Order Book Indicator – Share Market Trading – Advance Level Option Trading.

You will understand by looking at the order book that the quantity initiated by the seller is more or the quantity initiated byte buyer is more. And what will happen with this? You can come to an analysis that what can be the next movement of the price. So it is a very interesting concept and Shusha has joined us. So you already know about him. Before this, we have covered a lot of things in the last blog. In fact, we will learn this concept in the live market. Sir explained the basic concept in the previous blog.

So sir, let’s start. So Puskarji, I will give a recap of one minute so that people can connect with this. So we talked a little while ago in the last blog, in which we talked that the screen we see by pressing F6 in the market watch where the best 5 buyers and best 5 sellers are seen is not very informative. So what can we do? We can see the entire order book. The technology is so good and we go on it.

I am not talking about different volumes. I am saying that they divide the volume into two parts. How much volume did the buyer do and how much volume did the seller do? It is a little confusing that if there is a trade, then the buyer and seller both did it’s how do we differentiate it? We will differentiate who initiated it. If the buyer took the price by increasing it, then the buyer initiated it.

If the seller reduced the price and sold it, then the seller initiated it. This is our basic premise for this whole theory. So I will go directly and explain how we plot this thing on the chart. The most technical analysts in the world are in India. If you go to Google Trends and put technical analysis, the top cities, 9 out of the top 10 cities are in India.

I think there is no better way to explain it. So let’s plot it on the chart and see how it works. Absolutely sir. So as I said, we will use today’s data. I think the market is already on. So what I did is I clicked on the chart. By default, it is not the rolling future. I opened it on 23rdFebruary by default. I open the chart of the rolling nifty future. So you all must have seen that the chart looks like this. Snow what we will do is we will go here and select one-minute candle. This is the functionality of trading view.

I mean, the trading view component is integrated in our app. Everyone is familiar. And we are not doing this on the trading view, we are doing it on the Cont+ app indicator that you are going to use now is used only on theocon appoint is only in the cont. app and nowhere else. Okay, it is not anywhere in India.

You can go and sign up. So as you can see, the last candle, even though we are talking about the minute candle, but the last candle is the real time where the prices are continuously changing.

So if I zoom it a little more, then the last one you will see, the entry here is continuously changing. So we will track the candle in one minute, but we will see the real time. Now I will go to the chart and you will see the Indicators tab. All the feeds and streams here are unique to our data set, which you do not get in the trading view, but you get in our platform. All these are streams.

Do you take this from Neal raw data is given by NSE, but we process it’s basically all this is paid data, right? Yes, but we are processing it’s when you take data from NSE, everything is paid as a vendor and then we process it’s here I am not covering all the indicators, I am covering only two of my favorite, buyer initiated and seller initiated. So what I will do is, I will go to search and write buyer, and after writing buyer, I can see 5 things here, but what I have to select is the other one, which is order book buyer initiated quantity.

Not the count. So we can track the count, VWAP, everything, but we will see that the simplest is quantity, that how much quantity the buyer bought by increasing the price. So we are tracking this. Similarly, we will plot the seller initiated quantity. So we will go to this search box and write seller, and here we will select seller initiated quantity. Both are on our right side.

Now we are doing apply changes. After doing this, you will see two plots here, two indicators have been added, and this indicator is also real time, absolute real time. Now I will show you a step, because this is generally, I mean, there are different ways of looking at the chart. Some people like it this way, but I like it in a different way. Mix these two and make a line. So what I will do is, I will go to setting and in setting, I will make the buyer a little dark green and make it a line chart. Right.

Increase its thickness also. Okay. So we will improve the thickness a little. Right. Okay. So this is our buyer initiated. Similarly, we will go tithe seller and give it a red color in the setting. Right. So that it will be understood that red means sell and green means buy. We will increase its thickness also. We will also improve its thickness. Okay. Now these two have been plotted in our line chart.

Now what we have to do is, we have to compare both, so I will merge both. So what we can do is, go to more and move to existing pane above. So now these two charts have been merged. Right. But there is still a problem, if we look at the right side, there are two different scales. So now we have merged both the scales.

Now what we will do is, the red line we see is seller initiated and the green line we see is buyer initiated. Right. So now we will see the activity of the market of yesterday, that if we want to take real trade, how can we take trade. Right. So now the market, as you can see, the market opened with a gap down. Right. So we have to ignore the first tick here, because when the market opens, there will be a lot of trades, which will be the highest tick. So we have to ignore that. Now what is my condition?

