Swing Trading Masterclass by Nitin R | Ankur Patel |

Good evening Nitin bhai, after so many requests, so many calls so many messages finally finally Nitin bhai is on our YouTube channel.

So welcome and thanks a lot that you said yes and finally you are here.

Thank you, thank you Ankur bhai, it's an honour you called me and here great traders share their experiences, and I don't even have anything special.

I would say that not only me, a lot of Twitter followers had this request & people who watch our channel They wanted to see Nitin bhai also Let's see what he does and his training style too.

So, how is your trading going and how are you?

All is going well. As I am new to this I have never done any such video discussion or any YouTube interview so if there is any mistake from me please excuse me for that right.

I will try to say what I can say in as simple terms as I can.

Well, our subscribers are very forgiving They don't mind this Every time I make a video, I make one mistake or the other.

So I say that no one is perfect. Everyone learns gradually.

I will also learn something today and share it with you and people.

All right, tell me how did you start your trading journey?

And how is it going now?

Yes, I would like to start with the presentation directly.

Yes.

In fact, it is deserving that you start with graphics.

Good.

Is the screen visible?

Yes, the screen is visible.

Okay, this graphic here is special for you.

So what have I done so far?

How was my journey?

Answers to all these questions...

along with me, uoy answer what you think in your mind.

My answers don't have to match yours.

But if you think actively about these questions, there definitely comes a clarity in your mind about what style of trading you should do.

Or should you even trade at all or not?

Well, the first question is why are you training?

One answer is that it's my profession.

So, if you are a full-time trader, then end of discussion.

Then it's like a job for you.

Or you are a part time trader so you are looking at it as a secondary source of income.

Well, that complements your primary income and the thought that in future I will be a full-time trader and this will be my primary job.

The second answer is that it's my passion.

Passion is something during which you lose the track of time in doing it which is an inherent choice of your mind which you are doing without any pressure which helps you grow.

makes you a better person doesn't consume you like an addiction whose process and output are both in your favor.

So it can be a passion.

Third, that no one would like to commit, but many people fall into this category.

as a participant, for which the word "retail" is often used.

So this is the group where they have no process, no setup, nothing...

nothing...

There's no style of trading. One day you do momentum burst, next day you become a long-term investor.

No one should do this.

You have to be ether, it's to be your profession or your passion, but you just don't have to go into it like just as a participant.

The second question is, if you are a part-time trader, how trading-friendly is your job?

If it's totally unfriendly.

So from 9:15 until 3:30, you can't even see the screen for a moment so every time frame below the daily time frame is off the syllabus for you.

You don't have to see hourly, 15 minutes.

These timeframes are not for you.

Rather, you go towards positional training, even you can go to weekly charts.

If your job is very trading friendly like work from home scenario where a screen can be kept on all the time and you can get an undisturbed 15-20 minutes in the morning hours and take active intraday decisions then there are a lot of options open up for you.

Can do momentum bursts, can do a lot Mine is partially friendly means I can keep an eye on the screen I can see what is going on, maybe I can also execute once in a while, but mostly I can't take any intraday decisions.

If I have already planned to do something, then I can, But all these decisions have already been taken end of day.

I don't take the decisions during the day.

Rather, I'm not allowed to do that much by my job.

Now it is up to you to decide your training style as per your job friendliness This question becomes very personal.

How much is your trading capital?

If you have a small capital, then you do not need to become a long-term positional trader.

At this point your aim should be to take trade rapidly, take trades on a risk-reward basis and you grow your account fast.

But if you have a huge capital, a very large capital, this is also a problem because liquidity is very limited in Indian markets, then here the more your capital increases, the less opportunities you have, the less freely you will be able to trade.

And you need to shift to trend following probably My capital is medium, I can go both sides as the case may be. I can take short-term trades, I can also take long term trades. It's been very free so far.

The last question is what is your own expectations from trading?

Believe me, I have seen some people say that if you beat a fixed deposit, it's fine.

Is it, really?

If you are doing stock market trading to beat an 8% debt fund, then this is purposeless.

There's no need. Just buy an index fund.

Put 50% of the money into Nifty Index and 50% into Nifty Next 50.

Do an SIP and you will easily beat majority of traders.

so this should not be your aim.

If your aim is to beat the index, then also it's not a very difficult task.

To beat an index like Nifty, you should invest in a mutual fund. Take a Smallcase, You'll just need to pay 10,000 - 15,000 yearly, you will actively beat a lot of traders.

So what should be the aim?

The aim should be to beat everyone (laughs). Almost.

Well, you can't beat everyone, so first beat yourself first and try to be a better trader.

It's called super performance. Whatever you get is less.

As they say, the benchmark for a triple digit 100% 200%.

And that's not always possible.

Every year you probably can't, but when the market gives you this opportunity, when there is a roaring bull market and you sit in it with this satisfaction that I've already beat the index, now what am I going to do with more risk?

I've already got a 50% return & it is enough So when the market is allowing you, but your own mindset limits you.

How do you achieve things when you don't even dream about them?

So your expectation should be this so that when the opportunity comes, you can fully encash it. Don't let your mind limit you.

So now I've writen to answers of these four questions here This gives you a broad idea of what should I do?

What am I supposed to do? What should be my trading style?

What kind of trading style are my circumstances giving an oppurtunity for?

Rather is giving a permission for.

My skill has its place, Skill is a different thing, but if the circumstances are or are not there so what all can I do?

So I see that my field of interest or my area should be this.

What is marked. Here very short duration is, for example, scalping Now came out within a few seconds, very short.

Or Pradeep Bonde's momentum burst, where you stay in a trade for 3-5 days, or 5-7 days Minervini has lots of varations, but I have kept his style base to base.

A trading style in which you enter around the base breakout and exit as soon as the next base starts to form.

Because you do not want your money to get stuck in a non-moving instrument.

O'Neil, I see as someone who would hold the trade even during base formation first base, second base, they will go up to even third base & then exit this way you also sit in during the base formation also.

Stan Weinstein as entire stage two.

These styles are not absolute, but I see them like this.

enter with the start of stage two & until stage two is over, for the entire duration you are in that trade, this will be our framework to discuss today.

Our holding period will not be less than or more than this..

Our holding period is not forever.

like Warren Buffett.

So, basically you'll discuss in the context of these 3 MInervini, O'Neil, Stan Weinstein; their model is what you trade?

The horizon of holding is being talked about here.

