70% of the time markets are in consolidation and remaining time they trend. But getting it wrong in this 30% time can put your account in serious jeopardy. You need a strategy to tackle these periods of trend. We use Buy Breaks Sell Rallies.
Once again this no new stuff. But how do you determine a trend? And then find a reliable reference to buy breaks and sell rallies is what we are going to see here!
Derivatives Trading involves substantial risk of loss and is not suitable for all investors. Past Performance is not necessarily indicative future results – Read Full Disclaimer
Buy Breaks Sell Rallies
We will look at some examples which will help you take informed decisions while trading a trend.
Example 1 – Sell Rallies
The adjacent chart shows a 4-5 days old down trend. We have some good opportunities to sell rallies as the down trend is confirmed. The chart makes clear following points,
- A day with excess and next day forming lower value confirms a ST reversal in trend.
- The trader behavior should shift to sell rallies till an important ref is reached.
- In this example we get one shorting opportunity above the imp reference below and another once the reference is crossed.
- A fresh shorting opportunity was setting up at the time of preparing this chart.
Example 2 – Buy Breaks
The adjacent chart shows an example where we capitalize of a strong show by buyers. We look to buy breaks that reach important reference levels. The chart clears following points,
- The trend started when the trend of lower VAP was broken and we got a sideways VAP.
- Prices rallied sharply away from 2 day composite value and found acceptance at higher levels.
- High volume nodes at higher levels give a good reference for a break to stop into.
- Buying at such points has higher probability of successful trades.
- The first trade came immediately on the next day, whereas a the second trade came later at the right edge of the chart.
So we can use this Buy Breaks Sell Rallies strategy to find low risk entries in an existing trend. This can be used to enter a trend if you miss an early entry. Or pyramid on your existing long or short position.
But the most important thing to remember is we need a clear trend. If the markets are moving sideways then you may have to select a different strategy. Either Buy Low Sell High or Buy Break Outs Sell Break Downs.
Examples For This Strategy
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