Hello Friends!

1 SD formula is giving success in weekly forecast, from last 119 weeks. Below levels is the weekly level for NIFTY future and bank nifty future for 135th week (i.e. 25th to 28th Jan 2016).

What is 1SD formula?

$Price\; Range=\frac{\mathrm{(Price\; *\; volatility\; *\; square\; root\; of\; day)}}{\mathrm{divide\; by\; Square\; root\; of\; 365}}$

Nifty future of Jan 2016 expiry last recorded trade is 7436, we are going to find the weekly trend hence days will be 7 calendar days(including Saturday+Sunday).

Trend expectation as per 1SD method

UPTREND conformation 7466.74, Successful cross-over above 7516.5 will target rise till 7551.68-7597.01-7646.77.

DOWNTREND conformation 7405.26, Successful fall below 7355.5 will trigger fall till 7320.32-7274.99-7225.23

RANGE-BOUND trend identification: If all up move invites sale above 7516.5 and all down move invites short covering at 7355.5 level this indication is sufficient to conclude that the price action is in the range of 7516.5 to 7355.5

What trade decision one trader should take?

• Buying above 7466.74
• STOP-LOSS 7405.26,
• HEDGE by buying put option of strike below 7405.26, for initial target 7516.5

• Selling future below 7405.26
• STOP-LOSS 7466.74,
• HEDGE buy buying call option of strike above 7466.74, for initial target 7355.5 is advisable.

Note:These levels are weekly levels hence hedge the position with option for better money management. For intraday, better use our 1SD paid software.

How to trade this week NIFTY future levels?

On Monday or any time during the week if nifty 7466.74 cross then you buy the nifty future with 7405.26 put option long. If it achieves the 1st target 7516.5 during the day or any point during the week revise your stop loss to 7485.76 and hold the trade. If the 2nd target 7538.39 achieved, revise the stop loss to 7501.13 and hold the trade. If the 3rd target 7551.68 achieved, then trail or revise the stop loss to 7538.39. Continue this till last target is not achieved or trailing stop loss is not triggered. If trailing stop loss trigger, then close the hedging option position also.

After you initiate the buy trade
If the trend changes and stop loss 7405.26 hits then close the option trade, future long trade and enter the fresh trade in nifty future short and 7405.26 call long.

If your trade is with the option hedge and future has reached the stop loss, then do not quit the trade in hurry better wait for conclusive price crossover of 0.382 retracement or for the closing session 3:15 to 3:30 then decide.

You can also implement any other option strategy by the way of writing the options to protect the future trade.

Get our complete option course to learn options.

Note:I am using the call long simple option strategy to demonstrate hedging principle in trade. However, you can write the option also and do any complex strategy to protect the trade.