What is the “Key Level System”?

The Key Levels (Blue Levels) indicate who is in control - Bulls or Bears.

If you look at the graph below, we have plotted levels in 3 different colours. Blue, Red & Green. Out of these 3 colours, the Blue ones are of very high importance.

We turn bullish above the top blue level of 22635 and we turn Bearish when price goes below bottom blue level 22590.

We derive these levels based on 4 key inputs.

  1. Price Action - How does price behave around certain levels?

  2. Open Interest Build-Up - The number of CALL & PUT contracts that have been built at different strikes.

  3. Volume

  4. Institutional Buying & Selling (FII/DII Activity)

The Key Levels system has the above 4 elements as inputs. You might think - “What’s the Big Deal?”.

Let’s explore.

We track these 4 elements across multiple timeframes (Days, Weeks, Months, Years). Anyone can access the current Charts (Price Action), Open Interest (OI) Build Up, Volume & FII Data daily. But, it becomes difficult to track the info across weeks, months & years. Even more difficult to process and compute the levels based on the info. We solve this problem for you.

  • How was the Price Action 4 weeks back or 10 weeks back when the price was at a certain level?

  • At which strikes were the maximum CALLs and PUTs built the last time price visited a particular level?

  • Is the market moving with higher volumes compared to last time? Is the volume higher than average?

  • Did FIIs buy or sell on that particular day? How did institutions respond when the price reached a certain level?

We store and track these data over several periods. We give weightage to levels based on Price Action, OI, Volume & Institutional Buying/Selling. The ones with the highest weightage based on the 4 parameters become the Key levels. This is how we arrive at them.

How to use the Key Levels (Blue Ones)?

In the chart below, you can see that we have plotted 2 Blue levels. You can go long above the top blue level and go short below the bottom blue level. The red and green levels are targets on the upside and downside respectively.

Going Long or Buying on every Dip

If the price trades above the top Blue level (22635), then the Bulls are in control. So, we will always look to go long or buy. We will wait for any dips above the level (22635) to enter. We will never short as long as the price is trading above the top blue level.

Going Short or Selling on every Rise

Similarly, if the price trades below the bottom Blue Level (22590) the Bears are in control. We will look to exit our long positions and go short on every rise. We will never buy or go long from a trading point of view.

What are the Green & Red Levels?

Those levels act as the Support (Green) & Resistance (Red) above and below the Blue levels. Those are levels that can be considered as targets.

Advantages of the Key Levels System

  • Incorporates Market Generated Information. Calculated based on current and historic Price action, OI, Volume & Institutional Data.

  • It helps us stay with the trend. By buying above the area where Bulls are in Control and selling below the area where Bears regain control, we always go along with the trend & momentum.

  • It helps us stay prepared. By knowing the key levels, you exactly know what to do during the trading hours. You are never lost.

  • You know when your view is wrong. If you are long the market and you see that price has gone below the lower blue level, then it is an alert that your view has gone wrong and you might have to cut your losses short.

Note: This system is not for predicting the market. It is to understand what is going on and who is in control (Bulls or Bears) and estimate the likelihood (probability) of price movement. This is a plan and not a prediction. The 4 parameters Price Action, Open Interest, Volume & Institutional Behaviour are dynamic and keep changing in the live market. As these parameters change, the risk associated with a particular trade also changes. Appropriate Position Sizing, Risk Management & Hedging will continue to be the differentiators.