Trading NR7 setup

[rkkarnani]

A very interesting pattern developing in Nifty.

The hi lo of 1st July Bar has not been breached by the following bars on 4th 5th and 6th July. This makes it an IDNR4 bar.
The Range of 4th July Bar was NR7 and that of 5th July Bar was NR12. Add to this the range of bars on 28th 29th and 30th were all NR4!!

What does the market have in store for us!!! ???

Request AW to post his views.

 

[AW10]

RKKarnani, Whenever we face such indecision point on a TF, it is better to zoom out and look at mkt from higher TF. So on weekly TF, after 2 wide range weeks of 275 points range each, it is quite obvious that market will stop for a breather.. That's what we are seeing now. Multiple bars within one widebar is showing consolidation.

We also have trendline resistance above recent pivot high of 1/july. We had high volume, low range day on 30/june, indicating appearance of sellers. There is horizontal support turned resistance level at 5625. Means, there are enough of hurdles in this zone between 5600-5700.

Volume has dropped and the range too. Market is in balanced state. So lets get ready for breakout, watchout for volume to pickup in the direction of break. After a long consolidation, probability of false breakout is also high. So be ready with protective gears too. We should see increasing volume, as we breakout.

Time to accumulate some long strangles or long otm debit spreads

Global markets are also not showing any momentum, but seems to have halted at crucial supply zone. Maybe next week's result season will bring back some volatility.

Happy Trading

 

[umeshmandal]

Can anybody explain what is OTM Debit Spread? Or post a link to a proper page on Net. Google search resulted in more confusion, maybe becoz I am new to Option!!

 

[abhi_neth]

Can anybody explain what is OTM Debit Spread? Or post a link to a proper page on Net. Google search resulted in more confusion, maybe becoz I am new to Option!!

hi, Go through AW10's "Low Risk Options Trading Strategy" to find out about different types of spreads.

 

[trader.trends]

Can anybody explain what is OTM Debit Spread? Or post a link to a proper page on Net. Google search resulted in more confusion, maybe becoz I am new to Option!!

Debit Spread is where money goes out of your pocket first. Here is an example

Buy 5800Ce at 36 and sell 5900Ce at 16. Your net outlflow is 20/-
Buy 5500Pe at 35 sell 5400Pe at 15. Again your net outflow is 20/-.

On each leg you are risking your outflow for a max gain of 100/- Less the cost your net gain is either 80/- RR of 1:4

 

[umeshmandal]

RKKarnani, Whenever we face such indecision point on a TF, it is better to zoom out and look at mkt from higher TF. So on weekly TF, after 2 wide range weeks of 275 points range each, it is quite obvious that market will stop for a breather.. That's what we are seeing now. Multiple bars within one widebar is showing consolidation.

We also have trendline resistance above recent pivot high of 1/july. We had high volume, low range day on 30/june, indicating appearance of sellers. There is horizontal support turned resistance level at 5625. Means, there are enough of hurdles in this zone between 5600-5700.

Volume has dropped and the range too. Market is in balanced state. So lets get ready for breakout, watchout for volume to pickup in the direction of break. After a long consolidation, probability of false breakout is also high. So be ready with protective gears too. We should see increasing volume, as we breakout.

Time to accumulate some long strangles or long otm debit spreads

Global markets are also not showing any momentum, but seems to have halted at crucial supply zone. Maybe next week's result season will bring back some volatility.

Happy Trading

AW10 Sir, Whenever you find time please post an example of Long OTM Debit spread on Nifty in present scenario!! Have gone through your other thread also, but still a bit hazy about these Spreads.

 

[pumajay]

Hi,

I took up this setup and tried to bring up a system I can be comfortable with.
I basically prefer to do EOD trading (do not want to spend my time trading intraday). And also felt NRx setup suits my style to enter once in a while and come up in a month or so max.

I am attaching the backtesting I did with my system (which involved NRx + few Indicators like Stoch + Filters for break of NRx)

My only aim to upload this xls sheet is that people can try to make their own system out of this setup quite easily. All one has to do is to get comfortable with it.

All decisions were taken EOD only, with 1 or 2 decided within that day itself. I have not considered more than 2 lots as I did not want to go beyond 2% risk, and the time I went for 3% I had a backing of support by indicators that trailing SL will eventually come to 2% soon.

