Here’s an account of a loss trade that I undertook today. The stock in consideration is Auropharma. Please refer the 5-minute chart below. Scanning the last session we can see that the scrip fell down. For the current day, the scrip opened with a beautiful Dragon-Fly Doji candle. There is also a confluence zone formed by pivots –s1, p, P.
By 11:00 A.M., I had presumed a 3-legged correction to yesterday session’s fall was complete. At around 11:30 A.M., I initiated a short position right at the bottom. I didn’t wait for the bargain price; I had in mind, to come to me even. It was an impulsive trade. In my haste, I didn’t care to define stop point. I could sense something was amiss. Price started rising. I just couldn’t close the trade until I had lost 5 points. That’s an awful lot.
Once I closed the trade, I found out that a running flat was complete at the time of short position initiation and the last leg was yet to come. The damage was done already.
Lessons:
Wait for the market to give maximum confirmations.
Initiate trade without fear. Define all critical points before entering.
Set the limit price for all your orders. As you increase position size you can’t take what market offers.
If the point of stop is vague, wait for further confirmation.
Multiple time frame confirmation is must.
What happened to Nifty 50?
In Day before yesterday's session, Nifty 50 breached 17350 critical level with Huge Gap down. The broader index had closed lower. In yesterday's session, Nifty climbed back half of that fall. And, today Nifty has opened with huge green candle and scaled higher only to find supply zone resistance at around 10:35 A.M. Please refer the 5-minute chart of Nifty below.
Once the 3-legged climb up found resistance near supply zone, it started to fall. Nifty 50 closed 0.41% lower for the day.
