Markets at 5351 right now .... around 430 points profit on original lot ...... I have booked 50% today ... just holding the rest 50%.
Over the last 3 years of me trading 315, I have observed one thing on charts as well as on my ledger. This is something I have shared in the past as well i.e the cyclical nature of the market.
It means that every trend is followed by a rangebound market and every range is followed by a trend..... we hardly get a trending move immediately after a trending move and ranges do not continue forever. This is why we dont see a lot of 'V' shaped patterns on EOD charts.
A desciplined trader needs to stick to the system however also needs to adjust to the cycles and vary his trade sizes accordingly. I have been trying to proactively anticipate these cycles for last 1 year and now can share my 'sizing' strategy to the 315 traders here for their assessment and application.
My original strategy said that each trade needs to have equal trade size (Though in the past I kind of leaked my strategy by taking double trade quantity after 3 whips).
My 'amended' position size strategy is below.
After a good trending move is over (a move exceeding 5% and above excursion in favour of the 315 trade):
1. Take 50% of normal trade size on the next crossover .. there is a 'high' chance that this crossover will be a fake. A conservative trader can also decide to skip this crossover completely or take an small positions in options.
2. Take 50% of normal trade size in futures if the above crossover fails. This means that we are back in the bigger trend and hence the chances of a whip are relatively moderate.
3. Take normal trade size if the above crossover also fails. This means that markets have gone into some sort of range and a new trend is about to begin.
4. Take 200% of normal trade size as in rare scenarios, the 3rd crossover also might fail. This happened with us once recently. This means the markets have gone into a prolonged range and hence the start of a new trend is imminent.
By adjusting the position sizing, we will be losing less during whips and earn more with trends. Do backtest the same and post your comments/queries.
Cheers
SH
