Similarly, the strategy that I will show you today and explain the logic behind it, you will understand that this strategy can also give you very good results in the market. Now what is the unique thing about this strategy, let me tell you this first. There are many people who only trade price action.
It is a very good thing that price action is supreme and gives very good results. Nowhere are many people who only trade by using the data of the option chain. What we are going to do today is that we are going to mix the option chain and price action. And you will see that if you miss the option chain and price action, then when you have to get a powerful reversal, you will not leave that reversal.
So definitely you can say that today’s option trading strategy number one is going to help you a lot in catching reversals and powerful reversals. So now said price action and option chain, what we are going to do, let’s understand this.
The first and biggest thing is that we have to use both, we have to use price action and we have to use the option chain. So what we will do first is that we have to find potential support and resistance. Now if we talk about price action, I will tell you simply how you find support and resistance through price action. So you see the price went up, then you see the price came down.
So the price moves in the same way. Now what happens is that from where the last swing has happened, what we see is that the price started falling from here, so this last swing, we call it resistance in simple words. In simple language, no support and resistance can explain to you in the language of price action. Now the language of option chain remains.
The second thing is that from where you see the price was falling and then it started increasing, so from where it started increasing, this support happened. Last swing means from where the trend itself changed, means the price was falling first, means the downtrend was going on.
The price starts going up by changing the downtrend and then it starts falling from where you have to capture these areas and when you do this, we simply call it resistance and support identification.
Our first concept is clear we have to find out the potential support and resistance on the basis of price action and how will we find it out? We will mark those areas from where the last swing has taken a reversal and I will show you on the chart for this, you simply use horizontal lines.
What is the other thing? I will tell you point number2, we are going to use the option chain and if you are a beginner and you think that support and resistance is getting tricky, then I have recommended you an indicator many times that you can also use pivot points here. I am going to show you everything on the chart, but first am explaining you by writing the concept that what I want to say, so you can do this too.
Now let’s comet how we will find out from the option chain where the support and resistance is. So there is a very simple way that you get support and resistance from the option chain, which is more effective.
The price reacted at some point, which was told to you by the price action, but where the sellers are sitting, making their position, that is such an area from where the price is continuously falling, but at such a point, there is a lot of open interest, that is, the sellers have made a position of crores of rupees and will not let their loss happen, so they will try to push the price up, so what does this mean?
So how do we know from the option chain that where is the support and resistance? Where the maximum open interests standing, where the maximum open interest is standing, it becomes a potential support and resistance zone for us.
Now I will show you how it looks. So first of all, as we talked about the option chain, I will take you to the NSE option chain and show you on the computer how it looks. So now we have come to the computer screen. So we are on the NSE website, we are seeing the option chain.
So today if you see, today there was a very big range, but generally you will not see this. So the blog I am writing now, the budget is coming, so it is a big event, so the data in the markets a little different but you will not see it every time, but still I will show you.
So generally you must be familiar with the option chain. We have written a detailed blog on the option chain. So here you see the price is visible on the add the money. So this is the Nifty option chain. Now see here, the call side has written open interest on the OI. So when OI is written, it means open interest. There is open interest on the put side.
So what we have to see is that where is the maximum open interest. Now if you look at this side, then you will see that 57000, let’s leave one strike because you will see maximum open interest in multiples of 100, then 90,000, then 80,000, then 1,88,000. So where is the most potential, most open interest, this1,88,000 is at a strike price of 18,000. Means what is the biggest resistance for me today. We have removed the price action.
We are only looking at the option chain. We are saying that if the biggest open interest is here, then the biggest resistance price will be here. If the price keeps increasing and goes above 18,000, then the sellers who are here will try to send the price down.
The big players in the market, the operators will try to push the price down. If they do not run from here, we told you the concept that if the seller does not run with the lungi, then it is a strong resistance.
Suppose he cuts his position from here, then I will see the change in open interest and if I see the negative position in the change in open interest and if he is running from here and going tithe second strike price, 18,200, then there is a quantity of1,20,000 on 18,200. As soon as it increases more than this, it will be more than 1,88,000, then the next resistance will happen for me and the price will try to go there.
So we have discussed this concept. Now I have to discuss something else, so I will keep it fast. So do not do anything, see on this side where the maximum open interest is. I have seen the maximum open interest at the strike price of 18,000, 1,88,000.
