Heckyl Alpha Pulse

How to seize a trading opportunity using effective chart visualization

Posted on June 26, 2015 Updated on June 26, 2015

A successful trade depends on how a trader sets up his trading system with most relevant tools and softwares on his screen for trade analysis. Long term investor will analyse in details the fundamentals of the company on his trading platform while short term trader will monitor the daily price movements along with several market and price data points before executing a trade. Various softwares in the market provide ample indicators for analysis but the key to success is choosing the right indicators.

In this blog, we will explain how a trader can use Heckyl FIND’s Futures & Options , charts visualisation with appropriate data points to reap benefits in the derivatives market. For better understanding, let’s evaluate how to use data points like Open Interest, Volume, Fresh and Square off contracts for intraday charts by taking a case study of ICICI Bank chart.

As seen from the chart, ICICI Bank was trading at INR 312.1 on April 27, 2015 up more than 1 percent in the opening bell with open interest of 5.47 crore. ICICI Bank was slated to announce its quarterly results on this day and over the years bank has announced its results in the afternoon during market hours.

As the day progressed, the stock remained in a narrow range of INR 309 to 312 while Open Interest (OI) jumped from 5.47 crore to 5.67 crore till 12.12 pm suggesting long positions might be created ahead of the results announcement.

However, if one closely looks at Open Interest between 14.03 pm to 14.21 pm before the actual results were announced at 14.22 pm, there was a sudden drop of 3.4 percent in OI from 5.52 crore to 5.33 crore while stock price remained flat at INR 310 suggesting long unwinding of positions happening before the results were announced. This is a key observation since it suggests that market participants might be aware of news of lower than expected results and were unwinding their positions. The total Open Interest figure also fell at lowest point of the day suggesting heavy unwinding of positions ahead of the results.

Also if you add fresh and square off contracts data points in your charts, you can observe between 12.15 pm to 14.21 pm square off contracts activity picked up while there was hardly addition of fresh contracts in the same period giving another signal that market was anticipating poor results and traders were squaring off their positions ahead of results.

Once the results were announced at 14.22 pm which missed street expectations, stock price fell by 4 percent followed by jump in Open Interest indicating fresh short positions created in the counter accompanied by huge jump in volumes. As expected after a sudden fall from INR 310 to INR 297, traders booked profits at fag end of the day leading to mild short covering in the counter.

Heckyl FIND’s Futures & Options  analytics empowers traders with efficient chart visualizations making it a must to have tool in their trading system to spot profitable trading opportunities. To know more please write to us info@heckyl.com.