Bank Nifty trading strategy – Big reason to lose earned profit as an Option Buyer

Bank Nifty trading strategy – If you are an Intraday trader and specially an option buyer, then you must have made some money from your capital but its very frustrating when you lose your earned profit and take some loss. In this post I will discuss about several reason that you must consider, during your trading .

Bank Nifty trading strategy

Overtrading

This is the first term in which every retails trader lose their money. Overtrading is doing too much of trade,  this goes worse when you take a huge loss, in that situation you lose your control from your mind and you think how to recover that loss and you place several orders one by one without thinking that your entry is correct or not ? and finally at the end you close your terminal with a big loss.

The second reason of overtrading is that suppose,  by any reason in morning in first two trade you made profit, then your psychology get change and your mind started to think, today Is my day and I will convert my profit to double or triple, and you started overtrading and finally at the end you lose your earned profit and close with a huge loss.

Trading in range bound Market

Trading in range bound market is other big reason to make huge loss for an option buyer. You know in range bound market market move in a range , until the market doesn’t break the range you cannot expect a big move.

Trading in range bound market is profitable for option seller, because they get profit, due to time decay in premium, if bank nifty will be trade 1 or 2 hours in a range , suppose bank nifty started at 37000 and whole day it traded within a tight range of 200 points and finaly at the end it it close around 37000 level then you can expect at least 20 to 30 % of premium decay in your option if expiry is near.

Hence it is benefitial for option seller , but as as option buyer you didn’t earn anything in case you lose 20 to 30 % premium. So never try to trade in a range bound market.

How to identify bank nifty will be in range

To predict banknifty , generally fir you need to analyse the bank nifty on daily chart, after a big move, generally bank nifty goes sideways, and try to spend few trading session.

Second, when in the morning bank nifty will try to be range bound, you will notice first 5 min candle or 15 min candle size will be very large, it will be not as usual. And after making a large candle bank nifty will try to trade in that range whole day.

How to trade bank nifty when it is  in range bound

For a normal trader its not advisable to trade bank nifty when it is range bound, but if you are a skill trader then you can trade by following these rules—

1 Make opposite trade at one side

In a range bound market when when banknifty goes at one end  you should trade in opposite direction, for example if banknifty is trading with in a range of 37000 and 37200 , and when it goes at 37200 level then after taking resistance it will try to come at 37000 level so at that level you can short the bank nifty when you see a bearish candle.

Similarly when bank nifty goes at 37000 level and after taking support there you find a bullish candle there you can go long in bank nifty.

2 Try to book small profit

When you try to trade a rangebound market , always set your small target , because in range bound market if your target will be bigger then you will not make any profit, so your target will be small 60 to 70 points is ideal, and you must be very quick and fast to take your decision. Second thing you must initiate your trade with a strict stop loss, and you should maintain it.   

Not controlling your emotions

When you trade banknifty , and specially when as an option buyer, then your mindset, your mind psychology and your emotions play a big role.  During trading you should be nutral, you should not be carried away with your emotions.

For example, support you bought and option at 100 rupees and your target is 50 rupee and it achieved , then at that points your should book your profit, you should not be greedy , like some trader expect, it will go to 100 and so they wait and when it comes again to 50 then they think I should book at my target level,  still wait and and when it goes to 20 then they think, oh I must exit at my ently which it 50, and they still hold and when it goes near about zero then they think what will I do now. It generally happens on expiry day when you get sudden move , there you must take your quick decision.  

Not following proper risk management

This point in very – very important when you trade in bank nifty , because it you don’t follow proper risk management then in option you can lose your all capital in one trade, and if you don’t have capital then you can not trade even you find a good trade.

So this is the point which must be followed by each and every trader. Second thing if  your accuracy is not very good like 60% winning rate and and 40% loosing rate, and still you follow proper risk management then at the end you will be in good profit.

Suppose you bought your option at 100 rupee and 30 is your stopploss and and 160 is your target, then if it goes at your stoploos then you should not think at that point you must exit, similarly if you got your target then you should exit the trade or trail with stoploss.

But remember your stop loss and target should be proper analyzed, your stop loss should be below your support and target should be near your resistance level.