Day Trading Stocks & Futures

Whether US of A has punched above her weight finally OR has called the bluff of CHINA finally? will be known soon.

till that time................. radio mirchi ki taraf sai!
इब्तिदा-ए-इश्क़ में हम सारी रात जागे
अल्ला जाने क्या होगा आगे
मौला जाने क्या होगा आगे
most of the time, I am free during trading hours as there is nothing more to do than placing SLs.

started testing a breakout system for day trading. pointers are (all things are the same good old nothing new ):-
  1. stocks make more gains (both up and down) than an index. breakeven is fast in terms of points and cost is relatively low than index trading.
  2. BO trading works relatively better in stocks than in indexes in day trading.
  3. trending in the direction of the nifty intraday trend has a high probability of success in stocks. provided one can have a somewhat objective method of gauging the trend of the index.
  4. a big issue is which stocks to track/trade. either one can find the stocks using some method (discretionary or mechanical ) to find possible BO stocks from EOD. OR can do a manual scan. problem with manual scans for me during the day is how many and which? the solution I have found is......... select nifty 50 stocks which are also in the high beta index. 10 stocks are there. these are manageable to track during the day for BOs. stocks are - adanports, axisbank, bajafinsv, bajfinance, hindalco, indusindbk, jswsteel, sbin, tatamotors and tatasteel. there are a couple of more but 10 is the max I have taken.
  5. another issue is how to define a BO? the solution... there must be a minimum of 20-30 bars in a trading range to be considered a valid TR for the BO. there are other types of consolidation like ledge but it's difficult to track in 10 stocks.
  6. what kind of BO? is the next issue. solution... look for rounding bottoms/tops or have HLs (upside BO) or LHs (downside BO). there 2 are the best I have found for myself.
  7. risk: reward. one can expect 1:3.25/5. most of the time 1:5 is achievable, as risk is very low in BO set-ups provided one has executed it properly also the move is immediate with lots of momentum.
  1. always trade BOs in the direction of the NIFTY trend. this is a must.
  2. if nifty is flat one can take BO trade in stock in the dominant direction.
  3. best is for long - NIFTY uptrend + stock uptrend + strength of momentum prior to BO very low + congestion just before BO + point 6. (reverse for short side).
in the above post i have mentioned 10 stocks which are part of both high beta index & nifty 50.

these stocks work well with the BO. but on testing stocks which are not part of fno and minimum +3% or so up or accelerate in first 30-40 mins or so with strong volume coming in with free float around 10k or so has higher probability of giving excellent BO's and move very fast.

i have not done extensive backtesting/forward testing. but as per my understanding day trading these stocks are far more profitable than the 10 stocks.
BIG issue is how to find these stocks regularly.
“We have tested every system under the sun and, amazingly, we have found one that actually works very well. It is a very good system... The basic premise of the system is that markets move sharply when they move. If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try and fade that price move. When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.” -Paul Tudor Jones, Market Wizards

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