Hello Friends, Welcome to today episode on trading trend defining large moves In today’s episode, we are going to discuss a trading strategy for trading large-bodied moves Meaning large-bodied candles on the upside or downside So how to trade such moves? So in this video, we will cover What are large-bodied moves and how they work? How you should trade such moves? and when to enter? When and where you should place the stop loss and at the end, we will summarize So first, Let’s understand what are large-bodied move To understand let’s take an example of DHFL So as you can You can see a large intraday move of 50% In which price fell from around Rs.600 to Rs.330 during intraday The difference between large-bodied moves From trading, gaps are the fact that Usually in Gaps movement is because of some overnight news Because of that you see a sudden gap up or down In the case of large-bodied moves All the movement happen during intraday The news comes during market hours While you are trading stocks In such moves, you will not see gaps You will see large candles And if you observe, in this case, a 50% down move candle is formed and that too with tremendous trading volume so this is the conviction trend defining move So this candle has exhibited that DHFL has started its secular bear market and it has begun downtread and if you observe that even from Rs.300 level it has subsequently fallen to Rs.15 Many times people think That because of such move the stock is really and cheap and I should buy After this move many retail investors and traders Felt that such a good company is available in 50% Discount So I should buy and eventually, it will rise to Rs.600 But that’s the mistake made by investors and traders People forget that This is trend defining move and that too with tremendous volume Which means From now onwards the trend For this security is changed and one should not trade against the trend And if you trade it will 100% lead to value destruction It has a high chance and probability for loss Let see an alternative upside move If you see this is Axis Bank stock If you observe there is a huge 20% candle that was formed After that candle, it changed the trend of Axis Bank and it started moving upward If you see this candle is between Rs.480 to 540 after 540 stock gradually started moving upward and reached Rs.740 So usually when we see such large-bodied candles 10%, 15%,25% So how one can trade such candles? So ideally when such candles are formed they can be retraced to 50- 60% approx. It means that if you see a green bullish candle so the difference from that candle high to low of which 50-60% is the retracement zone Which is your buying zone. So in this case In the case of axis bank. The price from 480 to 540 odd levels The difference is Rs.60. So from 505 to 540, you can buy Which will be your buying zone If you have brought the stock of axis bank in buying zone When there was pull back and part retracement So you could have made 30-40% returns very interestingly when such moves happen it continues for long term So ideally once a trend defining candle is formed then the stock trend is changed and tend to continue for a long time So where to place Stop Loss?
So if you are buying so one can buy from the top To about 60% will be the buying level So keep a stop loss at the low of the large-bodied candle So in this case So 540 to 505 could be your buying zone and 480 which is also the low of the candle will be your stop loss Similarly, if you short sell meaning if you see a trend defining bearish candle Like in this example of Zee In that, a candle was formed from 440 to 320 So the day this candle formed the high of which will be your stop loss, so in this case, 440 will be your stop loss and the retracement zone will be the difference between high and low of the candle So 60% of the retracement level will be the selling zone If you observe Actually, the candle has defined the trend of the stock after which the stock has corrected by 150 points BUT. The stop loss triggered before that So sometimes it is possible that due to some whipsaw your stop loss may trigger But for the trading disciple point of view Both the trader and investor should keep stops in selling as well as buying positions are concerned VERY IMPORTANT NOTE Such types of trade Is not valid in random extremely volatile stocks To show you lets take an example of Indiabulls housing finance If you observe you will see many large candles In such stocks Where there is a lot of volatility Stock usually see a change of 5-7% So in such cases, this strategy will not work This strategy will only work when a low or medium volatility stock has made a large outsize move For example, any stock which moves 2-3% daily and we see a 10-15% move so average 6-8X of average daily volatility candle is formed then only in such stock this strategy will work To sum it up, Identify these trades Buy the pullback in large-bodied moves Sell the relief rally in large-bodied moves So up to 60% retracement Either on the buying or selling side You can actually enter such trades and larger the body larger the move Which means if you see a 30% candle, then you should not think that the stock has moved very high if you see a 30% candle This means that this trend will continue for a long period of time ideally, if you trade a bullish candle So keep a stop at the low of the large candle and if you trading a bearish candle the high of that candle will be your stop loss and please avoid stocks which are anyways are volatile That’s it for today’s episode see you in the next episode