Hope you have understood from part 1, the necessity to take part in the other time frame bigger player’s move to make profits in intraday trading. CLICK HERE if you didn’t read part 1. Now let’s talk a bit in detail about identifying entry points…
I told u earlier that the bigger player or you can call them as the other time frame player, once they enter into any particular stock/index the movement is more, either upside or downside. Let’s understand what a price range is. Say the market opens at 9.15 after the pre-open session and after the first half an hour of trade, any stock/index would have made a high and a low till then. This is the range of the first 30 minutes. Example – stock A opens a 500 and makes a high of 510 and a low of 485, the range of 30 minutes is 25 points from 485 to 510. Now, assuming that the other time frame player enters at 9.45 or 10 am, the range that was there till then breaks either 485 is taken out and it moves further down or it moves upwards above 510. Not all days are like this, sometimes the range never breaks implying that the other time frame trader is not participating at all through-out the day. In other words meaning that the prices are not at their pre-calculated entry point or the prices are not attracting the other time frame player either to buy or to sell. There are certain days where the entire movement of any stock/index happens in the first 30 minutes itself with huge movement and rest of the day is so quiet, the first 30 minutes range never breaks, thereby informing us the other time frame player entered at market open and out within 30 minutes.
Let’s summarize like this. Unless and until you are there inside the trade when the movement happens, that is when the range extension happens; it is not easier to get your desired results and make profits intraday.
Okay now what exactly is an entry and exit point? Are these called supports and resistances? The answer is certainly yes, to an extent. A support in other words is a Demand zone and a resistance is a Supply zone. Say when a stock/index moves to a point where it makes the other time frame trader to buy huge quantities is called a demand zone which is naturally a support point and vice versa, supply zones become resistance points. Precisely for any stock /index supports are formed when there is more demand and resistances and formed when there is more supply. And these are the entry and exit points for the other time frame bigger players. Clear?
Now how do we find these supports and resistances for any stock or index? You can do it either with charts or manually without any charts too (but needs a bit of writing work every day).The simplest way to find supports and resistances is to open any intraday chart for the past 1 week, if you could do it for 2 weeks, that’s wonderful. Don’t complicate things, just use simple line charts, it makes the job easier. Take every hour into consideration, mark the high and low made, do it for 1 week, and finally also mark the high and low of each and every full session (day). Now you have got a list of support points and resistance points. Pretty simple, you do it yourself and you will be amazed. Example stock A – 9.15 to 10.00 am – high and low made, 10.00 to 11 am – high and low made, go on till 3 pm to 3.30 pm.
Now by doing this on your chosen stock/index you will also be able to see whether the first one hour price range breaks out, or the range breaks and extends only during middle of the day or near the end of the day. You yourself can identify a pattern developing and this kind of work gives you a lot of confidence when you trade that particular stock/index.
The major advantage is you know the points wherever the prices have reversed in the past 15 days. If you are in buy mode and the price moves lower, you know where it will reverse and you know till which point you can wait and for a sell trade you will know from which point the price has fallen in the recent past. For people who follow charts here is an example given below. A hourly chart of HCLTECH for the past 1 month.
FOLLOW A SINGLE STOCK/INDEX FOR 15 DAYS AND THEN START TRADING IN IT FOR 15 DAYS. KEEP YOUR TARGET, STOP LOSS AND THE QUANTITY AS LOW AS POSSIBLE. AFTER 1 MONTH YOU WILL BE ABLE TO SAY EACH AND EVERY SUPPORT AND RESISTANCE LEVEL FOR THAT PARTICULAR STOCK/INDEX AND YOU WILL ALSO BE ABLE TO IDENTIFY A PATTERN THAT THE STOCK/ INDEX FOLLOWS
This kind of dedication is required. It may look tough, but a simple easy task. Rather than following many analysts, friends, co-workers, stock market forums, online recommendations on social media, both free and paid this is something that will make you an analyst yourself. It is not important whether you track a single stock/index or 50 or 100 stocks on a daily basis, but whether you make money out of it or not is more important.
LET’S GO AHEAD AND SEE HOW TO ENTER NEAR SUPPORTS AND EXIT NEAR RESISTANCES AT THE RIGHT TIME. HOW TO DETERMINE THE QUANTITY, THE TIME TO WAIT FOR TARGETS, HOW TO DEFINE STOP LOSSES ETC. ON PART 3 SOON.