Thoughts on Day/Swing Trading Part 2

[Smart_trade]

Dear Smart_Trade,

I have started trading your swift strategy but I am doing some modifications. Following is going on in my mind but I dont have enough data to know if it works so I request your suggestion on it.

1. Based on the swift setup, if a pivot high breaks, I buy and exit on the 4th bar. So, if the breakout bar is the 0th bar, I exit on the close of the 3rd bar (0 is breakout bar, 1, 2, 3rd bar)
2. I put a SL just below the pivot high. I punch the SL in the system on the close of the 0th bar.
3. On the close of the 1 bar, I move the SL to breakeven.
4. I have noticed that for valid breakouts, a lot of move is captured in 4 bars.
5. I think the strategy will work well on options.
6. I backtested it on DLF for the past 15 days. The success rate is 43% and the R:R is 2.25.

But I seriously need your suggestions. I remember you had said you do something similar. You get out of a trade if it doesnt move in a given time and you never wait for the original SL to be hit.

Please provide me a direction and I will work on the topic with concentrated effort, I am distracted right now.

Regards,
ptk

ptk,

1) I did a study sometime back which that time indicated that the market in any timeframe moves 5 bars in any direction, after that it either goes into sideways or a corrective phase before starting its journey in the original direction if the trend is strong. So you may get good results if you book profits on 3/4 bars and be ready to re-enter on next signal after correction.

2) After the entry, if the market closes below the pivot which put you in long trade then the breakout is suspect.My experience shows that waiting for the low of the bar to crack to get out of long positions will save many false exits. But it has a set-off of loosing some more points .

I have been able to save many points due to this "early exits" in trades which are not working out as expected and is a part of my trading system.

The method can work on options.But if we are trading as a daytrade, you have to trade larger quantity if you have to get same points as you get with futures.

Hope I have clarified all the points.

Best wishes,

Smart_trade

 

[Smart_trade]

ptk,

1) I did a study sometime back which that time indicated that the market in any timeframe moves 5 bars in any direction, after that it either goes into sideways or a corrective phase before starting its journey in the original direction if the trend is strong. So you may get good results if you book profits on 3/4 bars and be ready to re-enter on next signal after correction.

2) After the entry, if the market closes below the pivot which put you in long trade then the breakout is suspect.My experience shows that waiting for the low of the bar to crack to get out of long positions will save many false exits. But it has a set-off of loosing some more points .

I have been able to save many points due to this "early exits" in trades which are not working out as expected and is a part of my trading system.

The method can work on options.But if we are trading as a daytrade, you have to trade larger quantity if you have to get same points as you get with futures.

Hope I have clarified all the points.

Best wishes,

Smart_trade

I have copy pasted my post in other thread so that it will be available in this thread for further reference.

Early Exits

Posting 2 cases of Early Exits. These are only for illustrations ( as actually there is no sell signal there...)

Point A is a pivot low and when it is broken, we go short at the level marked by red line. Our usual stop is at a level marked by Black line. Market closes above the PL level in bar B indicating that the breakdown is a suspect so we cover our short positions at the level marked by Acqua line without waiting for our stoploss at black line to get hit. This saves on stoploss by 50 % or more.

A word of caution here. It is a method based on the principle that if breakout/breakdown is unsuccessful indicated by bar closing in the range, then it is wise to exit at earliest sign of trade not working out. But it sometimes gives false exits and hence needs re-entry.Overall I found this method to suit my mindset of low stops and high rewards trades. But at times these exits become frustrating ( like anything else in trading )....so it may not work well for everyone.

Smart_trade

 

[love2trading]

hi day traders,

In daytrading.. which profit/loss ratio is good?
1:1, 2:1, 3:1 or trailing stoploss... which one is giving more winning percentage.

for example

1) stoploss 2: target 2
2) stoploss 2: target 4
3) stoploss 2: target 6
4) trailing stoploss for every rise
which is good..

pls reply...
thanks in advance

 

[sangi79]

I have copy pasted my post in other thread so that it will be available in this thread for further reference.

Smart_trade

ST sir,

It will b of much use if you post the method in this forum too. Many members r interested in Swift method.

I hv registered in the other forum and activated too, still access denied for that particular thread.

Pls. help.

Regards,

 

[oilman5]

thanks for revival of this good thread!!!!!!

 

[ptk]

ptk,

1) I did a study sometime back which that time indicated that the market in any timeframe moves 5 bars in any direction, after that it either goes into sideways or a corrective phase before starting its journey in the original direction if the trend is strong. So you may get good results if you book profits on 3/4 bars and be ready to re-enter on next signal after correction.

2) After the entry, if the market closes below the pivot which put you in long trade then the breakout is suspect.My experience shows that waiting for the low of the bar to crack to get out of long positions will save many false exits. But it has a set-off of loosing some more points .

I have been able to save many points due to this "early exits" in trades which are not working out as expected and is a part of my trading system.