The trades were taken with the same feeling and thoughts one gets as an amateur or little experienced trader. You can see that there were trades(2-3) which were a bit costly(and could have been avoided easily, by either not taking at all or downsizing the lots).

But overall, I tried my best to stick to Money Management and never changed the SL against the trade, even when I saw that the trade was going to go towards my direction, I still took the SL as I assumed that I would be keeping the SL in the exchange before hand

The Calculations include the Charges by Broker and STT to best of my knowledge.

Any comments would be helpful for me as I am somewhat finalizing the rules I have observed from these trades

@AW10/Others, Any year which was range bound, to see how NRx behaves in such scenarios, or 2009 is sufficient?

Also, my only qualm is that I could not go for options(very useful for neutral positioning till confirmation comes) as I am unable to figure out the SL for options. Any help would be grateful ...

Hope this is useful to others to create their own system, as NRx does give the entry opportunity as well as "exit" opportunity (very important compared to entry)

 

[umeshmandal]

Hi,

I took up this setup and tried to bring up a system I can be comfortable with.
I basically prefer to do EOD trading (do not want to spend my time trading intraday). And also felt NRx setup suits my style to enter once in a while and come up in a month or so max.

I am attaching the backtesting I did with my system (which involved NRx + few Indicators like Stoch + Filters for break of NRx)

My only aim to upload this xls sheet is that people can try to make their own system out of this setup quite easily. All one has to do is to get comfortable with it.

All decisions were taken EOD only, with 1 or 2 decided within that day itself. I have not considered more than 2 lots as I did not want to go beyond 2% risk, and the time I went for 3% I had a backing of support by indicators that trailing SL will eventually come to 2% soon.

The trades were taken with the same feeling and thoughts one gets as an amateur or little experienced trader. You can see that there were trades(2-3) which were a bit costly(and could have been avoided easily, by either not taking at all or downsizing the lots).

But overall, I tried my best to stick to Money Management and never changed the SL against the trade, even when I saw that the trade was going to go towards my direction, I still took the SL as I assumed that I would be keeping the SL in the exchange before hand

The Calculations include the Charges by Broker and STT to best of my knowledge.

Any comments would be helpful for me as I am somewhat finalizing the rules I have observed from these trades

@AW10/Others, Any year which was range bound, to see how NRx behaves in such scenarios, or 2009 is sufficient?

Also, my only qualm is that I could not go for options(very useful for neutral positioning till confirmation comes) as I am unable to figure out the SL for options. Any help would be grateful ...

Hope this is useful to others to create their own system, as NRx does give the entry opportunity as well as "exit" opportunity (very important compared to entry)

PJ, BHow about some pointers for forming a Strategy to trade NRx!! If you wish to do,please share the strategy that you have followed in analysing for which excel sheet is posted by you!!

 

[AW10]

Hi,

I took up this setup and tried to bring up a system I can be comfortable with.
I basically prefer to do EOD trading (do not want to spend my time trading intraday). And also felt NRx setup suits my style to enter once in a while and come up in a month or so max.

I am attaching the backtesting I did with my system (which involved NRx + few Indicators like Stoch + Filters for break of NRx)

My only aim to upload this xls sheet is that people can try to make their own system out of this setup quite easily. All one has to do is to get comfortable with it.

All decisions were taken EOD only, with 1 or 2 decided within that day itself. I have not considered more than 2 lots as I did not want to go beyond 2% risk, and the time I went for 3% I had a backing of support by indicators that trailing SL will eventually come to 2% soon.

The trades were taken with the same feeling and thoughts one gets as an amateur or little experienced trader. You can see that there were trades(2-3) which were a bit costly(and could have been avoided easily, by either not taking at all or downsizing the lots).

But overall, I tried my best to stick to Money Management and never changed the SL against the trade, even when I saw that the trade was going to go towards my direction, I still took the SL as I assumed that I would be keeping the SL in the exchange before hand

The Calculations include the Charges by Broker and STT to best of my knowledge.

Any comments would be helpful for me as I am somewhat finalizing the rules I have observed from these trades

@AW10/Others, Any year which was range bound, to see how NRx behaves in such scenarios, or 2009 is sufficient?

