekly "Oversold", you could then say

the "A" wave is done.

Most often biggest gains are made in downtrends after

the "Lead indicator"(Stochastics) has reached below 20 (Most

refer it as oversold & start bottom fishing).

OR

Biggest gains are made in uptrends after the "Lead

indicator"(Stochastics) has reached above 80 (Most refer it as

overbought & start selling).

Look at the percentage of gains below 20 and above 80, they

are more than 60 to 70% of the total trending move.

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Reversal signal

Close above DHEMA or Below DLEMA. Lead Indicator (Stochastics) moving up

then reversing and then breaking 80 OR moving down, reversing and

triggering 20 from below.

Closing above or below DEMA.

When the close is between DHEma

& DLEma, trade less unless you are sensing a trending move

after a lot of consolidation.

Manage your trades with 20-30 points filter and see the

results after one quarter. You'll then feel like celebrating

with a "Full". :)

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Once you trade as per what you have learnt, the confidence

will grow. Besides these studies, the most important ingredient is

your "strong belief" in them and being steadfast in following them.

This is one of the biggest reason for being away from

marketmen. They are mostly excited lot and you can easily

get carried away by "bragging".

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Safer trading strategies involve:

Knowing the higher T/F Trend. Nifty has been in uptrend

since it closed above 5ema in Day & week.

Whenever overbought Hour TA gives a sell indication OR a close

below DHEma suggesting "trading scenario emergence", Part

book & you rebuy when Hour TA reaches oversold &

preferably with +ve div while Day/ week remaining in

uptrend.

How to capture Hour TA changes. If you have a trading

software, you will have 9 hr/ 14hr rsi settings, slow macd &

slow stochastics settings and these generally work well

during "trading range scenario".

Alternatively you can download the "JustNifty TA" file and

update and act at "critical moments of reversals".

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Following the established studies in true spirit itself is rewarding. It is

our objectivity to such studies that differentiates success/ failure.

How much importance / weightage we could give to a particular

study and at what situations comes with more exposure to various

markets.

How could you get more optimistic or excited or even depressed

unless you have your own opinions or expectations?. If you simply

state, with discrimination, what you observe and deduct your

conclusions from such an objective analysis, you'll simply follow and

not form opinions.

Your study should lead you to state buy/ buy on dips/ sell/ sell on

rises/ wait for more clarity. It requires tremendous poise of mind.

When we attain such a poise...calmness, it spreads to all aspects of

our life and we become a true yogi.

It is a journey in which I still struggle to shake off my prejudices.

Everyday is a progress as long as my sincerity of purpose remains.

Start believing in your strength while being humble & grateful for all

the talents & resources GOD has bestowed on you. You'll then walk

tall.

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Thank you Ilango Sir for your valuable guidance!

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For more such knowlege visit his blog at  Just Nifty