SH's 315 Strategy - how to use if effectively

[Tradewithhunter]

SH Sir, pl explain the scaling In/Out method in this strtgy?

Ok sorry - the entire weekend went away in home chores and election results ... let me explain one of the two methods below to maximise gains:

SH's incremental risk position sizing

This system tries to exploit the basic cyclical nature of the market i.e each trend is followed by sideways period and sideways period is followed by a trend period.

As a trader, it means that after a good trending move we need to limit losses by adjusting position sizing as market may move into sideways zone and give whipsaws &

As market gives whipsaws and enter sideways zone, we need to increase our trade size gradually as we know soon we will enter a trending period.

Simply put, lets assume a person can trade upto 4 lots nifty. You start your year with trading 1 lot on first signal. If the signal whipsaws and you get loss, next signal should be 2 lots, If the signal whipsaws and you get loss again, you trade 3 lots on next signal and finally 4 lots. We all know with each whipsaw the chance of trend goes up so while your losing points will be on 1 or two lots, the big trend that you will catch will be on 3 or 4 lots ...

At any point when you get a profitable trade in terms of points (lets say you trade 1 lot, whipsaw, you trade 2 lots .. trend emerges and you profit) ... you should revert back to 1 lot again and start afresh.

Lets take recent example... we got good trending move before the sell that was generated on 8/11/2013 ..- sold NF at 6186 .. as this signal came after a profitable trade we know we might be entering sideways zone so we start with selling 1 lot...

- this whipsaws and buy is generated on 19/11/2013 at 6230.. so we lose Rs 2200 (44 points on 1 lot)

- We buy 2 lots now at 6230, again whipsaws and sell generated on 20/11/2013 at 6149 ..so we lose Rs 8100 (81 points on 2 lots)

- We now sell 3 lots as 2 consecutive losses ... sold 3 lots at 6149 .. this also whipsaws, we lose Rs 11400 (76 points for 3 lots)

- We now buy 4 lots at 6225 on 29/11/2013 .. still held. We booked around 6400 so around Rs 35000 (175 points for 4 lots).. this trade is already open so we will enter back in longs with 4 lots at 3 EMA touch ....

However, above will explain you that even if we end up getting net 108 points profit per lot in this trade we will recover all losses from previous trades (we already have 175 though)...

However if we traded only 1 lot per signal, we would need 201 points in this trade to recover all losses of last 3 trades (44+81+76)..

You can sift through last 4-5 years charts and you will understand the power of this method.

Hope this makes sense... digest it and post any questions ....

Scaling out method I will post in a couple of days once this post is clear to all.

Cheers
SH

 

[trade4joisar]

Hello SH,

This is the same as you shared 25th May, 2011 which helped me a lot whenever trend move was suppose to complete.

http://www.traderji.com/technical-a...gy-how-use-if-effectively-299.html#post553963

 

[Tradewithhunter]

Hello SH,

This is the same as you shared 25th May, 2011 which helped me a lot whenever trend move was suppose to complete.

http://www.traderji.com/technical-a...gy-how-use-if-effectively-299.html#post553963

Yes T4J, same, I had forgotten than I have already shared it 2.5 years back

Cheers
SH

 

[trade4joisar]

Yes T4J, same, I had forgotten than I have already shared it 2.5 years back

Cheers
SH

And in my mind there is separate space for SH's words, which i never forget

 

[anup]

SH bhai..You are back after a long time..Is there any new method which you invented all these days, if yes plz share with us

 

[VJAY]

SH bhai..You are back after a long time..Is there any new method which you invented all these days, if yes plz share with us

Dear Anup bro,
SH trading this method since very long....successfull traders not change method/invent new ones everyday/frequently...they only invent new arsenal to their current method......which SH doing it ...but not doing it everyday...315,market correction...exit when 2days ema against pos,scale in,varibale po size...etc only new invented weapons to 315 method.... he making these not looking 1 month/1year data...he well tested it in live only after sharing it with us .......
Thanks SH again for your sharing mentality......:thumb:

 

[Tradewithhunter]

NF re-entry around 6375 today ...booked at 6410 yesterday so around 35 points profit.. in a way our entry price now becomes 6190 (6225 - 35 points).

