Nifty Intraday Trading – Newton Laws for Option Trading by Nitin Murarka – Share Market

 So are we ready to hunt for the lion? What does lion mean? Lion means Nifty. Now in intraday, earning profit in Nifty is equal to hunting for the lion or not? Is earning profit in bank Nifty equal to hunting for the lion or not? I will take you through some tricks. Have you heard about Newton’s law? Does Newton’s law work in the market or not? Any idea? No idea?

I have been in the stock market for 18 years. I started my career with SMC Global in 2004 after passing the Chartered Accountancy. And I am still in SMC Global for the last 18-19 years. In this 19 years, I have tried many technical indicators, moving average, RSI.I made many mistakes. I lost many times. The market hit me. I hit the market. I spent many nights. But in these 17-18 years, I got 3 rules where I got a little relief. You must be trying many indicators.

 You must be trying many moving averages. But I have found 3 rules which you can use from tomorrow and practice and improve. We will understand those rules now. And behind those rules is Newton’s law. There are 2 laws of Newton’s law in the market. Law no. 1. Newton’s law of motion. How does Newton’s law of motion work? See, the market is in trend. What does Newton’s law of motion say? We will see in the presentation. Law no. 2. Law of gravitation. You must have heard the story of Apple. This story works well in Nifty and Bank Nifty.

How to make money by following Newton’s law of motion and gravity in intraday option trading? We understand this. What does Newton’s law of motion say? A body in motion remains in motion and a body at rest remains at rest unless acted upon by a force. If something is in trend, it will go in trend. If Nifty is in downtrend, it will go in downtrend. If it is in uptrend, it will go in uptrend. What is force? Force is a volume. Force is a flow of funds. If the flow of funds or volume does not oppose it, that means the price will go in the same trend. If downtrend is in market, we cannot assume uptrend.

We will understand in detail how 1st law works. We are ignoring 2nd and 3rd law.1st law, law of motion. We will talk about gravitation. I did a poll on 3 golden rules. This is a premium index trading channel of SMC Global. There are 11,000 people. They did a poll and 3,285 people voted. When I talk about these rules, you may believe it or not. But when you see the views of 3,285 people, you will be confident that this rule works.84% of them said that rule 1, rule 2 and rule 3 are very simple rules.

If we combine all these, 84% of people said that there is more than 60% hit ratio. I did a poll on Thursday. This is the latest data of Thursday. 9,000 people have viewed this. Now, what is the rule? There are 3 rules. Let us understand these 3 rules. Rule 1 is this side. Rule 2 is this side. Rule 3 is this side. Let us understand like this. Rule 1 is intraday and nifty option trading.

 How many people are interested in trading nifty option in intraday? Trading nifty option in intraday is like hunting a lion. Now, divide nifty in 3 parts. This is called opening session, mid-session and closing session. Opening session is from 9.15 to 11.00. Mid-session is from 11.00 to 1.00. Closing session is from 1.00 to 3.30. These rules are the summary of what I have learnt in 18-19 years of trading. So, you divided the market in 3 parts. Opening session is from 9.15 to 11.00.80% of people trade in this session.

 That is called emotional session. Why emotional? Because opening session is always emotional. You saw SGX at night.95 points down. Emotion entered your position. You will lose. You have to cut it as soon as it opens. If Dow Jones, Nasdaq and Nasdaq show 100 points down, panic will be created at night.

 Fed statement came. Interest rate is 0.25 instead of 0.5. Reuters and Bloomberg has news. Opening is always emotional. So, for intraday trading, it is a strategy to trap from 9.15to 11.00.I mean to say that whatever you will learn, practice it for a month and you will improve in your intraday trading skills. What to do? Rule no. 1. You have to observe the market from 9.15 to 11.00 and not trade. What will you observe? We need 3 things to trade.1.

 Timing. When to trade.2. Trend. Where will the market go?3. Entry level. If I get to know in intraday that when to trade, in which direction should I trade? Done, profit will be made. So, these three rules define these three things. Now, rule number one says that we have to identify from 9.15and what level of trade I want to enter, then my work will beta 11.00 where the market will go after 11.00. Because you cannot identify where the market will go in the opening, because opening is always an emotional opening.

So, we have to observe the data with patience from 9.15 to 11.00how the data is forming. What is the trend? What does the law of motion say? If any train is at a station, how will you identify its route until it goes towards Gurgaon? Or you can identify its route only when it crosses Ghaziabad. Now, what we do is, the market opens at 9.15 and we think whether it has gone to Ghaziabad or Gurgaon and we trade as on opening.

So, if you want to trade wisely, then rule number one says that you should trade intraday after 11.00. What is the best time? Between 1.00 to 3.30. You must have observed that 80% of the time, the opening positions of the traders in the morning, their stop loss hits at 12.00to 1.00. And after 1.00, a new trend resumes in the market, whether itis an uptrend or downtrend.

