We can keep the fingers crossed and hope that the level of 14427 is maintained on Monday which happens to be a key support level as any break on Monday of this level opens the gate for the next leg of the wave correction. All know that today's fall in Nifty was caused due to Biden's direction of attacks on Syria. Have a look at the chart below to understand the same with Retracement and Harmonic pattern and likely projections for the index. 

The Break in Nifty 14427 can lead to support at 14333 level and 14000 and break of 14000 means Nifty will find support at 13400 level.

According to pivot charts, the key support levels for the Nifty are placed at 14,358, followed by 14,187. 

If the index moves up, the key resistance levels to watch out for are 14,810 and 15,091

Overall trend is bearish in Nifty and Bank Nifty. 

With us you need not worry as we take care of all kinds of global activities and this is the reason we had bought put today in Bank Nifty and our clients using the Bank Nifty option tips got more than 500 points in a single tip for the day. The 500 point per lot today translates into a profit of Rs 500*25=12500. Just remember that this profit was achieved on the capital of less than Rs 10000 as this is the only capital which is required for trading in the Bank Nifty option and no tension of any reduction in margin.

A gradual rise in bond yields globally has created a panic in the equity markets. Indian frontline benchmarks - the S&P BSE Sensex and the Nifty 50 - lost nearly 2 percent in intra-day trade.

At the global level, US Treasury yields vaulted to their highest since the pandemic began on expectations of a strong economic expansion and related inflation. Back home, the 10-year government bond yield jumped to 6.18 percent on Thursday, February 25.

The benchmark bond (10-year tenor) yields had fallen to 5.6 percent during the peak of the pandemic crisis but have since been rising and jumped 31 bps since the Budget. Year to date, the yields have crept up 16 bps in 2021 so far.

Acuit Ratings now expects the 10-year sovereign yields to rise from 6 percent in March 2021 to 6.40 percent by March 2022 given that the Reserve Bank of India may hike the repo rate by 25 bps going forward given the likely rate and liquidity normalisation expected next fiscal.

What is bond and bond yield?

Simply put, bonds are loans the one makes to a corporation or government. The interest payments remain largely unchanged over the life of the loan. Moreover, one receives the principal at the end of the loan tenure if the borrower doesn't default.

Bond yield, on the other hand, is the return that an investor gets on that bond or on particular government security.

Bond yield and bond prices

A fall/rise in interest rates in an economy pushes up/pulls down bond prices. However, bond yields fall/rise in this situation.

This happens because if RBI, for example, decides to increase interest rates, the bond's price (which is offering similar return as the current interest rates) would fall because its coupon payment is less attractive now on a relative basis. Therefore, investors would chase new bonds with better risk-free return.

Why do bond yields rise?

Bond yield is the return an investor gets on that bond or on a particular government security. The major factors affecting the yield is the monetary policy of the Reserve Bank of India, especially the course of interest rates, the fiscal position of the government and its borrowing programme, global markets, economy, and inflation. With the pandemic upsetting the calculations, Finance Minister Nirmala Sitharaman has pegged the fiscal deficit for 2021-22 at 6.8% of GDP (the original target was 3.5%), and aims to bring it back under 4.5% by 2025-26.

A fall in interest rates makes bond prices rise, and bond yields fall — and rising interest rates cause bond prices to fall, and bond yields to rise. In short, a rise in bond yields means interest rates in the monetary system have fallen, and the returns for investors (those who invested in bonds and govt securities) have declined.

Inflation expectation and bond yields

A rally in the stock market tends to raise yields as money moves from the relative safer investment bet to riskier equities. However, if the inflationary pressures begin to look up, investors tend to move back to bond markets and dump equities.

How bonds affect stock markets?

When valuing equities, investors add the equity risk premium they seek to a risk-free rate to compute the expected rate of return. Usually, the easiest way to estimate the risk-free rate is to default it to the long government bond yield. This is why long bond yields matter to equities.

Now, theoretically, given that the long bond yield is the risk-free rate, a higher bond yield is bad for equities and vice versa. But one must also remember why bond yields are changing and not just the direction of change.

“Long bond yields reflect the growth and inflation mix in the economy. If growth is strong, bond yields are usually rising. They also rise when inflation is going higher. The impact of these two situations is different for equities,” explains Ridham Desai, equity strategist at Morgan Stanley, in a co-authored note with Sheela Rathi and Nayant Parekh.

When growth is strong, the impact of higher growth in terms of cash flows or, more precisely, dividends more than offsets the negative impact of the rise in yields, causing equity share prices to trade higher.

“The gap between real GDP growth and the 10-year bond yield correlates well with share prices, underpinning the point made above. Indeed, to the extent that growth accelerates in the coming months faster than the rise in bond yields, share prices should be fine,” says Desai, adding that Indian equities/bond valuations are at the top end of their 2010-21 ranges.

“If growth accelerates from here, as we expect, it is likely that equities break this range on the upside, consistent with the fundamental relationship,” he believes.

How should investors trade?

Morgan Stanley suggests two scenarios for investors. Under the first scenario, where growth accelerates, portfolios should be positioned in domestic cyclicals, rate-sensitives, and mid- and small caps.

Under the second scenario, where inflation makes a rapid return, the brokerage advises investors to bet on technology, healthcare, and consumer staples.

Why are bond yields rising?

Inflation

For many, rising inflation expectations are the simplest reason for the yield ascent.

The combination of a recovering U.S. economy thanks to vaccination efforts, trillions in fiscal relief and accommodative monetary policy are expected to deliver the kind of inflation that hasn’t been seen since the 2008 financial crisis.

Bond-market forecasts of consumer prices are suggesting inflation could surpass the central bank’s target for a protracted period, and some investors are penciling in at least 3% inflation this year even if they are less sure if such sustained price pressures could last.

