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The secret of hi lo trading. Its actually quite simple.
Whatever time frame that you trade in, learn to start looking at the bigger picture. I was wondering, why our performance in May to July was below par. And I got one insight, which set me thinking. In order to make Hi-Lo trading - shorting from highs and going long from the lows, I used Fibonacci levels to determine resistances and supports. I looked also at the normal pullback levels as well. But it seemed like a bit of russian roulette. It took me some time to figure this one out, and we have not yet completely put it into action. Whenever you trade, start looking at the bigger picture of the trends for the scrip that you trade in. Its not about seeing the 15/30minute or the 4 hour charts. Its about seeing the larger trend patterns. It is possible to cancel noise in the market by switching to higher time frames. But what about looking at the bigger picture by compressing your current time frame. This is just one good way to identify all the trends relevant for your trading. For example, if you see 5 minute bars over 15 days on one screen, you will get an immense amount of information, that can be used profitably, by using your favorite trading method. If you are a trend follower, for example, you can plot all the relevant trend lines and avoid entries of new trades in mid trend or when the market is changing direction. Check it out, and you wont be disappointed! There is no silver bullet solution to get to the pot of gold that you dream about. But making trading simpler by looking at the bigger picture certainly helps!
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Whats the best way to trade in ranging periods, in specific? Usual trading approaches are all around concepts such as breakouts above or below levels. These levels are market means, swing highs and lows, camarilla type levels and so on. However, all of these methods do not give good results, if you are stuck in a range.
One of the most effective ways to trade, which we are experimenting now is to trade the highs and lows of the market. If you can get that right, you are always entering the momentum before the crowd gets in, and therefore will usually reach your targets. The challenge in this method is to discover the highs and lows from where you will begin trading. And thats something, which we have been working on for some time. This will reflect in our trades slowly but surely. From June 11th onwards, the ranging market movement has not given any significant range movement that could allow significant and successful trades. This is a test of patience and consistency in our trading methods. We offered a trial from 22nd June till 29th for new users, but havent been able to notch any significant trades during this period.
The only redeeming factor is that our trading approach has kept losses low and leads us to think on developing norms for not trading when range consistently stays within a specific limit and varying our trade . More on this in the coming days. This section has a wealth of information on popular trading methods and a lot of original work output from our own research methods. An example is that of the trade simulator which can be used in many innovative ways by a non tech savvy trader to test their trading ideas or just to journal their trading. A first has been that of demonstrating how two or more different scripts can communicate with each other, therefore allowing great flexibility to separate different actions within trading into "common" services.
Our trading methods have changed over time to become more efficient and risk managed. The number of trades per day has dropped drastically to no more than 1-3 trades. We've learnt to avoid ranging periods to a large extent and new services such as intraday positional introduced for Nifty Futures and short term positional for Bank Nifty Futures. These services are free for existing subscribers.
And of course, our traders profile has also changed to process oriented and disciplined ones! Original research using methods that have not been observed anywhere else are being employed to make this happen and more innovations will come in the future! Our Nifty trading results have not been much to talk about for the last 3 days, as we are switching to a smarter more reliable mechanism that ensures that we dont get affected by range movements on dull days or ranging after a gap up/down. Be patient around intraday trading for the next few days as the changes stabilize. However, BankNifty intraday and Nifty positional trades continue to do well as before.
If you are a day trader and you start hopefully at the beginning of a day for a good trading day and then slowly see nothing happening, because of a gap up or a gap down opening followed by a narrow 30 point range movement the rest of the day?
It hasnt been often that Nifty has traded in a range for more than 2-3 sessions at a time or that all the big moves happen only in the gap ups/downs. This is another reason for traders to look at diversifying their trading mix from just one style - day trading - to inlcude position trading or trading in more than one instrument. While Nifty, for example has hardly moved, the BankNifty has been swinging wildly with the volatility that makes a day trader happy. At the same time, positional traders who have stayed with the trend are making their money through the gap ups. Think about it! As traders, you cannot control the results of trading, they occur, because of the market moves and your risk management strategy was able to encash on those moves With the year now ending, an interesting realisation during our trading this month is the subtle changing of the market.
If you are a swing trader, you expect that higher highs and lower lows generally indicate an uptrend or a downtrend respectively. In ideal conditions, yes, they do, but the markets are no longer ideal with "algo"rithmic programmed trading, that try to fool small time traders who use this and other similar methods. What these algo program trends show are higher highs and lower lows together! But there is a secret, its a pattern within a larger pattern, which continues to be well behaved. The question then is judging the shape of the larger pattern which is well behaved and filtering out the noise at the micro level. This change has made intraday trading more complex, particularly Nifty trading. Volatile indices do not suffer this symptom so much, but then these are already high risk instruments because of the volatility. What do you do then? Several answers: - avoid trading in the periods when the market has these characteristics. - Fine tune your risk/money management system. - Avoid the low risk reward trades, where rewards are nebulous, small or doubtful. Look at price action and volume that indicates the development of a significant trend.. since the old adage, "trend is my friend: is still the most reliable way of playing these choppy markets. The challenge now is now simply being able to filter out the noise. This is simply amazing. Traders stay quiet and smug while running on the winning trail. But the moment they fall, they get the fear of God and freeze in their tracks like statues. They will stop trading or will trade and get out with 5-10 points profit in their next trade. And see the next long winning run just pass them by.
Why does this happen? Its simple. When you begin trading you need to have a full strategy or plan. And not trade simply on the fly. If you do the latter, you will be counting the pebbles, and miss the bigger story completely. Losses are part of the trading game. On December 1, all my trades were stop loss trades in the morning, but I persisted and won in the later trades, closing with a small profit net for the day. Budget for losses and profits.If your profit target is 100% your total trading outlay should be 150% which accounts for 33% losses in your monthly profit and loss statement. Spread this 33% across each week and calibrate your performance on that basis and not by each trade. Get that emotion out of your mind! and trade objectively. Come to me if you still have a problem. Now you can trade the BankNifty too as part of the services offered from this site. Why BankNifty? Its more volatile than the Nifty, but that volatility increases the potential profit earning. The downside, you may have a slightly and usually the same risk as Nifty.
Coming soon - experiments with European Indices. Will start posting positional calls for FTSE and DAX to provide an international appeal to the site. |
AuthorAbnash Singh, Am a Trader helping small traders to realize their dreams. Archives
October 2017
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