Level of understanding required: Beginner
I have been trading and investing in the share market for long. I have seen many people trading in the market with either knowledge or through their gut feel. Wherever, there is more of the gut feel, the more we leave the results to chance. Leaving that to chance means lesser control over outcomes. I prefer to have more control over my outcomes and I would recommend you to do that as well. by that, your returns on investment will be more under your control and predictable.
From experience I can say that there will be some contribution of chance and no one can avoid that. As a retail investor, one cannot control the movements but flow with them.
One very important aspect of knowledge is to understand levels from which a market might make a change in direction - or continue with its trend after a bit of consolidation. Therefore, I prefer to mark key levels on the charts before a week typically starts.
Note: I focus on levels close to the current price levels and do not think too much very far away from them.
I start by first looking at the charts with the 1 Day timeframe. If you see here, I have plotted the key levels in purple colour. Typically you will see these are points where the market has touched 2-3 times. When a market moves up, it pauses at these points. Thereafter it might reverse from there or break it.
Then, I look at the 1 Hour timeframe. Here, I have marked them in yellow. These are additional key points which are critical for intra-day trading. I keep things simple and usually follow only these two time frames for plotting key levels. You will see that there are some key activities that happen at these levels. In the figure below, notice how market reverses from 13175.
It all helps when we are actually taking trades. If you see the figure below, you will notice how a 'head and shoulder' pattern forms near a key day level. If anyone shorts the index at say the 13160 mark, the market would give an opportunity to take about 100 points in 3 hours or so.
Conclusion: Keep it simple. Try your own levels. See how they work for you. By this method, you will develop conviction in these levels and take controlled trades.
This builds science in trading, instead of leaving your trades to luck or chance.
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