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Learn to find Support and Resistance of NIFTY or any other Index

Saturday, June 13, 2009 | Labels: , | |


In this volatile market these days investor finding difficulties to cope with the sudden upward and downward movements of the market. Without knowing entry and exit points, even though an experienced investor can not trade in this uncertain market. WE know and heard always on NEWS channel about support and resistance of stock or index(SENSEX, NIFTY or any other indices worldwide.)

Index socks move in line with the index movement unless otherwise
boosted by a specific news item. Therefore, in order to enter or exit
stock, investor should first understand the support and resistance levels of the index i.e Nifty, to ensure that he has entered or exited
the stock at the right time. Here we I like to present you amazing method to find out support and resistance of NIfty.

In India , stock option are American type stock option and all index option are European  type Index option which can be exercised on the expiry date. An intelligent option trader would always choose to trade to and European and options as it buys him more time to adopt various trading strategies. during the life of option.

We will now see how option premium works. Premium is the sum of time. value and the intrinsic value. For example, if stock if trading at Rs 100 and its call is 90 call option has has premium of Rs, 15 and RS. 5 is the time value and RS.10 is intrinsic value. As the option nears its expiry, the time value of option premium decreases and become zero. on the date of expiry.

In order to understand the me how to find support and resistance levels of Nifty, we shall look of an example. Support Nifty spot. is trading of 3400 and levels and its 3400 PUT option is trading at Rs. 155 and the 3400 CALL option is trading at Rs, 186. With information , an investor can find the resistance and support of levels and ranges at NIFTY is expected to trade for the whole month or expiry. . Here we find resistance for Nifty at 3741 (3400-186+155) and support at 3059(3400-186-155). The investor also be aware of the possible range in which Nifty going to trade during the new  month. 

So we can calculate Range , resistance and support of Nifty, this example we get Resistance 3741  on the upside and 3059 on the lower side.

I hope this articles help you to decide trading strategy for month. Rather than always take information NEWS from source like TV, magazine, and free tips provider, you can make your own path with own compass.

Found any difficulty feel free to write in comment.
                                                                                   Source : Geodata by Alex.

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