Systematic Momentum and Pullback Swing Trading

[marimuthu13]

By the way, would you find it helpful if I posted the link to the chartink screen? What are the forum rules for links to other websites in posts?

You can very well send the chartlink scanner link here...

Also i think you have selected CASH in chatlink scanner, instead of that you can select FUTURE , so that list will be very less..

 

[spn1305]

Here's the link to the chartink screen:
https://chartink.com/screener/inside-bar-high-setup

 

[spn1305]

Intraday costs and slippages can be high too. That alone makes short term edges less useful.
I am guessing that your take profit level would have to be beyond 1R in intraday for it to be useful. That has been my experience so far, but best is for market to tell you what to do anyway ...

Absolutely. In currencies we can easily make an adjustment to the target based on the spread, in stocks we could do it by calculating your costs as a % of your turnover. If you're using a discount broker, it's likely to be somewhere around 0.05% of your 2 side turnover, can use this to adjust profit targets. Of course the trade off is that sometimes we may miss our target by a tick or two, but we can always protect our trade by moving the stop to break even.

 

[spn1305]

You can very well send the chartlink scanner link here...

Also i think you have selected CASH in chatlink scanner, instead of that you can select FUTURE , so that list will be very less..

Can do. Thank you for the quick suggestion!

 

[spn1305]

Bloodbath for longs today. HDFCBank, Petronet, hit breakeven stop, Granules, Muthoot hit SL. TCS is still on, Cipla is on after re-entry.

Only one new name in the screen today, Max Financial Services. Let's see if it triggers. Correlation goes to 1 during a market crash, hence keep in mind your portfolio's sector weightages and risk tolerance for choosing trades. This framework would automatically cut risk early(because of no new setups during a bearish market). The trade off of course is that sometimes you get chopped. Keep position sizes small in volatile times.

-Smeet

 

[spn1305]

Day Trading Setup

Here's a framework that could be followed for day trading. I mainly day trade during bear markets, the primary reason being that I prefer going long than short. I believe that the short side works dramatically different than the long side on longer term charts, and am not comfortable playing shorts for swings. However, I find the long and the short side to be relatively more symmetrical in intraday moves, hence the habit of day trading mainly during bear markets.

I trade the open mainly on stocks that have gapped up/down the most. I look for the first swing high/low to be formed with an inside bar, and trade a breakout of that. Have a look:

This is a setup in Hindalco from today. It's a 5 minute chart. Why Hindalco? I check the pre-open market. Companies down a few % pre-open are obviously going to gap down when they open. Vedanta and Hindalco were the top losers pre-open (there were no gainers today, the top was Sun Pharma at 0%, lol). Also, I tend to follow monthly and weekly sectoral action and relative strength, which I post about on my blog. Last month, Vedanta and Hindalco were among the top gainers of Nifty.

It's good to trade in stocks that have been moving and are at new milestones at odd times, they usually give good moves. For example, Torrent Power today was at a 52w high during such a bloodbath, check it out, Torrent Power did give a setup and it would've been a good one to take. However, note that we do not get setups before every big move, we can't catch it all and that's something we have to be comfortable with.

Also note that we do not wait for 2 bars after the inside bar to be within the range, we take the setup as it forms. I'm not saying it because that's what works on cherry picked examples, I'm saying it because we're trading intraday momentum during the open, and we need to be much quicker trading that. The idea for daily charts trading is to wait for a consolidation for a while, which is why we require a couple of candles to stay within the range. But not while day trading. What we're doing is figuring out which concept/property of the markets we want to trade, and try to objectify and standardize them in the form of simple, repeatable setups.

The examples of Hindalco and Vedanta are not cherry picked as well. Have a look at the pre open market top movers. Yes, setups would have appeared on much more stocks. Yes, some wouldn't have worked. If you show me a chart of a failed setup and ask me why it didn't work, I'll probably say that it didn't work because it's not supposed to. A setup doesn't have to work, we have to position ourselves with favourable odds in a way that we are in a comfortable place if we lose, and we stand the chance of making a multiple of the amount we risk should we be right.

