Bollinger Bands से Volatile Stocks में Trading क़ैसे करें? | #Learn2Trade Session 21
Welcome to the 21st session of Learn2Trade I’m Vivek Bajaj and I’m training to trade. Have you ever observed your heartbeat? You must have seen in the TV or movie That the heartbeat moves this way. And when it’s a straight line, it means gone Stocks in the stock markets also work the same way. It moves a certain way And if it’s straight it means that no one is interested in that stock, hence it’s standing still We will discuss volatility today in this video. We discussed a volatility indicator in the previous video We will take this discussion forward today and discuss volatility with Annapurna Hello! Hello sir! Mask is back on. Yes sir, corona is everywhere now We’re putting in a lot of effort. Eventhough during corona she wants to complete her training
She also wants to learn and she wants you all to also learn along. I’m not wearing a mask as one is sufficient. Did you track the market yesterday? Yes sir. It fell down a lot. Yes. And your stocks became negative You must be worried. It was evident in your face that you’re not okay. You can see loss in stocks I felt like leaving it once. Right. I had shared my story with you that I failed my CA foundation I secured Rank in all the other exams, but I was in a shock. Who fails CA foundation
But it was a very important learning that never take yourself for granted. Never take anything for granted. Loss is a very important part of your long-term growth Loss in stock market is good. You should welcome loss and the earlier you incur a loss, the faster you’ll learn.
Later the loss, more the problem. Imagine a scenario where the first 20 consecutive trades are right You’ll get over confident and arrogant that you’re supreme and better than the market And you can do anything. The earlier you get arrogant, it’ll lead to your downfall The earlier you incur a loss. You should smile when you incur a loss That’s why start with a small capital in the start so that a loss doesn’t make you psychologically weak You’ll start seeing the profit mantra after incurring loss. The loss could have converted to profit in a way But it’s important to do a post mortem to understand that. I had told you that every loss is like a dead body How will you know the reason of death without post mortem? Don’t worry about the loss Keep the learning on, profit and loss will become a part of your learning process Don’t worry. Did you party when you incur a profit? No. So why are you sad when you incur a loss
Don’t be sad. It’s a learning process. Market doesn’t know that Annapurna has entered the market Market is not going to welcome you and offer profits. Market has its own way Market was in the uptrend for the past 1 year, so it was easy money There’s this church in Park Street where they distribute free lunch. Market was distributing free lunch for the past 1 year. Now the market won’t distribute free lunch Only the deserving can earn. It’ll take some time for you to become deserving
Let’s cheer up and continue our learning. We had introduced volatility in the previous video And the ATR indicator. What is ATR? Average True Range. What does it indicate? Don’t give me the formula. What does it try to tell you? Whether the market is volatile or not
If the ATR is in uptrend, the volatility is high and if it’s in downtrend, then the volatility is low Why should we be concerned about volatility? Volatility indicates high risk and high momentum in the stock. Returns should be higher then. We should stick to the stocks where the volatility is high If a stock is standing still. What’s the point of participating in it. But if a stock keeps moving up and down, then it’ll be fun. Risk is high but that’s where you'll make money Your risk appetite will decide what kind of stock do you want to participate in If you participate in the less volatile stock, then it’ll be boring It’ll be more exciting to participate in a high volatile stock The more you’ll feel that you’ve utiised your day Today we will discuss one more concept on volatility I’ll not teach a lot if indicators, but there are some indicators that you need to know A concept that measures volatility is known as Bollinger Bands It was created by Mr. Bollinger, let’s see your screen; the template that I’ve created for you Do you remember the template? Candlestick that we have already covered Are you able to judge each candle now? I do have some idea now And I’m sure with time, it’ll be more clear. It will be with time
It can’t be like today you’ve read candlestick and you master it by next day It’ll atleast take 1 to 1 and a half years. Each candlestick like Asian Paints Ad slogan “Har ghar kuchh kehta hai”. Similarly, each candlestick denotes something The more you observe it, the better you’ll understand it.
