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Sunday 8 September 2013

How to Trade with the Trend ?

This lesson will cover the technique to trade in a trending market. There are several ways to trade in a trending market using technical analysis. Here I will cover a simple technique which is an extension of our Opening Range Breakout Trading System.

All readers are requested to read the course on Opening Range Breakout Trading system first before reading below.

Trend is your friend until it reverses – this is the basic simple rule in the market.

How do we know if the market is trending.

I apply a basic rule. If the moving averages are sloping upwards in a 45 degree angle then it is bullish trend and if the moving averages are sloping downwards in 45 degrees , then it is a bearish trend.

Rules of this trade

There is nothing new to learn if you are already familiar with our ORB (Opening Range Breakout) trading system. All the rules for buy, sell and stop loss are the same.

Only difference is that the time frame for opening range is considered as 60 min. Ideally, if you have traded 30 min breakout and booked profits, but the stock continue to move upwards and establishes new high, then re-enter for trend trading at the break of 60 min high. Ideal setup is when the stock pulls back and then moves up as in the examples below.

Follow the same for a bearish trend. Sell when the stock breaks down from the 60 min opening range low following all the rules of Opening Range Breakout Trading System.

More trading lessons will follow. Opening Range Reversal trading is another technique for advanced traders which I will cover in next few days. Meanwhile, go through the lessons and trading examples and make your days profitable.

Example 1: ICICI Bank – Trending 60 min Opening Range Breakout

ICICI Bank on Sep 06, gave a very good 30 min breakout trade, this was followed by a 60 min breakout and that is where we can enter to trade the trend. As always enter in two lots and book profits on the first lot with few points. Carry the second lot till the trend reverses. In this case, you can carry the second lot till the 5 min candle closes below the 20 MIN EMA.

Additional things to look at – overall market (Nifty) is trending in a similar manner. The stocks from the same sector (e.g. Bank Nifty in this case) is trending in the same direction.
Point A is the entry point for 30 min Breakout and Point B for the 60 min Breakout trade. Book full profits in point C.

Example 2: Cipla – Trending 60 min Opening Range Breakout


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