I would insist that you view my posts as a framework rather than a black box. Some decisions involve discretion on our part. For example, stock selection. Which stocks will we look to trade and find a setup? I've traded a variant of this setup earlier (nearly a year back), and my stock selection criteria was to trade the names that appear in the Economic Times Stocks in the News posts. I figured these would have a high likelihood of moving and I would take the first long and short setups that trigger. Does it sound too simple? Do you feel skeptical? It did for me too, but I simply tried it out with a small sum of money, day after day, with consistency, following and improving a process. And for those wondering, it turned out to be profitable, though of course its success depended on many other factors, some external.

I do not think intuition is bad, it's just something that needs to be kept in check. By figuring out ways to objectify certain properties of the market (momentum, corrections, volatility breakouts, or even investing related stuff), we will be figuring out a way to play our beliefs and assumptions in the market. Have conviction in that. Build a framework. Try using an existing one.

Would be great to have questions, I can't recollect and type every minute detail but there are nuances that may need to be covered. @TracerBullet asked a couple of questions and mentioned a few insightful things which I had to cover in future posts. It speeds up the process.

Feel free to explore these setups and discuss trade ideas arising out of them!

-Smeet

 

[against_tides]

First thread on traderji, looking forward to interacting with you all. On this thread, I'll describe some systems that we can use to trade. I've been in the markets since about 4 years now, started when I was 15. I'm not a fully automated/quant trader, rather a market participant who likes to objectify trading setups and execute correctly, following a process. There can be aspects of it which are discretionary, but I place a strong focus on ensuring that whatever we are doing is repeatable. Trading needs to be process based and consistent.

I invest for the long term as well. While that has mainly been discretionary, I'm looking to change that and have incorporated some objectivity into investments as well. We'll get into that too.

A summary of trading systems that I plan on covering (this can change):
1. A swing high inside bar system that looks to long after a breakout from a consolidation zone. These zones are defined objectively.
2. A 21MA pullback system based on swing highs and inside bars.
3. A positional trading momentum system that looks to buy after signs of strength are shown post-pullback.

Rather than describe the three systems separately and confuse you all, let me try to show you the essence of one system first, and we can start looking at setups in the live market.

-Smeet

All the Best

 

[spn1305]

Thank you @against_tides !

Top pre open market gainers (there were only gainers today, lol): Hindalco, ONGC, Zeel, ICICI, Axis. I was also keeping an eye out on Tata Motors for any sell opportunities. I feel last month's rally in certain Auto stocks was unjustified. But no setup in TAMO so no trade.
Axis Bank setup:

Ignore the moving average, I wasn't using that to check out this trade.

Swing low: Check.
Inside bar after swing low: Check.
Below opening 5m range for a short: Check
Top movers Pre open: Check

Exit options (in general, not just this trade):
1. 25% at 1R, rest keep trailing at every 1R level.
2. 25% at 1R, 75% at 3R.
3. 50% at 1R, trail every 1R level.
4. 50% at 1R, 50% at 3R.
5. Trail to BE once reaches 1R, exit full at 3R or keep trailing at every 1R level.

 

[against_tides]

Thank you @against_tides !

Top pre open market gainers (there were only gainers today, lol): Hindalco, ONGC, Zeel, ICICI, Axis. I was also keeping an eye out on Tata Motors for any sell opportunities. I feel last month's rally in certain Auto stocks was unjustified. But no setup in TAMO so no trade.
Axis Bank setup:

View attachment 42287

Ignore the moving average, I wasn't using that to check out this trade.

Swing low: Check.
Inside bar after swing low: Check.
Below opening 5m range for a short: Check
Top movers Pre open: Check

Exit options (in general, not just this trade):
1. 25% at 1R, rest keep trailing at every 1R level.
2. 25% at 1R, 75% at 3R.
3. 50% at 1R, trail every 1R level.
4. 50% at 1R, 50% at 3R.
5. Trail to BE once reaches 1R, exit full at 3R or keep trailing at every 1R level.

Do you trade in index futures...
your analysis on those can be helpful to many..

 

[spn1305]

Do you trade in index futures...
your analysis on those can be helpful to many..

The short is answer is no I don't.

Long answer is, not quite futures, but I used to trade a very simple opening range breakout strategy on nifty, using slightly OTM options instead of futures directly. It was profitable at first glance. But the drawdowns were an issue, along with slippage eating into the profits.