Things to Remember Before Enter in Stock

Market

1. Control your Emotion. Trade like a Robot.

Always follow your discipline and Money
Management.
2. Always use 30% Amount in Stock Market.
3. Enter in stock at Best Entry Time.
4. Always Book Profit.
5. Follow Strick Stop Loss.
6. Always Follow the Market Trend.
7. Forget All News, always trade on your Setup.
8. Do not follow any crowd decision.
9. Daily Practice your Strategy, learn new things
time to time.
 Introduction to Price Action

Terms Used
Long – buy
Short – Sell
Bulls – buyers
Bears – Sellers
Bullish – Market up (Uptrend)
Bearish – Market Down (Downtrend)
Risk to Reward Ratio: eg 1:3

Main Points of Price Action Strategy

- Price Action Represents Collective Human Behaviour
- Predict the Next Movement
- Helps to Reduce Noise and False Signals (No
Indicator like MACD etc)

 Smaller Timeframe Have too much noise and also

book loss many times.
 Larger Timeframe have reduce noise and give exact
entry and trend signal.
 Chart- Time is Very Important in Price Action.

Price Action is Applicable to Any Market like

commodity , Currency , Forex etc.
What is Price ?
- Depend upon supply and demand.
- If Demand More, --- Price Increase (Buyer Start
Buying) [ Support Level]
- If Oversupply - Price Falls(More Seller)
[ Resistance Level]

 Market Going Up Means - Demand

 Market Going Down Means - Supply

What is Price Action Strategy Includes?

- Support And Resistance Level
- Candlestick Chart Pattern
- Reversal Point

 Candlestick
Red Candle – Bearish Candlestick (Price open at high and
closed up to low)
Green candle – Bullish Candlestick ( Price open at lower
and closed up to high)
Bullish Candlestick

Bearish Candlestick
In Downtrend Situation – when you get signal that
downward trend is weak --- if happens at support level
---- wait for reversal candlestick. ---Your Entry point.
In Uptrend Situation – when you get signal that up
trend is weak --- if happens at resistance level ---- wait
for reversal candlestick. ---Your Entry point.
 Types of Trends

1. Uptrend – Price Moves Up

2. Downtrend – Price Moves Down
3. Sideway- Price Moves Sideway (Not Any Direction)

 Uptrend
- Price Make Higher High (HH) and Higher Low (HL)
 Downtrend
- Price make Lower High (LH) and Lower Low. (LL)

 In Live Market Situation Looks Like

 Sideway Trend
- Price Stuck between Resistance and Support. Not
move any direction.
 In Live Market Looks Like

Reversal And Continuation

- Reversal Means Trend Reverse.

- If Market Uptrend  Price hit resistance level 
Downtrend Start

Reversal Happens In This Situation..

- Resistance
- Support
- Fibonacci Levels
Continuation
- Means Main Trend
- Eg. If Uptrend - Price Slow DownStuck for
sometime - Again Fall
It means Minor Downtrend in a Major Uptrend Move.
Term Used in Market --- Swing

- If Swing Ends  Market Again Go to Uptrend.

 So, how to Execute Trade in which Time …What is our
Entry Point According to Trend…?

Solution: - Chart Pattern and Candlestick Identification.

See Later…
Swing
 Trade on Support And Resistance Level

Types of Support and Resistance Level

- Horizontal Support and Resistance Level
- Break Support (Resistance Level) and Break
Resistance Level (Support Level)
 - Not All Support and Resistance Level Work...
How to identify perfect support and Resistance level..
Solution:
Large Time Frame gives exact support and Resistance
level.
Time Frame- Daily, Weekly, Monthly.

1.
2.
 Price Channel

Trade on Downtrend Price Channel

Trade on Uptrend Price Channel

Trade on Sideway Price Channel

- Use Normal Support And Resistance Level
 Chart Pattern
 Triangle Chart Pattern
1. Symmetrical Triangle
- Continuation Pattern (Bullish or Bearish)
2. Ascending Triangle
3. Descending Triangle
Before Entering in Any Trade Candle Confirmation
is Compulsory…..