How much you can hold, how much you can follow the trend.

Pradeep Bonde is also following the trend.

But for a very short duration. Once the burst is over, The trend is over for him.

And Weinstein is holding irrespective of base formation, lots of pullbacks So this is trading horizon, if we can say so, Rather, how long are you able to hold your trade in a way?

So well here I would like to give some credits. It's been many years learning, learning from many people.

I also learned from you in your group.

Once you get so many so many varied opnions, Learned from Abhijit Paul Learned from Davinder P'aji Learned from Manas Bhai Learned from Ravi boss, Learned from RSP Ravi Shankar Prasad Learned from Ashwini Gujral, Vijay Thakkar. Learned from these people Learned from Jignesh Sir,

Learned from Himanshu Bhai OK.

Learning fundamental investing from Ishmohit. This is an ongoing process.

But the biggest impact on me, that is Chirag Bhai, because I've been very influenced by many of his thought processes.

Questioning things, not accepting the established norms as-is, Bringing subjectivity into my training activity What I mean to say is that I don't want to take credit for something because some things I learned from someone, some developed by myself, conceptual similarity remains.

We also learn from our contemporary traders now, people whose trades we see.

At the moment, those on Twitter who are with us, like Umang, Rahul, Rohit, Chartist boss.

We get to learn from everyone.

My graphics are my own, my thoughts, are my own, but somewhere you might think that he it is talking like that other trader Still, just like two fingerprints are not the same, two traders can never be the same.

Irrespective of how much they try to copy each other This is diversity and this is also unity, that we are all doing the same thing and we are all generating different outputs.

I have seen that we are trading the same setup, tightness or Pradeep Bonde's system, or Quallamaggie Trained together learnt together, but a set up that I feel good about is not what they feel good about.

They'd say, "Brother, where's the setup in this?"

So you're right.

Throughout if you trade the same setup day-in & day-out still their thinking or the patterns are not the same, because thinking is the main thing What is their experience?

that will matter.

So let's see how I look at my charts.

the first thing in that is that I do not use candlestick charts.

I use bar charts.

I stopped using Candlesticks a long time back because I was getting too much information.

Overload of so much information used to confuse me I want to extract less information, the minimal that's needed I only need a bar chart with high, low & close.

I don't even need the open. Okay?

All right, so the only information that you need from a chart is that whether the price is going up or down. Volatility is going up or down.

these are the two things you have to see, as shown here in this image.

The close is very near to its high If you look at this whole range, it is closing almost at the top and then as they are progressing, it has come somewhere in the middle in an indecisive range & the last one is very low, so from most bullish to least bullish (or most bearish) For now, we are looking at a single bar,

we are not looking at the entire chart or any context.

For those who can't visualize in this way, this DCR concept is good.

What is the daily closing range (DCR)?

close minus low divided by high minus low So where is your close in this whole range?

So this bar's DCR is 92% and this bar's DCR is 10%, okay, so this is like this.

As this is a chart, I don't see anything in it at the moment.

I want to see if I just want to see if the chart is bullish or bearish, then what I see here. Price is going up.

This can be seen from the line chart, perhaps.

But I also have to see the range so I need the bar chart ok then it takes this pullback, goes up, then a pullback goes up, then again a pullback So for this you don't need any indicator or even candlestick or anything.

To know that this chart is bullish, a very clear cut chart, this is creating higher highs & higher lows. Okay,

that's the basic information.

The second important information is the range.

Using the range, we find out the volatility. For range, we do high minus low divided by close.

Well, this is a very big bar.

9.1% is its range, & then it becomes smaller and this smaller one is 2.4% range right?

In such a small bar, the value of the close doesn't matter.

It's closing up. It's closing down, it is immaterial.

This big bar, there is definitely a value of the close in this big bar.

For example, I was watching this chart today, This bar has the range of 11 % I have put an indicator here if sometimes I have to look at the exact value When I'll hover on the bar here, then there you will see the value change First one is ADR, the second one is range.

In the end there is DCR.

Its range is 11% and when we go forward, the range became 7, 6, 4, 3.

Then here is a little bigger and as of today it is 2.3 Yes. Tight.

Yes. Tight.

These white bars are Narrow range 7 bars just for an indication you can that bar-by-bar, this range is contracting the volatility is contracting, & the price has come near its moving average and is forming a low range bar.

The volumes are also reducing.

This is a positive price action. That's how a pullback should be.

Now tomorrow it moves up or doesn't move up, it's a different thing, so here we compared bar-to-bar we're comparing the range, & another is this example, this is Usha Martin Here.

Okay, this is a VCP pattern.

One, two, three & four This one is a big range and smaller range and smaller range and smaller range and the bars that are in this small range are also small & getting smaller Not only that the range is decreasing in context of the entire chart But individual bars are also decreasing in their range.

So this is a very good volatility contraction You can also observe it from below if you want.

Volatility is contracting between both sides.

Yyou call it symmetrical triangle, can call it VCP. Good output comes out of such setups.

After having discussed these two things, the third thing that should be on our chart is the volume.

For the volume, I use my simple volumes.

Highest Volumes are very important.

Highest Volumes in a Quarter, Year & Ever.

Like for an example, this is a chart of Mazdock.

That's what's moving up these day defence ; Mazdock, Cochin H.A.L. So these are here, look at these.

H.A.L. So these are here, look at these.

This is a base formed in 2022 and during base formation, see how low are the volumes.

And here, exactly near the base break out, it breaks out with a Highest Volume in a year.

And after two consecutive back to back after staying so much subdued earlier Then it rests a bit, & then it keeps on going up & then again gives an HVQ with big range price bars, specially on the right side of the base

So let's say you make a simple scan that lists stocks making HVY or HVQ So all these kinds of stocks will come into your radar There's this scan on Chartink...

I'll try to show. This one.

Highest Volume in a Year If you'll scan for 252 days you will get HVY, & with 63 days, you'll get HVQ.

Okay, but you can't really scan for HVE, why can't you?

Because our training tools are inefficient.

What is the look-back period for Chartink, means how much can past data can it maximally see?

This is 2000.

If I do more than that, there will be no sensible output.

No.

So in the perspective of Chartink, Highest Volume Ever is actually the highest volume of past 2000 days For Tradingview, I think the lookback is 3650. So any volume indicator on Tradingview, Whether it's by TraderLion, mine or by TAplot When it plots HVE, So it is actually plotting the highest volume in the past 3650 days.