The 10-year break-even rate spread, which tracks expectations for inflation among holders of Treasury inflation-protected securities, or TIPS, was at 2.15%. That is well above the Fed’s typical annual target of 2%.

Scott Clemons, chief investment strategist at Brown Brothers Harriman, says another factor that could push prices higher later this year is the pent-up savings among U.S. households forced to stay at their homes and restrain their spending in restaurants, leisure and travel.

Once the COVID-19 pandemic is put to bed, consumers would unleash their savings upon the economy, spurring prices for services higher and leading to the kind of elevated price pressures that would usually prompt the central bank to raise rates.

But as part of the central bank’s new average inflation targeting framework, the Fed is likely to stand pat and allow the economy to run hot, adding to concerns that the Fed won’t protect longer-dated Treasury’s from reflationary forces.

Insufficient Fed action

Indeed, the lack of willingness on the part of the central bank to lean against rising bond yields has emboldened the bond bears this week.

Fed Chairman Jerome Powell underlined that the central bank would support the economy for as long as necessary, and that the Fed would clearly communicate well in advance when it starts to contemplate tapering asset purchases.

"It’s all just talk,” said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments, in an interview.

Al-Hussainy said until the central bank backs up its words with concrete actions, such as tweaking its asset purchases, yields could keep moving higher.

Some market participants were unimpressed by the Fed’s nonchalant tone, noting that senior central bankers like Kansas Fed President Esther George kept repeating that higher bond yields reflected improving economic fundamentals and were therefore not a cause for concern.

Thursday’s moves helped to drive selling in equities, with investors repricing those investments as rates jolt higher. The Dow Jones Industrial Average,  the S&P 500 index and the Nasdaq Composite Index all finished sharply lower on the session.

Forced sellers

Market participants also suggested yields were moving beyond fundamental forces, and that inflation fears weren’t enough to explain why rates were moving up at such a ferocious pace.

“A lot of this move is technical,” Gregory Faranello, head of U.S. rates at AmeriVet Securities, told MarketWatch.

He and others suggest the yield surge may have been a case of selling causing more selling, as investors caught offsides were forced to close their bullish positions on Treasury futures, in turn, pushing rates higher.

Ian Lyngen, a rates strategist at BMO Capital Markets, pointed the finger at so-called convexity hedging.

The idea is that holders of mortgage-backed securities will see the average maturities of their portfolio rise in line with higher bond yields, as homeowners stop refinancing their homes.

To offset the risk around holding investments with higher maturities, which can increase the chance of painful losses if rates rise, these mortgage-backed debtholders will sell long-term Treasurys as a hedge.

Usually, selling associated with convexity hedging isn’t powerful enough to drive significant bond-market moves on their own, but when yields are already moving swiftly, it can exacerbate rates swings.

How has the rise in yield affected stock markets?

The sudden rise in domestic and global bond yields recently moderated the enthusiasm of equity market participants around the world. The “taper tantrum” of 2013 showed the relationship between bond yields and stock markets — a sudden rise in bond yields caused markets to slide, as mass bond selling was witnessed. “Bond yields are inversely proportional to equity returns; when bond yields decline, equity markets tend to outperform, and when yields rise, equity market returns tend to falter. This could be one of the reasons for the Nifty’s correction this week,” said Nirali Shah, Head of Equity Research, Samco Securities.

Traditionally, when bond yields go up, investors start reallocating investments away from equities and into bonds, as they are much safer. As bond yields rise, the opportunity cost of investing in equities goes up, and equities become less attractive.

Also, a rise in bond yields raises the cost of capital for companies, which in turn compresses the valuations of their stocks. That is something that investors see when RBI cuts or raises the repo rate. A cut in the repo rate reduces the cost of borrowing for companies, leading to a rise in share prices, and vice versa.

How will the borrowing program and economy be impacted?

When bond yields rise, the RBI has to offer a higher cut-off price/yield to investors during auctions. This means borrowing costs will increase at a time when the government plans to raise Rs 12 lakh crore from the market. However, RBI is expected to stabilise yields through open market operations and operation twists. Besides, as government borrowing costs are used as the benchmark for pricing loans to businesses and consumers, any increase in yields will be transmitted to the real economy.

A number of aspects need to be kept in mind while trading stock market and the Bond market is one of the key factors which helps us to provide Best Bank Nifty option tips to the clients and we have been rightly voted as #1 Bank Nifty tips provider in India.

Mr Sanjay has undertaken a review of our Bank Nifty Option Tips and Commodity tips and we would like to see max traders get benefitted with Bank Nifty Option Tips service as one just require a small capital of Rs 10,000 and you are good to get started to make money from Indian stock market.

Have a look at the video below

To be honest we love this banking stock and this stock is a buy-in every downtrend and gives you an opportunity to add a good stock to your portfolio.

We are referring to HDFC bank which has a good track record, robust systems, and practices in place with happy and satisfied clients. We see its likely targets as 1700/1800/2000 in near future and add this stock as a systematic investment plan.

As a disclosure this stock is held by our clients with a long-term perspective as HDFC bank is likely to get most benefitted with the announcement by FM that PSUs can park their funds with private sector banks and HDFC bank is going to get the bulk share. Govt has also allowed private sector banks to participate in govt related business like a collection of taxes, pension payments, and small savings scheme.

You can know more about our short term investment tips or Bank Nifty Option tips here and start making money like professionals.

Just note that we had recommended HDFC bank in Jan 21 also and the analysis on HDFCbank in Jan 21 can be read here.

This video is worth watching as now Whatsapp is unilaterally going ahead with its privacy policy with a big logo i.e. you like it or gulp it as to be honest it is very difficult to dump WhatsApp as it has become a part of our life.

