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Hello Friends!

1 SD formula is giving success in weekly forecast, from last 119 weeks. Below levels is the weekly level for NIFTY future and bank nifty future for 135th week (i.e. 23th to 26th May 16).

What is 1SD formula?

Price Range= (Price * volatility * square root of day) divide by Square root of 365


Nifty future of h May 16 expiry last recorded trade is 7766, we are going to find the weekly trend hence days will be 7 calendar days(including Saturday+Sunday).

NIFTY Future trend for 23th to 26th May 16

1 SD Price Range145.62
NIFTY7766
Up TrendDown Trend
0.23634.377800.377731.63
0.38255.637821.637710.37
0.572.817838.817693.19
0.61889.997855.997676.01
0.786114.467880.467651.54
0.888129.317895.317636.69
1.236179.997945.997586.01
1.618235.618001.617530.39
Trend expectation as per 1SD method
:

UPTREND conformation 7800.37, Successful cross-over above 7855.99 will target rise till 7895.31-7945.99-8001.61.

DOWNTREND conformation 7731.63, Successful fall below 7676.01 will trigger fall till 7636.69-7586.01-7530.39

RANGE-BOUND trend identification: If all up move invites sale above 7855.99 and all down move invites short covering at 7676.01 level this indication is sufficient to conclude that the price action is in the range of 7855.99 to 7676.01

What trade decision one trader should take?
:
  • Buying above 7800.37
  • STOP-LOSS 7731.63,
  • HEDGE by buying put option of strike below 7731.63, for initial target 7855.99

OR
  • Selling future below 7731.63
  • STOP-LOSS 7800.37,
  • HEDGE buy buying call option of strike above 7800.37, for initial target 7676.01 is advisable.

Note:These levels are weekly levels hence hedge the position with option for better money management. For intraday, better use our 1SD paid software.

How to trade this week NIFTY future levels?

On Monday or any time during the week if nifty 7800.37 cross then you buy the nifty future with 7731.63 put option long. If it achieves the 1st target 7855.99 during the day or any point during the week revise your stop loss to 7821.63 and hold the trade. If the 2nd target 7880.46 achieved, revise the stop loss to 7838.81 and hold the trade. If the 3rd target 7895.31 achieved, then trail or revise the stop loss to 7880.46. Continue this till last target is not achieved or trailing stop loss is not triggered. If trailing stop loss trigger, then close the hedging option position also.

After you initiate the buy trade
If the trend changes and stop loss 7731.63 hits then close the option trade, future long trade and enter the fresh trade in nifty future short and 7731.63 call long.

If your trade is with the option hedge and future has reached the stop loss, then do not quit the trade in hurry better wait for conclusive price crossover of 0.382 retracement or for the closing session 3:15 to 3:30 then decide.

You can also implement any other option strategy by the way of writing the options to protect the future trade.

Get our complete option course to learn options.

Note:I am using the call long simple option strategy to demonstrate hedging principle in trade. However, you can write the option also and do any complex strategy to protect the trade.

BANKNIFTY Future trend for 23th to 26th May 16

1 SD Price Range408.58
BANKNIFTY16510
Up TrendDown Trend
0.23696.4216606.4216413.58
0.382156.0816666.0816353.92
0.5204.2916714.2916305.71
0.618252.516762.516257.5
0.786321.1416831.1416188.86
0.888362.8216872.8216147.18
1.2365051701516005
1.618661.0817171.0815848.92

What trade decision one trader should take? Buy above 16666.08 with stop loss 16353.92 for initial target 16762.5. Use the 16606.42 put option buy with long future or 17171.08 call option sell with long future to hedge the trade. If you sell it at 16353.92 hedge it with 16305.71 call or sell below15848.92 put option. Since 0.236 price giving triggering in bank nifty because of its high base value I am changing the entry point to 0.382 price point.

Conclusion: If you look the daily price point in the chart and compare with the weekly levels we have given, you will find our calculated point worked as point of pressure some time and point of revival some time.

Refer the past performance of the 1SD weekly trend calculation (from September 2015 to September 2017)

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