iCharts Discussions

[zhkzhk]

Hi Traders,

I recently came across this Forum. Going through it I noticed that most of the discussions are on the Indian Financial Stock Market. I am originally from India, presently living in U.S since 1979. I mostly follow and trade the U.S. market. I mainly trade on Price Action, which I call Zone Base Trading. I have been trading since 1984, started with all kinds Indicators, and my charts started looking like spaghetti. Indicators really did not help me. I finally came to the conclusion that all indicators are lagging and really do not help me in my swing trading, where I think most money can be made. I day trade US futures like S&P, Russell, and Euro. Recently I have developed an interest in the Nifty.

Let me explain my Zone Base Trading.
I would like to introduce a technique which I have known for a while, which I call "Zone Base Trading". This involves Risk Management, technical analysis which consists of price action, higher highs and lower lows, and volume analysis. These zones are essentially price zones where multiple buy/sell levels are determined. This technique is only for intermediate and advanced traders who would like to swing trade rather than day trade, in higher time frames. Traders should select these Zones on individual Risk Tolerance/Management. As far as taking profits its up to the individual risk tolerance.

As far as the US and Indian market goes, I am bearish long term with up thrust bounces along the way. Investors can short the market in these areas of the up thrust bounces.

My goal is to show stocks which have been identified in these price zones to swing trade.

I want to present a few Indian stock showing multiple buy/sell zones. I have selected certain Indian stocks to start from the BSE. Since I am not familiar with the Indian market, traders can write on the forum if they want me to analyses their stock.

Since I have the stocks in an excel format on Google Doc. I am providing the link:

https://docs.google.com/spreadsheet/ccc?key=0AsOOAWEc03LDdG9zTDF1MUZvcmF2UEFRQzNuMDkzb0E&hl=en_US#gid=0



Explanation of Zones:

* SELL ZONE: This is the price range DEPENDING ON YOUR RISK TOLERENCE you should place a sell limit on the stock, or buy a ATM / ITM put option and DELTA > 0.70 (ONLY for option traders)

** BUY ZONE: This is the price range DEPENDING ON YOUR RISK TOLERENCE you should place a buy limit on the stock, or buy a ATM / ITM call option and DELTA > 0.70 (ONLY for option traders)

*** VOLUME: When Buying or Selling the stock you should also use the volume. For example if the stock comes in the Buy/Sell zone price, and you would like to take a trade (depending on your risk tolerance) you should also check what Volume the stock is showing. I would recommend taking a trade after the market has been open for 3.5 hrs. The market is open 6.25 hrs.daily. If the volume column shows < 3.0 lakhs, you first divide 3.0 by 6.25 which daily hrs. = 0.48 Lakhs per Hr. The stock should average 0.48 Lakhs/Hr. in order to get 3.0 Lakhs for the whole day. So when you are looking for a trade around 3.5 hrs after the market open, in order to calculate the volume at that time you take 0.48 * 3.5 = 1.68 Lakhs. So when you are taking a trade around 12.45 am you should also check if the volume is around 1.68 Lakhs and not more, allowance of +/- 1%. If the volume is greater by 4% be cautious when you take the trade. This is because if you sell the stock, and more volume is coming in the stock that means that there are more buyers than sellers. Reverse the thought process for Buying.

[vinay28]

an immediate doubt : is volume of 3 lac per day a must? this is because volume for small value stocks can be in millions while that for large value stcoks will be in thousands only

[zhkzhk]

[zhkzhk]

Hi Vinodz,

Thanks for your question on Nifty Zone trading,

I had stopped posting any more because I found that there was no interest in my strategy.

But I can help you on the Nifty. or any stocks of interest.

Are you talking about trading nifty Futures? Or just buying calls and puts on the Nifty, utilizing zones.

I also have a strategy where you can buy a stock and then hedge it with a put option to protect your downside.

I do not get data for Options on Nifty as yet since I am in the US. But I am trying to get a Indian broker for option data.

Regards
Zarir

[jyothi2011]

there is nothing in the sheet sir

[zhkzhk]

jyothi2011,

Yes I took it out because I felt that there was no interest. Since you inquired I will over the weekend have a few stocks.

Zarir

[amitkbaid1008]

Dear zhkzhk

How to identify these buy and sell zones and also as you mentioned how volumes can be used. Because what you said is also true for its reverse. If volume is more and you are buying it does not necessarily mean that more people are selling because may people are also buying.


