In India, we are having two large-cap indexes that are Sensex and Nifty.
These two are associated with two different stock exchanges of the country namely the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Nifty Prediction.
Both the indexes represent the statistical aggregate on how a change in the stock market can be measured.
However, both of these indexes Sensex and Nifty are the stock market index used to determine the value and strength of the stock market. Nifty Prediction.
The reason for more trading in the Nifty is that the Nifty is more diversified and has more stocks listed in it as compared to BSE.
Moreover, in reality, both the indexes target the large-cap stocks and performance over the years have turned out to be similar. Nifty Prediction.
What is NIFTY?
Nifty is an equity benchmark index in India introduced is introduced by the National Stock Exchange on April 21, 1996. Nifty Prediction.
In reality, National Stock Exchange Nifty or Fifty is the market indicator of NSE.
Ideally, NIFTY is a collection of 50 stocks but currently, it is having 51 stocks in it. Nifty Prediction.
However, NIFTY is also known as CNX Nifty or Nifty 50 as its ownership and management are under India Index Services and Products Ltd. (IISL). Nifty Prediction.
IISL is India’s specialized company focused upon the index as a core product. Nifty Prediction.
It is one of the largest single financial product in India, with an ecosystem comprising of – exchange-traded funds (onshore and offshore), exchange-traded futures and options (at NSE in India and at SGX and CME abroad), other index funds and OTC derivatives (mostly offshore).
The Nifty 50 index represents about 62.9% of the free float market capitalization of the stocks listed on NSE as on March 31, 2017.
The term ‘Nifty’ is derived from the combination of two words – ‘National’ and ‘Nifty’- as it consists of 50 actively traded stocks accounting for 12 sectors of the economy.
It is used for a variety of purposes such as bench-making fund portfolios, index based derivatives, and index funds. Digital Marketing Training Indore.
Nifty is one of the most actively traded contracts in the world. Nifty Prediction.
How is Nifty calculated?
There are various methods to calculate Nifty, one of them is free-float market capitalization weighted method. Nifty Prediction.
To know the market capitalization, Nifty also follow the mathematical formula just like the Sensex.
In order to derive the market capitalization, it multiples the Equity capital with a price. Nifty Prediction.
Further, to determine the Free-float market capitalization, the equity capital is to be multiplied by a price. Nifty Prediction.
This result is further multiplied with IWF.
Here, the IWF is the factor determining the number of shares available for trading freely in the market.
However, the index is determined on a daily basis. Nifty Prediction.
This is done by taking into consideration the current market value divided by base market capital.
The result is then multiplied by the Base Index Value of 1000.
You can Also Read:
Method of Computation.
Since June 2016, 2009, Nifty 50 is computed based on the free float market capitalization weighted method. Nifty Prediction.
Wherein the level of the index reflects the total market value of all the stocks in the index relative to the particular base period. Nifty Prediction.
The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights etc without affecting the index value. Nifty Prediction.
Methods of Nifty Prediction
For the Nifty prediction, you can use the Time Cycles.
I personally find the Time Cycles very easy to predict the NIfty trends. Nifty Prediction.
In fact, with the help of this Time Cycles, you can predict the Nifty trends for the next two months.
How does Time Cycles work?
There is a particular method for calculating time cycle days.
The days that you will get after the calculation will be the reversal days. Nifty Prediction.
You can calculate Intraday reversal through this time cycle.
Also, it can give you delivery reversal as well. Nifty Prediction.
This all depends on how strong is the cycle.
Working of the Time Cycle
Let’s understand with an example. Suppose we have 23.7.18 is a time cycle day.
Now we want to know which type of time cycle is this, that is bullish or bearish. Nifty Prediction.
For this, we will go through the previous trading day’s candle color.
If say, 20.7.18 is a red day so we can expect a bullish day on 23.7.18. Nifty Prediction.
Further, if 20.7.18 is a green day then we can expect a bearish day on 23.7.18.
We also keep time cycle day + 1 day as a buffer day meaning if we don’t get a bullish/bearish day on 23.7.18, we can expect a bullish/bearish day on 24.7.18 ( Time cycle + 1 day ). Nifty Prediction.
