In the world of options trading on Bank Nifty, there exists a strategy known as the “9:20” strategy. This approach involves closely observing the market conditions and executing trades at a specific time, precisely 9:20 minutes after the trading session begins. The significance of 9:20 minutes lies in its association with certain conditions that traders must adhere to for optimal results.
When implementing the 9:20 strategy, traders focus on the 5-minute timeframe, paying attention to the volatility that occurs within the first 5 minutes of the session. Once this initial volatility subsides, they assess the market’s direction. If the overall trend of the market is upward and has been continuing for the past few days, traders eagerly anticipate a gap down opening of 300-500 points.
The occurrence of a gap down opening in an upward-trending market presents a lucrative opportunity for traders to employ the 9:20 strategy. By swiftly entering the market at this point, they can capture the momentum generated by the reversal from the gap down. Such situations often result from adverse news or events causing market participants to panic.
Implementing the 9:20 strategy in this scenario can yield substantial gains, with the market exhibiting a continuous move of 250-400 points. This rapid move can potentially generate profits equivalent to an entire week’s worth of trading.
Let’s consider a recent chart where the market had been experiencing an upward trend over the past few days, marked by fluctuations between rises and falls. On a specific day, the market closed on a positive note. However, following the market close, unfavorable news or events caused a gap down opening the next day. It is at this crucial point that many traders tend to hesitate and become fearful.
But fear should not deter us. Analyzing the chart, we observe the first candle after the gap down is substantial, possibly indicating a sharp market movement. Traders often get discouraged by this initial large candle, assuming the trade opportunity has passed. However, it is essential to recognize that in an upward-trending market, taking a trade at 9:20 minutes, even after a sizable candle, can still yield favorable results.
By adhering to this strategy, traders can potentially secure a profit of 250-300 points, despite a small stop loss of 60-70 points. It is crucial to note that not every day will present such favorable conditions. However, when the strategy aligns with the market’s trend and a gap down opening, the potential for substantial gains becomes more evident.
Furthermore, it’s worth mentioning that this strategy can create a rapid price movement, leading to a higher premium increase compared to regular trading days. Traders may experience premium increments of 120-130 points instead of the usual 100 points, amplifying their profit potential.
However, it’s crucial to focus on the color of the first candle after the gap down. A green candle signifies buyer interest and sets a positive tone for potential trades.
Once a green candle forms, traders can start planning their entry. The strategy dictates that traders enter the market after the high of the 9:20 candle is broken. It’s important to make this decision beforehand and avoid hesitation, as overthinking can lead to missed opportunities and potential losses. The entry is made at the break of the high of the 9:20 candle.
If the subsequent candle becomes significantly large, traders should set a stop loss (SL) of 100 points. However, if the candle remains relatively smaller, the SL can be adjusted to around 70-80 points. The volatility during this time may be higher, necessitating a wider SL.
Once the high of the 9:20 candle is breached, traders enter the market with momentum. It’s important to note that the candle’s size is measured in points. If the candle ranges between 100-150 points, traders should set a stop loss (SL) of 100-80 points. However, if the candle is larger, such as 250 points, a SL of 100 points is appropriate.
To capitalize on the strategy’s fast-paced nature, traders must press the exit button decisively. The market can move rapidly, with gains of 150-200 points achievable within a short span. Hence, it’s essential to book profits promptly and exit the trade.
Monitoring the candle’s behavior after entering is crucial. If a red candle forms after reaching a high point, followed by a correction that brings the price down by 50 points, it’s advisable to exit the trade. This decision should be made without waiting for the candle to complete its formation.
Profit booking becomes vital when a substantial move occurs, as profit-taking can lead to corrections in the price. If the market hasn’t reached a 400-point gain and experiences a correction of 150 points, it’s prudent to exit the trade to secure profits.
It’s worth noting that traders should exit the entire quantity rather than keeping a portion in the hope of further gains. By doing so, traders can ensure consistent profitability. If a substantial profit has already been booked, there is no need to risk potential losses by holding onto a portion of the quantity.
When analyzing shooting stars, two conditions should be taken into account. Firstly, if the shooting star forms after the market has made a significant downward move, and its low is established below the previous day’s close, it may be a favorable trading opportunity. This indicates that the market is still under the control of sellers who are waiting for the price to remain below the previous day’s close to maintain their positions.
