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Trading Sasmal
@TradingSasmal 5 years, 4 months ago 789 views

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@Traderknight007 @caniravkaria @vivbajaj @VijayThk

A Thread on Rectangle Pattern:-

What is rectangle pattern?

Rectangle pattern also known as trading range, consolidation.We get multi-day, multi-week or multi-month consolidation where price move in range.

How rectangle pattern formed:-

The price should touch two point of resistance and two point of support parallelly to form rectangle pattern. Price move in range line "A " and line "B", line "A" known as resistance or supply, line "B" known as support or demand.

Role of volume :-

If you go through textbook method volume should dry up during the consolidation. But in my experience it is not necessary that volume should dry up there are time when volume get aggressive during consolidation.

Below chart shows how volume get aggressive during consolidation.

Below chart shows dry up volume during consolidation.

Duration:-

Longer the duration of rectangle pattern generally more aggressive the breakout going to be.

How do I place my entry, stop loss and target?

ENTRY:- Entry will be at breakout candle high with 0.3% buffer.

STOPLOSS:- Stop-loss can be placed on various ways some people use breakout candle low as stop-loss some use percentage type stop-loss, some put stop-loss based on latest swing low.

what I prefer is when I take short term swing trade I place a stop-loss based on latest swing low on one hour time frame or breakout candle low as stop-loss.

TARGET:- Range of consolidation is calculated as target by textbook method

but I mark next resistance as target if I am long.If stock is at all time high do not mark any specific target I just trail until my trailing stop-loss get hit.

Thanks for reading.

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MyFnO
@MyFnO

see stocks where open = high/low .. and see how the candle is progressing.. if going strong then the trend can continue for the day :)
also keep lookout for the OI or volume change from yesterday if big enough, then major action is on the cards

Sarang Sood
@SarangSood

Understanding HIGH & LOW VIX

VIX at 16: If you check today's IV behaviour, they were not spiking much even with decent delta move in BNF. The movement was subtle, giving some time to adjust. So someone having good adjustment mechanism can stay in the game longer.

1/

VIX at 20: The same delta move will be more fierce, coupled with rise in premiums. When premiums rise with movement, then the adjustment cost increases exponentially. The premiums can fall back at EOD, but the damage is done if caught in the spike.

2/

After talking to few traders, their backtest result was in favor of high VIX of 2020, rather than 2017-19. The key flaw in the backtest were the adjustments which are not easy to calculate. Combination of high theta & fixed SL during high VIX, the IV crush is cashed at EOD.

3/

Neutral option sellers who don't adjust & have fixed SL on a static straddle will not be able to benefit highly in low VIX. The straddle which moves away from ATM will increase no matter what. But if we keep on rolling our strikes, then we get good realisation of theta.

4/

I have made majority of my profits in option selling when VIX was at 13-15, mostly just relying on my adjustments. Since 2020 with high VIX, adjustments stopped working because of increase in the frequency of delta + IV spike combos & so had to shift to directional trading.

5/

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Joel Pannikot, CMT Ass...
@PunnyQuote

'Simplicity is the ultimate sophistication' #leonardodavinci

In #technicalanalysis keeping it simple eliminates noise & avoids too much analysis leading to paralysis
#Journalists can use #linecharts to analyse the market & build stories
#MediaFriday
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@CMTAssociation

Krunal Rindani
@MarketsWithKR

My course on the basics of #stockmarket is live on https://t.co/8Jbd0ujLKq! Thanks, @malpani for helping create such a nice platform that promotes learning :D

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Julian Komar
@BlogJulianKomar

I personally don't buy any breakout! It must fulfill some criteria:

– Volatility contraction closely to the breakout line
– Volume dry up
– Sound chart pattern
– Story stock or great fundamentals

Pay attention to the details!
Don't blindly buy every outbreak.

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@LostTemple7

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