For eg. …

If I see symmetrical Triangle pattern form in daily

Chart - I know breakout will happen- go to 1 hrs
chart and wait for which direction break out happen
either upward / downward-- Enter your Trade…
 - Avoid this type of Long Candle
- Price Anytime to Retest Again

In this type of long candle better to wait for retest the

trend line.
Where to Place Stop Loss??

Practice Work 1.

- Draw Symmetric Triangle Pattern in Any 5 Stock

And Send to me …
 Ascending Triangle

- Bullish Pattern
Stop Loss – Same as Symmetrical Triangle

Target –
1:2:3 times the distance.

 Descending Triangle Pattern

- Bearish Pattern
Practice Work 2
Find 5 Ascending and Descending Triangle Pattern.

Head And Shoulders Chart Pattern.

Coming Soon…
 Head And Shoulder Chart Pattern

- Bearish Chart Pattern

- Found in Uptrend, give signal end of the uptrend.
 How to trade:-

How to Set Target:-

 Inverse Head And Shoulder Pattern

- Bullish Pattern
- Opposite of Head and Shoulder Pattern
Practice Work 3:
Find 5 Head and Shoulder Pattern and 5 Inverted Head
and Shoulder Pattern
Mention Entry, Stop Loss, Target Point.
 Double Bottom Chart Pattern

 Bullish Reversal Chart Pattern

 Starting of Uptrend
 How to Trade
- Trade the breakout of the neckline
- Wait to enter the on retest of broken neckline.
- Buy on bottom 2

Profit Booking / Target

- If buy at bottom 2 , profit booking at neckline.
- After Breakout you buy, set profit distance between
neckline and bottom 2
 Double Top Chart Pattern

- Bearish Reversal Chart Pattern

- Starting of Downtrend
 How to Trade:
- After Breakout
- Sell on Peak 2 (when u get confirmation)
- Wait for retest the broken neckline.
Target :- Same as Previous.

Triple Bottom

- Bullish Reversal Pattern

How to Trade:-
- After Breakout of neckline.
- Wait for retest the neckline
- Enter in 3rd bottom

Target : Same as Previous

 Triple Top
- Bearish Chart Pattern

How to Trade and Profit Booking is Same as Previous.

Practice Work 4:
- Find 5 patterns of double top and double bottom.
- Find 1 patterns of triple top and triple bottom.
 Candle Stick Pattern

Where I used this candlestick pattern ???

Ans: - Support / Resistance

Doji Candlestick

4 Types of Doji Candlestick

- Doji - Either Bullish / Bearish Signal
- Gravestone Doji  Bearish Reversal Signal (found in
uptrend/ Resistance level)
- Dragonfly Doji  Bullish Reversal Signal (found in
downtrend/Support level)
- Long- legged Doji  Bullish/Bearish Signal
 Engulfing Candlestick Pattern

Bullish Engulfing :- Found in Support level / downtrend

Bearish Engulfing:- Found in Resistance level/ uptrend
 Harami Candlestick Pattern

Bullish Harami – Found in Support / Downtrend

Bearish Harami – Found in Resistance/ Uptrend
Practice Work 5
1. Find 3 doji pattern, bullish / bearish enfulging and
harami pattern.

Dark Cloud Cover CandleStick Pattern

- Bearish Reversal Candlestick

- Found in Uptrend / Resistance level
 Piercing Line Candlestick Pattern

- Opposite of Dark Cloud Cover

- found in downtrend/ support
- bullish reversal candlestick
 Shooting Star Candlestick Pattern

- found in uptrend/ resistance level

- bearish reversal candlestick
- Also called as bearish hammer/bearish pin bar.
 Hammer Candlestick Pattern

- Opposite of Shooting Star

- Found in downtrend/support level.
- Bullish reversal candlestick pattern
Practice Work 6

- Find 3 (charts) down cloud cover, piercing pattern,

hammer and shooting star.
 Hanging Man Candlestick Pattern

- Similar Like Hammer

- It found in Uptrend/ Resistance Level.
- Bearish Signal
Railway Track Candlestick Pattern
Spinning Top
Practice Work 7