The method can work on options.But if we are trading as a daytrade, you have to trade larger quantity if you have to get same points as you get with futures.

Hope I have clarified all the points.

Best wishes,

Smart_trade

Dear Smart_Trade,

Thanks for your reply.

1. I further paper traded the 4 bar strategy on bank nifty for the past 15 trading days but the results are not that good. I made Rs 5000 on 1 lot.
2. In the same period, I made Rs 51000 on 1 lot of DLF.
3. Do you know why this strategy works better on stocks rather than indices or whether that is not true?

I have a few more queries on this subject on which I humbly request you to share your thoughts:-
1. I think the price of the share is important for the move. A stock price of 12000 (bank nifty) doesnt move as much as a stock price of 170 (DLF). I stand to be corrected here.
2. I think the 4 bar setup will work better on stocks rather than indices.
3. In stocks also, its better to take a stock in the price range of 100-300.

I humbly request you to suggest few good stocks for day trading. You have refrained in the past to suggest the names and you have said any stock which has good range is a good stock for day trading, but I am finding it difficult to shortlist them. I you have any post or any stock list or any idea that i can use to find such stocks will be of immense help.

Regards,
ptk

 

[Smart_trade]

WHY Most New Traders Fail Within 6-12 months

Till about a year back I used to trade from my own trading office. But on Diwali Muhurat day, I used to go to my broker's office on an invitation from him and participate in Muhurat trading and the festivities. The dealing room used to be full with smart looking guys ( few girls too ) and I used to find them brimming with confidence and talking about tips service, operators,sure shot method etc as if everyone has figured out everything about the market.

But on next Muhurat day the earlier lot of smart traders is missing and we have a fresh lot of traders.Broker used to say " Nayi fasal ayi hai..agle saal tak kat jayegi" meaning new crop has come...it will get cut by next year. I always used to wonder why so many intelligent and smart guys go burst in first 6 months or a year. As I came in contact with more traders, I found tat some of the reasons for this high rate of failure is because of the following :

1) Most come to trading thinking that this is a career for making big money with little or no work....just press F1/F2 and make money.

2) Most people think that their returns will grow exponentially or atleast in linear path. This is not true, there are very good patches in the market and there are also very bad periods or sideways choppy periods where maintaining the same returns is difficult. On has to understand and accept this fact.

3) Excessive leverage : Most traders blow their accounts due to excessive leverage. They will take positions double or triple in size than what their capital warrants...so small drawdown and they go underwater.

4) Trading on borrowed capital : After 6 months in the market, people think that they have figured out everything which is required to be known in the market. Hence to increase their profits, they borrow with the promise of 5 to 7 % per month or 60-80 % per annum returns from people and on that borrowed capital . And this is done by not new guys but guys with little experience.

This high returns can be achieved in few good months but no honest business activity can sustain that kind of returns.If it was possible to make those returns, Tata would not put up a factory to manufacture cars or Bajaj would not manufacture motorcycles...they instead will hire a big hall and put up array of computers and smart traders behind those computers.

5) Overconfidence : If you see the record of road accidents, most fatal serious accidents are done not by new learning drivers...but by experienced and overconfident drivers.Similarly accidents in trading are by little experienced and overconfident traders.

6) Markets change and good traders have to adapt themselves to changed market conditions. In driving a car, we dont press the accelerator paddle all the time...we need to use brakes, shift gears to lower gears . To change as per the market needs experience of trading different types of markets.Trader has to use different methods and techniques to trade different types of markets as a skilled craftsman will use different tools according to the job he is working on.

Just thought of sharing these observations so that nayi fasal agle saal tak kat na jaye....

Smart_trade

 

[onlinegtrash]

WHY Most New Traders Fail Within 6-12 months
(slightly edited for brevity)
...

1) under estimation of the complexity and effort needed
2) over estimation of returns
3) Excessive leverage i.e zero risk management skills
4) Trading on borrowed capital :
5) Overconfidence : i.e not knowing difference between competent persons confidence and dumb person's over confidence!
6) non adaptability formulaic mindset...
Smart_trade

Above advice is worth atleast 5-6 lacs of money saved for a newbie trader !
But the funny thing is... only after losing few lacs... mind becomes receptive to such wisdom (including myself in this category) !

Its chicken and egg problem... "Good Judgment Comes with Experience, But Experience Comes from Bad Judgment"

So, the next crop will be always ready for harvest... traders reap profits, learners reap good judgement and few learners go on to become traders themselves !

Happy endings!

 

[amit44]

Just thought of sharing these observations so that nayi fasal agle saal tak kat na jaye....

Smart_trade[/QUOTE]





Good :thumb:

 

[gunsho]

If it was possible to make those returns, Tata would not put up a factory to manufacture cars or Bajaj would not manufacture motorcycles...they instead will hire a big hall and put up array of computers and smart traders behind those computers.

:thumb: One can't explain better than this.