In this article, we will discuss
- What are the Top Gainers and Losers in Nifty 50?
- Nifty 50 Trading Strategies: How the Top Gainers and Losers Can Help
- Conclusion
Nifty 50 - Top Gainers And Losers Trading Strategy[/caption]There is nothing more permanent in the market than price swings — at least when it is accompanied by moderate to high trading activity. So, whether you are a beginner to trading or have years of experience to fall back on, price-based trading strategies can be among the most effective techniques you can use. For instance, you could use the Samco trading app to find which stocks in the Nifty 50 or any other index gained or lost the most amount and create a trading strategy accordingly.
Many seasoned traders use the indices — particularly the broad market indicators like Nifty 50 and BSE Sensex — as a foundation for their trades. One such effective Nifty 50 strategy is finding the top gainers and losers in the index — and formulating different trades based on your expectations from those stocks.
Not sure what the top gainers and losers in the Nifty 50 are? Let us delve into these details before we discuss strategies for based on these screeners.
What are the Top Gainers and Losers in Nifty 50?
The Nifty 50 index consists of the top 50 companies listed on the National Stock Exchange (NSE). These companies, which belong to a wide range of sectors, are considered to offer a broad snapshot of the overall market. Nifty 50 trading strategies involve tracking these stocks to get an idea of how different sectors and the market as a whole may be moving.
Another key aspect is to look into the top gainers and losers in the index. These are the stocks that have shown the most price movements over a given period. The price movement may be positive (for gainers) or negative (for losers).
Top gainers are the stocks in the index that have increased the most in percentage when compared to their previous closing price. These stocks may attract buyers for various reasons like strong financial results, favourable market conditions or any other positive news.
Top losers, on the other hand, are the stocks that have declined the most in terms of percentage. These stocks may face increased selling pressure because of negative company-related news, poor financial results or overall sectoral downturns.
The list of top gainers and losers in the Nifty 50 index is never fixed. Stocks that gain significantly today may stumble in a few months, while those that are deep in the red zone currently may be bullish in the future. This data changes daily based on the performance of the individual stocks in the index.
Nifty 50 Trading Strategies: How the Top Gainers and Losers Can Help
With just the data about the stocks that gained and lost the most, you can put together various Nifty 50 trading strategies based on your expectations from these companies. Check out the different strategies that are possible using the top losers and gainers in the Nifty 50 index:
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Momentum Trading
In momentum trading, you expect that the existing trend will continue and aim to leverage this possibility. For the top gainers in the Nifty 50, this strategy involves buying the stocks that are already rising — expecting that they will continue the bullish move.
You need to identify the gaining stocks that have a strong upward momentum and enter long positions in those stocks. Make sure you set adequate stop-loss limits to manage the risk in this Nifty 50 trading strategy.
For top losers, the strategy is reversed. You can short-sell stocks that display a strong downward momentum, provided you expect them to decline further.
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Swing Trading
Swing trading in Nifty 50 is possible with the top gainers and losers in the index. This is a medium-term strategy that can help you capture swings in stock prices over a few days or weeks. You can use this for swing trading in Nifty 50 using gaining or losing stocks that show strong trending patterns.
You can use a mix of technical analysis and fundamental analysis to make decisions about swing trading in Nifty 50. This is because you need to look for stocks with strong bullish or bearish momentum, but also have to consider the underlying reasons for the price movement.
For top gainers, you need to identify the stocks in an uptrend and enter the market with a long position set at the lower end of the price swing. Then, hold this position throughout the upward momentum and sell when the stock price shows signs of reversing. For the main losers in Nifty 50, you can use derivatives to take short positions that can be held for several days or weeks. This is because short-selling in the cash segment is only allowed intraday. By using derivatives, you combine swing trading Nifty 50 with a Nifty 50 options strategy.
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Scalping
The Nifty 50 scalping strategy is an ultra-short-term trading method where you attempt to profit from smaller price changes. Since you try to capture minor price movements, you will have to make numerous trades throughout the day — all the while holding your positions only for seconds to minutes.
You can consider buying the top gainers in the Nifty 50 index when you notice a minor upward price move and quickly sell the stocks for a small profit. Conversely, with top losers, you can short-sell the stocks when they show a small downward movement and square this position off quickly.
Since the Nifty 50 scalping strategy has such short time frames, you need to only choose the main gainers or losers that have high liquidity. This will allow you to enter or exit trades rapidly without suffering too much lag or price slippage.
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Options Trading
In the Nifty 50 options strategy, you trade options contracts based on the Nifty 50 index. This allows you to speculate on index movements without directly trading the underlying stocks. This strategy can be particularly effective when you are dealing with top gainers and losers in the index.
For bullish scenarios that pertain to top gainers, you can use call options in your trade. For instance, you can buy call options if you anticipate further upward movement in the index, so you can potentially benefit from the increased value of these options as the index rises.
Conversely, for bearish outlooks based on top losers, you can make use of put options. Buying put options allows you to potentially profit from downward movements in the index because the values of these options typically increase when the index falls.
As you gain more experience, you can employ combination strategies like straddles or strangles. In these Nifty 50 options strategies, you simultaneously buy call and put options. This allows you to profit from significant moves in either direction — which can be useful during periods of high volatility.
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Mean Reversion Strategy
The mean reversion strategy is based on the assumption that stock prices and other market indicators eventually return to their long-term average levels. For the Nifty 50 top losers, this approach involves identifying stocks that have experienced significant short-term declines but have strong fundamentals.
For the top gainers, the strategy can be applied in reverse. You can look for overbought stocks among the top performers and consider short-selling them (or their derivatives) as you wait for the price to return to average levels.
Irrespective of whether you are focusing on the top performers or underperformers, you will find technical indicators like the Relative Strength Index (RSI) or Bollinger Bands extremely useful when you want to identify oversold conditions.
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Intraday Trading
Intraday trading in Nifty 50 is all about opening and closing your positions within the same trading day. This way, you can leverage strong short-term price movements in the top gaining and declining stocks in the index. For best results, you need to focus on stocks that have high volatility and liquidity.
In the case of top bullish stocks, you can consider buying at the beginning of an uptrend and selling before the market closes or when the trend shows signs of a reversal. With top losers, you can short-sell stocks that show bearish behaviour and buy back the stocks before the market closes.
To make your intraday trading in Nifty 50 more effective, you can use technical indicators like moving averages, RSI, MACD and Bollinger Bands to spot trend strength and reversals. That said, since the time frame for intraday trading in Nifty 50 is very short, you need to monitor your positions constantly.
Conclusion
Trading the stocks in the Nifty 50 index becomes much easier if you have the Samco trading app. If you are a Samco customer, you can log into the app and navigate to the Index Analysis section of your watchlist. Here, you can see the top gainers and losers for every major market index in India, including the Nifty 50.
You can gain more in-depth information on the stocks that have gained and lost the most during a trading session by clicking on the Nifty 50 index entry. If you wish to go long or short on any stock in the Nifty 50 index, all you need to do is tap on the individual stock entry and click on buy or sell.
Alternatively, if you want to trade the index as a whole, options trading can be an effective solution. Samco Securities also makes options trading in Nifty 50 easier with Options B.R.O. — an industry-first options strategy builder.
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