Techncial Set up:Bank Nifty,Infosys and Reliance Capital

Risk = The Distance to your Stop loss. Which means you have to have carefully studied where is the best place to put your stop. Its the exact %loss that will occur if your stop is hit. If you hold positions overnight, this distance is less defined, since large gaps will widen stops, I guess put/call option hedges would be better than stops for large positions.

Reward – The Average Distance to your Profit exit or ‘Stop’. There must be a specific exit point, otherwise you ‘profit’ may disappear as you hang on to the trade i.e. you have to actually take the profit when you get it, just as you would a loss – I learned that the hard way, countless times I had profits ( my entries are quite good), but then kept the trade rather than taking the profit, only end up with a loss…somehow that is more emotionally difficult than a straight loss.

Therefore if you don’t use stops, or don’t take profits when they occur, your risk/reward is undefinable. I now refuse any trade I can’t define the risk/reward.

Bank Nifty

Bank Nifty has broken its trendline joining the tops of Nov 10 and Feb 12. Now the price confirmation is required to confirm the breakout with price staying above 10680 for this week.