Market Calls

Here is a live case study in Bank Nifty which explains the season behavior which provides exponential odds when comes to trading bank nifty. This tutorial explains how to understand the market generated information presented in Bank Nifty and how to convert that information into trading odds.

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How Range Bar Charts are Plotted?

The three basic rules of Range Bars are:

Each range bar must have a high/low range that equals the specified range
Each range bar must open outside the high/low range of the previous bar, and
Each range bar must close at either its high or its low.

Does range bar charts reduce noise? To some extent yes. It is a different form of data representation. However in a slow-moving markets range bar charts forms less number of candles and in a fast moving markets range bar charts for more number of candles.

Below chart is the Nifty Futures 10 point range bar charts. i.e each and every candle has a fixed high-low range of 10 points. A new bar will be formed if the fixed high-low range is broken either on the upper side or on the downside.

How to set Range Bar Size :

One need to set range bar size based upon what kind of trader they are. If they are scalper or intraday trader then smaller range bar size is preferred. However if someone is a positional trader then bigger range bar size is preferred based on their holding period.

When comes to Nifty Futures range bar size of 10 or 15 range is preferred. However, for positional trader anywhere between 25 to 50 is preferred based on the risky nature of the trader. If you are a trend follower then range bars provides better results compared to time based charts.

How Renko Bars are Plotted?

Renko charts help traders to focus on the trend visually. In Renko bars, every bar is of the same length (including reversals, but price must travel two times the Renko bar in the opposite direction).

If we choose a size of 10points for the Nifty Futures, then for every 10 pts move in price, a new Renko brick is formed, without any consideration about the time. So, if the Nifty Futures moves only 9 points in a day, a new brick will not be formed. This approach helps in showing price trends very clearly.

If Nifty Futures is at 10700 and moves to 10710. This marks the first bullish Renko box. A new Renko box is opened at 10710. Now Nifty Futures falls to 10695 and then rises to close at 10705. This marks a second bullish Renko box. Nifty then rises to 10720 and falls to 10710, we are still at the second Renko box (because for a reversal, we need 2 times the box size, which is 20 points in this example). Nifty futures then rises to 10725 and then falls to 10705; this is when we get a bearish Renko reversal box.

so clearly different trading instruments requires different brick size depends upon the price, volatility & traders holding period one need to fix the renko brick size

Traders use Renko bar charts to identify trends, Key support and resistance levels, to identify breakout trades and failed breakouts. Renko by itself is a trading strategy whereas for range bars one need to plot indicators or apply trading strategies on top of range bars.

What is the preferred charting software for Renko?

Ninjatrader 7 or Ninjatrader 8 is the preferred charting software for Renko and Range bars.

Traditionally traders use either Fixed Renko Bricks or ATR based Renko models but Ninjatrader supports wide varieties of renko models like hybrid renko, better renko, unirenko and many other renko types. And when there is a gap formation lot many charting tool plots renko blocks for the gap zones as well. However that issue is well handled in Ninjatrader.

What one can do with Orderflow Tool?

Here are some of the ways where one can use orderflow analytics to understand your trading competition better.

Stop Hunting: Track where other players keep their stop loss

Momentum Behavior : Track how momentum players drive short term momentum

Momentum Exhaustion : Track how intraday momentum exhaustion occurs.

Traders Confidence : Track weak & strong players behavior at key support/resistance

Absorption: Track how large orders absorb the liquidity and creates ceiling effect.

Most of the classical technical indicators/patterns look into the past data to take a trade decision. Whereas Orderflow studies rely only on present information and it focuses more on what is going on right now in the market.

Tools used for Orderflow Analytics

Some of the Frequently Asked Question before getting into the Orderflow Basic Terminologies

Can I use orderflow to find Big Buyers/Big Sellers?
Yes you can use orderflow to find big buyers / big sellers

Can I use orderflow to find Key Support/Resistance?
Yes it helps traders to identify scalpers/intraday traders to find key support / resistance levels which are critical for them to time their entry and exit.

Can I combine Orderflow with my existing studies?
Definitely, orderflow is a decision support tool which helps traders to get the short-term context and it improves the way you are looking into the market and your technical studies.

Does Orderflow bifurcates volume into Buyers Volume/Sellers Volume
Yes it does. Infact it does more than that.

Which is the Best Timeframe to Apply Orderflow?
It depends upon what kind of trader you are. If you are a intraday trader then 3min/5min orderflow or a range bar charts order flow would do better. However if you are a positional trader then one can consider using 15min or 30min orderflow information.