We have candlestick, moving averages, supertrend, volume Volume denotes..You had asked what does the green bar of volume mean? Green volume bar means someone has bought it and red means someone has sold it There’s one confusion regarding this. If someone has bought it and someone must have sold it as well Of course, good question. In the market you have bid and ask The buyers will take the ask at any cost if they’re desperate to buy. The sellers will sell at the bid price if they’re desperate to sell But if the buyer is not desperate and is willing to buy at the best price and not the seller’s price So they’ll stand on top of this as he’s not desperate. The limit order is when he stands on the bid
It means that he’s not desperate enough. The seller is more desperate The green and red measures desperation. Buyers kept buying at the ask price They were desperate to buy, so it got added in the green bar The desperate sellers kept selling at the bid price and got added in the red bar The one who works at the market price, turns red to green Who works at the limit price doesn’t turn the red to green as they’re not desperate This is the volume indicator, then there's RS indicator. RS Nifty Which tells the performance of the stock vis-a-vis nifty whether it’s underperforming or outperforming ATR that indicates increasing or decreasing volatility. This stock’s volatility is high One thing that I forgot to mention about ATR is that each stock’s ATR range is unique I think I told you, I’ll repeat it anyway. Each stock’s ATR is unique as there’s a unique operator behind each stock They operate the stock in its own unique way. Check the historical ATR in each stock to track the ATR
It’ll indicate whether the volatility s on the higher or lower range of historical volatility If it’s on the lower range then it might indicate that it’s preparing for a higher volatility And if it’s on the higher range then it means that it is very volatile So it might become less volatile and consolidate at that price for some time If the price consolidates at the same price for some time, then the ATR will go down ATR’s application was supertrend, that’s derived from the ATR. Our template is revised Let’s introduce the Bollinger Bands indicator that we’re going to cover today I’ll hide supertrend, EMA and moving averages once so that we’re not bothered I’ll insert the Bollinger Bands indicator here. I’ll save it here What is this?This is like a band, right! I’ve kept a rubber band here This is Bollinger Bands. It’s a band with an upper and lower limit Who decides the upper and lower limit? Do you see the middle line? It’s a 20-period moving average. We had discussed moving average
We track 21, 55, 100 and 200 period moving average. Let’s change the 20 to 21 Mr. Bollinger won’t mind. I’d said 20, if you like 21 then use that, it won’t matter a lot The middle point of Bollinger Bands that is 21 period moving average We use the concept of standard deviation to take out the upper and the lower range Standard means a benchmark and deviation means how much is it deviating Like we had taken the cricket example in a video while discussing moving averages On an average the score is 140 or 150, but as soon as Virat Kohli stepped in the average became 210 Standard deviation changed with the change. The standard deviation expanded with the change in range It’s a deviation from the mean and mean is the average. Mr. Bollinger has asked to benchmark 2 standard deviation What’s the meaning of 2 standard deviation? It means that it can deviate 2 times from the mean Not 2 times of mean, but 2 times of standard deviation. We had studied confidence limit in school
There was a concept known as probability theory. I’m explaining it in a very simple language Like this is a normal distribution curve. It’s a bell shaped curve where the mean is in the middle The probability of all events right to it is 1 and of all the events on the left of it are in negative 2 standard deviation means 95% confidence limit. Simplifying the explanation
There’s a 95% chance that the stock will move in this range If I want to increase it to 99.7%, then I’ll change the 2 standard deviation to 3 standard deviation The range will increase. It’s a very nice statistics test known as the confidence level test It’s 68% with 1 Standard deviation, that there’s a 68% chance that the stock will move in that range Should we try it? Let’s change the 2 to 3. What happened? It increased. The gap increased A higher standard deviation will lead to a higher range and denote that there’s a 99.7% chance That the stock will move in this range. I’ll change it to 1 now. The gap has decreased
