Weekly Chart Analysis and Trading Strategies for October 6th Expiry
BankNifty made a double-top pattern. What next? Read the full weekly chart analysis and trading strategies for the October 6, 2023 expiry.
Hello guys, I hope you are doing well. In this edition of our weekly market newsletter (Weekly Indian Market Outlook), I will cover the weekly Indian market outlook, weekly chart analysis of the Nifty and BankNifty, and trading strategies for weekly income.
Before getting started on our weekly chart analysis and trading strategies, let’s talk about one of the main problems that the majority of people are currently experiencing. That is “Position Sizing”.
When it comes to trading options, one of the most important factors to consider is position sizing. This refers to the number of contracts you trade relative to the size of your account.
In this blog post, we’ll discuss the importance of position sizing and how it can impact your option trading strategy.
Important of position sizing in option trading
When trading options, your position size will have an impact on your overall risk and return profile. For example, if you buy one option contract for every ₹1,0000 in your account, you are essentially risking your entire account on that one trade. On the other hand, if you buy 10 option contracts for every ₹1,0000 in your account, your risk is spread out over a larger number of contracts and your potential return is also increased.
The key to successful option trading is to find the right balance between risk and return. By carefully considering your position size, you can help ensure that your overall trading strategy is risk-balanced and that you have the potential to generate returns that exceed your expectations.
Here are the 5 tips you should follow while considering position sizing:
- Consider your account size: The first thing you need to do is consider the size of your trading account. This will give you an idea of how much risk you can afford to take on. For example, if you have a ₹10,000 account, you shouldn’t be buying more than 10 option contracts.
- Consider your risk tolerance: Another important factor to consider is your risk tolerance. This will help you determine how many contracts you should buy. If you’re a risk-averse trader, you might want to buy fewer contracts. On the other hand, if you’re willing to take on more risk, you could buy more contracts.
- Consider the underlying security: When you’re considering position sizing, you also need to take into account the underlying security. This is because different securities will have different price movements. For example, a stock might move ₹1 for every 1% move in the underlying index. However, an option might only move ₹0.50 for every 1% move in the underlying index.
- Consider the time frame: The time frame you’re trading in will also impact your position sizing. For example, if you’re trading in a longer time frame, you might want to buy more contracts, and vice versa for the shorter timeframe.
- Consider your exit strategy: Finally, you need to consider your exit strategy. This will help you determine how many contracts you should buy. If you’re looking to exit your position quickly, you might want to buy fewer contracts. However, if you’re willing to hold your position for a longer period of time, you could buy more contracts.
When it comes to option trading, position sizing is an important factor to consider. By following the tips above, you can help ensure that your overall trading strategy is risk-balanced and that you have the potential to generate returns that exceed your expectations. By following these tips, you can help ensure that you’re considering position sizing in a way that is consistent with your overall trading strategy.
Other tips for the importance of position sizing in option trading:
- Review your goals and objectives: Before making any decisions on position sizing, it is important to review your goals and objectives. What are you hoping to achieve through option trading? What are your risk tolerance levels? What is your time frame for trading? By answering these questions, you can help narrow down the number of contracts that you should buy.
- Determine your exits: Another important factor to consider is your exit strategy. What is your plan for exiting your position? Will you take profits at a certain point? Will you exit if the underlying security reaches a certain price? By having a clear exit strategy, you can help ensure that you don’t over-expose yourself to risk.
- Consider the liquidity of the options market: When you’re trading options, it is important to consider the liquidity of the options market. This will help you determine how easy it will be to exit your position. If the options market is highly liquid, it will be easier to sell your position. However, if the options market is not as liquid, it may be more difficult to sell your position.
- Use a stop-loss: A stop-loss is an order that you can place with your broker that will automatically close your position
- Use limit orders: Limit orders are orders that you can place with your broker that will only execute at a certain price.
I hope these tips have been helpful. Remember, a volatile market can be challenging, but with the right approach, you can still be successful.
Weekly Chart Analysis and Trading Strategies:
The market had a gap-up opening to the week and experienced highly volatile sessions this whole week. However, on Friday, the Market was less volatile and enabled Nifty to close with a weekly profit of 2.27% and BankNifty to close with a profit of 3.76%.