Also, my only qualm is that I could not go for options(very useful for neutral positioning till confirmation comes) as I am unable to figure out the SL for options. Any help would be grateful ...

Hope this is useful to others to create their own system, as NRx does give the entry opportunity as well as "exit" opportunity (very important compared to entry)

Great work Pumajay. Glad to see that you have build a profitable strategy on this setup.
Here are some of my observations
- Expectancy is about 3900 Rs. It is positive and pretty good (about 80 nifty points)
- I looked at deviation of your P&L, and it gives a range of -7000 to 25000 of return for 70% of the trades.
- Trades are limited to max 4 or 5 trade in a month
- You are keep wide stoploss - roughly it is around 100 points or more. In some cases 350 points too. Luckily these stops are not hit too frequently. Wide stops do help in improving the profitability of system, but they hurt from positoizing perspective. 350*50*2 = 35k which is more than 4% for 8 Lac of acct size. Maybe this is the point one has to be aware of while trading it.
One can always start with wide SL, but cut it if proven wrong by the market. i.e. these stops are only theoretical stops but in reality trader is not going to wait for them to hit.
- To apply position sizing, say if you started with 1 contract for 4lac of acct size, so when acct increased to 12 lac, you can very well go for 3 contracts.
This is very conservative position sizing. By improving position sizing, returns can be improved beyond current returns.

@AW10/Others, Any year which was range bound, to see how NRx behaves in such scenarios, or 2009 is sufficient?

As you are trading NR7 days, then yearly period is too long to consider. Personally, I just look at 1 higher TF to see if that is contracting or expanding. eg - if weekly bar is also contracting, then NR day may not break strongly, but if weekly is in expansion mode, then NR day breakout could give us large range. If you to extend it further than maybe go till monthly TF.

Analyse your profitability of for NR months to get better idea about performance.

Option trading will bring lot many variables into trading. To put stops in options, simplest approach is to go by x% of loss on position.

Hope this helps
Happy Trading

 

[pumajay]

Basically this is what is the gist of the strategy I was following

1. If trade is against weekly trend, 1 lot only, else 2 lots; Similarly if Nifty seems to be having a overall narrow range (depicted by say, BBands), then a single lot.
2. In trade, Use the new NRx for moving SL, especially if deep SL involved
3. Also I purposely took trades which were > 3%, to see how much of a gain actually one can get and I observed and concluded that for the sake 5-10K I will not make myself suffer psychologically . I have a different xls sheet which has notes right beside the trade before the trade was taken
4. I am looking at a max of 1.6%(preferrably < 1.1 %) for single lot and max of 3%(preferrably < 2%) for 2 lots with the aim of bringing the SL within in 2% or get out of 1 lot very quickly
5. The trades were taken with a conservative approach and hence a bit of a deep SL (of about 100 - 200), but no way am I going to go against the MM as it is the major part that is allowing me to make money
6. When trade is taken with 2 lots, 1 lot is exited the moment the price reaches 100 - 150 points and allowing the other lot to run or hit SL. That is why you are seeing the range in P/L

So you can see my whole aim was to learn the scaling of lots and downsizing and also understand the effects of not following MM(Theoretically I know, but personally identifying these issues makes the difference).

NRx setup as such is a good profitable setup, MM enhances it. :thumb:

- I looked at deviation of your P&L, and it gives a range of -7000 to 25000 of return for 70% of the trades.
- Trades are limited to max 4 or 5 trade in a month
- You are keep wide stoploss - roughly it is around 100 points or more. In some cases 350 points too. Luckily these stops are not hit too frequently. Wide stops do help in improving the profitability of system, but they hurt from positoizing perspective. 350*50*2 = 35k which is more than 4% for 8 Lac of acct size. Maybe this is the point one has to be aware of while trading it.
One can always start with wide SL, but cut it if proven wrong by the market. i.e. these stops are only theoretical stops but in reality trader is not going to wait for them to hit.

As you are trading NR7 days, then yearly period is too long to consider. Personally, I just look at 1 higher TF to see if that is contracting or expanding. eg - if weekly bar is also contracting, then NR day may not break strongly, but if weekly is in expansion mode, then NR day breakout could give us large range. If you to extend it further than maybe go till monthly TF.