The probability of the stock moving in this range has reduced. So 2 is a standard followed by everyone It’s fine and not a concern for us. You understood the definition of Bollinger Bands Let’s try to understand this from the application point of view We’ll assume that this stock is going to move in a range but if there’s a lot of strength in it Then it’ll go out of the range and will pull the band along with it. Like this is a rubber band and here my finger. Ideally this finger is in the range
But if there’s strength in my finger then I’ll pull it upwards So it’s like a rubber band, if the price has strength then it’ll pull the upper range higher As the moving average is also going up along with the price. How is moving average calculated? Average of open and close. Only close. ATR considered both open and close The higher the price goes up, moving average will also go up, taking the band along But generally if the stock is not very volatile then it’ll stay in this band The price will always be inside the band but if it’s too strong Either too strong or too weak, then it’ll try to break that band and will take the bad along with it What do you have to do? This works very well for intraday trading It might not be very applicable at the end of the day, you can use it I’m teaching you a lot of indicators but you can select which 2 to 3 indicators to track But it works very well in intraday as it’s all about liquidity driving the stock price How much money is entering the stock in one day. If the price is going up the band will also go up Mostly, whenever the band goes up and when it corrects, as anything that goes up will correct a bit What is it called? Retracement. When it retraces, then it generally reverses from the middle line In this stock, it went up. This is Hindustan Unilever. It went up, then fell and reversed from the middle line It acts like a support. If the stock is in uptrend the there are high chances of it being retraced from here
And if it’s in the downtrend there are chances of it being retraced from the middle line And if it’s on this zone for some time and then moves up, giving a breakout Then there are chances of it making a new range, given the volatility has gone up The second concept that we need to understand is the gap between the envelope It’s also known as BB Gap. Gap between the upper and the lower range The gap keeps changing with time. What is its relevance? It means that if a stock is standing at one point for sometime then the gap will reduce Indicating peace and a signal for the storm. If the envelope is reducing, then there’ll be a storm
When you get the signal of storm at the first price action, then ride with it Peace is always followed by a storm. You need to track 2 things in the bollinger bands One you need to check when will the storm arrive, when do the gaps increase and decrease Which stock is in correction and trading near the middle band as there’s correction after the storm You can make an attempt there to trade as contrarian as if the stock is above this point indicates that it’s in the uptrend When it’s in uptrend, then you earn well during retracement. Breakout trade is when you enter after it breaks its previous swing’s high. Your take profit should be small in it As there are high chances of retracement after the breakout. But when the price is down and trading near the support or the demand zone Demand zone can be identified from various parameters like price, technical indicator You’ll earn big bucks when it retraces from that point Market is falling for the past 2 days, You’ll earn big money of you identify the strong stocks in the falling market Even a donkey can earn money in the uptrending market I have a question that you said that the gap will open up after the envelope is small There’s a possibility that when the price gives a breakout, then it’ll blow up And that’s when you’ll earn. When will you earn money? You won’t earn if it’s here
You won’t earn money if it’s in the range. As soon as it breaks the range and envelope increases There’ll be a momentum and that’s when you’ll earn. If it’s trading in the upper band Does that indicate something? Does that indicate a bullish run? Absolutely If it’s trading in the upper band and keeps pulling it upwards, then it means that it’s in uptrend Maybe it continues the bullish run, It can possibly cool off come down and reverse again We can’t trade just by tracking the Bollinger Bands. That’s why I’m teaching you 3 to 5 good indicators Let’s talk about Hindustan Unilever, it’s going up, band is positive and going up It’s given a breakout and trading up, its relative strength is also strong vis-a-vis nifty It’s trending up, volatility is also positive, let’s add the moving averages as well It’s trading above all the moving averages, means it’s uptrending Denotes a strong stock. We can either trade now or when it retraces from this point Or put in some now, around 25% and put in additional 25% when it falls down And if it falls more, then sell. Let it go. It’s good to get rid of some people for a peaceful life
