Trading Room

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Opening Spike | NIFTY Weekly OTM Strike Based Strategy | Performance

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Those of you in the trading room would already know the changes that we have made to the existing Opening Spike trade by using OTMs instead of ITMs.

The Thesis - This strategy is about capturing the opening volatility, its a direction agnostic strategy and we aim to capture statistically optimal moves, with a fixed target and risk. We use NIFTY Weekly OTM Strikes to execute this strategy.

Here is the performance of the approach for the current month (As executed live in the Trading Room)

So what’s so great about it?

Well, several things.

  1. Low Capital Requirement - Typically the OTM Premiums that we use are in the range of Rs. 20 to 25. We keep 4x of which as the allocated capital for this strategy.

  2. Low Transaction Costs - Low premiums has a direct impact on STT and as you can see the strategy itself is designed to take very few trades. So on all counts low costs. *Example of a contract note below to give you a sense.

  3. High Win Rate - Yes this approach has a very high win rate, we have statistically tested it.

So whats the catch?

Like all good things in life, this one comes with a few catches,

  1. Time Dependent - This trade occurs at a specific time window, you need to be there to capture it.

  2. Execution Skills - Yes, this one is the most challenging one, being a scalper its easy for me to execute this, but if you are new there could be a learning curve of close to a month at least to get this right.

* Contract Note Example / Broker SAS Online

Warning!

  • Don’t attempt this by yourself. Unless you know what you are doing.

  • It looks simple but its not easy.

  • We factor in several variables to take this trade, its not a Price only thing.

  • Past performance is no guarantee of future results!

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NIFTY - Scalping Set-up - 03 - Afternoon Range Extension

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This is in continuation with the scalping set-ups series. 

The first one being (https://www.niftyscalper.com/blogs/2017/11/8/nifty-scalping-set-ups-01-opening-spikes-opening-drive)

The second one was (https://www.niftyscalper.com/blogs/2017/12/12/nifty-scalping-set-ups-02-mid-day-mean-reversion)

The third setup we will discuss is called the Afternoon Range Extension (ARE)

1. What determines entry?

There are two key factors to consider when entering this trade

a) Range - You need to check the pre noon ie pre 13:30 range. The mean of which is around 60. There are three possibilities, one is we had a very narrow range in the first half or we had a super normal / very high range in the first half. While the former is good the latter obviously reduces the probability of an A.R.E. Lets take a look at both these conditions.

If you look at the figure 1 below the day had a narrow range of 27 till 13:30 post which we got an over all range of 63.75. So if you look at it you will see that 42 % of the range was formed in the morning and balance 58% in the afternoon. 

So the key factor to consider for entry is the morning range.

2. What determines the target and exit?

Now lets do some basic arithmetic, the mean % of range that forms in the first half is 71%. So if you work that backwards 27 * 100/71 = 38. Which means (38-27=11) a 11 point extension is possible even if the the index remains in low range at large.  

You could use other statistics to guide you? For instance

a) What has been the mean extension on days with under 30 range in the first half?

b) How many days in a given year does the index remain within the range formed in the first half?  Of which how many days does the index remain in a narrow range within 30 itself? Is it an event day? Is it an expiry day? 

c) On days when range extension happens in the second half? At what time does it peak before it pulls back or reverts to mean again?

NIFTY FUT - 19th Dec'17 - Fig. 1

Getting these numbers right helps us form a probabilistically informed structure to work with. 

That is exactly what we attempt to do collectively in the NiftyScalper Trading Room.

Hope you found this useful. Back test it if you would like? I am sure you will see an edge here.

 

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Launching NiftyScalper Day Trading Room!

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I am happy to let you know that we at NiftyScalper are taking the next step to bring the day trading community in India closer through our slack based NiftyScalper Trading Room.

In the past few months, the number of coaching requests were quite overwhelming, and it was taking too much of my time, on top of it I could focus only on 1 or 2 people at a time.

Also, I realized there were several people who could not afford my coaching offering, based on my interactions with a few people I realized, a Trading Room would be a much better way of bridging this gap.

So this is what I intend to offer in the room (From 6th Nov'17)

1. Live Trade Alerts - Yes its not easy to follow, but the idea is to learn from observing so that in future you don't have to depend on the alerts at all. These alerts also act as references for any questions that you may have. Apart from alerts, I also provide live observations on the developing market structure, which includes aspects like Range, Range expansion levels, Points of invalidation for positions, Mean reversion areas etc. Watching the market and the reading the updates would help budding traders connect the dots. Which over the long run would help traders develop an independent sense of the market.

Do note, that I do not use any proprietary indicators, or exclusive and expensive technologies like order-flow/footprint charts. I would perhaps share my rationale sometime soon on the blog as to why I don't see an edge in it. Nevertheless, whatever indicators and references that I use, are (almost) freely available to everyone.   

2. Discuss Trade Rationale & anything else that wold help you become better at the game - Nothing like collectively discussing set-ups and clarifying by asking questions. I may not always be an expert at everything, the group over time will have several experts with different specializations, which would help you gather the wisdom of the crowds. 

3. Discuss/Share Articles/Books - Learning should never end, and if its does, thats the end. With that perspective, the idea is to share and discuss best of the books and articles in the Day trading space

4. View Daily Performance Logs - They say, what gets measured gets managed, so the idea is to post our daily performance logs so that we know how we are doing. This is more from an indicative purpose. One may not be able to post all scalp trades, but we will post trades which can be predicted well in advance. 

5. Specially curated blog posts and NIFTY data analysis reports only for members (after commercial launch) - There is a lot of effort and investment that goes into data analysis and related strategy formation, which is what would be shared with members. I also have data scientists on retainer contracts who help with testing various set-ups. All such data and reports would be available exclusively to the members.

The larger focus of the room will always be Quant/Statistics based scalping strategies. 

Given that I would be hiring people to manage the room and other associated costs, this would be a paid service, however we would make sure the costs are pretty nominal. Initially till the end of 2017 the room would be run on a beta mode and would be free for you to access.

I am also working on creating a detailed glossary and faqs which would help you and others understand the #scalp-alert messages and other conversations better. 

Look forward to your joining the slack group and would request you to type in a short intro (Location/Trading Exp./Etc.) about yourself in the #Intro channel once you join. 

Please use the link below to join

https://join.slack.com/t/niftyscalper-tr/shared_invite/enQtMjgwODY4ODk2MzM5LTJlMDA0NDQ4N2UxYzY0N2IxMjM0YjNlYmNmNGVhZjliOTc4YzhjZmQ1MDEwM2VkODMyMDhhZjI2Mjc4ZTE3ZTE