Patterns and Technicals

[pkamalesh]

Hi friends...Thought its time to start contributing to this wonderful forum in my most liked part (derivatives).

So this thread is really an inspirational one from the obervations of all my seniors and friends here especially after i had seen the kolkata meet videos...

The aim of this method or system would be very very simple..To trade the first half an hour and the last half an hour of the day.
Talking about the basics (That are derived from Ashish da's speech), the method would be to identify the high, low and closing of the day...Our day would typically begin at or after 3 pm..This is when we decide to sell or buy the nifty future.The calculation is simple...Consider the high of the day and the low of the day..At 3 pm(the approximate level that would be near the closing) we would calculate if the closing is 60% or more of the difference between the high and low of the day.If the closing is assumed to be around 60% or more then we buy nifty for the next day.In the same way if we find the % to be less than 50% then we sell nifty for the next day.

For example....if the high of the day is 3000,low is 2000 and the level at 3 pm is say 2700..
The difference between high and low = 3000 - 2000 = 1000
level at 3 pm = 2700 which would be 70 % of the difference between the high and the low..
In this case we would take a bullish insight and buy nifty only to sell it off the next day..The method should invariantly be called a BTST or a STBT one.

I have observed the trends for the above methodology and found it true for more than 80 % times...The only time we get stuck in such trades is when the % difference varies around say 30 % to 50%....on such days and all days ofcourse we would take a small amounts of risks which i would post soon..Hope all my seniors will keep track of this thread and give thier valuable insights and suggestions for all the juniors like me...Hope to learn a lot while this thread progresses....

 

[pkamalesh]

Re: Trading only one hour in a day !!!!!

Now the Question arises that we buy or sell at 3 pm...alright ..but when do we square off the trade?? Here we take some inputs from the great saint..we would normally watch the nifty for 10 minutes on the opening...If we keep at SAR at our buy/sell price + our risk appetite (which would be only 14 points max), That would be a sufficient back up for the odd days when this method fails to generate profits as a result of the undicided % factor as described in the earlier post....So if we buy at say 3500 then the next day we would wait for 10 am with our SAR's ready( at + 14 if sold and - 14 if bought) This is becoz on such a day when the open is the high or low the max it would vary is about 10 points...And another important point..if we stick to the rules here we must get out of trade at 10.30 (intial 10 minutes discounted)If the SAR's are triggered or not we would be in a profitable position....Would put in more points if we can extend the time frames (right now framing the method on paper)

 

[rkkarnani]

Re: Trading only one hour in a day !!!!!

Very interesting observation!!! Thanks for sharing it. Look forward to more input!!!
First thing that came to mind was :
How do we tackle the sudden movements after 3PM!!! At times we might have the price at 3 PM within our permissible limit of 60% and then by close it may go against us.
If we take a position at 3 PM when the price level was within the 60+% of the days range, but by close it moves to say 50% or less do we exit??
OR this movement is within the failed 20% trades!
A bit difficult to back test as it is not possible to decide at what priced do we enter. Would love to know a bit more about backtesting the system too.
Maybe if you post a week's or more periods trades the system would become more clear.
All the best.

 

[rkkarnani]

Re: Trading only one hour in a day !!!!!

Kamlesh,
Another thing that came to mind : Do we trade the days we have a "minimum" range? If we have just a narrow range of 0.25% or say Nifty Hi Lo difference is just 30 points do we still take a position?
Have you observed this system in Stock futures too!!! Do post any specific Stock futures you feel are following this pattern consistently.

 

[pkamalesh]

Re: Trading only one hour in a day !!!!!

Very interesting observation!!! Thanks for sharing it. Look forward to more input!!!
First thing that came to mind was :
How do we tackle the sudden movements after 3PM!!! At times we might have the price at 3 PM within our permissible limit of 60% and then by close it may go against us.
If we take a position at 3 PM when the price level was within the 60+% of the days range, but by close it moves to say 50% or less do we exit??
OR this movement is within the failed 20% trades!
A bit difficult to back test as it is not possible to decide at what priced do we enter. Would love to know a bit more about backtesting the system too.
Maybe if you post a week's or more periods trades the system would become more clear.
All the best.