Is it is enough to know only the Time Cycles method?
No. The knowledge of Time Cycle is not enough because it will give you dates only.
There are many other techniques you need to know. Nifty Prediction.
Like RSI, Elliot wave, Candlesticks, Open Interest data, Fibonacci’s which are to be used collectively to support your entry.
Further, it is important to understand that there is time to enter and exit the market.
Along with this, in order to support your entry, you need to have extra confirmation on the time cycle day which is possible through open interest data. Nifty Prediction.
Also, the fact is that you can only predict using time cycles.
But it is not necessary every time cycle day movement will go as per prediction.
You also need to know other techniques and extra confirmation to support your entry.
Yes, but the time cycles helps you to take safe and confirmed entries provided all your analysis supports your entry. Nifty Prediction.
So, which are the other techniques you need to know?
We will here discuss all the other techniques in detail that helps you to better predict the Nifty trend.
Relative Strength Index
RSI or Relative Strength Index is one of the most popular technical indicators. Nifty Prediction.
It is computed on the basis of the speed and direction of a stock’s price movement.
This means that the RSI indicator only measures the stock’s internal strength (based on its past).
So do not confuse it with its relative strength, that is compared with other stocks, market indices, sectoral indices, etc.
How to calculate RSI?
Calculation of RSI is a two-step process. Nifty Prediction.
First of all, you have to identify the average gains and losses for a specified time period.
Let us understand this with an example. Nifty Prediction.
Suppose you want to calculate the 14-day RSI.
You can consider any time period, but the 14-day RSI is the most commonly used—suppose the stock went up on nine days and fell on five days. Nifty Prediction.
The absolute gains (stock’s closing price on a given day — closing price on the previous day)on each of these nine days are added up and divided by 14 to get the average gains.
Similarly, the absolute losses on each of the five days are added up and divided by 14 to get the average losses. Nifty Prediction.
Just like this, the absolute losses on each of the five days are added up and divided by 14 to get the average losses.
Further, the ratio between these values (average gains / average losses) will be referred to as the Relative Strength or RS. Nifty Prediction.
Also, to make sure that the RSI always moves between 0 and 100, the indicator is normalized later by using the formula given below:
RSI = 100 – 100 / (1+RS*) * RS = Average gains / Average losses.
Elliott Wave Prediction Method
Elliott made detailed stock market predictions based on unique characteristics he discovered in the wave patterns. Nifty Prediction.
In this pattern, the impulsive wave, that goes with the main trend, always shows five waves in its pattern.
These ever-smaller patterns are labeled as different wave degrees in the Elliott Wave Principle.
Only much later were fractals recognized by scientists. Nifty Prediction.
Elliott Wave Rules and Guidelines
A correct Elliott wave count must observe three rules:
- Firstly, wave 2 never retraces more than 100% of wave 1. Nifty Prediction.
- Secondly, wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and 5.
- Further, wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle formation. Nifty Prediction.
A common guideline called “alternation” observes that in a five-wave pattern, waves 2 and 4 often take alternate forms; a simple sharp move in wave 2, for example, suggests a complex mild move in wave 4.
Corrective wave patterns unfold in forms known as zigzags, flats, or triangles. Nifty Prediction.
In turn, these corrective patterns can come together to form more complex corrections.
Similarly, a triangular corrective pattern is formed usually in wave 4, but very rarely in wave 2, and is the indication of the end of a correction. Nifty Prediction.
Candle Stick Charts For Nifty Prediction
In candlestick charts, just above and below the real body are the “shadows” or “wicks”.
In the chart, the shadows show the high and low prices of that day’s trading. Nifty Prediction.
So, if you observe the upper shadow on a down candle is short, it indicates that the open that day was near the high of the day. Nifty Prediction.
While a short upper shadow on an up day dictates that the close was near the high.
However, the relationship between the days open, high, low and close determines the look of the daily candlestick. Nifty Prediction.
Moreover, real bodies can be long or short and black or white. Also, shadows can be long or short.
