This post just appeared as a comment on "Vtrender.com" post of Shai - link here
If you don't understand failed auction concept, do visit Vandana's blog on the topic
Shai had earlier in the day posted data about 32 "failed auction" or FA points in Nifty. He successfully carried out a short trade which was based on yesterday's failed auction at 5620 Nifty July future. Gave us cool 32 points in profit. One more setup based on FA at 5620 remains (buy Nifty as close to 5620 as possible and keep Stoploss at 5605 and target 5720). The trade is not a 100% sure thing just like all other trades but if you can catch it low, the risk-reward ratio is really good.
I got to working with this data EOD and came up with some numbers. Those who don't know Shai, he runs this trading room complete with real time charts, chat, sms and his trades that he walks you through. Not like those Brokerage analysts who give you a trade with entry price, stoploss and target price but literally "walk you through" the trade. Go to vtrender.com and check his stuff out.
Had an idea around 5 PM that one could use conditional probabilities based on 32 FA points shared by Shai, which is a decent sample size. Here's a link to the sheet with conditional probs in "boxes". Basically probability of FA being visited if "not done so far"
Interesting data. Probability is low on day 1 and 2 and day 5 and 6 but really high for days 3 and 4. I have never done a visual analysis of Market Profile with FA in mind but someone who can do so will be probably able to come up with good trading setups based on the same like Shai did. My 2 bits are there in the rightmost 2 columns in above sheet however.
One could develop elaborate plays such as
If FA visit not done on day 1 and day 2....
and Nifty already 100 points up from FA point,
then book profit on existing positional and wait for dip to re-enter
and if Nifty close to FA point,
then be ready to trade breakout of last 3 day range with tight trailing Stoploss
Setups have to be based on observation and experience though. A failed auction near lows may tell a different story from failed auction near highs. Probabilities can only tell us only so much so use with discretion.
Enjoy.
Chandrashekhar
Posts
2 comments:
important thing is to find out such setups and put a one liner in the morning "FA trade - 5620" - do we have any other failed auction to be revisited on Monday?
Thanks CS for the post and the elaborate probability analysis for the revisit.
Clearly from the data, the best days to anticipate a revisit are days 3 & 4.
But before the revisit factor comes in, I'll like to focus a bit more on the actual failed auction. By definition, a failed auction in market profile is an inability of the market to pursue a given direction which in the case of the expiration Thursday ( and the one before in the same month at 5437)
was downwards. Once this is spotted and the market moves to the other end of balance, once can get a minimum of 70 points from the failed auction point.We saw this work to a nicety yesterday.
A conservative way to spot a rebound on subsequent days is to wait for a break of value or IB high/low of that day.Till this happens the rebound trade is not on.
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