Rohit Katwal Profile picture
Mar 4, 2022 17 tweets 7 min read Read on X
Many people want to jump in to trading. Post 2021 was one kind of a market where #BuyTheDip was the basic theme of the market. That for sure is not working now when markets are tanking.

That is why in absolute basic, "Understanding Price Action" is must for traders. A Thread...
Price Action Trading is representation of Price in the forms of charts taking in values - Open, High, Low, Close referred to as OHLC Values in Candle or Bar Form. To gauge whether the price is going up or down, we plot the price wrt to time on x--y axis. For eg. #Reliance + Image
This chart tells you what the market is doing and not what you think it should do. Second, you need to understand the time frame on which you are trading. For the simplicity, I will refer to 1 day charts. But traders use charts from 1minute, 5m, 15m, 30m, 1 hour to 4hr...+
It is important to understand the significance of timeframe. 5 minute to 30 minute is for intraday trading. Anything above can be for 3 -4 days trading. Daily charts are used for swing trading. It is important to set you time frame correctly. You cannot expect to make profit...+
of 4 hour time frame trading the 15 minute time frame. So set your trading time frame early based on your expectations from trading. 1. Charts 2. Time Frame.

Next you need to understand the concept of Support and Resistance.
Support – A horizontal area on your chart where you can expect buyers to push the price higher.
Resistance – A horizontal area on your chart where you can expect sellers to push the price lower.

Consider this image of #TATAMOTORS. How price jumped or fell from same price level? Image
Once a support is broken, price falls below it and previous support becomes a new resistance for price. Once a resistance is broken, price rises above it and previous resistance now becomes support.

Consider these two charts for perfect example. ImageImage
How do you define Support and Resistance on your charts?
Chart must have 200 bar on your selected time frames.
Look for price on charts where price has Risen/Fallen atleast 2 times. Mark a horizontal line at such places. These are your Support and Resistance Points. Consider eg. Image
Why is Support and Resistance important? Because price goes up when breaks a resistance. Price goes down when breaks a support. If after breaking a resistance, price falls below resistance or after breaking support price rises above support, its called fake breakout. Image
This is classic Support and Resistance I like to use. You can look into Dynamic Support or Resistance based on EMA/MA also. Various moving averages like 20/50/100/200 can be used. Consider example of LTFH and #ESCORTS on 50 Moving Average. ImageImage
As you can see, Support and Resistance can be used to trade breakouts or reversals. It needs practice and money management on the part of a trader which we will cover in a separate thread.

Now market moves in 4 phase:
1. Accumulating
2. Trending
3. Distribution
4. Declining

+
As a trader, in your time frame, its your job to find these phases and trade accordingly. Consider example of #LALPATHLABS for example. Before #COVID19 there was accumulation. Followed by a breakout because of increased profit, then distribution and finally decline. Image
As a trader, you look for trending or declining phase to make profit with the help of support and resistance zones to identify accumulation and distribution zones. As a rule of thumb, you always trade in the direction of the trend. Buy in uptrend, Sell in downtrend. +
To make things easier, one can use various methods to trade in the direction of the trend. My favorite method is to trade using chart patterns. Secret to using chart patterns for profitable trading is - "Identifying the chart pattern in the direction of the bigger trend". +
Sharing example of some of my favorite chart patterns. You can google these for more information.

VCP (Volatility Contraction Patter) or Cup and Handle

It is important to trade chart patterns in the direction of the trend with proper Risk Management. Image
Other Trend Continuation patterns that a trader can look for is:
1. Ascending Triangle
2. Inverted Head and Shoulder
3. Pennants
4. Bullish Flags
5. Darvas Box etc.

Even mastery of a single pattern is enough for a trader to make a living out of it.
Other important concepts in price action that a new trader must look into is:
1. Multiple time frame trading
2. Candle Stick patterns
3. Trading Reversals

and few more like Fibonacci Levels etc. I think this is enough for a new trader to start. Best of Luck.

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More from @rohit_katwal

Feb 25, 2023
Going forward, I am extremely cautious on BANKNIFTY.

I really was rooting for BANKNFITY to be bullish in coming days. Break of 39700 will take BANKNIFTY towards 37500 levels.

