Hello guys, I hope you are doing well. In this edition of our weekly market newsletter (Stock Market Prediction), I will cover the weekly Indian market outlook, weekly chart analysis of the Nifty and BankNifty, and options trading strategies for weekly income.
Before getting started on our weekly chart analysis and option trading strategies, let’s talk about one of the main components of successful trading that the majority of people don’t know and end up losing huge amounts of money. That is “Importance of Risk Management.”
5 Common Mistakes in Risk Management:
Risk management is essential for any trader or investor. The risks associated with trading can be huge, and there’s a lot that can go wrong. If your risk-management strategy is ineffective, you could end up losing a lot of money in the long term.
It might seem like a simple task to keep track of your risks, but there are things you can do to reduce the potential impact of those risks on your trading account. Keep reading to learn more about the top 5 mistakes in risk management and how to avoid them.
1. Don’t Define Your Risk Tolerance In Terms Of Layers
Defining your risk tolerance in terms of layers may seem like a great idea at first. After all, it’s much more fitting than simply saying “I’m 50% confident with this trade,” right?
The problem is that layers are not a good way to measure risk. The risk of a trade is not based on the number of layers you place in the market; it’s based on the expectation of profit or loss.
By definition, a layer is the amount of money that the market will have to go in your favor before you’ll make a profit. If the market has to go against you before it goes in your favor, it’s not a risk.
2: Only Focus On The Trades You’re Accepted For
Accepted trades are an important part of your risk management strategy. However, traders should not exclusively focus on these trades, as this will lead to poor risk management decisions.
Accepted trades are only a small part of your overall trading strategy. You should also consider other factors, including the amount of your trading account equity, the expected volatility of the market, and your trading strategies.
If you only look at your accepted trades, you may end up trading with too much risk in the long run.
3: Assume The Market Will Move In Your Favor
While it’s true that traders should assume that the market will move in their favor at some point, this should not be the only consideration in your risk management strategy.
It’s easy to convince yourself that the market will always move in your favor if you don’t account for all of the risks involved in trading. If you assume that the market will always move in your favor, you may double the amount of your trading account.
This will make it much easier for you to lose money. You should assume that the market will not always move in your favor, but that doesn’t mean you should not account for all of the risks involved in trading.
4: Don’t Understand How Leverage Affects Your Returns
Understanding how leverage affects your returns is one of the most important parts of risk management. Many traders assume that they can take on more risk with leverage, but this is not the case.
This is because the amount of risk you assume increases as well. If you assume a small amount of risk and use a high amount of leverage, it will be very difficult to make money.
However, if you assume a large amount of risk with a small amount of leverage, it may be possible to lose a large portion of your trading account.
If you take on a large leverage with a small amount of capital, it may be caused you a large return. However, if you take on a smaller amount of risk with a larger amount of capital, it’s more likely that you’ll be a successful trader soon.
You should assume a large amount of risk comes with a high amount of leverage. You should also understand the risk involved.
5: Always Be Looking For Opportunities To Sell
Traders often assume that they should always be looking for opportunities to buy. While this is a good strategy to use when trading, it’s also important to look for opportunities to sell. If you always assume that there are opportunities to buy, you may end up pushing your trading account too far in the red.
You should look for opportunities to buy but don’t miss the opportunities to sell when you’re long. It’s important to keep a balanced trading account, as long as you don’t let all of your money go into certain stocks.
You should always look for opportunities to buy, as well as opportunities to sell, to keep your trading account balanced.
I hope these tips have been helpful. Remember, a volatile market can be challenging, but with the right approach, you can still be successful.
Stock Market Prediction for November 20-24,2023 based on the charts:
The market had a gap-up opening to the week and experienced low volatility compared to the previous few weeks this whole week. However, on Friday, Nifty gave a bullish sign that enabled Nifty to close with a weekly profit of 1.28% and BankNifty to close with a profit of 2.13%.
