when are reliance’s results?
Seems like you’re trying to become purely fundamental trader👍
There are some truly remarkable people on this platform whose knowledge sharing is very useful.Wonder how they accumulated all this knowledge.
thanks a lot… please post on how to understand f&o data?
Anyway technicals fail, traders lose at the end of the day or over a time. Traders only can talk about mouth watering jargons and try to show off that they decipher the market movements but alas they back home with empty pockets at the end of the day, this is the harsh reality. But question is how many people learn?
Hi,
People who shorted on 11th covered their positions by buying back.
eg: if i shorted 1 lot nifty on 11th at say 10040, when the market started moving against my position i decide to cover my position. I will have to buy back 1 lot nifty to square off. Now, imagine thousands of people who shorted on 11th expecting a downtrend, all of them squaring off their position, they will have to buy back nifty to square off. Many people would have placed stop loss orders at variuos price points eg. above previous day’s high etc… when those stoploss gets triggerred it adds to the upmove. This is known as short covering.
The above was just a layman interpretation.
You can find detailed explanation if you google “short covering”.
How Nifty 50 will go up if I cover Futures Lot. ?
OR
if cover my HDFC Futures how Spot will go up ?
Who said that nifty spot will move because you covered in futures?
Why will nifty future not go up/down if demand supply imbalance happens ?
is this the reason for Nifty going up, people who shorted Nifty Futures are covering so Nifty Spot going up ? or Nifty Futures going up ? is it because everyone is covering Nifty Futures so stocks are going up ?
Hypothetically, if someone comes and buys nifty futures worth 1 billion dollars in 1 hour of trading will nifty futures go up or not?
Do they really buy with such big numbers
Below is a transcript of comments from zerodha varsity in Module 4 — Futures Trading
Chapter 9 The Nifty Futures
amit pathak says:
February 19, 2015 at 6:23 am
I read in todays newspaper that yesterday’s index rally was based on short covering. As far as i know you cannot carry shorts in the cash market overnight. it meant all those people who are short on the market in F&O squaring off their positions FnO is just an instrument that derives its price from EQ, I am wondering how FnO drives the market and not its underlying(EQ)?
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Reply
Karthik Rangappa says:
February 19, 2015 at 5:45 pm
It is true that the spot market drives the derivatives market… but at time for brief periods the other way round can happen as well!
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Reply
amit pathak says:
February 20, 2015 at 7:12 am
pls explain the reason and method how F & O drives the underlying index.
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Karthik Rangappa says:
February 21, 2015 at 6:10 pm
A derivative instrument is structured based on an underlying, hence it moves according to the underlying. Have explained the basics here – http://zerodha.com/varsity/chapter/background-forwards-market/
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Reply
amit pathak says:
February 27, 2015 at 3:06 pm
Hi karthik,
sorry for bothering you again on this concept.I am having difficulty in understanding the concept.Suppose there is short built up in nifty futures.Market participants who are short in nifty futures realise that bearish outloook is no longer visible .So they square off their short positions in nifty futures.which moves nifty futures in upward direction.Here all the activity is taking place in nifty futures.So how it leads to rally in underlying cash market based nifty index.Is it sentiment?Pls guide.
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Reply
Karthik Rangappa says:
February 27, 2015 at 7:21 pm
Yes, sometime and for a short duration the derivatives market can influence the spot. However it cannot be sustained. Such situations are called short covering or the long unwinding.
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Reply
Naresh says:
May 4, 2016 at 10:11 am
How do you infer at EOD by looking at futures data whether (a) there is short build up or (b) short covering or © long buildup or (d) long unwinding ? Thanks
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Karthik Rangappa says:
May 4, 2016 at 2:08 pm
There is no hard a fast rule for this, but generally…
- Price increase after few successive sessions of down trend is considered short covering
- Price decrease after few successive sessions of up trend is considered profit booking or long unwinding
It’s just a hypothetical scenario 
Short Covering happens in Spot Intraday.
For. Ex. if you short in Cash market and at EOD if market goes against you then you will go and buy it, that will push the stock further up. But can not happen for positional Futures. People used to short using cash market
if anyone is doing this then Short Covering happens. Covering Futures Shorts cannot make the Market go up.
Hypothetically, if someone comes and buys nifty futures worth 1 billion dollars in 1 hour of trading will nifty futures go up or not?
amit pathak says:
February 19, 2015 at 6:23 am
I read in todays newspaper that yesterday’s index rally was based on short covering. As far as i know you cannot carry shorts in the cash market overnight. it meant all those people who are short on the market in F&O squaring off their positions FnO is just an instrument that derives its price from EQ, I am wondering how FnO drives the market and not its underlying(EQ)?
¶
Reply
Karthik Rangappa says:
February 19, 2015 at 5:45 pm
It is true that the spot market drives the derivatives market… but at time for brief periods the other way round can happen as well!
Reply
amit pathak says:
February 27, 2015 at 3:06 pm
Hi karthik,
sorry for bothering you again on this concept.I am having difficulty in understanding the concept.Suppose there is short built up in nifty futures.Market participants who are short in nifty futures realise that bearish outloook is no longer visible .So they square off their short positions in nifty futures.which moves nifty futures in upward direction.Here all the activity is taking place in nifty futures.So how it leads to rally in underlying cash market based nifty index.Is it sentiment?Pls guide.
¶
Reply
Karthik Rangappa says:
February 27, 2015 at 7:21 pm
Yes, sometime and for a short duration the derivatives market can influence the spot. However it cannot be sustained. Such situations are called short covering or the long unwinding.