Yes, well, practically it's a period of 5-10 years, that's enough, but ideally it's not the highest volume "ever".

It's a significant highest volume for sure.

So as we see today in Campus This is a very large bar with HVE so this stock came now in your radar using this scan today.

Now you pursue this in the coming days.

After highest volumes, the second thing that comes to us is Lowest volumes in an year. These have their own importance.

Lowest volume is very important when it comes to base formation.

Another place where we get lowest volumes is in these, 5% circuit stocks.

Like.

Here now if you will see here below, the orange bars are dry volumes and This is the lowest volume in a quarter where Q is written, See so many of these are there, we are getting 2 LVQs and why are the LVQs coming?

Because the stock is in 5% of the circuit, right?

There's not much movement, Even in good stocks like this Dredging Corp, This goes into 5% circuit here.

And what happened to these volumes after that? Why?

1, 2, 3, 4, 5 LVQ followed by 1, 2, 3 Lowest Volumes in a Year.

When you get so many dry volumes in so much continuity you must look carefully at why this is happening.

Is the stock going to delist?

Or has it entered the circuit?

There is something that is not usual.

There was a very good example just now in Medanta.

This was a good upmove.

And this stock has never fallen below 20% so far, as far as I know.

It created an inverted head & shoulders kind of pattern here. Okay this is a shoulder this is a head, & this is a shoulder.

My patterns are very rough, they won't look exactly like a book picture, right?

Okay, what's going on here? These stocks started to consolidate.

This is on my radar at this time, and I when I see below Lowest volumes in an year, & in a quarter are coming again and again.

So I just put this note here, After writing "too many dry volumes", I left it here, What's the end result?

This does not give us any constructive upward movement.

When we start getting so many dry volumes, again & again you are getting lowest volume in a year or a quarter, and then you don't take it in the positive way.

it shouldn't be too much.

So this is a red flag? Yes, yes you can say that.

You say that it is not a good thing to get a lot of it.

Seeing this, you should get a bit cautious.

If you find something like this. Similarly,

when do we have to avoid the highest volumes?

The volume is when we should avoid when it comes at a climax top.

Like this chart of IOB. You see this from here when it starts to run up, it goes like crazy, and there's a lot of highest volume in the quarter 1, 2, 3, 4 ,5.

The top of it is here with highest volume ever. It tops out here.

so the location of the highest volumes is also important.

They are coming during base formation. Or during base breakout.

During climatic top or during consolidation.

Their location is important in price, Rather than blindly if I say that in my scan today this Highest volume came, so now I am very bullish on this so we should not look at this like this.

not like this. So, these are just volume only.

Well, highest volume or lowest volume is not considering the price, whether the price bar is small, or bigger or forming a very big range it doesn't care, it is just reflecting the volume.

So when you add the price upmove to the volume, this is more powerful and effective. So for that, these are our pocket pivot volumes.

Well, Pocket Pivot Volume is an up-day volume which is greater than any down-day volume of the last 10 trading days.

This is shown by the blue volume bars here. Let me show an example Railtel This is its base formation. That's fine.

Is this base visible to you? Yes.

as long as this base bottoms, this is the left side of the base and this is the right side of the base.

So clear differentiation will not always happen, but that's what we have to try to see whether we are on the left side of the base or on the right side.

So, when you come to the right side of the base, see the volumes on the left side are subdued There is no major activity.

As soon as we come to the right side, we start getting blue volumes, i.e.

pocket pivot volumes, some of which are also HVQs.

So this is now adding upmoves with high volumes from here to here.

It's a little more powerful.

The second one in it are bull snort volumes This was popularized by Oliver Kell.

that volume should be 3 times more than the average volume and your close should be above the previous close and the close should be in the upper part of its range, preferably upper 1/3rd For Bull Snort volumes also, There's this scan on Chartink

Those who want to use it can do so.

These are three criteria.

Okay, these are names we get in here today It's very obvious.

It was also there in Manali Petro. Yes, yes.

The third one is what I call power volumes, so what is this?

This is nothing but We basically quantify this volume in monetary terms. This is the same.

What Manas Bhai calls Purple Dot, right?

I have first heard this from him, so think it is his creation, so Purple Dot has been in simple volumes for a long time, but no one uses it because it is hidden in the setting.

These headlights are these, these are the highlights you see, these are purple dots.

This is the day when the price moved more than 5%.

Rice. It moved above 5% and.

More Than 1 Million Volumes.

You can now make this 50 thousand or even 2 million depending on the size of your portfolio.

it is only important in that it helps you to see whether the stock moves fast, gives big moves or does not give it, and you can also see some kind of liquidity.

This means that I can put big size in such stocks and I can also use this in a negative ways.

In stocks where you don't get it, you reject those names. Like this Fivestar.

This is a good stock. In my opinion, it has good fundamentals.

But look at this, in this very rarely would you get such a big highlights It doesn't trend very often, does it?

Look at this. Ahluwalia.

You don't get any highlight in this.

You can't have a very big move expectation in such names, it's a bit illiquid So now this way we have to look at the volume.

Volume only and volume added with price upmove.

If you take these four five scans and you add to a list every day that I found these volumes in these stocks today, you can take a look at them and in the future, they can give you an entry.

You can enter and trade them from there.

This is a very simple way.

Now after that we come directly to our process.

So far, this was just the chart setup.

I have nothing in it in the rest of the chart.

There is an index above. It is CNX smallcap.

To see relative strength.

And these are moving averages, 20, 50, 200. Sorry 10, 20 and 50, I keep keep the 200 hidden mostly.

I know if it is above 200 or not or even at the scanner level can eliminate that kind of stocks.

EMA or SMA, you can take anything doesnt matter.

Sometimes in a lower pane, I see the weekly charts and this is the quarterly earning script, that is, this is the quarterly earning script, ok.

Will you show Nitinbhai how you view the relative strength ?

if you have traded a stock with that concept.

Yes, why not? If you are covering relative strength later then it's fine. Yes.

Yes, it's being covered later, it's being covered, Don't worry, Ankurbhai, we will cover everything (laughs).

Okay then.

So our process has a whole universe of stocks.

from which you have to generate your holdings.

Well, the first layer is market health.

The market environment should be right.

that's when you can work, correct?

You have to take out the stocks from the universe.

Tradable stocks from the liquid universe ok, from those stocks you have to see how many stocks have a setup and from those setups you have to see how many I am getting entry.