Do remember to check our Best Bank Nifty Option tips for intraday which gets you profit with in first 2 hours of the day itself. Our aim is to trade less but trade accurately.

Michael Jordan was born in 1963, in the slums of Brooklyn, New York.

He had four siblings and his father's earnings were not sufficient to provide for the whole family.

He grew up in a poor neighbourhood. Exposed to mindless violence and heavy discrimination in the slums, he saw for himself only a hopeless future.

His father saw in Michael, a lost soul and decided to do something.

He gave Michael, who was 13 years old, a piece of used clothing and asked: 

"What do you think the value of this outfit would be?"

Jordan replied,"Maybe one dollar."

His father asked, "Can you sell it for two dollars? If you can sell it, it would mean that you are a big help to your family."

Jordan nodded his head, "I'll try, but no guarantee that I'll be successful."

Jordan carefully washed the cloth clean. Because they didn't have an iron, to smoothen the cloth, he levelled it with a clothes brush on a flat board, then kept it in the sun to dry. The next day, he brought the clothes to a crowded underground station. After offering it for more than six hours. Jordan finally managed to sell it for $2. He took the two-dollar bill and ran home.

After that, every day he looked for used clothing, washed and ironed it, and sold it in the crowd.

More than ten days later, his father again gave him a piece of used clothing, "Can you think of a way you can sell this for 20 bucks?"

Aghast, Jordan said, "How is it possible? This outfit can only fetch two dollars at the most."

His father replied, "Why don't you try it first? There might be a way."

After breaking his head for a few hours, finally, Jordan got an idea.

He asked for cousin's help to paint a picture of Donald Duck and Mickey Mouse on the garment. Then he tried to sell it in the school where the children of the rich study.

Soon a housekeeper, who was there to pick his master, bought that outfit for his master. The master was a little boy of only 10 years. He loved it so much and he gave a five dollar tip. 25 dollars was a huge amount for Jordan, the equivalent of a month's salary of his father.

When he got home, his father gave him yet another piece of used clothing, "Are you able to resell it at a price of 200 dollars?" Jordan's eyes lit up.

This time, Jordan accepted the clothes without the slightest doubt. Two months later a popular movie actress from the movie "Charlie's Angels", Farah Fawcett came to New York for her Movie promos. After the press conference, Jordan made his way through the security forces to reach the side of Farah Fawcett and requested her autograph on the piece of clothing. When Fawcett saw this innocent child asking for her autograph, she gladly signed it.

Jordan was shouting very excitedly, "This is a jersey signed by Miss Farah Fawcett, the selling price is 200 dollars!" He auctioned off the clothes, to a businessman for a price of 1,200 dollars!

Upon returning home, his father broke into TEARS and said, "I am amazed that you did it My child! You're really great! "

That night, Jordan slept alongside his father. His father said, "Son, in your experience selling these three pieces of clothing, what did you learn about success?"

Jordan replied, "Where there's a will, there's a way."

His father nodded his head, then shook his head, "What you say is not entirely wrong! But that was not my intention. I just wanted to show you that a piece of used clothing which is worth only a dollar can also be increased in value, Then how about us - living & thinking humans? We may be darker and poorer, but what if we CAN increase our VALUE."

This thought enlightened young Jordan. Even a piece of used clothing could be made dignified, then why not me? There is absolutely no reason to underestimate myself.

From then on, Michael Jordan felt that his future would be beautiful and full of hope.

He went on to become the greatest basketball player of all times. As per Wikipedia; Michael Jeffrey Jordan, also known by his initials MJ, is an American businessman and former professional basketball player. He is the principal owner and chairman of the Charlotte Hornets of the National Basketball Association and of 23XI Racing in the NASCAR Cup Series.

Reflection

How can I increase my own value? A very interesting thought indeed. Ponder on it.

Keep getting such informative content which can transform your life by filling your email in subscription provided in inbox free of cost and do not forget to check our Bank Nifty option tip for tomorrow as it is a sure precision call to get you profit every day.

What Is Stop Hunting?

Stop hunting is a strategy that attempts to force some market participants out of their positions by driving the price of an asset to a level where many individuals have chosen to set stop-loss orders. The triggering of many stop losses at once typically creates high volatility and can present a unique opportunity for investors who seek to trade in this environment.

Stop hunting is a tactic described in numerous reputable books.

Consider you have a strong fund; you want to buy a company or a lot of shares of a company. These shares are always without any brake in the hand of someone. With advanced mathematics, you don’t even need to know where their stops are.

In order to get these “shares” that are rotting somewhere in someone’s depot all you need to do is go “short” on a specific stock until the price hits a level where you know many people will get rid of them as (and now carefully) you have a lot of literature that tells the “lemmings” when to place a stop at a certain level of “loss”. So, it’s no hard work to figure out a level where enough people get rid of the losing stock.

The same happens in commodities and other markets. The same is in whatever market, certificates etc. Everywhere where you have a limited number of “contracts” but you need to get as many as possible these things happen regularly. It must not be your broker who does this, it’s usually big players who do this.

What people usually don’t realise, this is a game of wolfs catching sheep, and trust me the wolfs know how to catch a sheep.

In the simplest term stop hunting is equal to levels of supply and demand for buy and sell orders. Don’t ever forget that we retail traders can’t see the full order books, commercial institutions are keen on these levels of interest (where the stops are all placed) as it’s high in liquidity. The higher the liquidity the lower their costs of trading and quicker they can get filled and at a better price.

Understanding Stop Hunting

The fact that the price of an asset can experience sharp moves when many stop losses are triggered is exactly why traders engage in stop hunting. The price volatility is useful to traders because it presents potential trading opportunities.

