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....

#RELIANCE trades

This week I continued with the method that I tried last week. 

After a debacle on Monday, I decided to trade only #RELIANCE, since I am able to enter with very small stop losses in #RELIANCE. It might make sense to stick to just one scrip, since there is a greater chance to catching good moves in the scrip. This plans works only if (Warning: Zen philosophy alert)

1. There is a good move in the scrip
2. I am able to catch that move
   

Since the entries are with small stop losses, I could risk taking multiple hits before catching a good move, and still not be hurt much.

This idea worked for 2 days, and then got hit by a series of losses. That made me drop Stop and Reverse trades, just to reduce the number of trades (here the thought is that every trade = potential loss)

** There was a period when I used to avoid using the terms 'win' and 'loss' in reference to my trades. But now I am out of that phase. Now, even when I use the terms 'win' and 'loss', mentally I am just thinking 'plus' and 'minus'.

Trades on Monday, Jan 11, 2021

6 losses - 2 each in #INFY, #BANKNIFTY and #HDFCBANK, followed by a small gain in #RELIANCE. Result: -4.5x

#INFY opened gap-up in the morning. I just wanted to get in, hoping for a strong move in either directions. Did not happen.

#BANKNIFTY trades with small Stop Losses. Quick stop loss hits.

#HDFCBANK short did not work. Then I reversed to long by mistake, because I forgot to cancel the SAR order.

Small gain in the last trade in #RELIANCE.

 

Trades on Tuesday, Jan 12, 2021

Traded only #RELIANCE. Second trade was a winner. Result: +11x

The first trade, short, had the SL hit quickly. Did not SAR.

Got a long entry soon enough. I was under tremendous mental pressure to lock in some profits. Reason for the pressure: Losses in the previous trading days. Managed to ward off the pressure, and got to exit at almost the high of the day.

 

 

Trades on Wednesday, Jan 13, 2021

Only 1 trade. #RELIANCE. Result: +7x

Early morning entry. I was not under any mental pressure to lock in profits on this day. Reason: Win in the previous trading day. So even when +12x reduced to +7x, I was hardly bothered.

 

 

Trades on Thursday, Jan 14, 2021

7 trades in #RELIANCE. Result: -5x

The system had a grahana on Sankranthi. Bad day. Got whipped, whipped, whipped. I was expecting that this system would give about 4, or at max 5 trades on a whipsaw day. But on this day, I was already in 7 trades and 6 losses before lunch.

Keeping the Stop Loss small has its advantages. At the end of the day, decided to avoid SAR (Stop and Reverse) trades just to avoid the number of trades (potential losses.)

 

 

Trades on Friday, Jan 15, 2021 

3 trades in #RELIANCE. All losses. Result: -3x

Missed out on the best move of the day, the drop that began just before 2 PM. Could not identify any small risk entry after that since the scrip was volatile after the drop.

 

Next steps

I had a serious look at the options charts for the first time in more than six years. This method seems tailor-made for options. Taking small stop losses in the hope of catching a big move. Big moves from narrow ranges happen all the time in options. Somehow, I am still not impressed with the options charts, though I did identify some of those setups. For the moment, I still prefer the small SL setups in #RELIANCE. Options are still on the table, though.

I am more impressed with potential of this system on the commodities chart. I found multiple setups in all the charts that I looked - #CRUDEOIL, #GOLD, #SILVER, #COPPER, #LEAD, #NICKEL and #ZINC. These setups look much better and more consistent than those on any of the Stock Futures chart. I can catch some very good moves that start after 2 PM. I should seriously be trading this method on commodities. What's preventing me is life. Nowadays, get out of the house after 3:30 PM for 2-4 hours. Will try this method on commodities as soon as I am able to reschedule my routine.

Trying Entries with small Stop Losses

I am trying out another variation of the Range Compression Trading System. I like this so far. It seems to have potential. The idea is to take entries with tight Stop Losses, and trail the Stop Loss only when there is significant profit.

This is still WIP. So the rules are still fluid, vague and changing. Some are mechanical, some are left to to discretion - the rules cover scrip selection, entry, initial stop loss and trailing stop loss - all are currently WIP.

Trades on Wednesday, Jan 6, 2021

First 3 trades netted losses, and the fourth trade covered the losses. Scratch day.

The first 2 trades were in #HDFCBANK. As I said, the rules are still fluid. At the start of the day, I had not planned to take trades within previous day's range, but took those trades out of impatience.

#BANKNIFTY was an ok trade, I think.

The last trade was in #RELIANCE - again, I overrode my rules when I took that entry. And that one worked, so I added similar entries to my rules for the next day.

I also looked at #NAUKRI. It was a lively chart. A good point to go long in the first hour, and later points to go short are clearly visible on the chart. Please acknowledge my expertise in analyzing the chart after the end of the trading day. 

Trades on Thursday, Jan 7, 2021

Another scratch day. 3 losses, followed by a winner that covered the losses.

First entry signal - a strong one - was to short #INFY. Did not take that short because it was within previous day's range. But this one would have worked well. So, now I have iffy rule about entering within previous day's range.

First trade was in #BANKNIFTY. I think it was a good entry location though it resulted in a loss.

Next, a long in #INFY. Entry was good, I think. Could have reversed to short, but there are so many ifs and buts.

