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Now, this particular video is going to be very interesting because we will answer this question ‘What is Trend day’?. Now this particular question has been asked hundreds of times, but I never really got a chance to explain it practically, but fortunately, today, the way market moved and because of that a little bit of money that I was able to make, I thought that this will be a perfect opportunity to explain what a trend day is and how to take advantage of that.

Now, this particular trade is actually very interesting because what I’m going to discuss later in this video is not about how much money I made, but how much money I did not make. So that is a psychological aspect of trading, which I will talk about later in this video. So as I said earlier, this video is going to be interesting.

We’ll keep it short and sweet and get to the point. So, first thing first, let’s answer this question, “What is a trend day”? So trend day is simply a day where the market moves in one direction throughout the day. If we go back to the chart of the nifty bank today and take a look at how it has moved.

Bank Nifty opened somewhere around 32,500 and throughout the day it just kept moving up and up and it closed towards the highs of the day. But trend days need not be only on the upside as it can also be on the downside. So the basic definition of a trend day is that the market moves in one direction throughout the day.

Now the duration can be on the upside like we saw the example before or it can be on the downside. So a perfect example of a trend day on the downside will be on this particular day when nifty started at the top and throughout the day, it just kept going lower and lower. So having said that, let’s try to understand what is the real-life importance of trend days?

So first and foremost, the most obvious reason why people love this trend so much is that they can be very profitable. Let’s say if you take a trade in the right direction, and if you just sit on that trade throughout the day, you make a lot of money. But for me, that is not the real reason why Trend days are so important. For me, the reason trend days are so important is because they are signalling a change in the market sentiment. So if you go back to the same example of how nifty has moved and how bank nifty has moved, this move that has happened today, almost 2% on nifty 4% on bank nifty, this kind of a massive move indicates a change in the sentiment in the market.

So bank nifty, for example, has been extremely British for quite some time now, and this kind of a day, this kind of a move indicates that the sentiment in the markets has turned bullish. Now the third reason why I believe that Trend days are so important is that they affirm certain key levels in the market.

If you go back to the same example and identify the key level from where this market has turned and given us a trend da, it would be somewhere around 32,000. So by giving a strong trend day from this key level, the market has told us that it has rejected the level of 32,000 on the downside.

The market doesn’t want to go below 32000 at this point. So out of all these three reasons that I just talked about, I think the third reason about the levels is the most actionable and the most important aspect of having a trend day. Now, the next question that a lot of you might be asking yourself, is that how do we trade these trend days?

Whenever somebody asks this question, I tell them to break this question down into 2 parts. The first one is, how do you trade this on a swing trading basis? And the next one is how do you operate this on an intraday basis when the Trend day is actually happening? So let’s start with the first one, how do you trade it on a swing trading basis?

So the way professional traders trade after a strong trend day like this is to identify the key level, which has been rejected by the market. And using that level, they start writing either call options or writing put options at that level. It’s very simple, very straightforward. So if I go back to the same setup that we just talked about, what will happen from here onwards after a day like this, is that most of the professional traders who have been witnessing this kind of a move will start aggressively writing put options at this level of 32,000, because they have gotten a very clear confirmation from the market that this level is unlikely to be broken in the next few days or a few weeks, it’s very comforting for them to sell these put option and eat that premium.

This is the most obvious way of making money after you have seen a trend day. Now let’s talk about how to trade a trend day on an intraday basis. Now, this is one of the hardest questions that I have to answer and I know that the answer that I’m going to give is not going to be very satisfactory for some of you. But again, my job here is not to tell you what you want to hear.

My job here is to tell you what you need to hear. See the problem today is that there is a lot of misinformation about Trend days available on the internet and especially on YouTube. So there are a lot of people out there who will tell you that, okay. You know, plot the first hour high, your first 15 minutes high and 50 minutes low.

And if the market starts to break that, then you know that there is a trend day, but the reality, I think the real reality of this is that some days that setup might work, but most of the days the setup will not work. So if you put your money on the line and you want to follow that strategy, you most likely will end up losing money and not making money.

But then the question remains that how do you trade a day like this. And the honest answer to that question is that you trade on those days the same way as you would trade on any other day.

Let me explain. See if you look at the history of the market, if you pick up the data of, let’s say past 10 years or 15 years, you will find out a very interesting stat and the stat is that these trend days where the market starts from one end and goes to the other end throughout the day, right throughout the day, it just keeps moving in one direction. These kinds of days are actually rare. If you want to put that in the stat, I would say that these days are not 20 to 25%. For 75 to 80% of the time, you will not be encountering a trend day.

