Learn to read the market

Each candle shows four prices for its time period: open, high, low and close. A green (up) candle closed above its open; a red (down) candle closed below it.

The thick body is the distance between open and close. The thin wicks show how far price travelled but could not hold. A long lower wick means sellers pushed price down and buyers bought it back up; a long upper wick means the opposite.

One candle is a clue, not a signal. Read it together with where it formed: a long lower wick at a known support zone means much more than the same candle in the middle of nowhere.

An uptrend is a series of higher highs and higher lows. A downtrend is lower highs and lower lows. Anything else is a range.

Moving averages smooth out noise. The 20 EMA shows the short-term trend, the 50 EMA the medium-term trend and the 200 EMA the long-term one. When price stays above a rising 20 EMA, buyers are in control.

When 20 > 50 > 200 and all three slope up, the trend is clean. When they are tangled together, expect choppy, sideways price and trade smaller or not at all.

Support is a zone where buying has repeatedly stopped a fall. Resistance is a zone where selling has repeatedly stopped a rise. Treat them as zones, not exact lines.

Mark them from swing highs and lows on the daily chart first, then refine on lower timeframes. The more times a zone has been tested, and the more recent the tests, the more traders are watching it.

A resistance that breaks often turns into support on the retest. Many clean trades come from that retest rather than from chasing the first breakout candle.

RSI (14) measures the strength of recent moves on a 0 to 100 scale. Above 70 is called overbought and below 30 oversold, but in a strong trend RSI can stay there for a long time.

A more useful read: in an uptrend, RSI tends to hold above 40 on pullbacks; in a downtrend it tends to fail below 60 on bounces.

MACD is the gap between the 12 and 26 EMAs, with a 9-period signal line. A crossover shows momentum shifting; the histogram shows whether that shift is growing or fading. Use both as confirmation of price structure, never on their own.

Volume tells you how much conviction is behind a move. A breakout on volume well above the 20-bar average is more trustworthy than one on thin volume.

VWAP (volume-weighted average price) resets every session and shows the average price paid by everyone today. Institutions often benchmark their buying and selling against it.

Intraday, price holding above a rising VWAP favours long trades; price holding below a falling VWAP favours shorts. VWAP is mainly an intraday tool.

Open interest (OI) is the number of option contracts still open at a strike. Large call OI at a strike often acts as resistance because call writers defend it; large put OI often acts as support.

Put-Call Ratio (PCR) is total put OI divided by total call OI. Roughly 0.9 to 1.3 is normal. Very high PCR shows heavy put writing (bullish positioning but can be stretched); very low PCR shows heavy call writing.

Watch how OI changes, not just its size: rising OI with rising price usually means long buildup, while rising OI with falling price usually means short buildup.

Option premium has two parts: intrinsic value and time value. Time value melts away as expiry approaches, and fastest on the last day. This decay is called theta.

On expiry day, out-of-the-money options can lose most of their value in hours, while at-the-money premiums swing sharply with every move. Gamma is highest here, so positions change value very fast.

Nifty expires every Tuesday and Sensex every Thursday; the last one of the month is the monthly expiry. Check the Expiry Tape for holiday shifts before you plan an expiry-day trade.

Decide how much of your capital you are willing to lose on one trade before you pick the quantity. Many traders use 1% or less.

Quantity = (capital × risk %) ÷ (entry price − stop-loss price). Example: with ₹2,00,000 capital and 1% risk, you can lose ₹2,000. If your stop is ₹10 away, trade 200 shares, not more.

An ATR-based stop (for example 1.5 × ATR) keeps the stop outside normal noise. If the correct stop makes the position too small to be worth it, skip the trade.