Introduction:

Indian
traders have realized that benefit of trading in the nifty future from past
couple of years. However it is quite experienced that many traders never make
any success in nifty intraday trade. Learning little simplest technique can
make someone a winner in the nifty trading.

Interpret the daily volatility. It is the parameter which will gives you the most likely move the nifty
future can swing in a day. In this case the term ‘swing’ means high and low difference in a day.

Then the next question is how to find the
volatility. ?

To calculate the volatility the best
procedure is refer the daily volatility column given in the NSE site against
the Nifty future f &o quote section. You may get a figure 1.23 for 9th
October 2009 price quote in the bottom of the page. In other words it says the
nifty future has the potentiality to generate 1.23% returns today either in the
buy side or in sell side.

For example - if nifty is trading at 5000 it will generate
5000 X 1.23%=61.50 point return. This small arithmetic information is sufficient
enough for me to take a wise trade decision. Now it is the time to migrate to a
more realistic example. On 9th October 2009 at 10:45 a.m. I found the nifty at
4999. At that time the prior swing has recorded high 5021 and low was 4973 and
the daily volatility was 1.23%.

The previous days’ closing was 5001. Since the
daily volatility is a derivation from the yearly volatility I will calculate
the return points from the previous days closing which is 5001X1.23%=61.5123
round it to 62 points. The next big thing u can do is u can take the clue from
the midpoint of high and low of the current day.

For example the midpoint is 4997. the nifty high and low has created a swing of
48 points (i.e.5021-4973). current price 4999 suggests you are just above the
midpoint (hence I have a chance to scale 62-26=36 point from here in upside or
26 point down from here to complete the calculated return of 62 points. The 26
points the difference between the low and the current price.

Now the last job is
to derive a trade decision. Here the concept of cycle will get focused since your return is 62 points as per the volatility and every completion of 62 points
will start a new cycle. It is often observed that if the stock trade above the
mid point then it has the most likely chance of going up and in my case Nifty
is above 4997(mid point ) and I will buy nifty at current price of 4999 for
target 5035(i.e. 4999+36). Same time I will put my stop loss as 4997-27=4970.
If the up side target is achieved then my next target will be in the 2nd cycle
termination point of 5034+62=5096

similarly the 2nd cycle of the Nifty will be
4908(i.e. 4970-62).In between the 4970 and 4908 I will find one target at the
mid point of it (i.e.(4970+4908)/2=4939 )the 2nd target will be the mid point
of 4938.50 and 4907.50(i.e. (4939+4908)/2=4923.5). Same way the intermediate
target of the upside move for 2nd cycle can be calculated.Now as per the
calculation I have entered the buy trade and the stop loss is triggered and
given me the opportunity to enter the short trade of 2nd cycle. You may
surprise to see that that nifty low was 4923.05 on 9th October 2009. I too have
the answer why the 2nd cycle halted at 4923? But it is beyond the scope of this
article.

For your information I will once again
inform you this value is calculated when nifty were quoting at 4999 and have
neither made any of these calculated high or low.This same trick can be applied
to all the stocks just by referring its daily volatility and applying the midpoint concept on it.

You will be in a position to calculate many intermediate
target points and most likely reversal points . However stock market has different price tags and each method has
its limitation and can be applied only on selected group of price tag. These
refined techniques we teach in seminar programs. Try to use the above discussed
technique in Nifty Future and experience the success.

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