I have to enter it tomorrow, so how many triggers do I get?

It is the basic process, & for this, we need to have three things The right stock, the right size and the right time. Ok, let's look at them one by one.

What is the right time?

The most focus is on right time, so I use the Net new Highs for right time.

This indicator is also easily available on my TradingView profile.

Although almost everyone who are watching know this already still let me quickly refresh that the Net New Highs are calculated by taking the number of new 52-week highs on any given day and subtracting from it the number of new 52-week lows.

When it remains positive for three consecutive days.

then we say this the bias is positive.

If it stays negative for three consecutive days, we say the bias is negative.

And if there is nothing like that (neither positive nor negative for 3 consecutive days), we say that it's sideways, okay, Look at this here this we have added the Net new high indicator.

this is the index below are the Net new high This is our ongoing rally since April 23 ok.

And so far there have been negatives for a while in between.

The rest of this has been throughout green.

When the bias is negative When net new highs are negative and so is my portfolio, my watchlist is also not doing well, so this is the only period when I'll go in all-cash voluntarily.

If my portfolio is performing well, then I will hold No, even if the bias is negative I will hold, won't take fresh positions though.

But if bias is also negative and my portfolio is not responding well then I'll go in cash and till the bias turns positive I will be sitting in cash.

So this is an important condition.

So here.

This is the current run we are in and this is here and because it turned red here This was an 11 month long run.

From April 23 to March 24, if you compare it with the post Covid bull run It started here on June 20.

This is the low of Covid in the month of March.

The index goes up.

It consolidates a bit.

You missed this portion, as you waited for it to turn positive.

Once it turns positive you get a huge rally.

This is a 20-month long rally.

Similarly, if you go back, look at this, from here to here, from 2018 to 2020 this was a very bad market, extremely bad market.

This was a market that will Break the Heart of a Trader.

No trade used to work here. And at that time, we didn't even have these tools.

Forget about negative or positive, I didn't even know if there was something called net new highs.

So we used to keep on trading here, not return home empty-handed every day.

Used to lose money, and also lose confidence.

Yes.

The mental exhaustion becomes too much.

So if you follow this, most of the time it will save you from getting entry.

You will try a little bit here, see, it is going green, the market will give you this indication, see, "I am recovering, take entry, it's a good time" then it will turn red, then it will tempt you again, and then it will do it many times.

But even if we ignore these small losses, we will spend most of the time of a negative bias period staying out of the market. So it saves us a lot, okay.

Then the other thing that we see for right time is breadth.

So for this we see the % of stocks above 10, 20, 50 & 200 day moving averages.

Those who follow me, know that I post it in the market quadrant every weekend, Tthis is a very basic way. It's not very complicated.

There are also many advanced ways to look at these things and I feel that at least this much should be done.

This is the bare minimum.

As a trader, you should be this much awareness of what is going on at this time?

So if it has all four negatives, negative means below 50.

Let's take a threshold of 50%.

If the % of stocks abow 200 day moving average is less than 50.

10, 20, 50, 200 All of them are less than 50%.

So this will come in dark red, which is a weak market. There is a very bad market.

it can get so much weak that it'll get oversold and can stay oversold for a very long time and similarly when these four are positive it will come into dark green.

If there is a strong market, the rest are all their permetuations & combinations.

One is negative, another is positive then breadth can be categorized as improving or worsening What remains most important here is the % of stocks above 200 moving average this upper pane shows the % above 200 MA You can also add 50, 20 and 10.

I see the 200 MA different from the other moving averages When the % of stocks above 200 MA stays above 50%, we'll say that it's a bull market When the % of stocks above 200 MA stays below 50%, we'll say that it's a bear market Okay, if the market is undergoing a chop-chop

If it goes above 50 today and falls below 50 tomorrow, we won't say it was a bull market yesterday, today's a bear market So we need to give it a bit of space If it stays above/below for at least a month, then say that it's a bull/bear market You can take a month or even a quarter,

it's more confirmatory but more lagging So, if we look at this now, Let us look at it from here to here.

From May 2023 till today. We will also ignore this dip The 1-day dip was below 50% here when the net new highs also went negative.

All right, we'll ignore that. It's of no value to us.

If it lasts for at least a month, it becomes significant for us.

We've been in a bull market since then And it's still ongoing.

It is at 62.5, right?

Yes yes exactly 62.5.

Similarly, you can see the post-Covid run for a year and a half.

And this heartbreak, it was two and a half years, What a long period.

But this was what later on rallied for everyone.

Yes naturally The most important thing was how did we enter Covid?

We didn't enter Covid from the top of a bull market.

This was already a broken market from where you went to Covid.

there was nothing left here & was such a great opportunity for those who had the guts to invest here the other thing I see in this 200 MA breadth is that it should not be seen in terms of overbought and oversold.

Let me add the overbought and oversold levels This is 80 and 20.

Conventional overbought & oversold levels So you see this here.

Here around November this becomes overbought & reaches 80, & stays overbought for the next 3-4 months And this time you got one of the best moves So by seeing that 200 is overbought you become cautious?

No, this is in fact a good signal for us.

The entire market is participating.

The November rally came out of a base, right?

we come out of a base after 2-4 months Yes, this one.

Yet some people see it in the same way as 10, 20 and even 50.

So the more time it stays overbought (above 80), the more I say you are in a sustained bull run.

So this was just a difference in looking at the % above 200 MA.

By combining breath and bias, we can make a rough opinion about the market There is no need to worry too much about it.

In my opinion, too much detail is too complicated, there is no need to go into it.

All you have to answer is what phase we are in at the moment.

Are we in an easy money phase, hard money phase or no money phase?

Well, no money is very easy.

The net new highs will be negative or sideways The breadth would have gone weak it will be eventually become much weak, that it will be oversold and then from here as it improves then the sideways net new highs will turn positive.

Breadth will begin to improve and your breakouts will begin to work.

Your trade will give you good feedback.

You will enter an easy money phase.

Then from here the breadth will become so strong that it will become overbought, you will start to get a divergence. As you can see here.

See them here.

Look from here it goes up from here but it is not going up.

This 200 is constantly making lower highs, this is even up from here, so this is a divergence.

the index as a whole is improving but the breadth of the broader market is not improving, rather that is worsening So that means some selective very selective trades are working, So right now it's not very easy to make money at this moment So this is a hard money environment and then from hard money then you can shift to no money.