For example, assume that ABC Company's stock is trading at $50.36 and looks as though it may be heading lower. It is possible that many traders will place their stop losses just below $50, at $49.99, so that they can still hold onto the shares and benefit from an upward move while also limiting the downside. If the price falls below $50, traders expect a flood of sell orders as many stop losses are triggered. This will then push the price lower and give some traders the opportunity to profit from the decline and perhaps even open a bullish position on an expected rebound to the previous range.

Stop Hunting and Stop-Loss Orders

Stop-loss orders are types of orders that are slightly more complicated than a traditional market order or limit order. In a stop-loss order, an investor will place an order with her broker to sell a security when it reaches a certain price. For example, if you own shares of company XYZ Inc., currently trading at $70, and you want to hedge against a significant decline, one option would be to enter a stop-loss order to sell your XYZ holdings at $68.

If XYZ moves below $68, your stop-loss order is triggered and converts into a market order. Your XYZ holds would be liquidated at the next available price. Stop-loss orders are designed to limit investors’ losses on a long position. A stop-loss order can protect a short position as well.

Finding the Stop-Loss Orders While Stop Hunting

Stop hunting is relatively straightforward. Any asset with significant enough market volume will be moving in a more or less defined trading zone with areas of support and resistance. The downside stops losses tend to be clustered in a tight band just below resistance, while the upside stop losses sit just above support. Larger traders looking to add to or exit a position can shift the price action with volume trades that amount to stop hunting due to their market impact.

Generally, this will be signalled on the charts by increasing volume with a clear directional push. For example, the price action might bounce off support twice on the increasing volume before breaking through. Smaller traders jump on this stop hunting behaviour to realize profits from the volatility it creates in the short term. Depending on your strategy and indicators, you can participate in the stop hunting on the downside with a short position or consider it an opportunity to open a long position at a price lower than the recent trading range.

There are two aspects of “stop hunting”. One is the dealing desk brokers who take opposite trades of you (your loss is their win) and they can manipulate the price to catch your stop loss. You can investigate this if you compare several brokers and see how the price behaved at that point (if other brokers have no spike, then it’s quite possible your broker manipulated the price). 

The second aspect are the market makers and dealers who basically push the price to where more people have pending orders (they can see where stop loss/take profits are). They mostly profit on traded volume than if a particular trader loses or wins so it’s in their interest to move the price to where more traders are willing to participate.

However, you should note that as eddies said there are many traders and funds, and many companies buying and selling stuff around the world, there are central banks and governments buying/selling reserves. Therefore, the price can be manipulated in small pips rather than entire trends which are basically moved by central bank’s policies and/or supply and demand.

How Smart Traders Mess Around with You

The Bull and Bear Trap

Making traders take trades in the wrong direction is a very simple thing to do and you have noticed it before as well, without being aware of it. Let’s say you want to buy a support level after price drops back into it. Often, you’ll see the price going through the level and it looks like the level isn’t holding and the price is breaking out.

This scenario is ideal for smart traders. First, those traders who have prematurely bought a potential bounce off support see price heading for their stops (which are essentially sell orders). And second, the other traders who have waited patiently are now looking to sell the (fake) breakout. The average, retail traders are now all happily selling to the profitable traders who are even more happily buying from them for a very good price.

Because of the high demand from the profitable traders, prices will rise and now take out the stops from the traders who sold the fake breakout – which is accelerating the bullish move even more. The traders who are now left with profits are, as usual, the smart traders. The frustrated losing traders will see that their initial idea of buying support was correct and they are left thinking that it wasn’t such a bad trade after all – probably just some “weird” and “messy” price move. “Next time it should work again”, they think… It will, but not for them!

Triggering Your Greed and Fear Responses

This price behaviour is another amateur-trap and it works similarly to the Bear and Bull Trap. But the way it plays out on your charts is slightly different and therefore, worth pointing out.

Let’s say the price is currently at 110 and keeps falling towards the very big support level at 100 where you, and probably 90% of all other traders, want to buy. Very often you’ll then see a reaction ahead of the level. When price starts twitching at 102 and starts moving up a few pips, the impatient amateur traders will get very nervous and fear that price has already found support and will take off without them. We traders are a very greedy bunch of individuals and we hate it when price misses our orders by just a few pips. The profitable trader knows this and will use it to their advantage. Therefore, amateur traders will prematurely pull the trigger and take a long trade even if the price hasn’t come to the actual support level yet.

The smart and profitable traders can now drive price further down, generating panic among the long-positioned traders and then buy back from them when they exit their trades because they think the price is breaking down. The result is similar to the one of a Bear Trap, with the difference that the way of tricking amateur traders into losing trades is slightly different. 

How to Avoid Getting Tricked into Taking Losing Trades

Those are just 2 examples of how losing traders get tricked into making wrong assumptions about price movements, but if you can understand the psychology and think behind them, you’ll be able to understand the drivers of price action and the herding behaviour, in general, a lot better.

Tips on How to Avoid Stop Hunting:

• Don’t use the obvious levels for your stops. Big round numbers are a very bad choice for picking your support and resistance levels.
• Research shows that exchange rates trend faster after crossing round numbers suggesting that stop-loss orders propagate trends.
• Stop-loss orders are tightly clustered near rates ending in 00.
• Add your spread + a few pips of extra padding to your stop. The padding is key!
• The more people talk about a certain level, the harder it is to profit from it.
• Add a column in your trading journal and keep track of how far price moves against you. This is an excellent way to see if you enter too early or place your stops too conservatively.
• Get in the heads of the average retail trader. It’s usually very easy to figure out what they see on their charts and want to do. Then do the opposite.
• Use confirmation criteria in your trading as an extra filter
• If a trade is too good to be true, it’s too good to be true

We present below the Imp levels to be considered for Bank Nifty for the forthcoming week are as enumerated below and the same can be viewed in the chart also. These levels are for the week commencing wef 22 Feb 2021. Pl click on the image to enlarge it as it is a big image and is being seen in small size to cater for page width.