As you said that no interest in your strategy is due to non-explanation of strategy. It's just like saying "I have a strategy"

[opportunist]

[mdismail777]

Dear zhkzhk, i feel there is some good analysis involved in your trading strategy. i am interested.i am staying in dubai.My email id is [CONTENT REMOVED BY ADMIN].

[kamal.icharts]

Dear Member,

Email address or any contact information is not allowed. Please go through the terms and conditions, mentioned at http://www.icharts.in/forum/forum-usage-rules-und-regulations-t2771.html and ensure you abide by it.

Please use the FORUM platform to communicate, learn and teach, irrespective of your location.

Thanks for understanding.

Kamal

[svkum]

zhkzhk
IS this post in forum a time bound post , if no response , withdraw. its like exam paper , time over and ,ans sheet here excel sheet, taken immdty.
learning cant be time bound , unless its a valuable thing , may be chraged afterward.
normally many US based strategist do this , they attract many with half information, and take out the weapon of fees at 11th hr.

so if yu are really interested to explain , yu wd have explaine this on charts (w/o indicators)
otherwise its a hollow thing .
and this doesnt work in india , may be in usa.

[zhkzhk]

Hi Traders,

I have recently got a few questions on the Zone Trading technique. In my first post I wrote “Let me explain my Zone Base Trading.
I would like to introduce a technique which I have known for a while, which I call "Zone Base Trading". This involves Risk Management, technical analysis which consists of price action, higher highs and lower lows, and volume analysis. These zones are essentially price zones where multiple buy/sell levels are determined. This technique is only for intermediate and advanced traders who would like to swing trade rather than day trade, in higher time frames. Traders should select these Zones on individual Risk Tolerance/Management. As far as taking profits it’s up to the individual risk tolerance.”

To make it clear, these Zones are essentially Resistance (Sell zones) and Support (Buy zones) areas, where most of the trading has taken place. The key is to fine tune these areas with lots of screen time. The Sell and Buy zones are BALANCE areas.

Example of Balance and Imbalance. Assume that vegetables cost you today Rs.100. For a few more days the vegetables are still selling between Rs.100/120. The next day there are only few customers, than the previous days, and they feel that Rs.115 is expensive, and they don’t buy. Don’t you think that the vendor will reduce his price (say to Rs.80) to move his inventory especially if he has lots to sell?, otherwise it could go to waste the next day. Rs.100/120, was the balance zone, price, as soon as the vendor reduces his price to Rs.80, its out of balance (Imbalance)

Stocks also behave that way, because humans make it into an emotional trade, there has to be IMBALANCE for the prices to move either up or down. If there is BALANCE price will not move. There will be no market.

If price is going into a resistance sell zone area, before you take the trade you need to locate the lowest volume of an up day in the resistance zone area. (See charts) and lets assume the volume is 3.0 lakhs. Note how many days did the stock trade in the zone. The more times it trades in that area shows strong resistance, it shows that there is BALANCE in the zone area. Meaning traders were comfortable buying and selling at these prices with each other and no one willing to bid higher at that time. IMBALANCE will push the stock price away from the Balance zone area either above or below, depending on the higher or lower bid. In order to move the price above or below the zone area IMBALANCE has to occur. When imbalance occurs the stock price will got up to the next resistance sell zone, or down to the next support buy zone.

See charts: Examples of Buy and Sell Zones

https://docs.google.com/leaf?id=0B8OOAWEc03LDNDZjYjQyY2UtNGEwMC00MzBmLWFjYzYtYzhhMGJiNjhjZjc0&hl=en_US

https://docs.google.com/leaf?id=0B8OOAWEc03LDN2Q4Y2E2ZjItY2VjYy00ZmE3LWIwMzQtYzAwZjBhODc1YzVm&hl=en_US








What makes a Zone?

If traders decide that a certain stock price has gone too far up (expensive) they are not going to buy, some will buy thinking the stock could go up. The buying and selling at that level will finally be over and new buyers will not bid the stock up any more this occurrence makes a resistance sell zone. They are going to wait and buy at a price they perceive is low enough.
The buyers of a stock keep biding the stock up because they perceive the stock will go higher in the future. At same price level other buyers think that it too expensive and will not bid the stock higher. The stock then moves in a price range up/down which forms a resistance area (sell zone). If there is no interest to bid the stock up, the traders holding the stock at that price will panic and start taking profits (meaning selling). If there is further no interest in the stock the previous buyers will drop there price in order to get whatever profit they can. If prices keep dropping they finally panic and sell to the buyers who are waiting to buy at their perceived low price in the Support area “Buy Zone”.
These zones I have an interest to buy. I have the patience to buy and sell where I have an EDGE in the market; to me it’s very important to have an edge in the market. Without an Edge you can’t have consistence in your trading.

