First Hour Breakout Strategy

[iTrade]

No.how can u say that is too much if u are a active trader, yes ofcourse u have to give lot of attention than if you choose 1 or 2

but what is a advantage in that method is the probability of winning is high
if u choose 1 or 2 if both failed then that day u end in loss & u have to do 2 days trading with profit to equal that ,to avoid that i am that using 20 - 25 stocks

You definitely have a point, but its equally possible on other side that more than 50% of your stocks will hit stop loss. I am not saying every day, but that one day might wipe off everything. Only way to get around that is to have a tighter stop loss. What do you say?

 

[uts]

This is a very good profitable day trading strategy i am following for Tata Motors. It could work with other stocks as well as long as its a good momentum stock.

Entry Note down day hi, lo at 10:00 AM, go long on breakout of high or go short on breakout of low. I dont use any buffer. I place orders blindly. i dont wait for a pullback. I place orders on both sides (some brokers may not accept this). I cancel the other leg if one leg is triggered. I dont trade this on both sides on same day. only one trade per day. thats all !!! so simple !!!

Stoploss. Never open a trade without a stoploss. In this case its the other side hi/lo. For example, if you entered long, then SL is low of the first hour candle. similarly for short, its high of 1st hour candle. again i dont use any buffer. but you can chose some buffer for your comfort

Take Profit. This is the tough part. I am not a big fan of trailing stoplosses. Lot of times it eats into your profits. ofcourse sometimes you could lose a big move. For me a fixed TP is preferable. Its 75% of the 1st hour range (high-low). Why 75% , why not 100% or 50%. you could chose any number you are comfortable with. Again this is a function of how large is the range. if its a trending day (i wish i knew this at 10:00 AM ), you can go for a larger profit. with 75%, RRR is less than 1:1, but the hit rate is good, so i am comfortable with this

Backtesting Frankly speeking i dont have tools to do this. i have the data. but need a afl which could do this. but i am following this for last 1 month and very very rarely i end up on losses. every week is profitable so far. pl paper trade for some days before you follow this

Why this will work. Market tries to settle down in first 1 hour. then look for the direction. so we go in the same direction as breakout

No trade If the 1st hour bar is too large. any thing above 12 rs is no trade for me


Example

Mar 5 2010

At 10:00 AM , day high = 814.8 low = 809, so range is = 5.8 , placed buy order at 814.8 and sell order at 809 , sell order got filled at 10:13 AM , take profit for this is 75% of range = 809 - 4.35 = 804.65 , stoploss is high at 10:00 AM = 814.8 . Result = take profit hit at 10:18 AM. this is a very very good trade, that lasted just 5 min, but every day wont be like this. if i havent taken profit at 75%, instead waited till close, i would have gained 15 rs instead of 4.35 rs. but i prefer fixed targets

great work .....thanks

 

[veluri1967]

Here are few tips to counter false breakouts and minimise losses.

1. Expect a false breakout in advance. Make up your mind where to book losses in advance.

2. Adopt scaling in technique. Donot enter the trade in full capacity. Just enter with a bare minimum stock ie less than 30% of your intended capacity.

3. If the breakout proves false, you are already saved by keeping 70% of capital safe. Your losses are limited to 30% of capital.

4. Enter with another 30% when the first retracement is ended and the stock moves in the direction of breakout ie when the price takes off earlier retracement candle.

5. Keep ATR (Average True Range) figures handy. If the first candle formed is of more than 50% of ATR, excercise caution that an extraordinary situation only can sustain the breakout. (There are situations where even less than 30% of ATR candles turned into failed breakouts. To combat these situations, scaling in technique is adopted).

6. Excerise your discretion where to put stop losses based on past charts.

Hope this will help.

 

[mikjee]

Hi Bandlab,

I would like to Know if this strategy (First hour Breakout - Tata motors) alone is sufficient to make a living as Day trader. Out of 20 trading days in a month as per your average stastics 1) how many days does it not trigger at all and 2) How many days results in losses

Are you seriously persuing this strategy alone and do you make your living by this alone (sorry if i m too personal) but I have undergone a spine surgery and am unable to travel to office on a daily basis so I have to work from home now, I have chosen day trading for this but still I am not confident if I can really do this?

Though this reply is addressed to Bandlab, others too are welcome to answer my queries

Thanks

 

[scplindia]

Thanks for this nice post

 

[oilman5]

Gansal, I am replying to your post cause it should answer just not yours, but the self doubt of many others reader.
Am I earning consistently - YES. and I also have loosing trades regularly. But over a period of time, profit is bigger then all losses. I trade for financial freedom where trading is one more stream of income for me. For me it is not the only source of income for living.