Break below 35572 and sustaining below with a sufficient few candles below this level will open the gateway for fall to 35000/34000/33500 level. As of now buying be considered only above 36652 level and not to forget to use our Best Bank Nifty Option tips to start making money in flat 2 hours.

Imp levels to be considered for Nifty for the forthcoming week are as enumerated below and the same can be viewed in the chart also. These levels are for the week commencing wef 22 Feb 2021. Pl click on the image to enlarge it as it is a big image and is being seen in small size to cater for page width.

Bullish above : 15172

Bearish below: 15038 & on breaking below that level can head towards 14732 and close below 14700 opens another bearish wave which can lead to fall 14400 & 14000 where it can find the psychological support.

You can get our specialist support for Nifty and Bank Nifty option tips here and be a part of elite rich traders who make money on a daily basis.

Scalping requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains the trader worked to obtain. Thus, having the right tools—such as a live feed, a direct-access broker, and the stamina to place many trades—is required for this strategy to be successful.

Read on to find out more about this strategy, the different types of scalping, and tips about how to use this style of trading.

How Scalping Works

Scalping is based on an assumption that most stocks will complete the first stage of a movement. But where it goes from there is uncertain. After that initial stage, some stocks cease to advance while others continue.

A scalper intends to take as many small profits as possible. This is the opposite of the "let your profits run" mindset, which attempts to optimize positive trading results by increasing the size of winning trades. Scalping achieves results by increasing the number of winners and sacrificing the size of the wins.

It's not uncommon for a trader with a longer time frame to achieve positive results by winning only half, or even less, of their trades – it's just that the wins are much bigger than the losses. A successful scalper, however, will have a much higher ratio of winning trades versus losing ones, while keeping profits roughly equal or slightly bigger than losses.

The main premises of scalping are:

Lessened exposure limits risk: A brief exposure to the market diminishes the probability of running into an adverse event.

Smaller moves are easier to obtain: A bigger imbalance of supply and demand is needed to warrant bigger price changes. For example, it is easier for a stock to make a $0.01 move than it is to make a $1 move.

Smaller moves are more frequent than larger ones: Even during relatively quiet markets, there are many small movements a scalper can exploit.

Scalping can be adopted as a primary or supplementary style of trading.

Spreads in Scalping vs. Normal Trading Strategy

When scalpers trade, they want to profit off the changes in a security's bid-ask spread. That's the difference between the price a broker will buy a security from a scalper (the bid price) and the price the broker will sell it (the ask price) to the scalper. So, the scalper is looking for a narrower spread.

But in normal circumstances, trading is fairly consistent and can allow for steady profits. That's because the spread between the bid and the ask is also steady (supply and demand for securities is balanced).

Scalping as a Primary Trading Style

A pure scalper will make a number of trades each day — perhaps in the hundreds. A scalper will mostly utilize tick, or one-minute charts, since the time frame is small, and they need to see the setups as they take shape as close to real-time as possible. Supporting systems such as Direct Access Trading (DAT) and Level 2 quotations are essential for this type of trading. Automatic, instant execution of orders is crucial to a scalper, so a direct-access broker is a preferred method.

Scalping as a Supplementary Style

Traders with longer time frames can use scalping as a supplementary approach. The most obvious way is to use it when the market is choppy or locked in a narrow range. When there are no trends in a longer time frame, going to a shorter time frame can reveal visible and exploitable trends, which can lead a trader to scalp.

Another way to add scalping to longer time-frame trades is through the so-called "umbrella" concept. This approach allows a trader to improve their cost basis and maximize a profit. Umbrella trades are done in the following way:

A trader initiates a position for a longer time-frame trade.

While the main trade develops, a trader identifies new setups in a shorter time frame in the direction of the main trade, entering and exiting them by the principles of scalping.

Based on particular setups, any trading system can be used for the purposes of scalping. In this regard, scalping can be seen as a kind of risk management method. Basically, any trade can be turned into a scalp by taking a profit near the 1:1 risk/reward ratio. This means that the size of the profit taken equals the size of a stop dictated by the setup.

Scalp trades can be executed on both long and short sides. They can be done on breakouts or in range-bound trading. Many traditional chart formations, such as cups and handles or triangles, can be used for scalping. The same can be said about technical indicators if a trader bases decisions on them.

Types of Scalping

The first type of scalping is referred to as "market-making," whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. Obviously, this strategy can succeed only on mostly immobile stocks that trade big volumes without any real price changes.

This kind of scalping is immensely hard to do successfully because a trader must compete with market makers for the shares on both bids and offers. Also, the profit is so small that any stock movement against the trader's position warrants a loss exceeding their original profit target.

The other two styles are based on a more traditional approach and require a moving stock where prices change rapidly. These two styles also require a sound strategy and method of reading the movement.

The second type of scalping is done by purchasing a large number of shares that are sold for a gain on a very small price movement. A trader of this style will enter into positions for several thousand shares and wait for a small move, which is usually measured in cents. Such an approach requires highly liquid stock (to allow for entering and exiting 3,000 to 10,000 shares easily).

The third type of scalping is considered to be closer to the traditional methods of trading. A trader enters a specific amount of shares on any setup or signal from their system and closes the position as soon as the first exit signal is generated near the 1:1 risk/reward ratio.

Tips for Novice Scalpers

With low barriers to entry in the trading world, the number of people trying their hands at day trading and other strategies, such as scalping, has increased. Newcomers to scalping need to make sure the trading style suits their personality because it requires a disciplined approach. Traders need to make quick decisions, spot opportunities and constantly monitor the screen. Those who are impatient and feel gratified by picking small successful trades are perfect for scalping.

