COMPLETE GUIDE TO READ EVERYDAY BEFORE TRADING

AS TRADERS WE TRADE P R I C E . WE DO NOT TRADE COMPANIES.

AS DAYTRADERS, WE ARE JUST CONCERNED WITH TRADING PRICE OF XYZ

STOCK, DO NOT ATTACH EMOTIONS WITH ANY COMPANY.

WHETHER IT IS RELIANCE, PRESTIGE, TUKARAM OR GANGARAM, WE ARE

ONLY CONCERNED WITH EARNING PROFITS THROUGH SIGNIFICANT PRICE
MOVEMENTS KEEPING A GOOD RISK TO REWARD RATIO.

Q. WHAT MAKES A SIGNIFICANT PRICE MOVEMENT IN ANY STOCK?

A. THE ONLY REASON BEHIND A SIGNIFICANT PRICE MOVEMENT IS
IMBALANCE BETWEEN DEMAND & SUPPLY QUANTITY.

IF DEMAND EQUALS SUPPLY, PRICE WILL NOT CHANGE.

HIGH IMBALANCE – BUY AND SELL QTY SIGNIFICANT PRICE MOVEMENT

Q. WHY ARE THE PRICES OF AC, HIGH IN SUMMER & LOW IN WINTER?
A. IN SUMMER, HUGE DIFFERENCE BETWEEN DEMAND AND SUPPLY, MORE
DEMAND, LESS SUPPLY. JUST HAVING MORE DEMAND MEANS NOTHING,
SUPPLY HAS TO BE SHORT AS WELL.
Q. IS DEMAND & SUPPLY REFERRED TO TOTAL QUANTITY OR NUMBER OF
BUYERS & SELLERS?
A. DEMAND IS TOTAL BUY QTY NOT TOTAL NUMBER OF BUYERS. ONE
BUYER CAN BUY 1 LAC QTY & FIFTEEN SELLERS MAY NOT BE ABLE TO
SELL 60 THOUSAND QTY. TOTAL NUMBER OF BUYERS & SELLERS IS
IMMATERIAL, WHAT IS IMPORTANT IS THE QUANTITY THEY TRADE .

Q. WHO ARE THE TWO ACTIVE TRADERS IN THE INTRADAY MARKET?

A. THERE ARE ONLY TWO TYPES OF TRADERS IN THE STOCK MARKET,
RETAIL & INSTITUTION.

Q1. WHO BUYS LARGE QUANTITY?

Q2. WHY THEY BUY EVEN AT INCREASING PRICES?

A1. IF SOMEONE IS BUYING 50 LAC QUANTITY OF A STOCK PRICED AT

RS 500, TOTAL VALUE BECOMES 250 CRORES.
CAN A COMMON RETAILER BUY THIS MUCH QUANTITY???
ONLY I N S T I T U T I O N S BUY THIS KIND OF A QUANTITY.

A2. THE INSTITUTION IS APPROACHED BY A COMPANY, THE

INSTITUTION DOES NOT APPROACH ANY COMPANY. INSTITUTIONS HAVE
LARGE LIQUIDITY WHICH IS NEEDED BY COMPANIES FOR THEIR
BUSINESS EXPANSION
THE COMPANY APPROACHES AN INSTITUTION AS THEY NEDD
INVESTMENT TO GROW TO SPREAD BUSINESS AND MAKES THE
ISTITUTION FAMILIAR WITH
(A) CURRENT BUSINESS SITUATION
(B) BUSINESS EXPANSION PLANS
(C) TRUE BALANCE SHEET OF PAST QUARTERS
(D) KNOWLEDGE OF UPCOMING PROJECTS
(E) PARTNERSHIP PROPOSAL IN PROFITS

NOW, THE INSTITUTION DOES CLEVER RESEARCH ON THE COMPANY & IF

IT IS CONTENT, IT INVESTS IN THE MANAGEMENT & BUSINESS OF THE
COMPANY AND NOT IN PRICE. IT ONLY GAUGES MANAGEMENTS
INTENTIONS.