However, the scenario changes when the shooting star forms above the previous day’s close. In this case, it suggests that the market has surpassed the sellers’ control, with buyers gaining momentum. Sellers who had opened positions based on the market opening below the previous day’s close might be considering closing their positions if the market surpasses that level.
To trade a shooting star candlestick pattern successfully, it’s preferable for the shooting star to form after a gradual decline, with its low established below the previous day’s close. This ensures that the sellers maintain control and increases the likelihood of a downward movement.
In intraday trading, understanding and considering tomorrow’s high and low becomes crucial for making informed trading decisions. These levels hold significant importance in determining market dynamics and can provide valuable insights for traders.
When trading in the current day, if the market is trading below tomorrow’s low, it signifies weakness from a psychological perspective. This implies that buyers are struggling to gain control, and it remains in the trader’s mind that the market is trading below tomorrow’s close. This realization is derived from years of experience and is not typically found in books or standard trading strategies.
Conversely, if the market is trading above tomorrow’s close, it indicates strength from a psychological standpoint, suggesting that buyers are in control. Understanding this concept is essential for effectively interpreting chart patterns and making trading decisions accordingly.
For intraday traders, tomorrow’s high and low levels hold particular importance. If the market is trading below tomorrow’s low, it is crucial to recognize that tomorrow’s close will act as a resistance level for the current day’s trading. On the other hand, if the market is trading above tomorrow’s close, tomorrow’s closing price becomes a psychological support level.
Considering these levels can significantly impact trading decisions when encountering chart patterns such as shooting stars and hammers. It is vital to analyze the context in which these patterns occur. If the market is approaching a resistance level (tomorrow’s close) from above and a shooting star forms, it can present an attractive trading opportunity. Similarly, if the market is bouncing off a support level (tomorrow’s close) from below and a hammer pattern emerges, it may provide a favorable entry point.
Let’s revisit the previous example where a shooting star pattern was identified. When encountering such a pattern, it is important to consider certain factors. Firstly, the resistance level should not be breached, indicating that sellers still maintain control. Secondly, the market should experience a downward movement of approximately 100 to 150 points. Only when these conditions are met can traders consider executing a trade.
Now, let’s explore the question of whether one could have traded 50% of the position size when observing the shooting star pattern. The answer lies in the real-time market situation. While analyzing historical data, we have the advantage of hindsight and can identify patterns with clarity. However, when trading in real-time, uncertainty prevails, and traders can only make decisions based on the available information.
During live market hours, traders can indeed consider trading 50% of the position size when the shooting star pattern emerges, as long as the conditions outlined above are met. This approach helps manage risk by not committing the entire position to a potentially volatile trade. It allows traders to participate in the market while maintaining a level of caution.
Now, shifting our attention to the current example of a small hammer-like structure, a similar evaluation process is necessary. Although the hammer pattern may indicate a potential reversal, it is essential to remember that the resistance level has not been breached. Additionally, the market has not experienced the required downward movement of 100 to 150 points.
Hence, trading the hammer pattern would not be recommended at this point. However, if the market were to satisfy the aforementioned criteria, traders could consider initiating a trade with 50% of the position size. By adhering to this strategy, traders can navigate the market with prudence and seize opportunities while managing risk effectively.
Let’s look into the first scenario, where the market opens at a certain price, say 9:20. If the opening price is close to the previous day’s closing price, it is not advisable to initiate a trade immediately. Why? Because the closing price of the previous day serves as a resistance level. Trading near this resistance level is not a prudent choice. It is important to exercise discipline and wait for a more favorable setup.
Furthermore, traders should exercise caution when the opening price or subsequent price levels are close to significant round figures, such as 500 or 1000. These levels tend to attract significant selling or buying pressure, as reflected in the option chain data. As a result, it is best to avoid initiating trades near these round figure levels.
Suppose the market opens with the first candle at 9:20, and it reaches approximately 41,960. In this case, it is not advisable to enter a trade immediately. Traders need to be mindful that sellers are likely positioned near this round figure level, potentially creating resistance. Instead, it is crucial to wait for a breakout above a higher price level, such as 42,500, to validate a more favorable trading opportunity.
Maintaining discipline is the key. Even if the market seems tempting near the round figure level of 41,960, the focus should remain on waiting for a clear breakout above 42,500. This ensures that traders avoid potentially entering a trade prematurely and encountering adverse market dynamics.
