Hi friends
When it comes to option trading,there are some problems.
first thing
getting a proper data and good chart in amibroker
second = timeframe selection
third =which afl to use
getting live data and live chart in amibroker is a problem.
GDFL gives charts and good data but cost is pretty high at 1650 a month.
High fees due to nse doing extra favour to indian traders by charge extra to screw indian traders.
why chart?
without a chart you go nowhere.
I suggest RS chart using option versus nifty futures.
Timeframe
some companies recommend 15 minute charts.for two call and put kept side by side.
if nifty is near 6300,try looking at pe6300 and ce6300
intraday traders better use 5 minute trading chart or
those having tick data may use 8tick,13tick,21tick,34tick,55tick,89tick,133tick charts.
if you dont have these then use rangebar charts with range setting based on ATR(100).
Why Range bar charts?
to see if price breaking out on small ranges and proceeding up or down.
those having Renko FORMULA CAN TRY USING RENKO CODE-to see noise free chart with clear trend.
use P&F charts-to see noise free charts.but Point & figure are less clear as compared to rangebar or renko charts.
You need noise free-simple-visible clear charting.
Biggest question
how much loss to take on an option trade?
My friends use 25% of entry price as stoploss-initial and as things move in favour they adjust stoploss for minimum risk.
If you are a low capital small trader then
do 2 trades a day & take maximum loss of 250 rupees per trade.
Technically stock prices move in a zone of 2 TIMES atr BELOW LONG ENTRY price.
identify trend on nifty futures and if trend is up,then
choose an entry point price subtract 2 ATR from it and try entering at this price.you may get less number of entries-it may fail .then avoid trade.
do the opposite for short trades.
have more patience?
try entering on multiple timeframe strength.
Enter on a 5 min chart based on strong entry signal on 15min chart.
What did great traders do?
they used 20period high break for long and stoploss at 10period low break.
they used 20period low break for short entry and stoploss at 10 period high break.
This concept is readily available in afl example code by graham kavanagh.
you may try nr4 or nr7 narrow range method after 100 tests if it suits your mindset.
Danger of option trading
case1-WASHOUT
a trader bought call options when nifty index was at 6500. he decided to hold the position.
next day nifty crashed by 400 points.
case2 WASHOUT
a trader bought put options when nifty index was at 6000 for holding position.
next day nifty shot up 300 points.
case3 PLAY SAFE
use a spread-combination of 2 options
nifty at 6200,a trader bought 6400 put and 6000 call of same expiry.
He is at peace while nifty moves between 6000 and 6400.
loss is limited. if net profit exceeds 5% or 10% etc close positions take profit.
case1 & case2 show naked positions-unsafe if market crashes AS YOU GET WASHED OUT.
case3 is spread is protective whatever happens.
think of it this way- no profit no problem- but least loss is my motto.
can you think of better clever way of dealing with options?
then share it.
trading is profitable when you think and trade in an unconventional manner
can you?
When it comes to option trading,there are some problems.
first thing
getting a proper data and good chart in amibroker
second = timeframe selection
third =which afl to use
getting live data and live chart in amibroker is a problem.
GDFL gives charts and good data but cost is pretty high at 1650 a month.
High fees due to nse doing extra favour to indian traders by charge extra to screw indian traders.
why chart?
without a chart you go nowhere.
I suggest RS chart using option versus nifty futures.
Timeframe
some companies recommend 15 minute charts.for two call and put kept side by side.
if nifty is near 6300,try looking at pe6300 and ce6300
intraday traders better use 5 minute trading chart or
those having tick data may use 8tick,13tick,21tick,34tick,55tick,89tick,133tick charts.
if you dont have these then use rangebar charts with range setting based on ATR(100).
Why Range bar charts?
to see if price breaking out on small ranges and proceeding up or down.
those having Renko FORMULA CAN TRY USING RENKO CODE-to see noise free chart with clear trend.
use P&F charts-to see noise free charts.but Point & figure are less clear as compared to rangebar or renko charts.
You need noise free-simple-visible clear charting.
Biggest question
how much loss to take on an option trade?
My friends use 25% of entry price as stoploss-initial and as things move in favour they adjust stoploss for minimum risk.
If you are a low capital small trader then
do 2 trades a day & take maximum loss of 250 rupees per trade.
Technically stock prices move in a zone of 2 TIMES atr BELOW LONG ENTRY price.
identify trend on nifty futures and if trend is up,then
choose an entry point price subtract 2 ATR from it and try entering at this price.you may get less number of entries-it may fail .then avoid trade.
do the opposite for short trades.
have more patience?
try entering on multiple timeframe strength.
Enter on a 5 min chart based on strong entry signal on 15min chart.
What did great traders do?
they used 20period high break for long and stoploss at 10period low break.
they used 20period low break for short entry and stoploss at 10 period high break.
This concept is readily available in afl example code by graham kavanagh.
you may try nr4 or nr7 narrow range method after 100 tests if it suits your mindset.
Danger of option trading
case1-WASHOUT
a trader bought call options when nifty index was at 6500. he decided to hold the position.
next day nifty crashed by 400 points.
case2 WASHOUT
a trader bought put options when nifty index was at 6000 for holding position.
next day nifty shot up 300 points.
case3 PLAY SAFE
use a spread-combination of 2 options
nifty at 6200,a trader bought 6400 put and 6000 call of same expiry.
He is at peace while nifty moves between 6000 and 6400.
loss is limited. if net profit exceeds 5% or 10% etc close positions take profit.
case1 & case2 show naked positions-unsafe if market crashes AS YOU GET WASHED OUT.
case3 is spread is protective whatever happens.
think of it this way- no profit no problem- but least loss is my motto.
can you think of better clever way of dealing with options?
then share it.
trading is profitable when you think and trade in an unconventional manner
can you?
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