SO, THE INSTITUTIONS DO NOT BOTHER WITH INDICATORS,

FUNDAMENTALS, BALANCE SHEET, NEWS CHANNEL DISCUSSIONS &
WITHOUT WASTING ANY TIME, INSTITUTIONS STARTS BUYING & AN
IMBALANCE IS CREATED DUE TO THIS & THE STOCK STARTS RISING!
ONLY THREE SCENARIOS CAN OCCUR IN THE MARKET:

1. TRADE BETWEEN RETAIL TO RETAIL

i. BALANCED TRADE
ii. SMALL CANDLES FORMATION
iii. LOW VOLUME
HOW CHART WILL LOOK LIKE? SIDEWAYS TO RANGE BOUND

2. TRADE BETWEEN INSTITUTION TO INSTITUTION

i. BALANCED TRADE
ii. SMALL CANDLES FORMATION
iii. HIGH VOLUME
i HOW CHART WILL LOOK LIKE?SIDEWAYS TO RANGE BOUND

3. TRADE BETWEEN INSTITUTION AND RETAIL

i. HIGHLY IMBALANCED TRADE
ii. BIG CANDLES FORMATION
iii. HIGH VOLUME
HOW CHART WILL LOOK LIKE? TRENDING PRICE MOVEMENT
***************************************
CHECKLIST WHILE SCANNING PERFECT SETUPS
***************************************
PHASE I - STEPS 1,2,3

MOTIVE - TO IDENTIFY STRONG INSTITUTION

STEP 1. IDENTIFYING INSTITUTIONAL VOLUME

_________________________________________
THE MOMENT INSTITUTIONAL VOLUME WILL APPEAR, ALL PREVIOUS
RETAIL VOLUME BARS, ABOUT 70 – 80%, MAXIMUM PART OF THE PAST
VOLUME, WILL START TO LOOK VERY TINY.
MAKE SURE TO COMPARE PAST 3-4 DAYS OF INTRADAY VOLUME
DO NOT SHORTLIST ANY STOCK UNTILL OUTSTANDING VOLUME

STEP 2. KEY LEVELS

____________________
WE PLOT KEY LEVELS ON THE HIGH & LOW ON THE CANDLE GENERATED
DUE
TO FIRST INSTITUTIONAL VOLUME BAR OF THE DAY.
WE ARE NOT AT ALL CONCERNED WITH ANY CANDLES PRIOR TO THIS ONE
GENERATED DUE TO INSTITUTIONAL VOLUME & OUR LIFE REVOLVES
ONLY
AHEAD OF THE NEWLY FOUND PRESENCE OF THE INSTITUTION.
OPPOSITE SIDE KEY LEVEL SHOULD NOT BE BREACHED BEFORE
COMPLETION
OF ALL 7 STEPS OR IT INVALIDATES THE SETUP BECAUSE INSTITUTION
BECOMES WEAK OR EXHAUSTED.
LATER ON, ONCE A NEW CANDLE IS GENERATED DUE TO INSTITUTIONAL
VOLUME, WE CONTINUE TO OBSERVE IF 7 STEPS COMPLETE WITHOUT
BREACH
OF OPPOSITE KEY LEVEL.

STEP 3. VALIDATION OF KEY LEVELS

________________________________
THE MOMENT THE STOCK BREAKS A KEY LEVEL AND IN SAME DIRECTION
OF
PRICE MOVEMENT, MORE INSTITUTIONAL VOLUME BARS FORM, IT
VALIDATES
THE FACT THAT INSTITUTION IS STRONG & WILLING TO BUY MORE.
PHASE II - STEPS 4,5,6

MOTIVE - TO CONFIRM THAT COUNTER ATTACK IS DONE BY

RETAILERS

STEP 4- RETAIL CANDLE / STEP 5- RETAIL VOLUME/ STEP 6 SIDEWAYS TO

RANGE BOUND MOVEMENT
_____________________
RETRACEMENT SHOULD BE WITH SMALL CANDLES WITH SMALL VOLUME
BARS AND SIDEWAYS TO RANGEBOUND PRICE MOVEMENT.