- Find 3 Hanging Man, Spinning Top, Railway Track

Pattern in Chart.
 Cup And Handle Pattern

- Bullish Pattern
- Focus On Cup And Handle
- Cup on U Shape And Handle in V Shape
Practice Work – 8

- Prepare 4 Chart of Cup and handle Pattern. (In 1

Month Time Period Or Weekly)
- Mention Target And SL.
 Fibonacci Tool

- Price Action Respects Fibonacci Level (90%)

- Fibonacci Tool + Price Action + Reversal
Candlestick.
- Ratio Are 23.6%, 38.2%,50%,61.8%,100%
- Prefer only 50%, 61.8%
- Fibonacci Predict the Area or level in which the price
reverse.
Practice Work 9
- Prepare 5 Chart using Fibonacci + Price Action And
use the Candlestick Reversal Pattern To make a
Perfect Trade.
 MOVING AVERAGE
(Dymaic Support And Resistance)
Downtrend:-
- Identify bearish candlestick pattern like shooting
star, bearish harami, spinning top, dark cloud cover,
hanging man etc.
Uptrend:-
- Identfiy bullish candlestick pattern like pin bar, doji,
piercing line, bullish harami etc….
Practice Work 10:-
Prepare 5 Charts with Moving Avg + Price Action.
 Multiple Confirmation

1. Trendline + Support / Resistance + Fib.Tools +

CandleStick Pattern
2. Moving Avg + Fib Tools + Candlestick Pattern
 MultiTime Frame

Benefits
- Perfect Entry
- Reduce StopLoss
- Better Risk Reward Ratio

Triple Top Pattern + Bearish Harami Pattern

Practice Work 11:-
4 Charts Prepare Based on Multi Confirmation.
 Things To Remember Again

- Levels is Not A Simple Line, Its Important Part of

Price Action. [ Each level tested 2 or 3 times after
breakout]

- Don’t listen to Expert/Analysts [ Be Perfect on Own

Analysis.

- Find your Best Timeframe to Trade. [ I am

Personally Used Multitime Frame According to My
Position like intraday, positional, long term].

- If your Train Miss, Wait for Another Train.

- Wait for Opportunity.

- If you Continue Loose in Market, Break Sometimes

And Practice More.

- If your All Trade Are Winning, Do not Overconfident

and always maintain your risk and reward ratio.

- Take Risk According to your Capacity. Don’t

Compare with Other.
 SUMMARIZE WHAT WE LOOKING INTO CHART

- Pattern Breakout
- Support And Resistance
- CandleStick Pattern

Nothing Else !
 TIME FRAME SELECTION FOR INTRADAY AND
POSITIONAL

Intraday :- 10m, 15m, 30 min, 1 hrs

Positional :- 1hrs, 1day, 1 week

Long Term : - 1 Month

EQUITY : -
DERIVATE: (LOT SIZE AND EXPIRY)
- FUTURE
- OPTION (CALL AND PUT)
- CE AND PE

10600
10500
Nifty @ 10450 --- 100
10300

Strike Price:
Premium: - Instrinic Value (Basic Value) + Time Period

OPTION:-
MOVEMENT

- Budget
- Result
- Buy Back
- Elections
- Big News
 FUNDAMENTAL / LONG TERM INVESTMENT

- Analysis of Company Profile

- Financial Performance
- Study Historical Data
- Financial Parameters

MAIN POINTS
- COMPANY MANAGEMENT
- GROWTH
- QUALITY OF BUSINESS.
Step 1. Find intrinsic value of stock.
Step 2. Find undervalued stock.
Step 3. Check P/E Ratio.
Price to Earning Ratio.
PE = Price of the Stock / Earning per share
Earning per share = Net Income/Total number of Shares
Step 4. Find Growth Rate of Company
- Balance Sheet of Company
- Profit And Loss Statement
- Quarterly Results
Step 5. Use Technical Analysis to perfect entry in stock.
 STOCK SELECTION

- Active by Value
- Top Gainer/ Loser
- Volume High
- Open Interest
- Favourite Stock
- Sector Wise Selection
- Moving Avg
- 52 Week / 52 Low
- Breakout
 Hedging and Trading Equity using Option Data:-

What is Open Interest?