Was it easy to reach this stage - ABSOLUTELY NOT.
I have made all the mistakes that is possible as a trader, not just once but repeatedly and ofcourse lost money as well. I read many books and watched videos on TA, trading, trading psychology etc, practised on chart, practised trading with market reply /bar reply / manually scanning chart bar by bar etc, And struggled hard to break my habit of reacting to chart as normal human being to how a professional trader would react. I have done enough of paper trading, pattern validation etc. Have spent time in making trading plan. And the journey is still not over, I continue to do them even today.

A lot of this was done after loosing money. It was only when I realised that to get different results, I need to change something fundamentally in my trading. I did have mentors on the way. I did pay for their interaction but I was lucky to get good mentors, not fly by night operators. My profitability changed only after I got my well thought out trading plan, got a system that I could trust - for +ive as well as -ive result, and I addressed various psychological issues towards risk, money, market, trading, charts etc.

In my view, trading is a profession where you fight with yourself. It is regular fight between your conscious and subconscious mind and how they influence your action and decision making capability.

If you have not addressed these fundamental issue, then in my view, you may be quitting too early. And even if you have addressed them, then I am not sure, if you really addressed them correctly. Did you have any support/trader friends/ mentor etc to show you the right approach and track the progress.

Personally, I think anybody can be a trader provided they can improve themselves continuously and win the battle with their own subconscious mind.

Though knowledge is important edge in the market, but in my view, application of that knowledge is lot more important. Else knowledge is good to sale tips, and be teacher.. not a trader. Please don't use my, raunak, bandlab or other's knowledge as criteria to evaluate your personal knowledge level and hence trading results.
One can still make big money with just 1 or 2 methods and limited knowledge. One doesn't need degree from Harvard or IIM to be successful trader.

And at then end, whatever is trading result of mine, Raunak, Bandlab or anybody, it should not make any difference to you. As a trader, you got to compare yourself with only one person and that is YOU. I am sure you know it well that there are atleast 10% player in the market who make money. It is just that we struggle hard to join their camp and do the things that they do.

Are you a better trader then what you were yesterday ? What extra have you done to improve yourself as a trader ? How much of effort/practice you are doing after market hours ? If results are unacceptable, then what are you doing to change them ? These are lot more fundamental issues then the P&L account.

Hope this helps.

Raunak, Bandlab - plz excuse me for quoting your name in above post. PM me if you have any objection and I will edit the post.

Gansal - though I have used YOU in above text..but my apology in advance if that has hurt you. I have no intention to hurt you but just used the word YOU to pass the msg.

Hope this post helps in addressing some fundamental myths about trading.

Happy Trading

...................................
this is a jewel from a senior trader.all must follow it

 

[joy.edakad]

The Open Range Breakout strategy is mastered by Toby Crabel. It works at High volatility periods. You can find more about it in his book.

Trading ORB alone is dangerous. If u don't believe me, take a look at a minimum of one years intraday data.

 

[joy.edakad]

Thanks.

I have done a lot back testing on this strategy. I use to trade on this strategy. I used to set profit .5% and SL 1% and same like you I never used any buffer and used to place orders blindly.

When I did back testing I got around 80-85% success, but in real trade I used to get only 65-70% and the reason was jump.


Say for the above example if I put a limit buy order @814.8 and say cmp=812, then it might be possible that I don't get any stock even though stock breaks 814.8.


But anyway this is a ever green strategy.

How could it an Ever Green Strategy ?

Suppose u make 10 trades at rs 100. With 70% win rate and 0.5% target u get 3.5 points but u lose 3 points in 3 losing trades.

Net profit is only 0.5 points. What about slippage and Brokerage.

 

[akrsrivastava]

I came across this thread last weekend and spent a considerable portion of my weekend studying and testing this strategy. I tested this on Nifty Futures intraday data from 28-Feb to 21-Mar. I know this is a small duration to backtest, but unfortunately I had the data for only this period.
I will suggest two modifications based on the test results that I got

1. 
   Keep a stop loss of 50% of the range and not 100%

• 
  Keep the first target at 75% of the range. Once this is achieved move the SL to this point and aim for a target of 100% of the range.

I will continue to test this for the next few days and see if these modifications are worthwhile.On 22-March I took a successful trade based on this strategy.

Here's a snapshot of my PL.

Uploaded with ImageShack.us

Bold numbers at the top are the running total of Nifty points aquiered from 28-Feb till date. PL's entered as Zero means that it was a No Trade day based on a 1% criteria.(Not 1.5% as suggested by bandlab)

This thread is dead. Is there is no interest in the thread because of some critical flaw that I have missed? Let me know, so that if this strategy is not worthwhile spending time, I can move on. However it seems promising to me at the moment.

Amit

 

[augubhai]

Cool strategy. Bumping this thread.