Where is it less than that? At the second level, you can see that there is 90,000 standing, 17,800 means that the price will get a struggle even at 17,800. If he breaks 17,800, then he will not be able to go above 18,000. Youkan see this. Now you have taken out two potential resistances. In the same way, we take out support, so support will see on the put side how much the price can fall and where it can bounce back.
So if we look at this side, then you will see that on the side of falling, if you’re on the side of falling, then you are seeing the biggest at97,000, at 17,000. Now this data that you are seeing, you are seeing support at 17,000. What is the reason for this? Because now the event is close, so the volatility of the market is very high.
Otherwise, you will see 2 or 4 strike prices above, you will see maximum open interest. Maybe some people are reading this blog after 5 years, so I would like to tell you that you will check it, then you will see maximum open interest at 4 or 6 strike prices above.
So today Aim to write a blog, so we will talk according to today’s data. When you are watching, then you have to see according to its time reference, according tithe time frame. Okay, 97,000, where is the highest, the second highest is 67,000. So 67,000in the pass, 17,500, 17,500became a potential support zone and if the market falls from this, then it may fall below17,000.
So at 17,000, it will get support, but what you are seeing here is that the resistance is very strong. The resistance that I saw at 18,000 was of 1,88,000quantity.
For this, I have told you PCR. If you do not have knowledge about PCR, then you can be a little scared that there is more open interest on one side, there is a lotion the other side, there is very little on one side, what difference does it make. We have discussed all this.
If you have not read the blog on PCR, go ahead and read it because we have made blogs on all potential concepts, but what we understood now, while looking at open interest, we understood that where are the sellers in the market, on which strikes they are sitting and from where the potential reversal can come.
So let’s assume for now, you saw that there is a quantity of 67,000 here, 17,500 and you saw one thing, after that, we had90,000 here, 17,800, so we got 500 and 802 points. I am writing here for you, then I will show you on the straightaway chart. So I will write for you. For Nifty, I got two important areas 17800 and for Nifty 17500, so I took out resistance and support while looking at the option chain.
Now we come tithe chart, now I will tell you something very important, what are we going to do, so we have come to the chart, there are some indicators that I use, so we have already discussed about the indicators, these strategies are also very powerful, I hope you are using Bram Astra because when there is a trend or there are trending markets, then it works very well, it is already doing very well,
so now what you see here is now we were talking about those levels, see I have used an indicator that is the pivot, so those who do not want to catch it themselves, you can understand from where the last swing happened that you can get support, but simply you can use an indicator, pivot,
I use it myself because this Isa static indicator, most indicators are dynamic, the price changes, the pivot does not change, now when we are talking about the price, now look at this, I have removed the pivot,
I will remove the rest of the indicators for you, so simply the raw chart has come here and I will remove this on MACD, there is no need for this, so this is the plain chart, so if I talk about the price action, so what do you see here,
a simple thing is visible that the price has gone down from here, so if I do nothing, I go here and take a horizontal line and I will mark a horizontal line here that the price came here and reacted, the price went up and started falling from here, so a resistance level came for me.
Point number 2, what will happen, similarly you are doing it yourself, so what you have to see in this is that the price has reacted on similar levels, this is important, if it has reacted before, then it becomes so strong, but we mean by last swing, you have to take care of this, so a potential swing came here, now when the price started falling, so if you see here, then the price has reacted many times,
so what I will do similarly, I will take a horizontal line and put one here, so I put a horizontal line here, why did Input it here, because the price reacted here many times, then it went up from here, now after going up, the price has fallen again, so we are doing all this on a 5-minute timeframe because we are talking about the intraday, now the bigger the time frame, the better it is, but now when we are looking at the option chain, then our focus is on option trading for intraday basis, so if you see here, the price reacted from here.