Sir it is not that we take our call based on 3 pm exactly...What i meant was we observe the trend at 3 pm..and if we are sure that there could be a max 15 to 20 points movement..only then we enter the trades at 3 pm...I mentioned 3 pm becoz we need atleast 10 minutes to finish our buying/selling formalities and if we start the process of identifying the trend at say 3.15 pm..then we cant get our orders executed by 3.30( im speaking of the newbies who would be nervous at that point in time)....Thank you so much for ur interest and hope youl guide me furthur...

 

[pkamalesh]

Re: Trading only one hour in a day !!!!!

Kamlesh,
Another thing that came to mind : Do we trade the days we have a "minimum" range? If we have just a narrow range of 0.25% or say Nifty Hi Lo difference is just 30 points do we still take a position?
Have you observed this system in Stock futures too!!! Do post any specific Stock futures you feel are following this pattern consistently.

Karnani sir...i have just started identifying the movements and would definitely keep updating the method.First i want to test this for at least one month on paper...if everone here can do that we could probably learn and update this method even faster....and as far as the stock futures are concerned we actually cant rely entirely on this method coz i feel stocks run mostly on news and all...so starting with nifty futures...If god permits we would look into the stock futures too....

 

[pkamalesh]

Re: Trading only one hour in a day !!!!!

Just have a look at the daily bar that would be formed..We can ourselfs plot a graph on a rough sheet and mark the 50% mark..we could do this with the naked eye as well if you find the calculations too complicated...

 

[pkamalesh]

Re: Trading only one hour in a day !!!!!

Kamlesh,
Another thing that came to mind : Do we trade the days we have a "minimum" range? If we have just a narrow range of 0.25% or say Nifty Hi Lo difference is just 30 points do we still take a position?
Have you observed this system in Stock futures too!!! Do post any specific Stock futures you feel are following this pattern consistently.

Sir..in my point of view we will trade this method regardless of the minimal movement in the nifty....But yes..some days we get gap up's and gap down's but as i said 80% of the times we would profit from those gaps...and we cant claim that we have a system that gives only profits..so we do accept losses as well..But we would try to minimise the losses to the max limit possible....

 

[rkkarnani]

Re: Trading only one hour in a day !!!!!

Sir it is not that we take our call based on 3 pm exactly...What i meant was we observe the trend at 3 pm..and if we are sure that there could be a max 15 to 20 points movement..only then we enter the trades at 3 pm...I mentioned 3 pm becoz we need atleast 10 minutes to finish our buying/selling formalities and if we start the process of identifying the trend at say 3.15 pm..then we cant get our orders executed by 3.30( im speaking of the newbies who would be nervous at that point in time)....Thank you so much for ur interest and hope youl guide me furthur...

Kamlesh, Thanks for taking time and replying to all my posts.
I agree we do not trade at exact 3 PM!! But Kamlesh would rather be skeptical about the highlighted portion above!!! We cannot and should not try to predict the movement after 3 PM....it could be 15/20 points or less or maybe the other way!!! Frankly nothing came to mind how to avoid trying to 'predict' the market.
Also note that the range we look at shall actually be the high and low (range) between 9.55 and 3 PM and not the entire day.
I am sure we shall be able to find some way to identify the approximate level at which we trade but feel that it may differ from person to person.
Shall post my idea if any after going through a few charts as time permits!!
Thanks and all the best once again.

 

[rkkarnani]

Re: Trading only one hour in a day !!!!!

Just have a look at the daily bar that would be formed..We can ourselfs plot a graph on a rough sheet and mark the 50% mark..we could do this with the naked eye as well if you find the calculations too complicated...

Kamlesh, Dont think we need to draw the bar!! We can simply have an Excel sheet with required formula and feed the figures to get the range!!! Naked eye will surely tell us which side the movement is.
At 3 PM or may be 3.15, (whatever time we choose) we know the high and the low till then, we put it in an excel sheet and get the price/range where we BUY or SELL or STAY OUT!!!!
I think this part is simple.