This is 1 Month Chart of BANKNIFTY. Break of 39700 (Support) will push prices further down.
On Daily Charts, we are standing at a support and gave a dead cat bounce. COI did not recede from this point but as you can see there has been continuous selling. At support, either this gives a bounce or indicative of incoming sell off.
MACD and ADX on Hourly Chart at support are getting sideways. Not bullish but just sideways.

Below 0 Line, MACD bullish is still a sideways market. ADX receding from 40-50 level below its EMA again a sideways sign.

At support, I will create positions will slight caution!
Read 4 tweets
Feb 24, 2023
Attack on Police Station by mob has me worried since last few day. Morning I read the news of attack on #Punjab Police by extremists.
timesofindia.indiatimes.com/city/chandigar…

Do watch.

And yes, I am rightly worried. Its a neighbouring state.
This has been happening for past few months now. My immediate question was, what is the central government doing? I have no expectations from AAP. Or uprising of people of Punjab against such elements, as people themselves chose AAP. Many I talked with are regretting it now.
Today AAP might be the biggest threat to National Security. With Jammu and Kashmir stabilized, AAP might open a new frontier for Indian Government.

But no news media is showing this. Or Algorithms are not even picking it up. Why? Vested interest? But again back to question 1...
Read 10 tweets
Jan 14, 2023
William's Alligator is probably the most underrated indicator in moving average category.

Alligator follows the premise that market is sideways for 70% of the time and trending only 30% of the time.

This is where William's Alligator can be a great tool for traders.
Why William's Alligator can be a great tool for traders?

It can identify Bullish, Bearish and Sideways market pretty easily. Problem is, traders don't know how to use it effectively. Alligator has three lines:

1. Lips - Fastest Line
2. Teeth
3. Jaws - Slowest Line
Book Interpretation is when Lips Crosses above Jaws, it's a buying opportunity and when below its a shorting opportunity. And when three lines are crisscrossing, instrument is sideways.

BUT this does not make it a tradeable indicator in practice. Here is what should be done.
Read 11 tweets
Dec 3, 2022
I have no sympathies for #Scammers who were duping people with lakhs and crores of screenshots.

At first, I along with friends of mine were in awe of how they were generating this much return. For almost, 2 years I worked a lot and tried to break the code.

Do read and retweet.
A lot of ideas were worked upon on Amibroker may it be ITM Selling of Option, Option Doublers in 2 - 3 days, Intraday Option Buying, Future Holygrail and what not. In the process we were able to make Option Chain on Amibroker, calculate option greeks on Amibroker and what not.
But no definite system was built.

If we cracked up Option Buying or burst moves, it was difficult to ascertain position-sizing. For eg. position sizing average size, doesn't make the profit so lucrative. And if the position-size is big, loss could be 70% in 3 trades.
Read 14 tweets
Nov 30, 2022
When price is at all-time-high, retailers want to sell. When price is at all-time -ow, retailers want to buy.

This is where they fall into a trap.

"Upar chala gaya hai aur kitna upar jayega"
"Niche gir gaya hai aur kitna girega"

Do yourself a favour and follow these steps...+ Image
Put an Alligator on at least 1HR time Frame. If

1. Low of Candle is above Alligator Lips, price is bullish
2. High of Candle is below Alligator Highs, price is bearish

Check example of HUL and BANDHANBNK...+ ImageImage
Understand a little price action. If
3. Price is in upper right corner, it is bullish.
4. Price is in bottom right corner, it is bearish.

Consider example of TATAMOTORS and BATAINDIA. So if you are new to the market, follow market and not what you think "mujhe lagta hai"...+ ImageImage
Read 5 tweets
Nov 5, 2022
Thread on #OptionBasics for #Nifty #BankNifty or #Stocks for beginners

To understand options, three concepts are required:
1. Intrinsic / Extrinsic value
2. Time / Theta Decay
3. Implied Volatility

Option Value = Intrinsic + Extrinsic (Value)
Intrinsic Value - Value of Option if it were exercised today at CMP.
Extrinsic Value - Total Value of time in the option.

ATM and OTM options are 100% extrinsic value. ITM options have more intrinsic and less extrinsic value.
ITM Options: Intrinsic Value = Price of Underlying Asset -
Strike Price
For eg.
Nifty is at 11,416. 11400 CE of 29 Oct 2020 is at 224.40/-.
Intrinsic Value is = 11416-11400 = 16
Extrinsic Value is = 224.40-16 = 208.40.

208.40 is time value.
Read 14 tweets

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