I drew another line here, now what happens with this, what we know from this, we know from this that which are the potential resistance and support areas, if person simply follows the price action, then he saw that the price started falling from there, the price started falling from here, it reacted here, the price fell from here, now here it had support, the price went up from where it started taking a swing,
when it breaks its support and breaks candle’s low, then we say that what the price action is saying now, that the price will go down more, how much will it go down, from where you do not see a swing again, so where did you see a swing already, if you look carefully, then you saw a swing here also, can you see this,
you saw a swing here, after the price goes down from here, the price started rising from the first candle of the day, what happened to the price here, what is support, where there are buyers, so where there were buyers, the price started going up from there, so this was also a support area for me, now why are we doing all this,
I am simply teaching you to plot support and resistance, now what we have to do from this, I will come to the point, what is the point, the price action based support and resistance zone, when it matches with the support and resistance zone of the option chain, a powerful trade is born from there, now for example, many people trade hammer,
for example, here you have a candle like a hammer, you have a candle like a hammer, you have traded with its low, although its low break did not happen, you thought that the hammer works, but sometimes you will see that the hammer does not work, I will talk about this hammer, now we will remove the hammer, shooting star, hanging man, we will talk about simple pin, I am giving you a word here, pin, so what happened to the pin, whose body is small and the shadows big, so if the body is small and the shadow is big, then basically this long shadow or long wick is a rejection candle, we can also call it a rejection candle,
so I simply call it a pin, so pins are powerful, but where the pin is made is important, we talk many times that if a hammer is made at the bottom of the chart, then the price goes up, but many times we see that after making a hammer, the hammer fails, so when will the hammer fail and when will it give you a powerful result, we understand this concept, that’s why I am taking so much time and whenever you get a pin in this way, you do not have to leave it, so we have found a potential support area, now when the price breaks that support, after that you see a pin, but where is this pin made, let’s look at the price,
so it is very important for us to see the price, this is the chart of nifty, the symbol of nifty, now see here, it is made at the level of 17400, around the level of 17400, you can see it is almost low at 407, so it is made around the level of17400, so what is important is that all the multiples of 100 are important for you, because what you will see on the multiples of every 100, you will see sellers standing on the multiples of every 100,
you will always see open interest more, see I will show you, if you go to the option chain, then on the multiples of every 100, here there is a quantity of 67000, here there is a quantity of 47000, but on the multiples of 50, there is 14000 and 12000,so more important than the level of 50 is the level of 100, multiples of 100 on nifty is important, so this Isa potential zone that I do not want to leave, the second thing we saw that the price had already reacted at this level, if you assume on the chart, now the chart is made in front of us, whenever you plot the support,
you see that the price has reacted at that level many times, then it becomes a potential support as per the price action, now what you saw that this support was broken, the price went down, now suppose you were trading trend or you were trading price action, you saw that it broke, you took the entry, then it broke again, your entry continued, but then you see that a hammer formation has happened, it has happened on multiples of 100, the second thing we identified that the maximum open interest is around 17500,
so whenever the price will go down, open interest is standing here, sellers will not let their loss, they will try to push the price up, so you see here, what did you see, let’s understand it here, where my maximum open interest was standing, means a potential, my support zone was there, a price action based powerful candlestick pattern is also being formed near it, that is hammer,
now there are a lot of chances of giving good points of this hammer, this hammer can be made anywhere in the middle, it is not that important, it is not that significant, when visit significant, when it is going tom potential support zone, price action based and OI based, open interest based, so open interest is seen near 500, 400, there is a potential support, now near that support,
I saw a hammer, now you do not have to leave this hammer, similarly, when you have to go near the resistance, suppose the price would have reached here and here you would have got a long wick rejection candle, it could be a shooting star, if you could see a shooting star, then what would you do,
you would have seen that this shooting star, our example here is 17700 range, now 17700, if you see OI based, then the resistance is already around17800, so it is very close to open interest, sellers are standing here, they will not let the price go down, they will try to push the price down, that is why the shooting star becomes more powerful here,
it will be made anywhere in the middle of this range, it will not work as powerful, it will work as powerful when it is matching its potential where the price action is also matching and where the OI is also matching, now if I remove all this or use a simple pivot point, then now we can find out from this pivot, let’s see this, pivots basically help you to identify potential support and resistance areas, now see where we have done price action based catch, there was already yourS1,
so if you see it together, then there is confirmation that there is support here, the price has gone below the support and after that there is a hammer, now it can be down or up, I will show you what is the reason, suppose we will see in the chart of futures, so the pivot can be a little up or down, but what will be the benefit of this, it will not be seen here,
it will be seen here, so nifty futures, so as soon as I came to nifty futures, I used the pivot, look at this, the support was broken there, the support did not break here, the support was broken here. see a good candlestick pattern. So from here you catch the price action.
Now I have also taught you Brahmastra. Now what Brahmastra has taught is a strategy to catch momentum and when this pass means basically near my strong pivot area, your canthi market is trending, then when you get momentum, you get very good points. Now here, see Brahmastra told later that it is entry. I will show you if you were using Brahmastra, so MSTDM is used for that, I will show you. MSTDM gave a crossover here.