 So, the maximum closing of the market is by the creators or newcomers and closing is always by the professionals. The opening of the market can always trap you and closing gives you a right direction. The best suitable time is between 1.00 to 3.30, which is more likely to win. So, this is rule number one. Now, you read this poll, it says, rule number one, trade after11.00.

Rule number two, PCR data trend. Rule number two says, what is the trend of data, there are many methods to identify data, but the accuracy of PCR is around 70%. And third rule is, entry closer to VWAP. This law of gravitation defines it. How? PCR data is a very simple data, you can get it in any software. What you have to study in PCR data is, change in open interest. PCR data is called put-call ratio data, Nifty call open interest and Nifty put open interest. This is available in NSE website and I am showcasing it to you, this is from SMC, I am showing you this data from SMC auto tender.

You have to see, change in open interest, we are talking about intraday. In intraday, change in open interest, you can see column number4, change in open interest. Change in open interest of calls and change in open interest of puts. This data you are seeing is of Friday, the last market closed on Friday. Change in open interest means, you took a call, you took a call, you took a put, how many calls or puts did everyone take, that comes under change in open interest. That means, what positions in the market changed, that comes under change in open interest.

 Now, what we are seeing is, how much is the total change in open interest in the call side? Anybody can say. How much is the change in open interest in the call side?2 crores 71 lakhs, that means everyone together bought 2 crore71 lakhs of calls. Right?  How much is the put side?1 crore 24 lakhs. Out of 6000 people, who bought more calls or puts? Calls.

So, what should you buy, call or put? See, everyone has come to the market to make money, like Vivekji said, only 1% people make money, 99% people lose money, it is a zero sum game. So, if in this crowd 70% people are buying calls, will 70% people be able to make money? So, should we take calls? So, we should work against the crowd, we should buy puts. Have you been to a casino? Who earns money in a casino? Casino people? If you always go with the crowd, the winning probability will be less.

Here the concept is, we have to track this data, if the public, that is the crowd, here you can see that 90% people are in calls, so we don’t have to take calls. You use this theory for 15 days and see if you feel that there is a change, something amazing is happening. Because I have been using this model for 2-3 years every day, every day, and the winning probability is 70%.

 So, the concept is understood that what the public is doing, we don’t have to do that. Now, this difference can be anything, now you see the difference, this is 271 and 124.Sometimes, the value of this call will be 4 crores and therein will be minus 10 lakhs. So, what will happen is, the whole crowd is in calls, there is no one in puts. So, in that scenario, you can trade puts more aggressively.

 So, rule number 2 says that the market opened in the morning. Now, this data that you are seeing, every 15 minutes, the ratio of call and put is, change in open interest of calls and change in open interest of puts. We are seeing here that how many people took calls, at 10.30, there are 2 crores and 90 lakhs of calls. And how many are in puts, 1 crore and 60 lakhs.

That means, the crowd here, what is their view, towards calls,2 crores and 90 lakhs. There is less interest in puts, so what should I do? After seeing the data at 10.30, I am understanding that I don’t want to take calls. That means, on Friday, the market was down, how many points,200 points. After that, many people must have taken calls, because 200 points opened down, so it is obvious that people will think that if 200 points are down, then they take calls.

But, the data says that most of the people are interested incalls, so we should be interested in puts.So, this is rule no. 2, law of motion, Newton’s law of motion,if any data is in any direction, it will go in that direction.Now, why is this data reliable?Because the indicators are made on price, if you change the timeframe, the indicator will change.Suppose, you can buy in 5 minutes and sell in 30 minutes.

But, how much capital is required to make 1 lot of open interest?2 lakhs.Because, as a buyer and as a seller, how much capital is requiredto make 2 crores and 90 lakhs of open interest?This much capital is required in thousands of crores?So, this model is reliable because this model is totally basedon money,how much money is being in flowed, how much money is being spent.

So, rule no. 2 says that we have to identify the market trendy looking at the PCR data. Rest, you can use technical charts, price formations, volumes. You can use all the indicators that you use, but you can use it like an add-on pool, whose accuracy is around 60-70%. Now, I come to rule no. 3. So, what is rule no. 3? You must have heard a story. This is a story from 1966.

In 1966, there was a COVID epidemic in London. At that time, everything was shut down. Newton was getting bored and he was lying in the park. Suddenly, an apple fell. We have heard this story in our childhood. So, he thought why this apple fell in a straight line? Why this apple did not go here and there or why did not the apple go up in the sky? Then, he came back the next day with his friend. And then he told his friend to move the tree, drop a few more apples so that we can observe what is happening.

