Intraday Trading method

#1
Hello respected seniors and friends, i am new to trading and did 2 years back-testing and paper-trading for last 6 months.
I have one query:

In real trading does it make any sense to trade Nifty for 10 points with stop loss of 20 points in every trade.
when strategy has 90% success rate???

I'l reveal the strategy also but first i need answer to this question.
thanks.
 

NTrader42

Well-Known Member
#2
Hello respected seniors and friends, i am new to trading and did 2 years back-testing and paper-trading for last 6 months.
I have one query:

In real trading does it make any sense to trade Nifty for 10 points with stop loss of 20 points in every trade.
when strategy has 90% success rate???

I'l reveal the strategy also but first i need answer to this question.
thanks.
Hi

Lets see the maths for your first 100 trades :)

With Efficiency of execution 100%

Winning Trades ==> 10 * 90 = 900.
Losing Trades ==> 20 * 10 = 200.
Cost of Trades ==> 2 * 100 = 200.

Nett Gain 500 Points

Can you do it with 100% efficiency for execution ?

What if the Efficiency of execution is 80%

Winning Trades ==> 10 * 90 = 900 * 80% = 720.
Losing Trades ==> 20 * 10 = 200 + 180 = 380.
Cost of Trades ==> 2 * 100 = 200.

Nett Gain only 140 Points

Conclusion: You need to trade this system with risk reward of 2:1 & win/loss of 90% with 90-100% accuracy in implementing.

Thanks
 
#4
Hi

Lets see the maths for your first 100 trades :)

With Efficiency of execution 100%

Winning Trades ==> 10 * 90 = 900.
Losing Trades ==> 20 * 10 = 200.
Cost of Trades ==> 2 * 100 = 200.

Nett Gain 500 Points

Can you do it with 100% efficiency for execution ?

What if the Efficiency of execution is 80%

Winning Trades ==> 10 * 90 = 900 * 80% = 720.
Losing Trades ==> 20 * 10 = 200 + 180 = 380.
Cost of Trades ==> 2 * 100 = 200.

Nett Gain only 140 Points

Conclusion: You need to trade this system with risk reward of 2:1 & win/loss of 90% with 90-100% accuracy in implementing.

Thanks
What a nice forum with nice traders.
thanks Ntrader nice to see your reply, to be very true i am expecting near 100% accuracy but lets see what happens in real time trading and what about the slippage?
 

linkon7

Well-Known Member
#5
Assuming you need 3 points to break even,

Then every winner will give u 7 points (10 -3 = 7)
Every looser will set u back by 23 ( 20+3 = 23)

Every trade has equal chance of hitting the stoploss. Only after we take a series of trades, we have an edge. But trading for 10 points with high cost of transaction (almost 30%) nullifies that edge....!

Say, you suffer 3 losses in a row and you now need 10 winners in a row just to break even...! psychological problems will start on the 4th trade itself as you wont like to hit another looser. If trade 4-7 are winners and 8 turns out to be a looser... you will end up in lot of unnecessary mental pressure as the number of winners needed to break even keeps piling up.
 
#6
Yes great to see your reply linkon :)
With all your experience, what would you prefer:
A strategy with profit of 10 points, SL- 20 points with 90% success?
or
Profit of 10 points, SL 15 points with 80% success rate?

"Provided that the method is mechanical & 100% implementation can be achieved"
 

linkon7

Well-Known Member
#7
Yes great to see your reply linkon :)
With all your experience, what would you prefer:
A strategy with profit of 10 points, SL- 20 points with 90% success?
or
Profit of 10 points, SL 15 points with 80% success rate?

"Provided that the method is mechanical & 100% implementation can be achieved"
I would prefer a stop loss that is just below a known support or above a known resistance. stop loss only gives the trade room to move in my desired direction. I wouldnt fix it at 15 or 20 points.

When i started trading, i used to trade patterns with 80-90% strike rate but always tried to keep the risk reward above 1. Anything less than 1 simple adds to the pressure.

Normally my thumb rule is, i dont want to loose in 3 trades what i cant recover in a single trade. This rule could be accomplished only after i sacrificed my strike rate.

Again, i don't know what strategy you have in mind. I prefer a mechanical system as it offers easier execution. So you have all my attention...! Looking forward to you system...!
 
#8
Thanks for the encouraging words linkon, i also thought about it but problem with nearby support & resistance is that it can be even more than 15-20 points and if i do not go for such trades where nearby support/resistance is more than 15-20 then the fear is that i might be losing out so many winning trades.

I think its better to implement the method in real time trading...i have already done a lot of head-banging on this.

I started this thread just to know the thoughts of experienced traders like you, just to make sure if i am not missing something......:confused:
 
#9
Thanks for the encouraging words linkon, i also thought about it but problem with nearby support & resistance is that it can be even more than 15-20 points and if i do not go for such trades where nearby support/resistance is more than 15-20 then the fear is that i might be losing out so many winning trades.

I think its better to implement the method in real time trading...i have already done a lot of head-banging on this.

I started this thread just to know the thoughts of experienced traders like you, just to make sure if i am not missing something......:confused:
Just a word of caution, that 80 % and 90 % hit rates are very difficult to achieve in real life trading.10 points gain and 20 points stoploss with 90 % success rate ...all this is too theoratical.

It is very difficult to achieve over 65-70 % success rate in real day trading and that is why we need reward to risk ratio of atleast 1.5 :1 or preferably more.

Trade your method in actual trades for 1 month....and if you get 90 % success rate , hats off to you....but not practical to base your method on such assumptions.

Best wishes, good luck....

Smart_trade
 

johnnypareek

Well-Known Member
#10
Hi,

If you can use Amibroker then backtest without brokrage and another time with brokrage. Lets see. A sys I was testing yesterday gave 11 lacks profit in one lot nifty. When I change buy-sell-short-cover to opening of next bar, profit was 1.30 lakh :(

johnny
 

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