What knowledge is required to study the Orderflow Context?
Knowledge in Auction Market Theory (Market Profile) or Price Action or Volume Spread analysis helps traders to evaluate the underlying context.

Can I use Orderflow as Independent Decision making tool?
Yes one can. But Knowledge in Auction Market Theory (Market Profile) or Price Action or Volume Spread analysis helps a trader to take better trading decisions.

In the next tutorial, we will look into the basic terminology and key components of orderflow.

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Cocoa’s 2016-7 bear market reversal was in total harmony with one kind of analysis

By Elliott Wave International

If financial markets were styles of music, equities, especially the most stable Big Board stocks, are like great classical compositions: They’re made up of consistent, steady tempos you could listen to all day with the occasional booming or crashing note.

Commodities are different. They’re the jazz players delivering choppy, frenetic tunes with jolting chord changes.

It’s easy to write it off as chaos; to believe these markets open every morning as a blank slate, riffing off each other or external “vibes” in the moment. That’s the very basis of fundamental market analysis and its reactive claim that outside news events drive price action.

But that’s not the only option. Maybe you’ve heard of technical market analysis? It’s based on a closed system of values, such as momentum, relative strength, bar patterns, Japanese candlesticks, and so on — that provide an objective way to measure near-, and long-term future price trajectories.

A popular choice for market “techies” is Elliott wave analysis. It’s incredibly user-friendly, thanks to the fact that there are only five core Elliott wave patterns to remember. One of them is called an impulse wave, defined as a five-wave move in the direction of the larger trend in which:

Wave 2 never retraces 100% of wave 1
Wave 4 does not enter the price territory of wave 1
Wave 3 is never the shortest among waves 1, 3, and 5

Wave 3 is never the shortest because it’s usually the most powerful wave in the sequence. Ralph Nelson Elliott himself described third waves as “wonders to behold.” Think of the part in a song that builds and builds and then bursts into crescendo (price surge) or quiets into decrescendo (price selloff). That’s a third wave.

Cocoa: From Rockstar to Has-Been

Remember the gut-wrenching crash that occurred in cocoa back in 2016-7 in which prices plummeted 40%-plus to a 10-year low? Turns out, that was an Elliott third wave in action!

Not everyone originally saw it that way, as memory serves.

See, after a record year of gains in 2015, the fundamental backdrop in cocoa going into 2016 was fully-loaded to the bull side, including: a global supply deficit, production shortfall, rocketing demand, and a supply-eroding El Nino in West Africa.

According to the news-following analysts, cocoa prices were set to “riff” off these bullish chords and makes sweet gains, as these news items from the time confirm:

“Cocoa futures soar as global chocolate demand grows… [Chief market strategist] doesn’t see the uptrend slowing down anytime soon.” (Nov. 1, 2015 CNBC)
“Cocoa is a long-term bull” (June 20, 2016 Seeking Alpha)
“Cocoa Futures Savoring a Tasty Upward Swing… Cocoa could prove to be a delicious landing spot for commodities investors targeting opportunities as far into the future as 2018.” (Sept. 1 The Street)

But for Elliott Wave International’s chief commodities analyst Jeffrey Kennedy, cocoa prices were singing a very different tune; namely bearish. In his July 2016 Monthly Commodity Junctures’ “Featured Market” video update, Jeffrey presented this chart and explained how cocoa prices were ideally positioned for a powerful wave three decline. In Jeffrey’s own words:

“We’ve seen a decisive break of the lower boundary line of the corrective price channel. This price action confirms that the counter-trend [rally] that’s been in force since January of this year is finally complete.

“We can now anticipate this larger wave three selloff targeting at the least 2194. This is very, very exciting and opens the door for further selling well into 2017…”

From there, cocoa prices hit the skids, reversing from a near 5-year high to a 10-year low into mid-2017 before pressing the brakes.

(Editor’s Note: See and hear Jeffrey Kennedy’s analysis of four major commodity markets — sugar, soybeans, lean hogs and cotton — for FREE!)

From a fundamental, news-moves-markets perspective, cocoa’s bear market crash sounded like chaos; a move with no ties to the clearly bullish “score” laid out before it.

But from the view of technical analysis, specifically Elliott wave analysis, the market’s reversal was in complete harmony with the objective, third wave pattern in which prices were developing.

Take part of this all-inclusive event from our friends at Elliott Wave International and get instant access to exclusive video clips from Jeffrey’s Commodity Junctures lessons, which reveal his long-term forecasts for sugar, soybeans, lean hogs, and cotton in the months and years ahead.

This article was syndicated by Elliott Wave International and was originally published under the headline . EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.