Next was a short in #RELIANCE. Just shaken out before it moved down. 

Then the #NIFTY short that made money. Nice short, I think. Was patient with my trailing stop.

 

Trades on Friday, Jan 8, 2021

-1.5x loss day. Initially, took impatient trades that got me in the negative. Then got into a trade that started moving late in the day. If I had just held on, this would have been another day of 3 losses, followed by 1 winner that covered the losses. But मैंने खुद के पैरों पर कुल्हाड़ी मार दिया and tightened my stop loss. Even that early exit was fine, but then I decided to shoot myself in the foot. I tried one more impatient trade in the last few minutes on the day. My foot hurts.    

First 2 trades in #INFY, a long and then a SAR to short. Both did not work, but were within my entry rules. I think the entry location was good. Look at the gap with which #INFY opened. I thought it could have gone either way, and hence my impatience. Still ambiguous about whether I should take such entries or not.

I was still not done with liking the #INFY chart, so took another trade that lost.

Then, a long in #NIFTY that did not move for a long time. So when it started moving.... well after sometime I got jittery and tightened my stop loss. Mistake.

Took one more trade in #INFY. Impatient trade - don't really know why I took it - FOMO maybe? #INFY was moving fast at that point, and I took a gamble on short.

And then there are a couple of charts that I started watching only after mid-day. #MARUTI and #WIPRO moves had serious money. Scrip selection is important. Catch a full move like this and my week is made. 

 

 

 

2020-12-10 - 5 losses

 5 losses today. This method is still being backtested. The discretionary element of scrip selection and entries make it difficult to backtest the system with any confidence.

Live tweets of today's trades

 

 

2020-12-09 - Trying the Range Compression Trading System once again

 Today, I tried my hand again at the Range Compression Trading System that I used to trade some years ago. This time there some changes, though the concepts are very much the same. 

I had these mottos for the Range Compression Trading System:

 

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Say NO to small profits, Say NO to big losses.

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Be the Hunted

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Those remain. Today, I was trading the system on the M3 charts. This version of the Range Compression Trading System is mechanical. The only discretionary element that I am allowing is in scrip selection and entry point selection. The entry criteria is slightly different from the earlier versions of these trading system. Also, trailing begins much later than in the earlier version.

Today, I got an early entry in NIFTY and that held throughout the day. It did not move enough to initiate trailing.

 

Usually I do not post mechanical trades, but...

My live tweets of today's trade.

 

 

2020-12-07 - Regression

 Visually, today's trades look worse than those of Friday. Tonight, I will have to decide whether to continue with discretionary trading.... Almost decided. My confidence is slow, and it looks like I don't have the skill.

Live tweets of today's trades

I am done with this round of discretionary trading.

— Bakwaas Trading (@BakwaasTrading) December 8, 2020

2020-12-04 - At the end of my tether

 Call it wrapped thinking, but I am satisfied about two things:

1. I thought my entry setups were good, expect for the frustration trade in RELIANCE.
2. I kept my initial Stop Losses small.
   

Would patience have given me better entry with such small Stop Loss? I don't think so. With a larger stop loss? Perhaps.

Hardly any of my entries worked. I was not even able to trail my SL. So, objectively, weren't the entries bad? But pictorially they look good to me.

The first trade in BANKNIFTY moved, but I trailed the Stop Loss just a bit too quickly. In the last trade in ICICIBANK, I trailed slower. Quick trailing would have got me out earlier, maybe at breakeven. Everyday, I am flipping between having tight SLs and loose SLs.At the end of the day, my thinking was that small initial Stop Losses are fine, because in any case I have a tendency to get into losing trades. What's the point of losing bigger then. I could trail slower though, because the important thing is to catch the big move. Getiing out quick from a trade - whether in profit or loss - gets me faster into the next losing trade. So moving the initial Stop Losses slower might work.

I have almost given up on this round of discretionary trading. It's been another frustrating round. The objective of trying this out - to minimize (or eliminate) losing days - seems remote.Not sure if I will continue to trade discretionary on Monday. Last year, my discretionary trading trial had lasted whole of 5 days.

My live trading tweets today until I stopped tweeting.

2020-12-03 Tilting at windmills

Today's trading plan was to have a tight initial stop, and then mechanically trail slower than the previous days. It was wrong, since in the end it was like trading a untested mechanical trading system. I knew that right at the beginning - it goes against my rationale for trying out discretionary trading. Even a untested semi-mechanical system does give a sense of comfort - the possibility to blaming the "system"instead of taking full responsibility for the actions.

But I was psychologically damaged from yesterday's losses, and did not want to do the right thing. In the end, the results forced me to drop the plan, and concentrate on discretion. So the last 3 trades - one in HDFCLIFE and two in MARUTI were completely discretionary.

 

In MARUTI, I was tilting at the windmills - shorting an uptrend. On the previous days, a failed short would have made me go long, but today the plan was to avoid SAR. Even in the discretionary trades towards the end, I wanted to avoid SARs. Results of a couple of days in the last two weeks have been badly affected by SAR trades - including yesterday.

Tomorrow, let be play my discretion to the hilt. SAR will be decided by discretion. Entry will be discretionary. Trailing will be discretionary.

Live tweets of today's trades before I stopped tweeting.