Resistance is a previous price zone where most traders perceive that the price was too expensive, and do not want to bid any higher. As soon as traders do not want to bid higher price, meaning no demand. Price comes down. (Imbalance occurred)

Support is a previous price zone where most traders perceive that the price was too cheap, and want to bid higher. As soon as traders want to bid higher price, we got demand in the stock. Price moves up (Imbalance occurred).


Explanation of Zones:

* SELL ZONE: This is the price range DEPENDING ON YOUR RISK TOLERENCE you should place a sell limit on the stock, or buy Put Options Stk. Price mid zone area, ATM / ITM with DELTA > -0.75 (ONLY for option traders)

** BUY ZONE: This is the price range DEPENDING ON YOUR RISK TOLERENCE you should place a buy limit on the stock, or buy Call Options Stk. Price mid zone, ATM / ITM with DELTA > +0.75 (ONLY for option traders)



Volume Analysis:

VOLUME: When buying or selling the stock you should also use the volume. Volume is an important factor while taking trades when the price comes in the zone area. For example if the stock comes in the Buy/Sell zone price, and if you would like to take a trade (depending on your risk tolerance) you should also check Daily Volume in the stock at that time. I would recommend taking a trade after the market has been open for at least 3.5 hrs which give sufficient time to develop volume. The market is open 6.25 hrs.daily. For example if you are SELLING a stock, locate the lowest volume of an up day in the resistance zone area. (See chart) and assume volume = 3.0 lakhs. The Volume of daily price bar coming into the resistance zone should be between 8 to 10 percent less than 3.0 lakhs. Example 3*.08 = 2.76 lakhs. Then first divide 2.76(vol) by 6.25 daily hrs. = 0.44 lakhs per Hr. The stock should average 0.44 Lakhs/Hr. approximately, in order to get 3.0 Lakhs for the whole day. When you are looking for a trade around 3.5 hrs after the market open, in order to calculate the volume at that time you take 0.44 * 3.5 = 1.54 Lakhs. If taking a trade around 12.45 am check if the volume is around 1.54 Lakhs and not more, allowance of +/- 0.50% is ok. If the volume is greater by 2.75% of the volume shown (e.g. 3.0*2.5% = 3.08 lakhs) you should not take the trade. Volume is an important factor while taking the trade when the price comes in the zone area. This is because if you are selling the stock, you do not want volume greater than 3 lakhs coming in the stock in that zone area. Generally more volume could means that there is more interest in the stock, especially at the highs. If more buyers are bidding the stock could go higher, more often especially the next day because the new buyers will see that the stock closed at its high, and if there is greater volume then the example of 3.0 lakhs, means more volume is bidding the stock up, buyers are getting interested in the stock. Once the stock has gone beyond the high of the zone area and missed selling at that level, its best not to chase the stock, let it move up to the next sell zones and evaluate the price/volume at that time.


I hope this helps. If anyone is interested in any stock please give me the name and symbol and I will explain graphically on the chart the zone areas.

[zhkzhk]

[sandew]

ZhkZhk,

You indeed have a nice set up to play
Do you wait on weekly / daily chart for trade opportunity. On these time frames the opening will be few and far. How many trades on daily charts you get in a month ?

For options data you may visit OptionsOracle to get the informaton

Keep posting your charts

[zhkzhk]

Hi Sandew,

Thanks for kind words.
Time is not an issue in my trading plan. Yes the trades may not come as often as you want. There could be at least 50 to 100 stocks you could be looking. And I would like traders to give names of stocks they would like me to look at.
As mentioned I trade only when I have an Edge. Edge to me is having the odds of WINNING in my favor, when I place a trade.
Without an edge you could breakeven or even have a loss in your portfolio.

Therefore I like my "EDGE".

Sometime you can get Buy and Sell Zones often if the stocks get volatile.

You wrote” How many trades on daily charts you get in a month ?” As mentioned that will depend on your stock selection, and how volatile the stock gets in the future.

If you are an options trader, look at example charts on Nifty. Once you define your Buy or Sell zone, then you can select the mid price of the zone. See what the strike price is available and what premium is suitable to you in your risk management.

Again don’t forget the send me names of stocks you are interested for me to analyze.

zhkzhk