Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

Nifty Vs Bank Nifty Ratio Charts

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Nifty Vs Bank Nifty Ratio Charts
Nifty vs Bank Nifty
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In my last post about Nifty and Bank Nifty Positional charts i had spoken about price divergence between nifty and bank nifty. But the question that comes to your mind is how one can understand that price divergence is happening between two underlying instruments? And how to benefit from the price divergence? The answer is ratio charts.

What information we can get from ratio charts?

1)The above charts shows the ratio charts between bank nifty and nifty. Decreasing ratio charts indicates bank nifty is underperforming nifty in terms of price. And a increasing ratio indicates banknifty is outperforming its benchmark index. From the investment point of view ratio charts are often used across Sectors to identify sectors with relative weakness in a measure against the benchmark index so that you can avoid yourself investing your money in sectors that are likely to underperform with respect to the benchmark index.

2)Pair Traders often use ratio charts to identify low risk opportunities. Since Apr/May 2013 the Bank Nifty/Nifty ratio charts moved from 2.10 to 1.74 which indicates bank nifty underperforms nifty in terms of price performance. Even though bank nifty had taken a huge downside fall and nifty relatively haven’t lost its equal weight. So pair traders in this case often long nifty and short bank nifty to execute low risk strategies with controlled risk. And they do reverse their strategies when the banknifty/nifty ratio starts likely to decline from the peak.

Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

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7 Replies to “Nifty Vs Bank Nifty Ratio Charts”

  1. Dear Rajandran Sir,

    Please advise site to see above type ratio charts as I would like to see few more pairs.

    Thanks.

  2. Dear Rajendran, i think Ratio charts are good for positional pair trading. what are the settings for super trend for EOD charts?

  3. Hi how can we view the ratio charts.. is there any specific website or programme which can be used with amibroker ?

  4. Hi Sir how to get ratio charts for Nifty / Banknifty.Is there any software available or any websites providing the same.

    Regards.

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