Lookback period
The lookback period is the amount of candles you wish to use when making a trading decision. For example, if you set the lookback period at 3 months, you are viewing today’s candle in light of the past 3 months’ data. This gives you an idea of how today’s price action relates to the prices from the previous 3 months.
For swing trading opportunities, a look back period of at least 6 months to 1 year is recommended. However, scalpers should consider the last 5 days data for optimal results.
When plotting the S&R levels, it is advised to expand the look back period to a minimum of two years.
The opportunity universe
The sheer number of listed stocks on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), combined, could be overwhelming. Obviously, trying to scan through them all every day will be difficult – if not impossible. Over time you should identify a select group of stocks that you are comfortable trading. These stocks form your ‘Opportunity Universe’. Once you have done so, it is much more manageable to survey this smaller selection for potential trading opportunities on a daily basis.
Here are some pointers to select stocks to build your opportunity universe:
If you have difficulty locating stocks that meet the requirements, it may be wise to opt for some of the Nifty 50 or Sensex 30 stocks. Also referred to as index stocks, these have been carefully selected by exchanges to fulfil various parameters – including those discussed above.
Investing in the Nifty 50 may be a beneficial approach for both swing traders and scalpers. This group of stocks provides an ideal opportunity to explore.
The Scout
We now look at how to pinpoint trading opportunities, especially for a swing trader. This process is beneficial in assisting us to select stocks appropriately.
We have now set the 4 important aspects –
After attending to the practical matters, I will now proceed to outline my approach in searching for trading opportunities. This process is split into two sections.
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