The most important thing is that these things are not black and white.

They don't always go from easy to hard and from hard to no and from no to easy.

This does a lot of back and forth.

From an easy money environment you will come into a hard money environment and then there will be a little improvement and you can go back into an easy money environment.

It keeps on doing this back and forth. So rather,

I would say that most of the times we stay here, we are mostly stuck in a transition between easy and hard money.

And the rest, if someone asks you Ankurbhai what phase are we in?

Just close your eyes and say we are in hard money face.

80% of the time you will be correct. (laughs)

Jokes apart, this phase here from no money to easy money is very swift & very rewarding upmove If you enter & make positions here then when reach here you get saved from the shakeouts here

because you have already entered from a lower level and you are in good profit.

Still, I say that bull markets spend most of their time here.

The bull market is from here to here, no money to easy money to hard money, this is the whole bull market, and this is the whole bear market below.

The bull market has always shown greater.

It's more than a bear market. Bear markets last lesser so one shouldn't be so afraid. (laughs) So, I still want to say, we should look at all this from a very hazy perspective Practically these things are not so well defined You just need to have an awareness.

If I know that I'm in a no money phase, why would I trade daily or if I know I'm in an easy money phase, why wouldn't I confidently go on margin?

Why woul I shy away from taking the risk?

If I'm in a hard money environment then I will again hold with my stop loss and take a cautious approach.

as I know that only selective trades are working.

Just so much awareness is enough, People don't even think this much, this was our discussion regarding the right time.

Well, now we come to the right stock.

the most important thing about a right stock is liquidity.

So your stock must be liquid.

No procedding further if there's no liquidity.

then you can choose some criteria according to your trading capital.

If you run any scan, If you look at any stock, you should first ensure your liquidity parameters getting fulfilled.

For that we see turnover. Okay, what's the turnover?

Multiply the average volume by the average price.

Multiply the 50-day moving average of the volume by the 50-day moving average of price The value that comes out of it, whatever the maximum capital you want to put in a stock, should be 10-20 times.

So that you don't get slippage.

this value is different for everyone.

I consider this value to be 5 crores.

Some people say 3 crores.

Some people say 8 crores.

So when you make such a basic scan, it will become a liquidity scanner for you.

So as I show you here.

As we can see This one was for free float.

have removed this for now.

The basic three four criteria marketcap > 300, daily close not too little, not too high main criterion is that daily turnover greater equal to 5 Crores.

So here I am getting 974 stocks.

So these 974 stocks are my universe.

and I don't have to work outside of it.

These are the stocks which are liquid, so this is one way to view the liquidity at the level of the scanner.

Well second you can see liquidity at the level of the chart, for example this stock.

Hercules Hoists If I look at this chart in 5 minutes time frame There won't be much liquidity How do you know this?

The price bars are broken the bars are unable to form properly it is not liquid If you look at any chart, you just look at it once in a lower time frame.

If it contains well-formed candles or bars, This chart is Seamec.

Also see this.

It's all broken.

MMFL also is the same.

It broke out today or yesterday, but before that it was the same if you can see.

Yes, at many places the bars are not forming properly Conversely, if we see a very good stock like Mazdock Well, what a good stock this is and I'm looking at it in 5 minutes time.

Now tell me what's missing?

What if I hide its name and time frame You can't tell that whether you're seeing the daily time frame.

or 1 minute or 5 minutes timeframe.

Even at the 5 minutes timeframe, its average dollar volume is 43 Cr This is so liquid.

So this is also one of the ways to look at liquidity.

This method should also be employed apart from ruling out illiquidity at the scanner level Second thing is Float.

So float is that value is that part of the stock that is available for you to trade that is not held by the promoter or an institution, so we want low float stocks preferably less than Rs 5000 Cr or Rs 10,000 Cr

So this combination of high turnover and low float This is an indicator of a potential for big and fast mood, well, then the average daily volume should be higher.

& float should be low it should be imbalanced in this direction only If this float is too high and the daily volume is too high, then you should not have much expectations of fast moves.

If it's very little, then you already rejected it, so this combination is very important.

Sometimes I feel like making an indicator. We already have both turnover and float.

So this volume to float ratio could be interpreted somehow.

But then these things make sense by themselves, so not needed.

Then the third thing in a right stock is that it should be a stage 2 stock.

It's very simple, ther's nothing much to it.

The 10-week moving average should be above the 40-week average and both should be trending up.

There should be a space between the two.

The more the gap, the more trendy will this be considered.

So we have to work only in the stage two stocks These stages appears very clearly in some stocks.

and in some stocks doesn't appear that clearly. Let me shift to the weekly chart.

Okay?

This is the chart of Mastek. Now you see this the Covid low in March 2020 Stage 2 is very clear. 10 week MA is red & 40 week MA is blue.

that is, 50 days and 200 days. Here we are in stage two and it got a little quiet here.

We entered stage three.

So then we started going down from here, we got to stage four and then bottom out and enter stage one, and back to stage two.

Well, it's very clear in stocks like this.

This would not be visible so clearly everywhere. For example, Sequent.

What happens here?

Stage 2 starts, after a very small duration, it went directly into the stage floor.

This stage four is so clear & long. The 10 week average is below, & the 40 is above. There is a...

a consistent gap between the two.

And then back from here very quickly. Most of the time it is staying in either stage two or four.

One or three here is very short lived. It's nature perhaps.

And if you complicate it further, you will get such stocks.

Saksoft entered stage 2 & then what happened here?

And this again entered a stage 2. This is what I sometimes call stage 341.

Stage 3, stage 4 & stage 1, they are all muddled up in one now you keep analysing it that here it is in stage 3, here in 4, here in 1 It is not important to us that what stage the stock is in.

It is important to us whether the stock is in stage two or not.

Our energy should be used where it is worth it.

Is the stock in stage two here? No, then we're moving on to the next stock.

Here is it in stage 2?

Yes, it is. so we can work in here.

Theoretical discussion whether this is 3, 4, or 1 doesn't matter that much.

All right.

Another one is like this chart of Hindustan Copper.

This is the same thing here. After this stage two.

it enters in four and three and one, & starts again I'm saying this because here we are talking about base counting.

When we have to see how old or how fresh the stage 2 is.

we see how many bases have formed. All right.

So base counting is the creation of William O'Neil.

so this is how Market Smith counts base.

They count the first base here.