Bar charts and candlestick charts show the same information, just in a different way.
In fact, candlestick charts are more visual, due to the color coding of the price bars and thicker real bodies, which are better at highlighting the difference between the open and the close.
Rules To Follow While Trading Nifty
The first thing to keep in mind is that a market peak is a right time to restructure your portfolio more meaningfully. Nifty Prediction.
When the share market rallies rapidly, it takes a lot of deserving and undeserving stocks along with it.
You may find a lot of stocks in your portfolio which have appreciated sharply without any without any fundamental justification. Nifty Prediction.
This is the time for you to act. Use these highs to exit these stocks in your portfolio and reallocate them to more quality stocks.
New highs and further highs are normally led by big growth stories. Nifty Prediction.
When you allocate money, look out for where the growth is.
It may look quite enticing for you to rush in to buy stocks that are out of favor and have corrected sharply. Nifty Prediction.
Remember, when a market moves into a positive orbit, the rally is rarely driven by beaten down stocks.
They are necessarily led by the growth stories and that is where your focus should be.
A market high is a time to latch on to growth and not to your perception of deep value. Nifty Prediction.
There is a popular saying in the market that the profit is what is booked by you, rest is book profits.
As a trader or even a short-term investor, do not miss any opportunity to book profits consistently. Nifty Prediction.
If you bought a trading stock with a target to earn 20%in 6 months and the stock is up by 25% in 15 days then you must look to book profits.
Such an approach also ensures that you always have adequate liquidity available when the market gives intermediate corrections. Nifty Prediction.
Use a combination of hedges and rolling stop losses term portfolio.
Assume that you are convinced about the 5-years prospect of stock ABC Ltd. Nifty Prediction.
Your broker is convinced and your research also supports the view.
If the stock has already reached the target in 1 year what should you do?
The answer is you can look to trade with rolling stop losses. Nifty Prediction.
Keep moving the stop loss higher as the stock price moves higher.
Another way is to use put options to hedge your long side risk. Nifty Prediction.
This not only protects your downside but also enables you to make money when the market turns volatile.
Lastly, keep an eye on the one factor that is driving the market rally in the first place. Nifty Prediction.
There could a variety of reasons. It could be global flows, it could be a surge in liquidity.
Also, it could be a genuine turnaround in performance or even a sharp spurt in revenues and profits of Indian companies.
That is where the monitoring comes in handy. Nifty Prediction.
Irrespective of what is driving the market, keep an eye on the one factor that could seriously impede this driver. Nifty Prediction.
If you see that changing, then it is time to be cautious.
These five rules at new highs are not exhaustive but indicative.
However, they can surely act as a one-touch guide for traders and investors in the current market scenario.
Nifty Trading Strategy
This strategy is for all those who love Nifty intra-day Options trading.
Let’s say Nifty is currently at 5000.
- Buy one lot of 5200 Call @ 50.
- Buy one lot of 4800 Put @ 50.
Rules to be followed
Buy at around 11 AM – 12 PM when the market is calm.
This is the only time in the day when the volume is less and markets are mostly calm and settled down.
9 AM and 3:30 PM are times when people rush into buying and spike up options premium.
If you see that your positions are in profit then book profits on intra-day positions at 3:25 PM.
But if the position is in slight losses, hold positions and book profits in a subsequent day. Nifty Prediction.
Buy both Call and Put at similar values. Do not buy Call lot at 90 Rs and Put lot at 60 Rs.
Keep it balanced equally. Nifty Prediction.
Only trade in current month expiry.
Avoid trading in the last 2 weeks of expiry. Nifty Prediction.
This is the time when Options premium drop fast when markets stay flat.
Avoid holding positions over the weekend. Nifty Prediction.
Premiums could drop when markets open flat on Mondays.
Here, the simple logic we use is Options premium trade at fair value between 11 AM – 12 PM and trade at spiked up values at 3:25 PM within the day. Nifty Prediction.
You have to buy the stock at a fair value and sell the same at spiked up value.
Moreover, the straddle position ensures you the profits even at the time when markets fluctuate either way.