That said, scalping is not the best trading strategy for rookies; it involves fast decision-making, constant monitoring of positions and frequent turnover. Still, there are a few tips that can help novice scalpers.

Order Execution

A novice needs to master the art of efficient order execution. A delayed or bad order can wipe out what little profit was earned and even result in a loss. Since the profit margin per trade is limited, the order execution has to be accurate. As mentioned above, this requires supporting systems such as Direct Access Trading and Level 2 quotations.

Frequency and Costs

A novice scalper has to make sure to keep costs in mind while making trades. Scalping involves numerous trades—as many as hundreds during a trading session. Frequent buying and selling are bound to be costly in terms of commissions, which can shrink the profit. This makes it crucial to choose the right online broker. The broker should not only provide requisites like direct access to markets, but also competitive commissions. And remember, not all brokers allow scalping. 

Trading

Spotting the trend and momentum comes in handy for a scalper who can even enter and exit briefly to repeat a pattern. A novice needs to understand the market pulse, and once the scalper has identified that, trend trading and momentum trading can help achieve more profitable trades. Another strategy used by scalpers is a countertrend. But beginners should avoid using this strategy and stick to trading with the trend.

Trading Sides

Beginners are usually more comfortable with trading on the buy-side and should stick to it before they gain sufficient confidence and expertise to handle the short side. However, scalpers must eventually balance long and short trades for the best results. 

Technical Analysis

Novices should equip themselves with the basics of technical analysis to combat increasing competition in the intra-day world. This is especially relevant in today's markets dominated by high-frequency trading, as well as the increasing use of dark pools.

Volume

As a technique, scalping requires frequent entry and exit decisions within a short time frame. Such a strategy can only be successfully implemented when orders can be filled, and this depends on liquidity levels. High-volume trades offer much-needed liquidity.

Discipline

As a rule, it is best to close all positions during a day's trading session and not carry them over to the next day. Scalping is based on small opportunities that exist in the market, and a scalper should not deviate from the basic principle of holding a position for a short time period.

The Bottom Line

Scalping can be very profitable for traders who decide to use it as a primary strategy, or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders. 

We do take advantage of scalping and you can get started with our Bank Nifty Option tips to know more about our services which gets you daily profit and remember that we have been voted #1 Bank Nifty tips provider in India.

His appreciative word definitely acts as a morale-boosting for our team to keep providing good quality tips for the clients which provide daily profit. He will be also joining with our delivery calls from the next month.

The banking Index needs to be monitored to know the health of the Indian economy and here we will let you know which banking stocks form a part of the Banking Index and how they led to the fall in the BankNifty Index as of 19 Feb 2021.

Have a look at the below screenshot to understand that if you want to trade Bank Nifty Option, then you need to keep track of these stocks to stay ahead of the market. As we can see that ICICIBank, HDFCbank, Axis bank and SBI led to a major fall in the market and IDFC bank has been the saviour for the day which we have been recommending to hold for a long time and same has been recommended multiple time to our stock investment tips subscribers.However, you can make use of our Bank Nifty option tips for tomorrow and let the whole work be handled by us and you can just sit and relax and watch your bank balance grow.

Whether you are a real-time trader, swing trader, position trader, or investor, you will find great value in this book, regardless of the markets you trade or your level of experience. This book is by Franklin O. Ochoa and he has analyzed the market every day over the past 12 years and has cultivated the techniques in this book into fine art.

You can make use of our Best Bank Nifty Option tips to make daily money in the stock market as we get you to profit in less than 2 hours.

Often people will argue that the stock market is too risky to invest in. Especially for those of us that grew up in the shadow of the GFC – putting your money at risk seems too much. Far easier to protect your hard-earned when it is safely insured in the bank. 

The problem with that attitude is that you’re missing the bigger picture. Over the long term the stock market has been a fantastic wealth creator. By missing out on this opportunity, we are setting ourselves back later in life. Forcing ourselves to delay retiring and to keep working. Forcing ourselves to take a job for the paycheck. Most of all, forcing ourselves to work for our money rather than have our money work for us. 

When it comes to investing your money, have the following thoughts ever come to your mind: “I want high returns, but at low risk” or “I want to get 30% annualised returns, but must keep my principal safe”. If so, then you are setting yourself up for disappointment. And don’t blame the financial markets or your luck or your investment advisor.

Rather, take some time to understand that earning a high return at low risk is incompatible. If you want to create wealth for yourself and your family, you need to take some calculated risks and can’t be totally risk-averse.

The trade-off

Many a wise person has shared the wisdom to the effect that “if you want to achieve lofty goals, you have to take some risk”. Usually, the goal is compelling and rewarding enough for us to willingly take on the risk. However, we think of ways of mitigating the risk through some kind of damage control so that we don’t end up suffering if the risks were to materialise

For instance, let’s say our team is batting second in a one-day cricket match where the opponents have set us a very demanding target of scoring 400 runs in our allotted overs. If our team just scores singles and doubles, it might be safe, but we will fall dramatically short of achieving our target. By taking no risk, we might conserve wickets, but we are almost sure to lose.

To achieve this lofty goal of scoring 400 runs, our team will have to take risks. We will have to swing for the fences. Only then can we have some hope of reaching our target. In summary, scoring 400 runs — or earning a high return — while taking no risks is going to be almost impossible.

The same is true for investing. Earning a high return but while taking on very low risk is not possible. It’s a balance that even world-class investors struggle to achieve. Investment history has shown that you just cannot have it both ways — you generally get high returns only when you take higher than usual risk. 

Take calculated risks

Exposing oneself to risk is not something one should do blindly. It must be done in the context of what the expected pay-off might be. If the reward is compelling enough, then it probably makes sense to take on the risk. Otherwise, it is not worth it. 