- Open interest is the number of contracts available at a

given STRIKE price.
- Suppose Stock XYZ is trading at 100 points.
- Look At OI Data, you see that OI of 120 Strike Call is
1000.
- OI for the same Call, at the same strike was just 500.
- What is indicates??
- You immediately buy the call. Lot of interest has been
generated suddenly, looks good.
- Think Again

- If someone buying the CALL, then it means someone is

selling to.

- In any market seller comes first. If nobody selling

something, then you cannot buy.

- If suddenly lots of people sold a CALL of XYZ at a

strike of 120 , then what does it mean?

- As a seller of a CALL, they think that price of XYZ will

not cross above 120.

- What it means?
120 of stock xyz is now acting as a ‘resistance’.
- Similar open interest was seen in PUT option, then what
is means?
- The price is going to stay above 120 because seller is
PUT is confident that price will not fall below 120 and
that they are in Profit.
- Price of 120 is now acting as a ‘support’.

REMEMBER THIS POINT:-

- If OI of Call is increasing, then it becomes resistance.

- If OI of Put is increasing, then it becomes support.
- Always look at OI data from seller point of view.
 HEDGING STRATEGY

- The main purpose of future and options was to provide

traders a tool to hedge their position. So they will cover
if the market is moving in opposite direction.
- When you trade in equity, also buy take a reverse
position in future or option markets.

Cont. with previous example

Suppose, stock XYZ is trading at 200 points.

This is the beginning of the month.

PUT option of STRIKE 100 points is trading at just a

premium of 2.
PUT option of STRIKE 150 is trading at a premium of
5.
PUT option of STRIKE 250 is trading at a premium of
55.

You don’t need to spend a lot of money to hedge your

position. Its just for a safety. In case the stock start
falling, so you can cover your loss.

- If you are “Buyer of PUT” , then you are in profit if the

spot price goes below STRIKE price.
Based on this its safe to conclude that both the PUT options
given above (100 and 150), have no profit (Intrinsic value) in
them.

Because this is the beginning of the month, and there are days
left to expiry, the only value you are
seeing is the "Time value."

And we already know that as we get closer to expiry, the

Time value will keep decaying (vanishing)

However, the third PUT option, i.e 250, has both profit and
time value in it.

how much profit value is in it?

PUT Profit = STRIKE – SPOT

Profit = 250 (strike) - 200 (SPOT, current price) = 50

So in a premium of 55, only 5 is the time value which will

vanish, but 50 is the profit value, which will increase as the
stock keeps falling.

LOT size is 100, so you'd need only Rs 5500 to buy one lot.
This is the maximum you'll lose, because
you are a buyer, isn't it?

Now lets assume if by the end of the month the stock is at

270, then how much did you make, and how
much did you lose, equity and option together?
You made a profit of 70 points per share in equity. You had
100. Total = 7000

You made a loss of 5500 in the PUT option (entire premium),

so total profit = 7000 - 5500 = 1500

However, what if the stock fell when you bought it?

Assuming its trading at 150, how much did you make or lose?

You made a loss of 50 points in equity per share. You had

100. Total = 5000

You made a profit of 100 points in the PUT option.

Time value = 0 (at expiry) It was 5 when you bought the

option.

Profit value = Strike - SPOT = 250 -150 = 100

Lot size is 100, so total profit = 100 * 100 = 10,000

Profit of PUT - Loss of equity = 10,000 - 5000 = 5000 total

profit!

But wait, its not that simple. You also need to subtract your
investment from the profit you made in the
PUT option. Your total investment was 5500 ( 55 rupees x
100 shares )

So your final profit or loss would be:

5000 (profit from PUT) - 5500 (your investment) = -500
(Loss)
You still made a loss, but instead of making a loss of 5000
rupees (stock coming down from 200 to 150),

you just made a loss of rupees 500 only.

