WHICH WAY COULD THE MARKETS GO FROM HERE? (BANKNIFTY)
The global cues lately have not been the best and markets are correcting quite aggressively lately. BankNifty has corrected a little over 15% and Nifty close to 10%
The pattern I am observing now is a triangle pattern, with both an upside possibility as well as downside.
The trade plan:
Bullish:
Entry upon breakout above higher trendline (36,650)
SL: 36,050
Target: 37,850
Risk-Reward: 1:2
Bearish:
Entry upon breakdown below lower trendline (35,900)
SL: 36,500
Target: 34,700
Risk-Reward: 1:2
I know that the SL and Target are quite large, hence, this would be a good opportunity to practice position sizing. Generally for smaller targets I could trade full quantities, but for this my risk is only about 100-200 points and targets around 400 points max. But considering the VIX is trading around 20, the volatility is high and larger targets can be achieved. So, if the SL and target are upto 3x my normal trades, this where I will cut down my positioning by 1/3. Example, if my full quantity is 150 (6 lots), I will only trade 50 (2 lots) which is exactly 1/3. This will ensure that larger SL does not mean more risk in absolute terms.
The pattern I am observing now is a triangle pattern, with both an upside possibility as well as downside.
The trade plan:
Bullish:
Entry upon breakout above higher trendline (36,650)
SL: 36,050
Target: 37,850
Risk-Reward: 1:2
Bearish:
Entry upon breakdown below lower trendline (35,900)
SL: 36,500
Target: 34,700
Risk-Reward: 1:2
I know that the SL and Target are quite large, hence, this would be a good opportunity to practice position sizing. Generally for smaller targets I could trade full quantities, but for this my risk is only about 100-200 points and targets around 400 points max. But considering the VIX is trading around 20, the volatility is high and larger targets can be achieved. So, if the SL and target are upto 3x my normal trades, this where I will cut down my positioning by 1/3. Example, if my full quantity is 150 (6 lots), I will only trade 50 (2 lots) which is exactly 1/3. This will ensure that larger SL does not mean more risk in absolute terms.