We have to put two conditions. We have to take trade, obviously buyer initiated, seller initiated, but we have to check two conditions. One, that any breakout or breakdown is valid only when consolidation has happened before that. Right. If consolidation has not happened, then why is there a breakout or a breakdown? So the first thing should be consolidation.

The second thing is that the average quantity that is being traded should have a jump. So if we talk about volume increasing, then the average buyer initiated, seller initiated trade, did it have a jump? And what is the definition of that jump? Did the volume increase three to four times of buyer initiated and seller initiated? These are the two conditions. It is very simple. We have to show people how they will see the numbers.

Show it to them once, so that they can see the numbers. So I will tell you the trade, I will just tell you the concept. You can see the numbers there, like you are seeing 10,000. So people will see the numbers in their concept. You continue. So the two things we need are consolidation and jump. So I will explain both. Now the market opened here, this area is a little easy.

The market opened here and there was a lot of volume here. Then if you see, the market has gone sideways for a while. This whole zone has gone sideways. Right. Volume has normalized, buyer initiated, seller initiated, the peak after the market opened, if we see, then here there is abnormal range of trade. Now what is the average of this normal range? So if we go to the average here, then roughly this is the midpoint, 9275.

Approximately these many quantities were being traded by buyer initiated and seller initiated. Now what happened here, the first red tick that we are seeing here, what happened here, if you look at the right, what is the quantity? 31,500.31,500 means suddenly there was a breakdown here and some market order or IOC order or the genuine order book has sold a large quantity.

What we see is that this is actual money, this is not fake data, this is trade data. Means someone went and took a bet that the market has gone from here. What we have to do is we cannot create a trend in our 2 lots,10 lots, 20 lots, 100 lots. We have to follow. So what we have to do is when we see that after consolidation there is a breakdown and the volume of the average quantity has increased 3-4 times, this is my trade initiation point. So roughly around if we see this point, at which point is the trade coming? At this point, 17,733. And this is a chart of 1 minute, if you look carefully, we are looking at 1 minute.

We are looking at 1 minute, it will come in real time, it is possible that you have taken the same deal not up to here. But I am saying that even if you are taking after the last completion, then around 17,730, round off, you are going and taking the deal around 17,730.You have taken the deal at 17,730.

then we will see how to trade it in the option, it also has a methodology, we don’t have to bluff, so this is our sell signal, we will come back after a while, we will just note down the signal, now the exit is a very simple concept, when this green, when to exit, if someone sold it and went, if this was my reasoning, then when someone comes to buy in a very large quantity, Then i will exit, so how to define that a very large quantity has come to buy,

so my rule is very simple, the green spikes you see, after buying the deal, there is a green spike, then there is another greenspace here, here is a green spike, here is a green spike, whenever this green spike is greater than the previous red spike, the previous spikes are not there, the one that was my entry is done, even after that if we see, a large quantity is sold again, a large quantity is sold again,

so when this green is buyer, the previous peak, so the previous peak is this one, for this one, the peak is obviously this one, because there is no big peak, and for this one, the peak was this one, so where is my exit? It is here, so my exit is here, so where did I go and cut thisdeal? This deal will be your score of here, which is level 17675,so 60 points we got there,

now this trade is complete, now if you see, there is consolidation again, there is a breakdown again, the volume shoots up again, so we can basically say this is a whipsaw, but I still got a profit, I am going to take ideal again,

when this quantity is multiplied so much, and the trade is initiated again, it is around 17665, there is not much difference, the exit is done at the same price, so I can say that the first trade is going on, in between you gave a little brokerage, one entry and exit, now let’s see again, where are we getting exit?

There is no green spike, this green spike is not above the red, so finally where is this square off going? This green spike is bigger than the previous red spike, so here we have a solid square off ,which is 17585, so the deal that was going on from 17730 is ending at 17585, you got a lot of points, 140 points,

if we round off, we have 140 points, we have done this, the spikes are coming, when the green is more than the previous red, then exit, so this is our signal, so this is our signal, so this is what we are doing, this you were taking on the fall, when the green spike came, did you make an entry for it?

No, because if you see the control, if you just ask yourself question, who is in the control? So, I am in the bear control, so here it is very clear that most of the time red is up, so I will just wait for the sell trade, if the next day it happens that green is up, then I will go and take that, so here it is very clear that seller is in control, so I am just taking the short trades and exiting here, very simple system.