This is why you hedge, and at the time of hedging, you

calculate the total amount of money you might
lose if the worst happens.

As a good practice, when hedging, you do not select a strike

which is very far away from current price.

Cause if you select a strike which is very far away, then that
option won't give you any profit, plus you made a loss in
equity. This doubles your loss instead of cancelling it.

Its Only a Math Calculation.

You'd say that you can just go and apply this strategy in
any stock. NO, a big NO.

What would have happened if the stock had settled at 240? Do

the math.

Your loss would have been more than your profit, thus
resulting in a total loss.

Find out the levels that a stock can

rise to. Find out where it falls. Concentrate on chart patterns.
Buy when a stock is at a support and is showing signs of
recovery.

And then hedge using your math skills to calculate your profit
and loss at different STRIKE prices.

You saw that the PUT of 100 is trading at a premium of 2,

extremely cheap.

With a lot size of 100, you need only Rs200 to take a position
here. But would that do any good to you?
What will happen to this PUT at expiry?

Time value = 0 (at expiry)

Profit = 0 i.e STRIKE - SPOT = 100 - 150 = -50 = 0

Total = Profit + Time = 0 + 0 = 0

And on top of this, your loss in equity = 5000, so total loss=

5200
Instead of a profit of 5000 you made a loss of 5200 because
you hedged in the wrong STRIKE price...

This is the biggest mistake most people do when trading in

options. They go for cheap.

This is the reason why you need to study charts. To figure out
the levels of support and resistance.

Instead of buying the equity itself, you could have bought a

CALL option, and hedged your CALL using a
PUT option. The most important thing is to select the right
STRIKE price.

And as I already pointed out, you can always use Open

Interest data to figure out what the market is
thinking. Where does market see a support, and where does it
see a resistance.
ASHOKLEY in our example to explain how the method
works.

Current price of Ashok Leyland, as on 24 March, 2017 is: 87

rupees

LOT size of ASHOKLEY is 7000

Because there is no STRIKE of 87 itself, so we'll look into

STRIKES closest to 87, which are:
STRIKE of 90
STRIKE of 85

You already know that if you sell an option, you can make
unlimited loss. However, if the option is covered, meaning
you actually hold the equity, then the loss can be reduced to a
negligible point.

CALL option of 90.

Premium for CALL is 0.60 paisa

Its an ITM sell CALL option,

As a CALL seller, you make money if price stays below your
STRIKE,

As a buyer of a CALL you are making a loss, but you are the
seller here.

So as long as the price stays below 90 in this case, you make a

profit because you get to bag the premium paid to you by the
buyer of the CALL.
However, if the price moves above 90, you start making a
loss, and this is what we'll bring down.

Cover the loss by buying equity of ASHOKLEY as soon as

we sold the option.

1. Sold a CALL option of ASHOKLEY at a STRIKE of 90

2. Bought the stock itself from equity, same amount as LOT

size, at a price of 87/-

Now suppose if the stock went up and at expiry it closed at

92. What will happen?

You made a 2 rupee loss in the CALL you sold, but you made
a profit of 5 rupees in the equity.

Net profit: 3 rupees!

And that is per single share. Remember the LOT size was
7000 shares!

So total profit is 21000 rupees per LOT

What if the stock fell instead of moving up?

This is the third point in this strategy.

We know that we'll profit if we had "bought" a PUT option.

This time STRIKE price of 85

The Premium of PUT option is 0.45 paisa for a STRIKE of 85

So upto now we did:
 1. Sold a CALL option of ASHOKLEY at a STRIKE of 90

2. Bought the stock itself from equity, same amount as LOT

size, at a price of 87/-

3. Bought a PUT option of ASHOKLEY at a strike of 85

If the stock would have moved up like we first saw, then this
last PUT option will become zero, isn't it?

Its a buy PUT. We profit if stock price goes below our

STRIKE, isn't it? In this case 85.

So if stock moved up to say 92, then our total profit or loss

balance sheet looks like below.