Price Action Trading Strategy.
Now, this is not the Holy Grail.
But, if you devote time to learning price action trading, you’ll trade with cleaner charts, and can pinpoint your entries and exits with better precision.
This is powerful stuff, right?
This is why I’ve devoted 3000+ words to today’s post, teaching you the essence of price action trading.
Here are 4 things you must know:
- Support and Resistance.
- Previous Support turns Resistance.
- Dynamic Support and Resistance.
- Trending and Retracement move.
Support and Resistance.
Support – An area on the chart, with potential buying pressure, to push the price higher.
Resistance – An area on the chart, with potential selling pressure, to push price lower.
The case when, the price breaks below support, previous support becomes resistance.
If price breaks above resistance, previous resistance becomes support.
Dynamic Support and Resistance.
Support and Resistance can move along with price, which is called Dynamic Support and Resistance.
Dynamic support occurs in an uptrend and dynamic resistance in a downtrend.
They can be identified using moving averages.
Impulse and Corrective Mode.
Impulse move – “Longer leg” on the chart, which points the direction of the trend.
Candlestick size is usually larger, signaling momentum behind the move.
Corrective move – “Shorter” leg on the chart, which is against the current trend.
Candlestick size is usually smaller because of traders taking profits, without strong selling pressure.
Arbitrage Trading Strategy in Nifty
We have discussed many times that we should check the volatility of the stock.
But the fact is that volatility does not matter in some cases.
If you are able to find a stock having a huge difference with its Futures price, profit is guaranteed.
Then you have no need to care about volatility.
There is no scenario of loss in arbitrage strategy, though profits are smaller but guaranteed – every time.
There can be slippages though and that’s the only issue.
Understand this with an example.
Here you have to understand the risk of time when you close the Futures trade in profit and the stock falls 1% instantly.
So, in such a situation firstly just close the stock, and then close the Future as it is in profit.
But then the particular stock may also move a few points up and you may lose the profit in Futures.
Hence, to counter such a situation I better suggest you open the trading platform in two different browsers.
Further, try to close both the trades as soon as possible without wasting too much time.
There are lots of reasons people do not trade this. Here we will discuss few:
The first and say the biggest reason is that traders simply do not know the arbitrage strategy.
Like you also are discovering it from my post only.
Another reason is, nowadays it is very hard to find such arbitrage opportunities giving meaningful returns.
However, you see most of the stocks in India have very low liquidity, especially in Futures.
Maybe you will find an opportunity but you will see that no one is trading.
Further, the ask and bid price in the future will be poor.
Profits are small.
Less than 1% a month is not very attractive.
If stock soars, you will not be able to profit even if the stock doubles in 6 months.
So, you will only make 6% in six months that too in the best case scenario.
But you will then regret your decision to arbitrage.
Trades are boring.
However, it is really not very exciting to wait full 30 days and make just 1% on your trade.
That is when you can actually make more through the non-directional strategies.
Humans hate anything boring. So these trades are not very popular.
Lots of cash is required to trade this strategy.
You know, minimum lot size in stock is now 4-5 Lakhs.
And over 95% of traders do not have this much cash in their trading account.
So, those who have, are not satisfied with 1% return a month.
Actually, they are high net worth individuals and are willing to take the risk and make more.
1% a month is not attractive to them.
Let us understand with an example.
Taking your TCS as an example, you will make some Rs. 4800/- in 60 days.
TCS lot size is 200 and the price difference is 24. So 24*200 = Rs.4800/- is guaranteed profits.
So, the margin blocked in this trade will be 2290*200 = Rs. 458,000/- minimum.
This converts to an ROI of (4800/458000) * 100 = 1.04% in 60 days.
Approx 0.50% in 30 days. Obviously, this is NOT a good return in any sense.
This when VIX is high. Imagine the kind of returns you will get when VIX will be on the lower side.
I have not even deducted the brokerages and taxes.
After that probably you get to keep 0.40% in 30 days.
In stock markets, you should take calculated risks to make more money
But 0.40% return is just not worth any kind of risk.
Not even in the US where 1% a month return is considered great.