Then they say this is the second base.

Then this is the third base..

All right.

But what is the purpose of a base?

The purpose of the base is to absorb the supply.

So what supply is this base absorbing? There's nothing here.

Stage two is long over.

This stock has hit its bottom. Now there is no particular activity here, so what supply is being absorbed.

If there is no supply absorption, then I call this kind of base mostly zero base, I do not include them in the count.

You can get many such bases.

Sometimes you get two or three, and then once you get an upmove from here you can say that it is the first base if you look from the low of this base, price moved up 85% and if we look at the breakout of this base, the it's 33%, not a very big move but it's ok some supply has been generated, and then it becomes the base number...

Two.

Okay, 0, 1 & 2.

Marketsmith will count them as 1, 2 & 3, right?

When they count these bases, they compare the high with high If it breaches even a penny from here, they'll say that it is a base breakout.

They'll consider this base also from this high, but I say you draw this base from here, include this too.

You should draw the bases fuzzy and subjective.

It shouldn't be drawn too mathematical.

You can assume this.

You can take it to this point It's a machine, it's an algorithm.

We don't have to draw like a machine, we don't have to be influenced by it and do our base counting.

This is the practical way of base counting, which we should.

All right.

So after discussing stage two, the next we come to are Fundamentals, Now I don't know much about Fundamentals, my knowledge about Fundamentals is very little, very limited so I just have a basic working knowledge So the fundamental parameters you can broadly divide into three

Valuation, quality and growth.

Valuation would include your PE ratio, price-to-book ratio, market cap to sales.

Quality would incude debt-to-equity or pledging or promoter holdings.

So if suppose you are a swing trader, you have to hold the stock for two weeks, what difference does it make to you as to how much is its pledging or promoter holding?

You shouldn't have anything to do with it.

No, it's not important for you.

Yes, if you want to hold for a quarter & then if you get some backing of growth or fundamentals somewhere then it's great.

So most important for us is the parameter of growth. What we see in growth?

Sales growth, earnings growth and margins.

If we are getting both sales & earnings growth, then it's great.

Here the formula that I have written, if you get this combination in a stock, then this is a very good combination.

Here you are getting both sales & earnings growth your margins should be at least stable and if they are growing, then even better.

Together if there is a low debt company and there is high ROCE or ROE.

By creating this query on Screener, you can see.

you will get some good names.

When I look at this in TradingView, sometimes I see it that way.

There was a fundamentally good stock that I traded Lupin.

Look at this.

This is pretax Income. You can use profit-after-tax or EPS here.

This is the operating margin, this is the P-E ratio.

All of this you can get in the financials section of TradingView You can choose your indicator here and in this way you can see it in the form of a chart also.

It's very easy to see from here.

you can see how the margins are improving and increasing.

How is the Pretax income going up.

and with its backing is the EPS growth here 145%, 605%, 276% year on year So much good earnings are you getting. And this stock too gave a solid move.

Its ADR was just 1.9 at that time.

Still you see how great this move is, just because it had the backing of solid fundamentals.

so these things help if they are seen in the right context Then there was another similar stock. Gabriel.

So in Gabriel, if you look at this, it has a consistent growth in earnings and sales.

We took it somewhere here. It was an earnings surprise here too.

This was the base formation ahead of it and this stock was not highly volatile.

Took it and then it gave a very swift upmove.

I sold in strength because outside the base, it was forming an HVE.

Just like we saw in IOB.

Yes, even after that, it consolidates & moves ahead.

Understanding fundamentals is like suppose You catch a bus at a bus station and you get a very nice bus.

AC bus, neat and clean, first class but there is no one in it, but you took a seat there & it is a very good bus Now when will it start? No idea.

But there is another bus that is in such good condition but it is ready.

to leave the station.

And you sit in it and it takes you to your destination, so you have to decide whether you want to get the best seat in a bus with no momentum or you want to enter in a crowded bus with good momentum.

So along with Fundamentals, if you are getting the backing of momentum, which you will get from the chart, then this is a very good combination.

All right.

So only this much fundamentals I see and there should be a little awareness that the stock in which we are trading If I have my holding period from quarter to quarter I'm holding it for at least two or three months, then if I'm getting good earnings and sales in it, it's very good, isn't it?

Then comes your question which arose earlier So far, for a right stock, we have seen liquidity fresh stage-2, good fundamentals, low float and let's see relative strength, To see relative strength the best way is that you compare the stock directly to an index

and a good example that I remember is Surya Roshni.

Our current rally has started from April 23.

Here, this period.

This is December 2022, this index is down, the stock is also down, ok now from here the index gives a pullback and gets resistance from the moving average and it comes back down.

Let's make it a little bit bigger okay.

but what is the stock doing?

The stock is going up, not even breaking 10, what to say of 20.

Now whenever this index makes lower lows the stock gives a little pullback.

just a small one. Then when the index tries to go up, the stock makes a new high this is very clearly visible that from here the stock is going up & the index is going down from here.

Stock is making higher highs & the index is making lower lows.

All right.

What happens in the end?

Sommeday the stock had to get tired.

Finally from where the index starts, it tires out after moving a bit more.

But if this period was not a good period, the period between December 2022 and March 2023, right?

Most people were in cash during this period.

The rally started from here.

From April, So if during such periods, if you pick such a relatively strong stock like Surya Roshni, then it supports your portfolio a lot.

Now this is the best way in that you are not dependent on any indicator ever for this.

You just have to add the index to your chart.

I use the CNX Smallcap, you can use CNX500, it doesn't matter, there should be a little broad index, not the Nifty So, for those who can't visualize it like this, I made an indicator called MARS (Moving Average Relative Strength) So this is nothing but This just compares the 50-day moving average Between the index & the stock, the difference between the distance from the 50-day moving average .

Is the index is far away from its 50-day moving average or the stock is further away?

The one further away will be considered stronger.

If it is above its zero line, if it is green, this means it is outperforming and if it is below the zero line, it is red, it is underperforming.

This means it went below its 50, but the index has not gone that much below its 50.

All right, let's look at it in the Surya Roshni stock.

Look at this from here it has come above the zero line.

It's green. The orange line that you're seeing is...

is a moving average of this indicator.

So, its above its own average, it's gross outperformance.

ok and it stays above till here This finally goes red and now if we look at the current status, this is not outperforming the index anymore.

Now it is underperforming.

So it was a right stock earlier, but not now.