The same principle applies if the market opens at 9:20 around 41,470. At this point, 9:20 should not be the sole basis for initiating a trade. It is crucial to assess the overall market structure and wait for a breakout above a higher price level before considering a trade. Rushing into trades solely based on a specific price level can lead to suboptimal outcomes.
To illustrate the significance of these considerations, let’s address the scenario of a gap-up opening. A gap-up indicates a significant difference between the previous day’s closing price and the current day’s opening price. In such situations, traders should pay closer attention. Gap-up openings often provide excellent trading opportunities due to the potential momentum and increased volatility.
It is not uncommon for traders to aim for a limited number of high-quality trades per month or year. The focus should be on identifying setups that align with their trading strategy and offer a favorable risk-reward ratio. If a trader can secure a handful of such trades within a given period, they can find satisfaction and contentment in their trading approach.
To address the issue of trade quantity, traders sometimes explore alternative methods beyond individual orders. One such approach is utilizing basket orders, which allow for the execution of a larger quantity across multiple trades. By combining orders, traders can accumulate substantial positions, providing them with the opportunity to capitalize on favorable market movements.
However, it’s important to note that not all brokers offer basket orders. Traders may need to explore different platforms or consult with their brokers to find suitable solutions for executing larger quantities. Additionally, it’s crucial to ensure that executing such quantities aligns with one’s risk management plan and overall trading strategy.
Trader psychology plays a significant role in long-term success. The ability to separate emotions from trading decisions and maintain discipline is crucial. By focusing on realistic profit expectations, recognizing the inherent risk in each trade, and adhering to a well-defined risk management plan, traders can navigate the markets with confidence.
It’s worth mentioning that some traders may choose to segregate their buying and selling accounts. This separation can provide clarity and facilitate better risk management by ensuring that profits from one type of trade are not used to offset losses from another. By keeping these accounts separate, traders can maintain a more organized and structured approach to their trading activities.
To achieve consistent profitability in trading, it is crucial to establish a well-defined and clear trading strategy. This strategy should be based on a set of rules that can be followed consistently, even by others. By teaching these rules to my staff and ensuring they can execute trades on my behalf, I am confident in the strength of my strategy.
Emotionless trading is a key aspect of successful trading. By incorporating stop-loss orders into the strategy, the decision to cut losses becomes automatic and devoid of emotional influence. This allows for a disciplined approach, where losses are accepted as a natural part of trading and are not overly distressing.
Similarly, having predefined targets adds further clarity to the trading process. By instructing my staff to book profits at the predetermined targets, I ensure that the strategy is executed without deviation. This approach removes emotional decision-making from the equation, as the trade is closed based on a predetermined plan.
Furthermore, I believe in the importance of having a clear and well-documented trading setup. This clarity enables anyone, including an algorithm, to execute the strategy effectively. Regular backtesting is recommended to assess the strategy’s performance and profitability, thereby reducing the element of uncertainty.
When it comes to trading, implementing effective risk management and capital allocation strategies is crucial for long-term success. Many traders make the mistake of not considering these factors, which can lead to unnecessary losses and financial stress.
Maintaining a balanced risk-to-reward ratio is key. It is important to assess the potential loss and reward before entering a trade. By understanding the risk associated with each trade and setting realistic profit targets, traders can make informed decisions and avoid impulsive actions driven by short-term emotions.
It is essential to emphasize that trading should not be financed through loans or borrowed funds. Instead, traders should focus on utilizing their own savings or capital. Starting with a manageable portion, such as 5% of one’s savings, allows for controlled risk exposure and minimizes financial stress. This approach provides the necessary psychological stability to make rational trading decisions.
Trading should be approached as a long-term endeavor, with a focus on consistent profitability and sustainable growth. By adhering to a risk management plan and allocating capital wisely, traders can build a solid foundation for success. The goal should be to protect capital, manage risk, and steadily grow profits over time.
In conclusion, traders should prioritize risk management and capital allocation to achieve long-term profitability. A disciplined approach, based on a sound risk-to-reward ratio, ensures that trades are executed with calculated decision-making rather than emotional impulses. It is advisable to trade only with personal savings and limit the exposure to a reasonable percentage of the available capital. By implementing these strategies, traders can cultivate a resilient mindset and increase their chances of success in the dynamic world of trading.