Importance of Understanding Nifty’s Trend

trend of nifty

Why it is important for traders to understand about the trend of Nifty to become a better trader?

Let’s understand this from the perspective of different traders. Traders have adopted different styles of trading to generate returns over their capital.

First let’s start understanding this from perspective of a day trader.

Most of you know that trend is your friend. Most of the trades which are taken with the trend yields successful results.

Would it not be easier if you apply your strategy with the overall sentiment of the market?

A lot of times I have been right even doing the wrong thing! The biggest reason was that my trades were planned in the market’s direction.

If you buy things in an uptrend and sell things in a downtrend you will have a lucky day.

Lot of times you will see stocks giving big moves on upside even when the markets are not doing well. Do you think it is easier for someone starting in the markets to make such an appropriate stock selection?

Obviously not! Here you have to know that applying common sense will give you a far better result than using most technical indicators.

Now let’s understand it from the perspective of a swing trader in the markets.

Swing trader is someone who is looking to take advantage of a trend over a period of time.

Smallcap/Midcap stocks if picked at the right time and location can deliver 10-20% returns in a very short span of time.

Most of the traders who make handsome returns in a bull market trading smallcap and midcap stocks lose it in a month in a bear market.

A lot of people reading this article might have faced this earlier this year when Nifty was giving wild swings.

It is because this is not the right process. It can only work for a bull market and they will come to an end at some point of time.

A right trading process will tell you when you have to make positions for swing trading in smallcaps and midcaps and when you have to avoid making positions.

If a swing trader starts understanding the trend of Nifty, he/she can even make bigger gains on swing shorts in the markets by trading stock futures and options.

A great disadvantage that smallcap and midcap traders face is that they do not try to understand market sentiment. Even if they find it, they do not have the option to go short on these stocks.

Avoiding trades is the toughest part of trading if you have to do it for a bigger period of time.

Now let’s understand how market sentiment and benchmark trend identification can help investors or traders who love to hold positions for a large period of time.

If you know trend of Nifty in the short term, you can definitely become aggressive and defensive accordingly.

And if you are an investor, you are bullish on the markets. So knowing when to be on sidelines is a very important part in this process.

Investors can make aggressive entries in the markets by waiting for the right areas. It can only be done by avoiding a lot of bad areas by knowing the short term market sentiments.

The more liquidity you have during panic, the better off you become as an investor.

Now the question is how to understand the market sentiment in short term, and take benefit of it as a day trader or a swing trader or an investor.

I take help of market participants data where I read positions made by FIIs, DIIs, PROs and clients on a daily basis, relate it with cash activity happening in the markets and accordingly make my short term and long term positions.

Nifty's trend on twitter

If you want to learn how to read market participants data, you can fill the form and let us know.


Leave a Reply

Your email address will not be published. Required fields are marked *