Nifty

Today I will introduce you to some very basic concepts for trading, which can be applied to any time frame.

I'm starting with Nifty:

I will cover 2 concepts here - Divergences (normal & hidden) and 123 Setup.

In the first part of a 123 setup - We look for a low (lowest pivot) and label as 1 and then we look for a higher pivot label as 2 and then a higher low pivot label as 3 - Our point of entry is at the high of Pivot 1. Around 5400. Our stop is at 5353 @ pivot 3.

We then look at identifying the next set of 123 setup's for Buy - In this case we spot one and this could be our second entry to the trade. Our stop now moves up from 5353 to 5402 (our initial entry).

Market is now at 5461 - we also notice a negative divergence on the chart and exit longs making a 61 point profit.

Although price has moved up we notice that the indicator has make a lower top indicating negative divergence signaling an exit in the trade.


We also have a GAP at 5370 & 5330.. which need to be filled.

In the next chart I will cover Hidden Divergences.

In the chart below we see Point 1 - Price is Higher than Point 2, however on the indicator front the inverse happens. The corresponding point 3 on the indicator is lower than the corresponding point 4 on the indicator which indicates that Price will fall.