 So, the conclusion he made was that if you lift anything up, it comes down in a straight line. So, there is a gravitation force in the earth. Now, you will think what is gravitation in the stock market? The price also has a gravitation force. How is it? The charts I am showing you are of 9th.9th and 10th, that is 9th Thursday and 10th Friday. I have brought the graph of both. The yellow line you are seeing is the tick by tick chart of price. And the blue line you are seeing is the volume weighted average price.

Now, you can understand the volume weighted average price as the earth. And the meaning of gravitation is that the price will touch the VWAP due to its gravitation force.Now, rule no. 1, we have to trade after 11.is up or down.Rule no. 2, we have to see what PCR data says, whether the trendLike we saw Friday’s data, it said that the overall trend isdown.And rule no. 3 is very important, where do you have to enter?Because identifying the trend is still easy, but entering is the toughest task in the market.

And you have to wait for that entry, when I get VWAP, VolumeWeighted Average Price,which is law of nature, out of 22 trading sessions,at least 15 trading sessions will be such that the market willcome to VWAP after 11.And you will get an opportunity to enter at a lower price. Now, if you had taken the trade here, for example, this is break down. If you see this price, it is a breakdown. If there was a breakdown entry, you would have stopped out till here. But if you take VWAP, VWAP is a Volume Weighted Average Price.

 Why is Volume Weighted Average Price important? I don’t have much time, I can’t explain much, but assume Volume Weighted Average Price. What is the buying average of all these people here? That is called Volume Weighted Average Price. Volume Weighted Average Price. If I get to know the average of all these people, that so many people have bought Nifty at this price, if I enter near that average, my risk reward ratio will not improve.

And if I enter here, my condition will get worse in the option. Option will go down by 30-40%. So, rule no. 3 says that you have to enter near VWAP, near Volume Weighted Average. This is an example of Bank Nifty. I have taken this example from 10th, you can see the graph till3. 30pm.Market gap got down. After 11pm, there was an opportunity from where it came back from VWAP.

Second opportunity was from where you got this fall.Are you with me?Concept is getting clear?And you can use this theory from tomorrow.You can do paper trading.You can do it for 15 days.I assure you 100% that this model will give you 70% accuracy.Now, why is it important for us to follow this rule?Like Vivekji said, smart players make profit.1% of the people in this hall can make more than 5-7 crores.We are all retail traders, small traders.And we have a big fish to eat.And who is that big fish?FI’s, DI’s, Mutual Funds, Proprietary Funds.

So, as a retail, if we don’t follow discipline, we will keepon losing.Sebi’s paper came out, you must have seen it.Sebi said that 8 out of 9 people lose in options.Did you read that? So, why is it like this? Because we don’t follow discipline, we don’t follow rules. We have simple 3 rules. Are these rules complex or simple? Are the rules complex or simple? Rule no. 1, after 11pm, rule no. 2, PCR data. Rule no. 3, we have to take entry near VWAP.

So, the bigger hands, all these small traders, all these small traders, are hunted by stop loss. Now, a very important question arises, I have taken entry, where should I put stop loss? Because as soon as I put stop loss, that person gets hit or gets hunted. So, this is my 2-3-minute presentation. These 4 participants who trouble us, in the market, there are basically 4 participants.

One is retailers, we are retailers. Second is FIs, third is domestic institutions, and fourth is proprietary funds. Now, this is a zero-sum game, his money is in his pocket, his money is in his pocket. And all people want to make profit. Now, who is the weakest link among these 4? The weakest link, who has limited money, limited resources, we believe that he is a retailer.

 So, to make the retailer smart, we have to follow some rules. Otherwise, all 3 of them will empty our pockets. And out of 10, 9 people who have released the paper, will continue to face such losses. Now, I will conclude and summarize. Because in 15 minutes, I have summarized the rule as much as could. So, rule no. 1, you have to trade intraday option trading after 11. You just follow this for 15-20 days in paper trading.

 And then you can touch up with me to see if it works or not. Rule no. 2, identify the trend with the help of PCR data, put call ratio data, what is this? PCR data, intraday, change in open interest, you have to see. And rule no. 3, try to enter closer to the VWAP level, that is, close around the volume area, you have to enter. And what should be the stop loss? The low of the day, if you are buying, then.

And the high of the day, if you are selling, then. This will be the stop loss of option price. Now, if you put stop loss on day high or low, what will happen? It will get triggered. Because that operator and big FIs also know that maximum stop loss is there. Now, what we have to do here is not to put stop loss on day low. We have to put it a little below that. We have to put stop loss a little below that, all stop loss get hunted and my stop loss is saved.

 Do not make a wide difference. If a big stop loss is being made, then you do not have to take trade. And if your average range is making stop loss, then you can take trade. I have seen that the trade I am doing normally for the last 2-3years, in options, at the money, call or put, you can trade very easily in stop loss of 25 to 30 points, if you enter on VWAP.So, these are the three rules, you can follow them. Thank you.