Let’s see another stock. Idea. What does it say? Underperforming, low volatility It’s trading in the lower band of the Bollinger Band. We’ll sell it when it goes up We can never buy it. It’s price is Rs. 8.80. Should we buy? No 90% of the retail investor will buy it as it’s cheap and they haven’t watched the Learn2Trade series This looks cheap. Even bhelmuri costs Rs. 15, Vodafone is at Rs. 8
Are the Rs. 8 relevant?You’ve learnt enough. Will you make the mistake of buying Vodafone stock? I will not buy it as it’s on the bearish trend. Amazing, all my efforts are paid off now Teach the same to your friends, father, his friends. If it’s looking expensive then maybe it’s good If it’s cheap then maybe it’s not good. Unless you know an operator who is building a position at the bottom And he calls you up to inform that he’s bought it, so you should too. Do you know anyone? No
Then it’s not possible. You can’t buy it cheap if you don’t know any operator. You have to buy expensive stock If the operator has bought it and you feel it’s expensive, then it’ll become more expensive As the operator’s intention is very clear, to make it expensive and then sell it at a high price Let’s check other stock, Dabur. Tell me. Is it rocket science? No. There’s no problem in it Tata Steel. There’s a correction but overall it’s a good trend. Where can it reverse from? The lower part of the Bollinger band which is 788. Maybe it doesn’t reach 788 We’ll add an alert that let me know if it reaches 788. There’s an alert feature in StockEdge Go to web.stockedge.com, and search Tata Steel and click on the last option “My Target”
Here you can add that when the price trades below 788, then let me know as I’ll buy Description is that I learnt it in Learn2Trade session. Add target. That’s all You’ll get a notification from StockEdge whenever it hits 788. You can do it here in the TradingView. Just right click, add alert You can add an alert here as well that they inform you you when it reaches this level You don’t need to be on the screen throughout. We will work when there’s an alert Let’s go to Indigo now. Tell me. It’s going down. Right Till it goes beyond this and trend is not convincing, we’ll not hurry to buy till then But it’s running on a good range. It can give a range breakout. It went up
And it’s consolidating for a very long time. If it goes down, then sell. If it goes up then buy What’s happening with Reliance? We can’t buy. Maruti? Definitely not Let it show strength. Like I said that the operator will buy at a low level and we can’t buy it You need big money to become an operator. We can’t buy it now, maybe later when we grow We can’t buy HDFC Bank. Just Dial. We can try. This is going up. ICICI Bank. It’s on a weakish trend
Right now you need to track Hindustan Unilever, Dabur, and JustDial. I’ve added a new stock Tell me. Tata Elixsi. Good one. Where did you get this stock? StockEdge. It’s a good stock It’s so nice and good. It’s on the mid line of Bollinger Band. It’s given a breakout and is trading here
You should definitely buy it. Another thing you notice here is that whenever it went up There were big green candles, and there are small candles when it fell. It means that the operator is not desperate to sell, but to buy. Can you connect all the dots now? Yes sir. Price, Bollinger, moving average, volume, relative strength and ATR.
ATR is not that relevant as you’ve added supertrend. So we can remove it if not required We can keep it as well. It’s on you. Remove it as I taught you ATR to explain supertrend So it’s not required. I’ll explain another indicator, RSI and that’ll be the last indicator
Our template will be ready when we add the RSI. Any question? No sir This was a small video on Bollinger Bands, I hope you liked it. Use it Like and share the video if you liked it and tell others if you’re liking the series And smile if you’re liking me. Remember that trading is not tough Annapurna was raw when she started off and now she’s becoming an expert In sometime she might start giving stock calls. Let’s see. She has added a stock Tata Elixsi I hope that you’ll pick up more stocks for me, so that your stocks are in front to discuss when to generate trade ideas Till then stay tuned and share my work and take care. Thank you. Bye
2021-05-03 21:58