But I'm saying that there's no need for it.

You just train your eyes, you can easily make an informed decision about relative strength from just comparing with the index There is no better way to look at relative strength than this.

Okay now.

Next we come to the right size.

Ankurbhai, let's take a 2 minutes break.

Let's have some water, rather a five-minute break, okay, I'm not boring you, am I?

No, no, I'm enjoying it.

MARS was good & also the discussion about fundamentals We just see if the trade is going on, if yes, then keep carrying on (laughs) The problem is that I have already used a lot of indicators a long time ago, then you no longer feel like using them.

Actually a beginner needs a little support, so for him there is nothing wrong If he is using an indicator.

Yes, it's fine.

He will take some time and then eventually he will no longer need the indicator.

It's like when a child starts walking, he walks with some support and then later he runs away.

I think I understood that.

Was.

There is nothing wrong with beginners & for those who find it hard to visualise.

If he'll not use the indicator, what will he leave? (laughs)

All right?

So let's continue.

So, So next we come to right size This is very important because the concept that comes here is the concept of risk.

There are two types of risks that you should never take.

One is the risk of ruin and one is risk of comfort, so risk of ruin is a term I have heard only from Chhiragbhai I do not know where else it originated and he has used this term in many of his YouTube videos.

I see it this way. Let me give you an interesting example.

Tthis image shows the game of Russian Roulette. This a theoretical game.

But it has been described in many films, books and novels.

What's going on here is tha there's a gun There's just one round in it. Just one bullet.

The rest of the gun is empty.

Ok now the gun this put to your head and you are asked to pull the trigger and on the table are placed 100 crore rupees (laughs) If you pull the trigger and nothing happens, then these 100 Cr rupees are yours, Ankurbhai.

And if you pull the trigger and the gun fires, then that's the end of the matter.

So there is about 80% probability that the trigger will come up as blank There are six rounds & only one of them is loaded.

Five rounds are empty. Probability is in your favor.

So tell me, Ankurbhai, would you like to take this risk?

No, no, I don't want to take this risk.

Why not? It's life-changing money?

(laughs) It's also in a Hindi movie.

"One bullet, 5 empty".

Some dialogue like this.

I think there is such a movie, a Sanjay Dutt movie.

it's in the movie.

Yes, this is there in many films. It's very interesting.

Well, this risk is not to be taken, it is definitely not to be taken.

Never do that.

Never take such a risk of getting wiped out.

Never ever hand over your entire portfolio to the market without any risk management technique, without any stop loss.

Okay, Conversely, another risk that comes up is my own creation, the risk of comfort.

Here your portfolio is so overdiversified These little minions that have been shown here are your stocks.

You have so many stocks in your portfolio, so little risk in your portfolio, this bear is stomping on your portfolio and you don't care.

You say that you can do this lifelong I lost Rs 2000 and then I lost Rs 1000.

Even if get 50 losses back to back, even then I will not go in a drawdown.

How will a drawdown happen when you'll not risk at all?

So, both the risk of ruin & the risk of comfort are risks you never have to take.

Your risk must be just so much that it pinches you a little.

Right?

If it doesn't make any difference to you, then you have taken an inadequate risk.

Well, that's why paper training is never successful because you don't care about its outcome.

Here I have shown how I size my trades I have shown here a fixed allocation sizing.

how much maximum amount do we allocate to a stock we pre-decide it, okay, so the maximum amount of allocation I say is 25% iI I get 4 stocks of 25% each, then I could have 4 stocks with full position size.

in my portfolio.

I won't take that full 25% in one go.

I will take it in two different positions.

Okay first I will take a 12.5% position & when it gives me some good feedback then I will add another 12.5% and make it a full 25% position.

So I can have 8 partial positions of 12.5% each or four full positions of 25%.

Well, I will try to get out of those that are not doing well and strive towards getting 25% size in the one's that are doing good.

Okay, how much risk do I take?

On one individual position that is 12.5% of your portfolio, we can take a mximum SL of 8% This 8% is the maximum.

Maximum doesn't mean that I'll always take it.

If I'm getting a logical stoploss of 4%, I'll take that.

I'm getting a logical stop loss of 2% so I will take that.

I'll go to 6, 7, or even 8, but I won't go deeper than eight.

Why wouldn't I go beyind 8?

On a 12.5% size, this 8% stop loss is equivalent to 4% stop loss for a 25% position, It's 12.5 & that's 25, this is 8 so that becomes 4.

Right?

This 8% SL equals to 1% risk on entire portfolio. I wouldn't take a risk greater than this.

On an average, my stoploss comes out as 4-5% deep.

So, although maximum can go up to 8 and the minimum has been 1-2% in some trades.

So this way of sizing is meant for positional trades in which you fixed the allocation.

but your stop loss and risk remained dynamic.

For swing trading, This second model is much better, in which you fix the risk.

You say bro I will take 1% risk on portfolio, come what may. Right?

Will a tight stop loss, I will get a huge allocation.

This allocation can be, say, 50% 75%, or even can be the complete portfolio in one stock.

No problem, nothing will happen.

You have a stop loss, right? Nothing will happen.

You are not taking any unreasonable risk here.

So these are two ways. I detailed about the positional one.

The swing is a common one that all of us are using.

So from here now we come to a summary of what is the right size as what we just saw?

That avoids the risk of ruin, that has the losses that you can tolerate barely Pinches you a little and the returns you get have a significant impact on your portfolios.

Okay, then what is a right stock?

One which is in fresh stage-2, has some theme or individual catalyst & one which is relatively strong Right time is the easy markets framework that we saw, and when there is a volatility contraction in that stock is the right time for that particular stock Another third right time is when your mind is calm.

You don't have to make any decisions in any agitated state, then it is also a right time for your individual personality.

If you are upset for some reason or you are in some hurry, you should not trade.

So after all this, we have defined our process.

Now we come to here scans and watchlists.

No matter what kind of a scan you have, Whatever type of scan you make, it will come in one of these three categories.

Universe scan, Expansion scan or contraction scan.

Ok so what is the universe scan? One in which you scan a total universal like we just saw.

in which you scan for a total universe or you are scanning for a special subset like IPO?

It's also not a very difficult task to scan for IPO names.

You only have to put one condition in it, so many days ago, close greater than zero.

If this condition fails, then the scan will give you the IPO names.

so here it is telling you the IPOs of past one year.

Past 365 days . You can change it to, say, 50, then you'll get more young names.