Now, what do you do in trade? Can we say this is scalping? Because what I see is that you are working on 1-minute time frame, and you are very proactively and keeping it for short term, that is fine, it went long, but is it for scalping?

So, generally what we have seen is that the average trade holding time is 1.5hours, so it is for 1 minute, then it is not scalping, because scalping means 5-10 minutes, so I will call it intraday trade, it maybe 1 deal in 1 day, or 2 deals in 1 day, but the accuracy level of the deal is very good, money will be made every day.

So, what is the accuracy of this that you have tested? So, whatever data I have seen so far, it is about 70-75% accuracy level, because this data, visibility is not available to other people, retail, if someone is going somewhere else and seeing the data, except for co-location,

I think no one is seeing it, right, someone must be processing, I have not met anyone till date, people do a little bit in co-location, obviously, but if someone is seeing retail, the answer is no, all the people who are using concept, they have access to real-time data. So, this was our question, that when you took the entry,

I understood that I have to leave, but what was my stop-loss? So, stop-loss is a very simple concept, I will not add anything complicated, where we took the deal, if the previous swing high of the deal crosses, then it is stop-loss. So, if I took a trade here, if I initiated a trade here, then what was my swing high?

This point, this point is my swing high, so my stop-loss was about 30 points. If it had been squared off, then it would have been over. So, now we come to what to call a deal, this is the underlying, we can do the same thing on the option, if you learn this concept, if you say that you can do this on a call of 17500, you can dot’s, what do you suggest here, that means, look at the underlying or look at the chart of the option and trade?

So, here I will differentiate between two things, you are adoption buyer or you are an option seller. So, if you are an option buyer, then you are making a new trade, then you have not decided which option, then you will see the underlying.

Here we are looking at the futures, because in the futures, this is going to be traded, we are not talking about the underlying spot, here are the futures.

So, we will see the futures chart, we will get a signal from there and we will go and take that trade in the option. But if you are writing the option, then what is more important to me than what is happening in the underlying in the market, that if I have 17500, let’s say the market is going on now, make a round off,

17500 is going on and I have sold a straddle of 17500, now the market has started to fall. So, what is bothering me is the put of 17500, so I will put chart, is anyone coming and buying a big one in the put of 17500? If someone is doing it, then I will cut my trade, I mean, I will square off the writing trade.

So, if you are a buyer, then you will see the underlying, you will see the futures basically, and if you are a seller, then you will see the same data of the same option. So, if you go here and write, let’s say, the expiry is 23rd February,23rd and I say strike of 17500, then I see the call put, everything is there.

So, if I say put here, then we see the order book of that data. So, let’s say someone saw the put option, so it is 3.85, so Isere spikes here, then what? So, it is the same.

So, if I have written the option and I see green spikes, Theni will cut my trade. Okay, tell me for the buyer, because most people are buyers, what will they do? So, if you are a buyer, then it is simple, if you see green spikes, as we talked a while ago by taking out the signal, so if you see green spikes, then we will buy the option.

And if you see red spikes, then we will sell, but for the buyer, I will recommend that you do not see the order book of the option, because it is a little, if you see, it is unnormalized.

It was a little normalized, it was easy to read. This is a little difficult to read because the order book of the option is thin, it cannot be very deep, it is thin. The order book of futures is very big. So, you have to go and get the signal from it, your whipsaw will be saved if you do that. So, now let’s talk about the trade that we took, it was a deal of 17,730 and we made a deal of 17,585.

I will take out the chart again and once we note its time and build the same trade and see how we can use that trade. So, now what we are doing is, we are bringing back our signal and see how we can trade it. We have to take a scientific trade behind this.

So, where was my deal? Our deal was at 9.43 am. This time is visible, February 22, 9.43 am. And at that time, the price was 17,730. So, what I have to buy is the behavior of the Greeks. So, I will not go into the Greeks, but the behavior of the Greeks. What is this trade that we are trying to trade? This is what we call in Greek as Gamma trade.

This is a Gamma trade. If you want to make money from momentum, then momentum means Gamma. Now, where is the highest Gamma? Which option has the highest Gamma? So, the chart of Gamma looks like this. This means that the Antistrike has the highest Gamma.

So, if I want to make the most money from this trade, from any trade that moves fast, then there is no need to think. The best strike is the ATM option. Simple. Plus, if the market is falling, then the volatility will increase. We all know that it is inversely correlated. If the volatility increases, then the trade of Vega will happen.

