Friday, February 12, 2021

Range Bar Trading

So after the budget day crash in Upstox, I had withdrew all the cash from my trading account, and took a break for few days. While sitting idle and reviewing my trading, I realized that I am not satisfied with my trading results (Not a surprise, since every time I review my trading, I come to the same conclusion.)

My main trading system is good - positive about 48% of the time, one trade a day, with RRR above 1.5. But even a 48% win rate with single trade per day, can give consecutive losing months. Also, the Stop Loss for the system is quite wide. The wide Stop Loss is the reason that I restrict myself to just one trade a day.

On the other hand, the experimental trading that I was doing with #RELIANCE had a small Stop Loss - allowing me to afford multiple losing trades in a single day. On 5th Feb, Friday, I tried paper trading #RELIANCE with range bar charts. I was impressed - many of my backtested trading systems are very impressive during the backtests... not so much during live trading.

I am not a fan of paper trading, so I had to put in money to trade. Here goes....

Upstox seems to have lost confidence in themselves as much as its clients have lost confidence in it. They auto-squared-off the trades at 2:30 PM and 2:45 PM and made me miss the some of the best moves. I have been trading with Upstox for over 10 years now, and have not faced major issues - but the budget day crash was too much. In the last few years, Upstox support has been pathetic, so it is hopeless to expect anything if the system crashes. I have been trading all these years with them without any real need for support. If they continue this business of early square-offs and higher margins, I will have no option but to move. For now, I just want my life to be simple - so I am continueing with the broker that I am used to.

I am posting the range charts (₹3) and M3 charts with my trades. The system is still very much WIP, and is being modified everyday.

Friday, 5th February - Paper Trades, POC

As you can see, I used a lot of SAR (Stop and Reverse) trades. All looked good on the paper, but I still had to try it live. Was a very narrow range day, but the paper trades still showed profit. Impressed.



Monday, 8th February - Learning: Avoid SAR

First trade was good. After that, trades drained the profit little by little. Judging entries was much easier while paper trading. Paper trading and live trading are not the same thing. I was very unhappy with a series of SAR losses towards the end. Auto-square-off at 2:30 PM cheated me of a good move. Scratch (small profit) day.



Tuesday, 9th February - Cheated by auto-square-off, again

Deliberately avoid SAR trades. I think that was a good idea. Still, leakage due to small losses ensured a negative day. The last trade (short) was auto-squared-off early. Else, this would have been a good day.



Wednesday, 10th February - Happy with the system, but need further filters

Opened the terminal late. Checked the charts and realized that I did not miss out anything. It was just a volatile early morning with no setups. Monday to Wednesday, #RELIANCE was duller compared to the #NIFTY moves. Yet, the system was able to catch good moves, with small Stop Losses.

Price was moving down, and I got multiple opportunities to enter. The first 2 attempts at shorts hit SL - full losses. Very slightly, very unlucky, I think. But then, this system keeps on giving entries. So, was able to catch some of the short move. I liked the SAR to long at the end of that move.

However, I wanted to avoid full losses - like the ones in the first 2 trades. I attributed it to volatility, so decided to minimize entries during volatility, even it meant missing out on some profits - some of the best moves originate from volatility. But I am just hopeful that the system may be able to catch other (safer) moves and compensate.

Again, very good directional move after my auto-square-off at 2:30.



Thursday, 11th February - Lesson: Relax the trailing

#RELIANCE was on fire on this day. I learned that it accounted for 90% of the #NIFTY gains on this day. So good, but...

Until 11 AM, was a somewhat volatile upmove. Botched it up. At the end of that move, I had generated much brokerage, and was in the negative. 

Finally, I had no option but to relax my trailing stops. It worked. Auto-square-off was at 2:45 PM, but still early enough to rob me of some profits. At the end of the trading day, I was convinced that I should be relaxed with my trailing stops, but analyzing a few more charts I realized that it would be a folly.



Friday, 12 February - OK day, but system is still fluid

So the plan for the day was:

  • Avoid/minimize entries during volatility.
  • Minimize SAR (Stop and Reverse) entries
  • Trail faster until the trade locks in about 10+ points.
  • Then, relax and go slow on the trailing stops.

The first hour of trade was volatile. Kind of expected, given the upmove of the previous day, and markets close to highs. Avoided the most volatile bars.

After that, the moves got calmer (and better?). Only one trade got to the slow trailing phase.

Overall, happy with the system. Still work-in-progress. Rules are being changed every day. Let's see....



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