You will be encountering a, basically a range-bound kind of a day. So if you devise any strategy, which is based on identifying these kinds of days, then 80% of the time you will lose money. So that’s point number one. Point number two is that by the time you actually realize that this is a trend day, it is already very late.

So let’s say bank nifty has already made like 500 points or 600 points move. And now that you realize that, okay, this is going to be a trend day. And now if you want to enter into a trade, let’s say a long trade today, the risk-reward of that trade is already very unfavourable to you. So even if there is a little bit of a shakedown, let’s say 100 or 200 points, you will be out of the trade because your stop loss will get triggered.

So that is the second reason why I believe that trading these kinds of as special is not a good idea. So, guys, the main point that I’m trying to make here is that there is no magic formula to find out when there will be a trend day. And that is the one question that people ask me all the time. And the answer to that question is no, there is no way of knowing before the day starts, or even after the day starts, let’s say after one or two hours, that this is going to be a trend day.

Your strategy should be independent of this assumption that this is a trend day or not because at least up until 2 o’clock or 2:30, you would not know this is going to be a trend day or not. So even though I cannot tell you the magic recipe or the secret formula for making money on trend days, I can give you some practical advice on how to trade on these kinds of days.

And my first advice is not to take any contract trades in the market. It means that if the market is going up, you’re taking a short trade and the market is going down, you will take a long trade. See what happens. And I know this from practical experience and talking to a lot of traders is that after the market has made a massive move like this and the market starts to have a little bit of a shakedown. People are starting to book their profit a little bit. What happens is that people start to think that the market has already gone up so much and now it can easily come down 300, 400 points. So when they see a big red bar like this, and when they see some sort of a follow through on the downside, they start taking short positions.

But what happened today to those people who took short positions here? Well, they got trapped and they got trapped big time. So all these people who shorted here and they were not able to cover their short positions, they got into some serious trouble. So my advice number one is that when you realize that this is a trending day, if you cannot go with the trend, at least doesn’t go against the trend.

My second advice is to not get greedy and I know that this is one feeling which is very hard to shake out. So when we see that our market is trending and is moving with so much momentum, there is a very strong temptation in us to take a huge position. We want to take a huge position, 10, 15 or 20 lots because we want to make a big deal out of it.

But then the same problem can happen because if the market makes a big move on the upside and even if a little bit of profit booking comes and if your entry was not perfect with that huge position size that you have taken, you can see some serious losses and you will be shaken out of your position even before you can make some.

So stick to the rules that you have made for your position sizing. No matter if it’s a trend day or a range-bound day, it should not matter to you and you just follow your rules. Now last but not least in case you’re not able to ride the full-wave, do not regret it because it is very normal for a lot of traders to miss such massive rallies.

Now, remember this particular trade, which I mentioned in the beginning. I said that this trade is not about how much money I made, it is about how much money I did not make. So let me explain that. So I took a long trade on bank nifty at 9:20 this morning and exited my position at somewhere around 9 45.

So I stayed for about 30 minutes. And this particular option, which I shorted at 661 rupees basically, came down to 200 rupees. So I shorted this at somewhere around here. If I look back, I left a lot of money on the table. So from here to here, I just made fifty thousand rupees, but if I would have stayed in this trade, I would have made almost two lakh rupees.

This is the kind of regret that we feel that despite making some money, we feel that we have left money on the table and we could have made more. But here is the problem guys, and I’m sure you who’ve watched the video that I made on Friday, where I exited a trade after I made 50,000 rupees.

I explained the market context in which I was operating. And because of this, I took the decision. So by the time I took this particular trade, I did not know that this was going to be a trend day. So my memory and my context will remain the same that I carried forward from Friday. And based on that context, if I am making a profit of 50,000 rupees, I would rather book the profit of 50,000 rupees before it goes back to zero.

The decision that I made of booking the profit was based on my understanding of the market that I saw the previous day. In the hindsight, everybody’s an expert and everybody can tell you that you should have done this and you should’ve done that, but when there is real money on the line and you have to make decisions, you have to make decisions based on the facts that you have at that point of time.

And as far as I’m concerned, I always try to err on the safer side. So basically guys, my advice here. In case you’re not able to make serious money on this particular day, don’t worry. Most of the traders do not make serious money on trend days and it is very normal. So, guys, this is it. I just wanted to quickly make one video talking about what a trend day is and how you can potentially trade it on a swing trading basis and what kind of mistakes that you should be avoiding on an intraday basis if you are in the middle of a trend day.

So I hope that you learned something new today.