Sunday, 19 October 2014

How to calculate target and stop loss as per Volatility?







Next step go to : Daily volatility : click on archives


Next step download
Next step go to column NIFTY
Next step go to column Current day volatility today which is column M in the Excel sheet
Now the close price is 7975.50 as on 17.09.2014
Volatility is 0.0071
Calculate now as below
7975.50 * 0.0071 = 56.62 ( 56.62 IS THE MOVEMENT FOR THE DAY )
56.62 * Fibonacci ratio of 0.381 = 56.62 * 0.381 = 21.57 is the Derived number
Now let us calculate the Buy price and Targets as below

Our Buy price is Closing price 7975.50 + 21.57 = 7997.80
So our buy should be only above 7997.80 level 
What is the stop area : The stop area is 2 to 3 points just below the closing price 7975.30 -3 =7972 is the stop
So Buy Nifty cash above 7997.80 with a stop at 7972 ( strict )
Targets are as follows


Movement price we arrived multiplied by the following Fibonacci ratios ( 56.62 is the movement price arrived )
56.62 * 0.681 = 38.55 + 7975.50 ( close price ) = 8014
56.62 * 0.781 = 44.22 + 7975.50 = 8019
56.62 * 1.000 = 56.62 + 7975.50 = 8032
56.62 * 1.381 = 78.19 + 7975.50 = 8053
56.62 * 1.681 = 95.17 + 7975.50 = 8070
So now we buy Nifty spot above 7997.80 with a stop at 7972 for targets of 8014 - 8019 - 8032 - 8053 - 8070

Reverse the calculations for sell side or Short
We sell Nifty only below 7975.50 - 21.57 = 7953 with a stop 3 points above close 7978 .50
Targets are 7936 - 7931 - 7918 - 7897 – 7880
Finally unless you are too Bullish or Bearish you can calculate the nos with Fibo * 2



Buy Nifty spot above 7997.80 with a stop at 7972 for targets of 8014 - 8019 - 8032 - 8053 – 8070


Sell Nifty spot only below 7953 with a stop at 7978 .50 for targets of 7936 - 7931 - 7918 - 7897 – 7880


Coming to the set up : The price should trade for a minute are two to take up the trade
The zones in between Buy above and sell below are no trade zone before a direction is seen.


Book profits in phased manner as soon as the price hits its first 2 or 3 targets book 50 to 60 % of traded qty 
For Balance 40 % Trail stops strictly 

Paper trade before you are convinced and only than start to follow



About

Parag Patil is a technical analyst and trading system designer with stock excel programmer. I hope the articles and live chart of nse future and mcx on this Website will be as helpful and profitable to you . I try to update and post new articles tips everyday. My motto is to encourage the traders, so that they should able to understand the technique views behind the moment of stocks. I have deeply analyzed with many technical indicator with parameter and added to my amibroker afl. And even taken backtest report which is never being implemented. Any of the analyst expect me. Seeing all this you may understand that my views is more technical than commercial. If you are profited by my views I fill happy.

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