So why it does not deserve a place in your strategy?
No one would like a strategy that guarantees just 1% or less per month.
Convincing people to buy strategies that can make 3% or more per month is difficult.
So, just forget about telling something that makes 1% a month even if guaranteed.
It is fact that no one would care for 1% a month strategy, including myself.
They will think I am a fool. Also, it will give me a bad name to sell something that only a few people can trade.
Further, which is known by most advanced traders. No one will destroy my name for 1% return a month.
Well, I myself not interested in selling something that I would rather teach for free.
This strategy has no negatives except poor returns.
In order to predict Nifty accurately, a trader must know these 4 things very well:
The markets are always changing.
It always moves from a period of a trend to a range, and range to trend.
However, you can break it down further into 4 stages:
The accumulation phase usually occurs after a fall in prices and looks like a consolidation period.
Features of accumulation phase:
- Firstly, it usually occurs when prices have fallen over the last 6 months or more.
- Secondly, it looks like a long period of consolidation during a downtrend.
- However, the 200-day moving average tends to flatten out after a price decline.
- Price tends to whip back and forth around the 200-day moving average.
In fact, after price breaks out of the accumulation phase, it goes into an advancing phase (an uptrend).
Characteristics of advancing phase:
- Firstly, it usually occurs after price breaks out of the accumulation phase.
- Secondly, the price forms a series of higher highs and higher lows.
- Further, short-term moving averages are above long-term moving averages (e.g. 50 above 200-day ma).
- The 200-day moving average is pointing higher.
- Price is above the 200-day moving average.
The distribution phase usually occurs after a rise in prices and looks like a consolidation period.
Characteristics of distribution phase:
- Firstly, it usually occurs when prices have risen over the last 6 months or more.
- Secondly, it looks like a long period of consolidation during an uptrend.
- Further, the 200-day moving average tends to flatten out after a price decline.
- Price tends to whip back and forth around the 200-day moving average.
After price breaks down of the distribution phase, it goes into a declining phase (a downtrend) and consists of lower highs and lows.
This is the stage where traders who do not cut their loss become long-term investors.
Characteristics of declining phase:
- Firstly, it usually occurs after price breaks out of the distribution phase.
- Secondly, the price forms a series of lower highs and lower lows.
- Further, short-term moving averages are below long-term moving averages (e.g. 50 below 200-day ma).
- The 200-day moving average is pointing lower.
- Price is below the 200-day moving average.
How to tell when the market is trending
Remembering a famous Wall Street saying that goes like this…
Question: What is the trend of the market?
Answer: What is your time frame?
You are wondering:
What does it mean?
Well, this means there are trends in different time frames.
You can have a downtrend on 5 minutes chart and an uptrend on a daily chart.
So, now you have understood that trends can exist in different time frames.
Now… let us learn how to define a trend objectively.
I will here discuss two ways to go for it:
- Structure of the markets.
- Moving average.
Structure Of the Market
The market is in an uptrend when there is a series of higher highs and higher lows.
Likewise, in a downtrend, there is a series of lower highs and lower lows. Nifty Prediction.
Alternatively, you can use a moving average to define the trend.
Here’s how you can do it:
- 20 ma – a Short-term trend.
- 100 ma – a Medium-term trend.
- 200 ma – Long-term trend.
In the case when 20 ma is pointing higher, and the price is above it, then the short term trend is up.
If 100 ma is pointing higher, and the price is above it, then the medium-term trend is up.
If 200 ma is pointing higher, and the price is above it, then the long-term trend is up. Nifty Prediction.
How to tell when the market is ranging.
A range market is contained between Support and Resistance.
In the real world, you get variations like:
- The Range expansion.
- Range contraction.
The range expansion occurs when the market does a false breakout and trades back into the range.
Thus expanding the “space” between Support and Resistance.
Selling at resistance would get you stopped out, as price breaks above the resistance, only to trade back into the range.
The range contraction occurs when the market enters a period of low volatility, usually due to an impending major news release.
Looking to “buy low sell high” would put you on the sidelines as the markets went into a tighter consolidation.