There is only one name that is coming, Gopal.

This is just an example.

You can scan for stage two, very easy.

You need to have a 10 week and 40 week moving averages.

Both should be trending up. Similarly for 52 week high. These are universes.

This is a common characteristic that constitutes a universe.

This is not telling you to buy what ever you got in this scan tomorrow.

Right?

This is just broadly telling you a group, ike these are the stocks in stage two.

You can also scan on the basis of fundamentals.

This we will not do in Chartink.

You do it here.

In MarketSmith. Go to the research tools here, then you go to the idea list, you go to the Build Your Screen here And then If you go here, filter India stocks.

And.

Here is a scan for 100% EPS growth So you can go here: EPS percentage change last reported quarter.

Here you can choose your values.

Similarly you can make one for sales growth.

What names you will get are scanned as per the fundamental criteria you have set, then you can export them and take them to TradingView.

The problem here is that it also gives a lot of BSE names and sometimes some illiquid names come up, so you have to remove them.

So, what I mean to say is that these are all universe scans.

All right, next are the expansion scans.

when the price is going out of a range and into a trending state it always has to be with the volume.

So if you are scanning for pocket pivots or you are scanning for HVE then you are looking at an expansion.

You are also looking at price upmove.

Or you can use a purely breakout scan. Lots of them are available.

After that, the third category is of contraction scans.

You can scan for narrow range, 3WTC, Bollinger Band squeeze.

Contraction scans mostly give you the name in which you can get an immediate entry or in the next few days All right.

So I say you should have one contraction scan, one expansion scan and two universe scans in your arsenal.

Why two? There will be a total universe.

Second, should be the IPO scan.

You won''t get it until you actively scan for it.

(laughs) You have to show up.

You have to voluntarily see it. It won't jump up by itself.

Within these categories, you can take any scan. It doesn't matter much.

More or less, the same names have to pop up from different scans, no matter from where you seek them.

So, you make four or five scans like this, No what to decide after scanning? When you see the stocks You have to divide them into three categories.

These colors are the flags in the watch lists of TradingView.

It becomes easy for us to do it like this.

The blue color, first looking at it from within the liquid universe is liquid and tradable.

Tradable means that it is in stage two and This is in some sort of trend to some extent, we can work on it, but we need to work on it. But for that, we need a setup, a base formation of some kind, a valid consolidation below a trend line.

Even with a setup, we do not have a valid entry here Maybe the stock is extended here, or just giving an upmove or in the process of creating a flag pole you will mark it green, and then when it gives an entry we will shift it to yellow.

Yellow is the one that is ready for the antry.

For example.

Like this is this blue list of stocks, There are many names in this one that are tradable.

If we find any name here for example, if we feel that it is good it's got a setup somewhere, then we will change its flag from here itself and change it to green.

Suppose this BSE here has a setup in it then it will be now on my green list.

All right.

Please don't lok at these names as a buy or sell recommendation.

For example, this stock here if I see this JNK India, this is also an IPO name it is contracting & forming a base and that's what it is.

It has also reached a narrow range, and it has started to look a bit ok Something like this.

Roughly.

The trendline also doesn't have to be too accurate.

There's no need to connect the high with high.

You can make it like this by cutting through a lot of bars Can break a lot of rules while drawing trendlines.

It's just that the bulk of the move should be contained within it.

Stocks don't care about your trendline. All these things are just for your mental comfort.

Ok now I got this JNK India Now I'm right-clicking it And...

And...

now it enters my orange list.

We just have to keep rotating between these 3 lists.

Okay, let's say tomorrow it goes down.

It gives a break down instead of giving a break out it doesn't go down too much, but it goes up to that point, so now it's no longer an entry level stock for me, I will change it back to green I won't totally remove it from my sight till the setup is intact

this might be a shakeout & maybe tomorrow it will move up In this way, we will get to make three kinds of watchlists.

The first, blue one will be of the stocks where we will wait for a setup to develop You will get a setup watchlist where you will wait for an entry trigger to develop And a trigger watch list which is what you will see tomorrow morning.

Either you will place an order at night or you will place an order in the morning.

There can be five seven names.

Stock watchlist wil have a lot of names The setup watchlist also can have many names But the trigger watchlist should be the smallest So our process evolves into something like this.

From the universe we took out stocks, we took out setups from stocks, we took out triggers from setups, from the triggers, we got our holdings If the trigger didn't work, but the setup stays intact, we put it back in the setup list If the setup went bad, if the base formation stays incomplete or disturbed But still it is in stage two.

It can still give you a good move If we can give us an opportunity sometime in the future, we put it back in the blue and when the stock is not even tradable There's nothing in it right now.

It is currently going below 200 or the 50-day averages So you exit it back to the total universe.

Remove the blue flag.

so we have to keep moving between these three.

There is no need to make too many watchlists. It doesn't need to be too complicated.

Make another focus watchlist in which the stocks you are holding Put in two three indices and another ones you can make for EPs or IPOs That's enough.

Just because it is giving you unlimited watchlists doesn't mean you create a mess of it by making 200 watchlists.

So now we will talk regarding the setup, In an uptrending stock, if you look very broadly you get only three types of setups.

Flag is the first set up, where the stock gives a very small pullback & quickly moves up After that, the second main setup is where there is a proper base formation.

And.

Then you get a very large base.

Okay so.

Now from here we see.

So this is a flag.

This is a base.

And this is a big base or You can even call it a stage.

All right.

So in the flag we will get a pullback, which has a very small slope, duration and depth.

This is a setup of urgency. Due to a lot of demand, it doesn't wait too much for a deep pullback or consolidation for a long time.

It moves up immediately.

The base takes longer time and if a very large base is being built, you can also call it a stage.

rather than calling at a base, these are just the differences of names, these are just nomenclatures but what is really happening?

What is the purpose of this base formation?

Or flag formation? What is their goal?

Their purpose is supply absorption.

In a flag, you get the supply absorption as minimal.

Well, the base gets you significant supply absorption.

And a very large base or in a stage, you get Maximum, as much as possible first here.

I wanted to write the word 'absolute' here.

This is their purpose. These formations tell you how much supply is getting absorbed.

This is a resting phase in the stock's upcycle, and how much supply is the resting phase absorbing.

What difference does it mean to us? The more supply gets absorbed the more easier the future upmove will become.

Perhaps we can anticipate a quantum of move based on this.