Stock Market Prediction based on weekly chart of Nifty and BankNifty
Now let’s look at the weekly chart first to know the important levels:
If you look at the weekly charts of Nifty, you can easily find that After a profit booking, Nifty took support near 18900 and now heading towards its resistance level at 20200. If Nifty manages to give a sustainable breakout from it's all time high, then we may see some more upside levels.
However, Banknifty is still trying to give a positive signal. After took support near 42000, we saw some recovery this week but again on Friday, faced good resistance near 44200.
So by looking at weekly chart, we can say that in BankNifty trend looks sideways and Uptrend in Nifty.
Now, because both are trading in a range and there is no clear breakout, It's too early to initiate any long trade here. So let us wait for one more week. If Nifty and BankNifty manages to sustain above the immediate resistance then only we should initiate a long trade.
Now let us look at the daily chart.
Stock Market Prediction based on daily chart of Nifty and BankNifty
Let’s start with the Nifty chart first. The Nifty opened with a gap-down on Monday and closed below 19500. That triggers a caution button for long builders. But on Wednesday it changed it's moode completely and open big gap-up. That triggered a reversal sign and continued its upside movement in the following days.
Now, this 19850 is important resistance level that is important in terms of further upside. A breakout from 19850 is required to initiate a new long trade in Nifty.
Trade Plan for the coming week: If the Nifty manages to stay above 19900 this week, you can place a long bet above that level. Else trade with a range-bound strategy. I will share my Intraday trades in our telegram channel. Join through the below button.
BankNifty is also giving the same setup as Nifty is showing on the chart but looks weak compared to Nifty. Gave a breakout from its important resistance level, i.e., 44151 but couldn't sustain and fall again below this level on Friday.
Now by looking at chart, trend looks completely sideways and there is no clear indication of breakout or breakdown. So lets trade with neutral strategies till we are not getting proper breakout or breakdown in BankNifty.
Important levels to keep on the radar this week in BankNifty is 44550. In BankNifty, initiate a long trade if BankNifty manages to sustain above 44550.
Tip for the week: Don’t go long or short very aggressively. Let market give a proper indication and then entre in any trade. Go long above 44550 only if banknifty manages to sustain above 44550 level.
If you are trading intraday and wanted to know how I’m taking my trades (Option Buying & Option Selling) then you must check the below link. In the below link I have shared my Option Buying & Option Selling Basket, that I use without worrying about trend movement. Just rule-based strategies with proper risk management.
Stock Market Prediction for November 20-24,2023 based on Open Interest
In the above section. we have analyzed the chart and found the range based on the chart. Now before we create any strategy, let’s look at the open interest data to check the range for the coming week.
- Nifty Open Interest Analysis:
- Highest OI is at 19500 PE & 19900 CE. The support is at 19500 & Resistance is at 19900 for the coming weekly expiry.
- Max pain is at 19800.
- BankNifty Open Interest Analysis:
- Highest OI is at 43000 PE & 43800 CE. The support is at 43000 & Resistance is at 44000 for the coming weekly expiry.
- Max pain is at 43600
Based on the OI data, the range is very wide but dee to low volatility premiums are also very low. So today, I’m sharing a premium strategy that has a high probability of success in Nifty only.
Options Trading Strategies for the Coming weekly expiry
You can see this strategy has a 55% probability of success. For risk management, you can keep a stop loss of ₹15000 as MTM loss.
We will do some adjustments if required and will share in our students group. To join our student group, you can enroll to our Mentorship Program.
Much Check this also-
- Deploying short strangle by looking profit/loss at the payoff chart? – A must read for beginners!
- Why is psychology important in options trading?
- 3 Simple Options Strategies for High Volatility
Post your comments in the comment box if you have a query related to this weekly Indian Market Outlook. You can ask any question related to options trading in the comment box.
If you need more real-time assistance on the Nifty and Bank Nifty weekly expiry strategy or want to deploy these hedging trading strategies for monthly Income, Can take our premium subscription and you will get real-time assistance every month on these Options trading strategies. You can contact us on WhatsApp.
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DISCLAIMER: We are not a SEBI research analysts. Views and trading strategies are posted in this weekly market newsletter only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders aware of the risk inherent in securities trading.