Market Structure 20201111
1 trade — scratched.
0915
Nifty opened 40 points gapped up, saw some profit booking and then got bought up to BRN 12700.
0920–0940
Orders came from the buy side until the 0930 candle which saw some retracement, but was quickly brought back up halfway. This could be initial range high and seemed like it with the next candle (0935) more or less negating the retracement. But the 0940 candle made a new DH.
0945–0950
Sellers had had enough and pushed the market down, marking a clear DH and an IRH (This is important because this is exactly where the day ended). The next candle (0950) was unable to pull the index back to the DH, and the market started falling to the next DP resisitance: BRN.
0955–1015
The market started falling smoothly towards the DP:BRN, with a very minor retracement. I have to start taking these trades, they have been successful on all the last 3 days.
1020–1100
There was a little pullback, but unable to take out the last swing high, and we fell smoothly to the DP. The 1100 candle closed comfortably below the DP:BRN.
1100–1110
There was a sharp decline in the market with the 1105 candle. And we were clearly in bear territory. The market had taken out all the next 3 DPs viz. DO, IRL and PDC. There was simply nothing to stop it now, and so I entered the trade. There was a support barely 5 points ahead, which I conveniently ignored in the emotional state. (Mistake #0)
1115 (Entry) — 1155(Exit)
I did the same mistake I have been doing a lot of times: that of not waiting for the candle to close (Mistake #1). Although I did take the trade at the very end, after seeing a pullback fail. Unfortunately for me, as soon as I entered, the candle retraced and I saw that the drop was over. Now I was stuck with a losing position, especially since I had shorted an ITM call (Mistake #2). The rationale was that if we’re dropping, we’ll atleast take out the 12600 levels, which would make the call OTM and fetch me a lot of monies. I did not see that selling calls means I’m fighting with IV raise which comes with a drop in the market prices, but I didn’t want to buy puts because of theta decay on Wednesday. In the end this worked in my favor as I was able to handle the drawdown (which frankly was a lot) easily. I did not have a stop loss, because I was trying to be brave, but I did have a mental stop loss. Then after the drawdown dropped back to manageable levels, I put that mental stop loss in the system as well. Fortunately it didn’t trigger, and I exited/scratched my trade near the absolute bottom, making enough to cover brokerage. The market was kind enough to let me do that as it zoomed back up in the next candles.
1200–1210
The market made a V recovery confirming the support level of 12623 and went back up through one DP (PDC) before facing resistance at the next one.
1215–1325
We faced resistance at the DP:IRL and turned back around to make a new DL
1330-EOD
The market found support at some level, which I have now marked in my chart as a imp level, but it was out of the blue that the market again made a very sharp up move and rallied all the way up to close at DH. (This is similar to what we discussed in yesterday’s market structure, but the timing was a little different)
Mistakes:
1. Ignored the support level at 12623, which I had clearly marked in the morning.
2. Entered before the end of a candle. (Had my rationale, but a rule is a rule)
3. Shorted ITM instead of OTM to allow for some slippage
What I did well:
1. Had a strong heart during the drawdown, saw the loss wasn’t my biggest, and saw it in the grand scheme of things.
2. Put a SL in the system as soon as the initial frenzy calmed down, and the Sl was above a DP and above the latest swing high.
