Market Overview: Nifty 50 Futures
Nifty 50 Trading Range and inside bar on the weekly chart. The market this week had a strong bear close, but it is still trading inside a range. Because of this, traders can expect quick reversals, which also implies failed breakouts. On the daily chart, Nifty 50 has recently been forming many surprise bars, but these surprise bars were not followed by strong follow-through bars. This is a sign of a trading range, so traders should manage their trades accordingly, assuming the market is still trading inside a range.
Nifty 50 futures
The Weekly Nifty 50 chart
- General Discussion
- Traders who entered a short position on the previous week’s close or this week’s open may continue holding their positions until the market reaches near the trading range bottom or the bottom trend line of the bull channel.
- Traders who are not holding any position may enter a short position on the next open, with a wide stop loss at last week’s high, or with a small stop loss at this week’s high.
- Deeper into the price action
- There are two major ways to place a stop loss. One is placing a conservative, wide stop loss, and the other is placing a tight stop loss.
- Consider we enter a short position on the next open, as we think that since the market is trading near the trading range top, chances are that it will go back near the trading range bottom.
- Now we place a wide stop loss for this position. We set our stop a few ticks above the previous week’s high. If we had set a tight stop loss, we would simply wait for the market to either reach the profit target or hit the stop.
- But when you place a wide stop loss, you do not just sit and wait for the market to hit your stop loss. Instead, you manage your position. When you have a wide stop loss, chances are that the market in most cases won’t hit your stop in just one bar. It would take at least a few bars to reach your stop. This is not the case when setting a tight stop.
- So, when setting a wide stop, you get to see developing price action. If you think that the price action is now signalling something different from the time you entered the trade, then you exit early before the stop gets hit.
- Whenever you set a wide stop loss, you will notice that in almost all cases, you will not take the original stop loss. Instead, you will exit early (booking a smaller loss than planned).
- However, adding this trade management part brings more discretion into the trade. So, if you are someone who has just started trading, then initially going with tight stops makes sense. As you gain more experience, going for wide stops makes more sense.
- Patterns
- The market is also trading inside a broad bull channel, which is almost as flat as a trading range. On the breakout of this channel, traders may expect the market to make a measured move up/down.
The Daily Nifty 50 chart
- General Discussion
- Traders who are in a short position may continue holding their positions with a stop at the nearest swing high. Since this would be a wide stop loss, traders may manage their positions.
- Traders who are not in any position may wait for the market to give a pullback, and then enter a short position once the market gives a strong bear close again.
- Deeper into price action
- Notice that the overall price action on the daily chart is trading range price action, so traders should expect quick reversals and V-shaped moves.
- Entering a position near the middle of the range is difficult, as the price action is often confusing. Traders may wait for the market to reach either end of the range before entering a new position.
- Patterns
- The market is forming surprise bars. Usually after surprise bars, the market gives a measured move up or down depending on the follow-through bar of the surprise bar.
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