Weekly Chart Analysis of Nifty and BankNifty
Now let’s look at the weekly chart first to know the important levels:
Image source: in.tradingview.com
Image source: in.tradingview.com
If you look at the weekly charts of Nifty and BankNifty, you can easily find that after an upside movement, this week we saw some profit booking both indices.
Now the important weekly support zone is at 18900 - 19200 and We may see some profit booking till 18900 in the coming week in Nifty. On the other hand, BankNifty is trading near its important support zone i.e. 44000 - 44100.
Overall trend looks bullish and there is no clear sign of weakness.
So we can say that the medium-term trend is UP. We can follow the “Buy on Support” strategy until we are not getting any fresh breakdowns from the above-given support zones.
Daily Chart Analysis of Nifty and BankNifty
Let’s start with the Nifty chart first. After a gap-down opening and followed by sharp decline last week, profit booking continues this week also. And Nifty made a low of 19492.10.
Now 19200 - 19450 is the support zone that needs to hold to maintain upside rally.
This breakdown from 19200 will trigger a short trade for the downside target of 19000 & 18600.
Trade Plan for the coming week: If this downside movement continues on Tuesday also then we can create a bearish strategy. A neutral strategy will work if Nifty manage to stay above 19400.
I will share my trade on my Free Telegram Channel. You can follow that too.
Click here to join FREE Telegram Channel
BankNifty is also giving the same setup as Nifty is showing on the chart. After toughed all-time high again, we saw sharp decline due to profit booking.
Due to this profit booking BankNifty is making double top pattern and now taking support near its important support level i.e. 44500.
If you look at the chart you will find that 43500 - 43900 is the important and strong support zone here for this double-top pattern. A breakdown will trigger a short trade.
For a fresh trade, We can wait for a breakout from 45000 or a breakdown from 43500. Above 45000 we can initiate a long trade and below 43500 we can initiate a short trade.
Tip for the week: Don’t go long or short very aggressively. Let market give a proper indication and then entre in any trade.
If you are trading intraday and wanted to know how I’m taking my trades then you must join our Telegram Channel. In this FREE Telegram channel, Daily I’m sharing my personal trades and the logic behind these trade.
Click here to join FREE Telegram Channel
Options Trading Strategies for the Coming weekly expiry
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 19600 PE & 19800 CE. Support as per the rule of PCR is at 19500 & Resistance is at 19800 for the coming weekly expiry.
- Max pain is at 19600.
- BankNifty Open Interest Analysis:
- Highest OI is at 44500 PE & 45000 CE. Support as per the rule of PCR is at 44000 & Resistance is at 45000 for the coming weekly expiry.
- Max pain is at 44500
Based on the OI data, overall trend looks "Neutral". So today, I’m sharing a premium strategy that has a high probability of success.
Trading Strategies for the Coming weekly expiry
This strategy is only valid if Nifty manage to sustain below 19700 on Tuesday. You can see this strategy has a 68% probability of success. For risk management, you can keep a stop loss of ₹2000 as MTM loss (1 lot).
We teach this strategy in our Mentorship Program. You can enroll to learn weekly expiry strategy with predefined rules of entry and exit.
If you want to learn these strategies and their adjustments in more practical ways with live mentorship, You can enroll in our Option Strategies – A Mentorship Program.
Much Check this also-
- How to Use PCR (Put Call Ratio) to Find False Breakouts or Breakdowns?
- The 3 Reasons Why Open Interest is More Important than Price Action
- 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 strategies for monthly Income, Can take our premium subscription and you will get real-time assistance every month on these Options hedging strategies. You can contact us on WhatsApp.
Options Strategies – A Mentorship Program
If you’re an options trader looking to take your skills to the next level, then our Options Strategies: A Mentorship Program is the perfect opportunity for you. With our program, you’ll learn advanced option hedging strategies and adjustments through live market support, giving you the hands-on experience you need to succeed.
By signing up for our program, you’ll gain access to a team of experienced options traders who will guide you every step of the way. You’ll learn how to identify the right options strategies for different market conditions, how to manage risk effectively, and how to adjust your positions as needed.
Plus, with our live market support, you’ll have the opportunity to ask questions and get real-time feedback on your trades. This personalized support will help you develop the confidence and skills you need to take on even the most challenging market conditions.
Don’t miss out on this valuable opportunity to take your options trading to the next level. Sign up for our Options Strategies: A Mentorship Program today and start your journey toward success!
DISCLAIMER: We are not a SEBI research analyst. Views 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 interpret specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.