 Let’s take an example from everyday life. Wearing a seatbelt while driving is compulsory. Yet, many of us choose to drive without fastening our seatbelt. This exposes us to numerous risks. However, taking on these kinds of risks has very little upside or payoff, but clearly disastrous consequences if the worst were to happen. This kind of a risk, which has no upside, is not worth taking.

Contrast this with the batsman chasing 400 runs who tries to hit every other ball to the boundary, with a degree of power and placement. Sure, there is a risk of getting caught, but this risk is probably one that is worth taking because the payoff of scoring a six and chasing down the target is rewarding enough. The big takeaway here for all of us here is that risks should only be taken when there is an upside and the expected payoff is rewarding enough. This is a lesson we must remember when investing our money.

Risk across the spectrum 

 Let’s take a look at common investment options and their risk-reward trade-offs. The following will help illustrate how we, as investors, expect higher returns as the risk associated with the investment increases.

Let’s say, I have `10,000 to invest in a fixed income instrument, an instrument that will give me a fixed return that is pre-set at the time of making the investment. I am considering three options: Investing in a fixed income security issued by the government or a government-backed entity, investing in an FD issued by a bank, or investing in an FD issued by a company. The government security will pay the least amount of return — the reward — because it is the least risky. It is backed by the government, and all things being equal, the government ought to be a safe party to loan money to.

The bank FD will pay a slightly higher return because the government guarantees only part of the deposit. So, there is the risk of the bank failing, even if it is a very small risk. However, the company FD will pay the highest return because the risk perceived in lending to the company is the highest, so we expect a slightly higher reward for it. What we are trying to demonstrate is that as the riskiness of the investment increases, so does our expectation of return. As a corollary, if we set out to earn a high return, please recognise that this will come at the cost of taking on a higher risk. The above graphic shows some common investments and their riskiness.

No pain, no gain

For those who frequently go to gyms, the idiom “no pain, no gain” is probably a familiar one. In the investment world as well, if we want gains, it’s going to be possible only when one takes some risks. Almost every investment option involves taking on some risks.

Taking risks, albeit in a calculated manner, is something that is advisable, depending on one’s personal situation. Just like not everyone has the capacity to lift weights of up to 40 kg in the gym, not everyone has the capacity to take on high risks. You must take on risks according to what your risk appetite allows you to do, and what you feel you are comfortable about.

So, the next time you are looking to invest money, do keep in mind that there will be “no gain without pain”. Be realistic and don’t expect to get high returns unless you take on some risk.

Regardless of the type of investment, there will always be some risk involved. You must weigh the potential reward against the risk to decide if it's worth putting your money on the line. Understanding the relationship between risk and reward is a crucial piece in building your investment philosophy. Investments—such as stocks, bonds, and mutual funds—each have their own risk profile and understanding the differences can help you more effectively diversify and protect your investment portfolio.

Carrying Risk

While the traditional rule of thumb is “the higher the risk, the higher the potential return,” a more accurate statement is, “the higher the risk, the higher the potential return, and the less likely it will achieve the higher return.” To understand this relationship completely, you must know what your risk tolerance is and be able to gauge the relative risk of a particular investment correctly. When you choose to put your money into investments that are riskier than a standard savings or money market deposit account, you run the possibility of experiencing any or all of the following to some degree:

Losing your principal: Individual stocks or high-yield bonds could cause you to lose everything.

Not keeping pace with inflation: Your investments could rise in value slower than prices. This is more likely to happen if you invest in cash equivalents, like Treasury or municipal bonds.

Coming up short: There is a real chance that your investments don't earn enough to cover your retirement needs.

Paying high fees or other costs: Expensive fees on mutual funds can make it tough to make a good return. Beware of actively-managed mutual funds or ones with sales loads.

The Different Risk Profiles

Three main investment vehicles are readily available to most investors: stocks, bonds, and mutual funds. Some of these carry more risk than others, and within each asset class, you'll find that risk can also vary quite a bit.

Stocks

Most people have stocks in their investment portfolio, and for a good reason. According to Ibbotson Associates, stocks have reliably returned an average rate of 10% annually since 1926. This is higher than the return you're likely to get from many other investments, especially less risky ones such as bonds. However, be cautious with stocks. You could buy stock in established, blue-chip companies that have a fairly stable stock price, payout dividends, and are considered relatively safe. Or, you could choose to invest in smaller companies, such as start-ups or penny-stock firms, where your returns are much more volatile.

Bonds

A popular way to offset some of the risks from investing in stocks is to keep a certain amount of your money invested in bonds. When you purchase bonds, you're essentially lending money to a corporation, municipality, or other government entity, depending on which bonds you buy. Bonds generally provide more safety than stocks and are given a rating from agencies such as Moody's and Standard & Poors. Ratings act like a credit score or report card, and AAA-rated bonds are considered the safest.

When you buy government bonds, you receive a guarantee from Uncle Sam that you'll get your money back plus interest. At the other extreme are junk bonds, which are sold by corporations. Junk bonds promise much higher returns than long-term government bonds, but they're high-risk, and in some cases not even considered investment-grade securities.

Mutual Funds

Mutual funds make sense for many investors because they're managed by professional portfolio managers so that you don't need to worry about watching the market or monitoring a stock portfolio. Mutual funds work like a basket of stocks or bonds, and when you buy shares of a mutual fund, you get the benefit of the variety of assets held within the fund.

You can choose from a wide variety of funds with different risk profiles. Some hold large-company stocks; some blend large- and small-company stocks; some hold bonds; some hold gold and other precious metals; some hold shares in foreign corporations; and just about any other asset type that comes to mind. While mutual funds don't completely take away risk, you can use them to hedge against risk from other investments.

You can definitely get benefitted with our least risk taking Bank Nifty option tip as we have been rightly christened as the Best bank Nifty tips provider in India.