I told you about the super trend setting that we use 20 and 2. So see here, Brahmastra went here and said, take this entry in this candle, but if you had caught this hammer before Brahmastra, then your entry would have been in the next candle and here you have already got big points. That means before this, you have caught the reversal that this downtrend can be reversed from here and how did you do this?
You checked the price action and you also swathe OI. Now what I am telling you now, when you see in the live market, whenever you have OI, where there is maximum resistance, maximum support, whenever you get this pin, do not leave the pin and I have already forbidden you to leave Brahmastra.
So you can catch good points here. You can get 6 points. So this was your strategy number one. Now I told you that I will give you one more strategy, so let’s understand that too. Now let’s remove all this, clean the chart and then let’s discuss another strategy here in this blog itself.
Now what will happen when you are doing trend trading, suppose you saw the price was falling, the price fell from here to here. Now you think that the price can fall more from here. Now you think for yourself that the price can fall from here. You also check PCR, I will show you. So we had to find out whether the price will fall or rise today. We user regularly for this and if you are using PCR, then you must have seen that the accuracy is very high.
Means the people who are working with a lot of money in the market, you are with them. You are seeing that they will try to lower the price or try to increase its PCR looks negative to you. Now suppose you saw on the chart that you come at 11o’clock and see that the price has fallen a lot and at 11 o’clock you see that PCR is negative.
Now if you see PCR negative, then you are expecting that the market correct can be more, it can break. So if you want to take re-entry or you want that if the market falls from here, then I have a right entry. So if you come here and see that Pucras negative and you have seen that the price is going down continuously, then I will take entry.
You do not have to do this. What you have to do is you see that the price has fallen, after that you see that the price will start increasing.
No was far as it will increase, we have understood this in Dow theory that the price does not fall continuously. The price falls, then it goes up and then it falls. We have understood this. So when we have understood this, we want to catch that this reversal happened, we should know this before.
So I have already told you about Fibonacci. I hope you are using Fibonacci. If you are not doing it, then let’s understand now. So we want to catch that the price fell from here there. Now how high can it go that I can get a re-entry as per the PCR, the price can fall more and how will I know the re-entry. So you simply from this level, from where the price started falling, from here to where it fell, you went and plotted a Fibonacci.
So the market also respects Fibonacci numbers a lot and especially when you see 0.5 and0.618, these are two magical levels where you will see that the market is respecting Fibonacci. So the price fell, then the price started increasing, but you see carefully that the level of 0.5, the price started falling again from this level, it did not even reach0.618. So you get confirmation from Fibonacci.
As soon as you see that the reversal is coming from here, you go to one candle and take confirmation that the low has also broken, you can take the re-entry again and the price that fell from here, you can catch it. So now here Fibonacci, I told you that the price was falling from top to bottom. You were looking at PCR, there was negative. You were expecting that the market can break more. So here in this blog, you understood how you can catch the potential reversal again.
What is potential reversal? The price was falling and going up. Where is the potential reversal? Fibonacci number also helps you a lot that the price can fall again from here and in this much move, you can get good money in option trading. Similarly, as we have plotted Fibonacci from top to bottom, you can also catch from bottom to top. If the price is going up continuously, then how much retraceable it can be, you will plot the level from bottom to top and you will get to know.
So now we don’t make this blog too long because in this blog, I have explained the main thing that I had to tell you. I explained Fibonacci to you and for Fibonacci, I have explained to you how to use PCR. Now you can get PCR in many places, but what is important for us is that the PCR of the relative strike prices near the market. Here we are using this auto-render software. So I will suggest you to trade with PCR, so you will benefit more.
Alright, so this is one thing and we have already taught you how to use PCR. Finally, as I told you, let’s summarize this blog once, what we understood in this blog. We understood in this blog that you do not depend on just the price, you can see multiple dimensions. The first dimensions definitely price action. You do price action based trading, very nice. The second thing told you is that you do not avoid the data of open interest option chain.
This is very powerful data. Use the combination of both to trade and with this you can get the potential support and resistance level and there you will get the pin and I told you about the pivot points, you will get the pin near the pivot points. So you can trade them and you can find a potential reversal point number one and second we have also talked about Fibonacci, with which again you can take a powerful entry. I hope you found this blog valuable.