Coming back to SH scaling out method

Assumes flat 4 lots traded per trade

- book 1 lot at 100 points profit
- book 2nd lot at 200 points profit
- book 3rd lot at 300 points profit
- book 4th lot at 400 points profit and buy OTM option in direction of trend and hold in case trend continues

This will reduce your loss trades in cases where market moves in direction of trend and then reverses to give a whipsaw.. it will also preserve profits due to partial booking.

Personally I combine both methods ie after a profitable trade I reduce position for next trade to 2 lots and then make it 4 lots, 6 lots and finally 8 lots in case of whipsaws. Then I book partial at 100, 200, 300 & finally at 400 to get best of both worlds....

For example in this current trade we had 3 whipsaws so 4th trade was 8 lots at 6225. Had booked 2 lots at 6325 (100 points profit) on 5/12/2013 and carried 6 even though 3 EMA was not touching ..this is because 3 EMA was close.

Then yesterday gap up meant booked all 6 lots at 6410 based on 3 EMA rule...couldnt book at 6425 (200 points mark) as was late to login....

Now today entered longs again with only 4 lots as 200 points mark missed yesterday so I am content to book 2 lots with 185 points. So in a way have already booked Rs 10K profit at 100 point mark & Rs 18500 at 200 point mark.

Now remaining 4 lots, will book 2 lots at 6525 marks it it comes, and rest 2 lots at 6625 mark if it comes. Otherwise if market reverses and gives a sell, I will initiate sell with just 2 lots assuming the reversal point is above 6225 (i.e profitable trade).

Hope it makes sense...

Cheers
SH

 

[Tradewithhunter]

just to explain the benefit of combination ..

The sell on 9/11 at 6126 came after a profitable long trade so started with lowest position size... 2 lots... market fell to lows of 6008 so was able to book 1 lot at 6026 (100 point profit mark).. Rs 5000 profit.

Later market reversed and exited the 2nd lot at 6230 on 19-11... so loss of 104 points ... Rs 5020 ...

Net loss of Rs 20 only .... If I had not scaled out ... the net loss would have been 104 points on 2 lots i.e Rs 10400 ...

So I was able to breakeven despite the overall 315 signal whipsawed...

Another example to show benefit...

Sell on 20/11 at 6149 ... at this point I was 6 lot short as previous 2 trades were whipsaws... market fell and made a low of 5983 ...

Again I was able to book 2 lots at 6049 (100 point mark) i.e Rs 10000 profit.

Markets reversed and rest 4 lots exited at 6186 on 29/11 (expiry day so Nov NF closed at 6186) ... loss of 37 points i.e Rs 7400

Net profitable trade as 10000-7400 = Rs 2600 profit.

However had I not scaled out, I would have lost 37 points of 6 lots i.e net loss of Rs 11100

Again through scaling out I could make net profits even out of a lossy trade.

However from pure crossover perspective it has to be counted as whipsaw so next long for 8 lots (Dec seried from 6225) and current positions explained in previous post.

Hope now you can understand how to maximise profits and minimise risk through adjusting position sizing and partial booking.

Enjoy !

Cheers
SH

 

[jain.er]

Expanding the results by using last 5 years trades now and assessing numbers based on 3 methods that can be used:

Dear SH 2009 was a trending year I guess then why did scaling in out method made losses

 

[Tradewithhunter]

Jainer - started with many whipsaws until March so following just flat position scaling method gave many losses until March ...

Then we had one 1600 points trend until June, however by following just scaling out method we would have captured only 400 of these...

Then from June to Sep it was rangebound between 4700 & 4000 ..

From Sep to Oct a 400 point trend followed by wild whipsaws in last 2 months ...


However if you apply a combination of both incremental risk and scaling out method together like i have explained in previous posts, even 2009 was hugely profitable.

cheers
SH