_____________________
THE RESPECTIVE VOLUME OF RETAIL CANDLES CAN BE DOUBLE TO
TRIPPLE BUT NOT HUGE. IT IS A MISTAKE TO THINK THAT ALL
CANDLES OF RETRACEMENT SHOULD BE WITH RETAIL VOLUME. WE ONLY
CONSIDER WHETHER MAJORITY OF THE CANDLES ARE RETAIL AND
SMALLER IN SIZE.

______________
THE ANGLE OF RETRACEMENT OF CANDLES SHOULD BE SLANTING
SMOOTHLY & NOT STIFF LIKE AN “A” FORMATION.

INSTITUTIONS MANIPULATES CHARTS WITH THE HELP OF INDICATORS IN

ORDER TO GENERATE SUPPLY SO THAT THEY START ACCUMULATION
BEHAVING LIKE A RETAILER, BUYING ON “LIMIT ORDERS” NOW AS
OPPOSED TO “AT MARKET ORDERS” EARLIER & THAT IS WHY WE GET
SMALL CANDLES, SMALL VOLUME & SIDEWAYS TO RANGEBOUND
MOVEMENT.

SO ITS STILL NOT RETAIL TO RETAIL DEALING BUT RETAIL TO

INSTITUTION WHERE IN INSTITUTION IS FAKING AS RETAIL.
PHASE III - STEP 7

MOTIVE - TO CONFIRM THAT INSTITUTION IS NOT WEAK OR

EXHAUSTED

STEP 7. REVERSAL CANDLE

_______________________
STOCK SHOULD GENERATE REVERSAL FROM BOTTOM OF RETAIL
RETRACEMENT BELOW LOWER LOW AND THE ANGLE SHOULD BE
VERTICAL
FORMING LIKE AN “N”. IT IS A MISTAKE TO CONSIDER BREAKING HIGH
AS A REVERSAL, WE WOULD PREFER A REVERSAL FROM THE BOTTOM TO
REALISE THAT RETAILERS AT THAT LEVEL GOT EXHAUSTED.

DURING ACCUMULATION (PHASE II), IF SUPPLY GETS EXHAUSTED, THEN

INSTITUTION WILL NOT HAVE FURTHER SUPPLY TO ACCUMULATE AND
HENCE IN ORDER TO FULFILL REMAINING QUANTITY/DEMAND, IT HAS TO
BUY ON MARKET PRICE ONCE AGAIN AND WE WILL GET INSTITUTIONAL
VOLUME AGAIN WITH THE PRICE MOVING IN THE SAME ORIGINAL
DIRECTION INTENDED BY THE INSTITUTION. IT REVERSES RETAIL
PRICE MOVEMENT AND THAT CANDLE IS A REVERSAL CANDLE & THIS
CANDLE WILL USUALLY BE BIGGER THAN THE RETAIL FORMED CANDLES.

RISK MANAGEMENT

THE MOST IMPORTANT PART OF ANY STRATEGY IS RISK MANAGEMENT.

THIS WILL DECIDE WHETHER YOUR ACCOUNT WILL BE IN RED OR GREEN
AT THE END OF THE MONTH.

ENTRY – ONCE REVERSAL CANDLE FINISHES ENTER

STOPLOSS – NEAREST LOW TO REVERSAL CANDLE

TARGET - BOOK 50% QUANTITY AT A RISK:REWARD RATIO OF 1:2

BOOK REMAINING 50% AT GREATER RISK:REWARD OF 1:6
OR 1:10 OR

EQUAL RISK OF 2% ON EACH TRADE (ON CAPITAL, NOT EXPOSURE)

POSITION SIZE – RISK PER TRADE / STOPLOSS = TRADABLE QTY

DATA MANAGEMENT – 1 FOLDER OF TARGET HIT & 1 FOLDER OF

LOSS HIT CHARTS. MAINTAIN AN EXCEL FOR P&L
 KEEPING MINIMUM 1:2 R:R AND BOOKING 50% POSITION ON 1:2
TARGET ENSURES PROFIT IS GUARANTEED AS EVEN IF STOPLOSS
HIT WITH HALF QTY, ALREADY CASHED HALF OF PROFITS.

DRAW THIS IMAGE DAILY BEFORE 9 AM, SO THAT IT CAN CREATE

PERFECT PICTURE IN YOUR MIND

ALL THE BEST