July 1, 2023

Every trader want to know expiry level of Nifty and Bank Nifty on expiry date. But only few traders are able to know these levels. ISFM – Best Stock Market Training Institute has discovered Max Pain Theory to know index closing levels on expiry. What is Max Pain ? Max Pain Trading Strategy Is a Technique Of Options Trading Which Predict The Strike Price At Which Contract Is Going To Expire. The Concept of Max Pain Is Use to Predict The expiry Of Contract, Option Buyers Who Hold Their Contracts Until Expiration Will Experience The Maximum Pain, Which Is When Their Options Expire without Having Any Value. The Max Pain Strike Price Is Derived From The Option Strike Price Having Maximum No Of Open Interest Of Put And Call Options. The Max-Pain Theory To Understand The Concept Of Max-Pain Theory, Let’s Suppose A Big Player Sells A Call And Put Option Of 18000 strike price. If index Price Rises Above The Strike Of 18000, The Big Player Will Sell Contracts To Push The Price Back Towards The Strike Of 18000, And If The Stock Price Falls Below 18000, The Big Players will buy Contracts To Push The Price Back Toward 18000 Strike Price. By Doing This The Big Players Are Trying Their Best That Both the call And Put Options Expire Worthless, And Make Sure That They Keep the Premiums Collected When They Write the Options. How To Calculate Max Pain ? 1. Find-Out ITM Strike Prices:We Must Identify the ITM Strike Prices for a Particular Contract’s Put and Call Options. The ITM Options Are Those With Intrinsic Value. 2.Calculate The Difference Between the Underlying Price And Each ITM strike prices:Now, We Must Calculate The Difference Between The Underlying Price And The Strike Price For Each ITM Strike Prices. 3. Multiply Result With (O.I) Open Interest:After Getting Differences for Each ITM Strike Prices, We Will Multiply Each Difference By The OI Of That Strike Price. OI Is The Number Of Current Outstanding Contracts. 4. Add The Results:Now Sum up the Results Obtained in step 3 For All ITM Strike Prices To Get The Total Outstanding Value Of Puts And Call Options. 5. Determine the Max-Pain Strike/Level:Strike Price with Maximum value of Outstanding Put and call Is Considered as the Max Pain Strike/Level. It’s The Strike-price At Which Option Sellers Will Try to Retain/Hold Price Till Expiry to Make Sure Their Options ExpireWorthless. 6. Calculating Max-pain manually can Be Complicated And Time Consuming Process, Specially In Case Of Stocks with Multiple Strike Prices Option Contracts. That’s why Most of Traders uses Automated Software to Find out Max pain Level/Strike. So you can google live max pain Nifty and find some good website like : – https://www.niftytrader.in/options-max-pain-chart-live/NIFTY

Relative Strength Index – RSI is one of the most popular indicator in the world among traders. But it is very strange that mostly trader are doing loss in trading even they know how RSI is working. Because they follow simple rules of RSI and they don’t know about What is RSI divergence.RSI divergence is one of hidden gems of the trading world, only few people know exactly how to use this and how to get profit from this tool. ISFM – Best Stock Market School explaining in this blog about this hidden gem. We also explain this concept in video which link is given in bottom of the blog. What is RSI Divergence? Divergence occurs when an indicator and the price of stock or index are heading in opposite directions. If there is a normal situation means RSI is going to move as per the price of an asset. We will try to explain in the picture given below : Above mentioned picture is showing in last 2 situation divergence occur and we must react accordingly in during trading. Types of Divergence : – 1. What is Positive Divergence : –Positive divergence occurs when the price is in a downtrend but an indicator starts to rise. It showing bottom out of this stock / index and we should exit from out short selling trade and we should start profit booking in short trades. If there is positive divergence in any stock / index we should start buying and with the passage of time we accumulate the stock in good quantity so that we will get maximum benefits if stock price goes up. Positive divergence showing trend reversal but we should also take help from supportive indicators like Moving average, MACD and support line to confirm the trend. 2. What is Negative Divergence : – Negative divergence happens when the price of a securities is in an uptrend and a major indicator like RSI is going in to opposite direction. Its showing top of this share / index is near by we should book the profit and can exit from this trade. If might be price may be slightly high after this situation but they will not stay in market. Negative divergence showing trend reversal but we should also take help from supportive indicators like Moving average, MACD and support line to confirm the trend. How to use RSI Divergence in Trading : –You need great patience and continuous practice to find our positive or negativedivergence in the market. So it would be better you can maintain you daily trader diaryfor better measurement of price and RSI level on daily basis. Watch Video also for RSI Divergence : –