Trying to predict what will happen to the price of a single option or a position involving multiple options as the market changes can be a difficult undertaking. Because the option price does not always appear to move in conjunction with the price of the underlying asset, it is important to understand what factors contribute to the movement in the price of an option and the effect they have.

Options traders often refer to the delta, gamma, vega, and theta of their option positions. Collectively, these terms are known as the Greeks, and they provide a way to measure the sensitivity of an option's price to quantifiable factors. These terms may seem confusing and intimidating to new option traders, but broken down, the Greeks refer to simple concepts that can help you better understand the risk and potential reward of an option position.

What Is Theta?

The term theta refers to the rate of decline in the value of an option due to the passage of time. It can also be referred to as the time decay of an option. This means an option loses value as time moves closer to its maturity, as long as everything is held constant. Theta is generally expressed as a negative number and can be thought of as the amount by which an option's value declines every day.

Understanding Theta

Theta is part of the group of measures known as the Greeks, which are used in options pricing. Remember—options give the buyer the right to buy or sell an underlying asset at the strike price before the option expires. The strike price, which is also called an exercise price, is set when the contract is first written, informing the investor of the price at which the underlying asset must reach before the option can be exercised.

The measure of theta quantifies the risk that time poses to option buyers since options are only exercisable for a certain period of time. This is known as time decay or the erosion of the value of an option as time passes. An option's profitability decreases as time goes on. But what happens when two options are similar but one expires over a longer period of time? The value of the longer-term option is higher since there is a greater chance or more time that the option could move beyond the strike price.

Because theta represents the risk of time and the loss of value of an option, it is always expressed as a negative figure. The value of the option diminishes as time passes until the expiration date. Since theta is always negative for long options, there will always be a zero-time value when the option expires. This is why theta is a good thing for sellers but not for buyers—value decreases from the buyer's side as time goes by, but increases for the seller. That's why selling an option is also known as a positive theta trade—as theta accelerates, the seller's earnings on their options increase.

All options – both Calls and Puts lose value as the expiration approaches. The Theta or time decay factor is the rate at which an option loses value as time passes. Theta is expressed in points lost per day when all other conditions remain the same. Time runs in one direction, hence theta is always a positive number, however, to remind traders it’s a loss in options value it is sometimes written as a negative number. A Theta of -0.5 indicates that the option premium will lose -0.5 points for every day that passes by. For example, if an option is trading at Rs.2.75/- with a theta of -0.05 then it will trade at Rs.2.70/- the following day (provided other things are kept constant). A long option (option buyer) will always have a negative theta meaning all else equal, the option buyer will lose money on a day-by-day basis. A short option (option seller) will have positive theta. Theta is a friendly Greek to the option seller. Remember the objective of the option seller is to retain the premium. Given that options lose value on a daily basis, the option seller can benefit by retaining the premium to the extent it loses value owing to time. For example, if an option writer has sold options at Rs.54, with a theta of 0.75, all else equal, the same option is likely to trade at – =0.75 * 3 = 2.25 = 54 – 2.25 = 51.75 Hence the seller can choose to close the option position on T+ 3 day by buying it back at Rs.51.75/- and profiting Rs.2.25 …and this is attributable to theta!

How to Interpret Theta?

To understand theta, it is important to first understand the difference between the intrinsic and extrinsic value of an option. Together, the extrinsic and intrinsic value make up the total value or premium of an option. The intrinsic value only measures the profit of the option based on the strike price and market price. One way to think about the intrinsic value is that if the option were to expire today, the premium consists only of this intrinsic value (strike price – market price). The extrinsic value, on the other hand, measures the part of the premium not defined by the intrinsic value. The extrinsic value is the value of being able to hold the option and the opportunity for the option to gain value as the underlying asset moves in price. The closer an option is to expiration, the smaller the extrinsic value becomes.

We now know that the further away from expiration the option is, the higher the extrinsic value. The closer to expiration the option is, the smaller the extrinsic value. At the expiration date, the extrinsic value is 0, and the entire premium consists of the intrinsic value assuming the option is in the money. Theta is a sensitivity measure that determines the decline in this extrinsic value of the option over time.

The Theta Curve

As mentioned above, Theta is not linear. That is to say; the affect Theta has on an option's price is not straightforward and does not reduce an option's price by the same amount with every passing day.

The effect Theta has on an option's price is not straightforward. It does not reduce the price by the same amount throughout the life of the contract. As the days pass, an option has less time to make a move, and thus it will be worthless.

Let's take a second to think about this. If an option has 100 days till expiration, that is an eternity for it to make a move so that that option would be more expensive. Contrarily, if an option expires tomorrow, then the time to make a move is very limited, and the value of that option will be low.

When an option's time to expiration is under 20 days, the amount of Theta begins to increase exponentially. This is worth noting, and if you are long options near expiration, you will be fighting an uphill battle against time. On the other hand, if you are short options near expiration, time will be your new best friend.

Special Considerations

If all else remains equal, the time decay causes an option to lose extrinsic value as it approaches its expiration date. Therefore, theta is one of the main Greeks that option buyers should worry about since time works against long option holders.

Conversely, time decay is favourable to an investor who writes options. Option writers benefit from time decay because the options written become less valuable as the time to expiration approaches. Consequently, it is cheaper for option writers to buy back the options to close out the short position.

Put a different way, option values are, if applicable, composed of both extrinsic and intrinsic value. At option expiration, all that remains is intrinsic value, if any, because time is a significant part of the extrinsic value.

Conclusion

Time may be flying, but now you can put it on your side. By understanding Theta, you know it will have an adverse effect on your long positions and a positive impact on your short positions. You now know when options have accelerated time decay, which allows you to take the right strategy at the right time. Remember, there is no edge in trading options over the weekend, and volatility can negate time decay, especially around an earnings announcement.

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