1. Sell CALL = 2 rupees loss

2. Equity = 5 rupees profit
3. buy PUT = 0.45 paisa loss (premium was lost because PUT
is zero now)

Net profit: 5 - 2 - 0.45 = 2.55/- per share

Total LOT size was 7000 so net profit:

7000 * 2.55 = 16,750/- rupees per LOT!

Coming back to our question. What if the price fell? Say for
example, at expiry the price was 80 rupees?

What will profit loss balance sheet look like?

1. Sell CALL becomes zero for buyer. You get full premium
= 0.60
2. Equity is in loss = 7 rupees (you can hold the equity, no
worries)

3. Buy PUT is in profits = 5 rupees

Net = 5 (put) + 0.60 (call) - 7 (equity) = -1.40/-

7000 * -1.40 = 9,800/- if you sell the equity, which you do not
have to.

You can hold equity for as long as you want, isn't it?

And if you do not sell the equity, then this is what balance
sheet looks like

1. Sell CALL = 0.60 profit

3. Buy PUT = 5 rupees profit

Net profit: 5 + 0.60 = 5.60 rupees per share!

7000 * 5.60 = 39,200/- per LOT!
NOTHING IS FULL PROOF IN STOCK MARKET

But nothing is full proof in stock markets. SO where do you

make a loss?

If the prices goes nowhere.

Say it only went to 86 rupees.

Profit loss balance sheet:

1. Sell CALL = profit of 0.60 paisa

2. Equity = loss of 1 rupee

3. Buy PUT = loss of premium = 0.45 paisa

or if you do not sell the equity:

1. Sell CALL = profit of 0.60 paisa

2. Buy PUT = loss of premium = 0.45 paisa

Total = 0.60 - 0.45 = 0.15 paisa profit

What kind of profit is that...

You ended up paying more brokerage than you made in
profits...
Imagine one more situation.

Instead of buying a PUT of 85 Strike, what if you bought the

PUT of Strike 90 itself?

Cost of that PUT is over 3 rupees.

Using the balance sheet above, calculate profit and loss in

each case.

Calculate for both the cases i.e when stock closed at 92, and
when it closed at 80

Stock closed at 92
1. Sell CALL = 2 rupees loss
2. Profit in equity = 3 rupees
3. Premium lost in PUT = 3 rupees loss

Total loss = 2 rupees per share = 7000 * 2 = 14,000/- rupees

per LOT

Just because you selected the wrong STRIKE price to buy the
PUT. Instead of making a profit of 3 rupees
per share, you instead made a loss of 2 rupees per share...

Whenever you are buying options, spend only what you are
ready to lose. Do not lose your capital in greed.
REMEMBER THAT POINT

Always remember. When buying options, spend only what

you are "ready" to lose. Not what you are ready to earn.

Loss of a buy option premium should not affect your total

profits too much.
GLOBAL MARKET

USE MONEY CONTROL APP

- SGX NIFTY [GLOBAL INDICES]

- BRENT CRUDE / CRUDEOIL

CRUDE INCREASE

SECTOR TO FOCUS

- OFFSHORE COMPANY
- OIL PRODUCER COMPANY
- DRILLING PIPES

STOCK – HOEC, DOLPHIN OFFSHORE, ABAN

OFFSHORE, JINDAL SAW, JINDAL DRILLING,
ONGC, OIL INDIA,

DECREASE IN CRUDE PRICE

SECTOR – OMC (OIL MARKETING COMPANY)

- TYER
- PAINT
- AVIATION
- PACKAGING COMPANY

STOCK – HPCL, BPCL, IOC, ASIANPAINT, CEAT,

APOLLOTYRE, JETAIRWAYS, INDIGO, ETC.
IMPACT OF DOLLAR

- DOLLAR INCREASE

- METAL SECTOR DOWN,

- EG. VEDL, JSWSTEEL, TATASTEEL, SAIL,

HINDALCO ETC.

- IT STOCK POSITIVE EFFECT

- EG. TCS, WIPRO, INFY ETC.