Vega’s chart is also the same. It is highest on the ATM. So, according to the Greeks, there is only one deal that we have to take. That is the ATM put option. Because it is a sell trade, we are talking about put. There is no other trade other than the ATM option. We have to solve this. So, on 943 AM, February 22, ATM option means we will take 17700 round off. And when is our trade cutting? We can take 17750 round off.

But we should avoid odd strikes. Because there can be a lot of liquidity. It is in Nifty. It is in Nifty. That’s why I am saying that if you go and trade-in stocks or anywhere. Or in Nifty, when we talk about skew, we will see later, it Isa little uneven.

So if we take round off, there is no problem if you take even750.But if you take 700, there will be more Osos you will get the trade very easily, the impact cost will be less. So where is this trade going to square off? Square off is happening at 15 o’clock. Sorry, it is Indian time reading. So if you are going by flight, you will see 15-6. So at 3.06, your trade is going to square off on 22nd.I am talking about this.

Before I go to the second chart or data, if the market was going to close, I would have cut the trade. You would have cut it earlier. This is an intraday trade. We don’t have to carry forward anything. Because conceptually, you will take it out by 3.10 anyway. No, I will cut it by 3.25. If this trade is continuing, I will cut it by 3.25.

Because conceptually, if we understand, we cannot compare today’s order book with tomorrow’s order book. Because it is possible that today more orders are pending and people have not cancelled. The next day when we come, new orders come and there are not many pending orders.

So it is not comparable. So comparable is the same day’s data. That’s why we are looking at the same day’s data here. Now we come and take this trade. I think trade recap is the easiest. Where we can see this trade by running through its I will recap this trade. So I will build this trade here’s we go to trade recap and we say we have to do a new strategy. And it is on Nifty. When we had to do it? On 22nd.

We had to go and take this trade at 9.43 am. So I will go and set it at 9.43. At that time, we will see that it is loading the entire data of that time. So initially, it will take a little time, 2-3 seconds. And if you see, 17,720 is about the same as the signal that came there. This option was changed there. I had to do 17,700 put. If I had to buy, I would click on buy here. And I say let’s say 10 lot.

We will get a little feel. Take 1800 which is normal. So let’s do that. So we are trading the quantity of 1800 here. At that time, what was the price of this option? 50 rupees, 70rupees.So I say I would have bought this option at the same price. Now what are we doing? Now we will go to the point in time.

I can see what happened to this trade by going ahead. So we will go. Our exit time was 15.06. Okay. So at this time, we go ahead. And see that our mark to market, the option we took, how much profit or loss we have in it. See your P&L is 1,87, 290.The 17,700 put option that we took for 50 rupees, its price is154 rupees. You got 104 rupees. The price has tripled.

The profit around 100 rupees is 1,87,000 rupees. So if you see, single option, how much margin I have put, a little. How much risk did you take? 30 points. Nothing, in the option, maybe 10 goes. And what is the payoff in front? 104.I am not saying that you will get 104 in every trade. Generally, if you get 50 points from this strategy and get regular50 to 60 points, and your accuracy is 70 to 75, then maybe this will be a good strategy.

So what we have seen generally, in the option premium, I am talking about the option premium of about 30 points. The underlying signal will be more than that. You can get a benefit of about 30 points. So you get a 30-point benefit in the option premium. Because there will be some trades that will be in 10 rupees or15 rupees.

Then you will get 1 is to 1. No, 30 points in the option. In the option, and 10 points will go. And in the stop loss, your risk is calculated as 2.5. That means, every 2.5 rupees you make, your loss will be around12 points.

So I can roughly understand it as 1 is to 2.2.5.2.5 exactly. You have calculated i.e. have calculated 2.5. According to the data we have seen, it is 2.5. So if the risk is 1 rupee, then the profit is 2.5 rupees. So this is a very simple trade. I will summarize it so that you can understand it from the buyer’s perspective. We saw a big consolidation.

The quantity was trading at 9000.It became 30,000. Someone came and sold it. What do we have to do? I took a deal. I took a deal. Someone sold itched knows something or he knows something. I simply took the money at the end.

So I went there and bought the ATM put option. When the buyer is more than the previous seller, then I will go and square off. And my deal is over there. I will add one last point. If you are an option writer, then you will open the chart of the same option. And if the big buyer comes there, you will square off.

So I hope you found this order book concept very interesting. Because this order book concept is also not available anywhere on the internet. And as sir said, the indicators that have been given to you are very good indicators. You can use the points here.