No Indicator Strategy - Intraday: A Three-Phase Approach to Trading

 

No Indicator Strategy - Intradays: A Three-Phase Approach to Trading

Introduction:

Welcome to today’s Blog. We’re going to dive into a trading strategy that doesn't rely on indicators. We'll break it down into three phases to make it easy to understand and apply. We’ll cover entry, target, and stop loss, explaining each phase step by step.

Phase 1: Market Movement Analysis (9:15 AM - 10:00 AM)

Observe Nifty Movement:

From 9:15 AM to 10:00 AM, watch the direction of the Nifty index. Determine if the market is moving upwards or downwards.

Select Opposite Stocks:

If Nifty is moving up, identify stocks that are moving down, and vice versa. Use the top gainers and losers list to find these stocks (1%-2% move up/down and vice versa to Nifty directions).

Example:

• At 9:15 AM, start observing the market.
• By 10:00 AM, if Nifty is up, look for stocks that are in the top losers list.
• Select around 5-10 stocks with significant opposite movement (1%-2%).

Entry Point:

• Enter when the 10:30 AM high breaks.
• Set a 1.5% stop loss and a 3% target.

Phase 2: Midday Market Movement Analysis (12:30 PM - 1:00 PM)

Analyze Nifty Movement Again:

Observe the Nifty index from 12:30 PM to 1:00 PM. Identify the direction of Nifty’s movement during this period.

Select Opposite Stocks:

If Nifty is down, find stocks that are moving up during the same period. Use the same method as Phase 1 to identify these stocks(1%-2%).

Entry Point:

Identify the high or low of the selected stocks at 1:30 PM. Enter the trade when the 1:30 PM high or low is broken. Set a 1.5% stop loss and a 3% target.

Example:

• From 12:30 PM to 1:00 PM, if Nifty is down, find stocks that are up.
• Note the high or low of these stocks at 1:30 PM.
• Enter a trade when this high (for a down Nifty) or low (for an up Nifty) is broken.

Phase 3: Late Afternoon Market Movement Analysis (2:15 PM - 2:30 PM)

Check for Market Reversal:

Observe if there’s a change in Nifty’s direction from 2:15 PM to 2:30 PM. If Nifty changes direction (e.g., from up to down), expect a potential reversal in selected stocks from earlier phases.

Entry and Exit Strategy:

If a reversal is observed, adjust your strategy accordingly. Stocks that were following Nifty’s earlier trend may now panic and reverse their movement. Enter trades based on these potential reversals, ensuring you set appropriate targets and stop losses.

Example:

• If Nifty was up in the second phase but moves down from 2:15 PM to 2:30 PM, expect stocks selected in Phase 2 to potentially reverse.
• Enter trades when these stocks show a reversal movement, ensuring tight risk management.

Stock Selection and Trading Execution:

Importance of Stock Selection:

Stock selection is the most crucial aspect of stock options trading. It’s now 2:30 PM, and we still haven't entered any trades yet. The focus is on stocks selected in the first and second phases. If Nifty changes direction between 2:00 PM and 2:30 PM, keep an eye on these four stocks.

Strategic Entry:

If you missed the second phase, the third phase provides another opportunity. Focus on the four selected stocks, ensuring you are ready to enter trades post-2:30 PM.

Example:

• Suppose you have selected two stocks in the first phase and two in the second phase. Now, you have four stocks to monitor.
• Even if you haven't entered any trades yet, focus on these four stocks for potential entry post-2:30 PM.
• Observe the 3:00 PM high/low breakout for entry points.

Personal Experience and Learning:

I previously taught a 9:25 AM strategy on my Blog. To further help traders, I shared additional insights. Understanding entry points is crucial, but equally important are target and stop loss.

Stop Loss Strategy:

Importance of Stop Loss:

The primary goal is to avoid losses. Set a stop loss between 0.5% to 1.5%, depending on stock volatility.

Stock-Specific Stop Loss:

• For highly volatile stocks, set a stop loss at 1.5%.
• For less volatile stocks, set a stop loss at 0.5%.

Example:

• A stock with 1.1% daily movement might require a 0.5% stop loss.
• Highly volatile stocks, with 3-4% movement, might require a 1.5% stop loss.

Target Strategy:

Double the Stop Loss:

Set a target that is double the stop loss (R:R is 1:2).

• For a 0.5% stop loss, the target should be 1%.
• For a 1.5% stop loss, the target should be 3%.

Example:

• If a stock has a 0.5% stop loss, aim for a 1% target.
• If a stock has a 1.5% stop loss, aim for a 3% target.

Example of Strategy in Action:

Nifty Analysis:

• From 9:15 AM to 10:00 AM, Nifty is down.
• Identify top gainers moving opposite to Nifty.

Stock Selection:

• Selected Chambal Fertilizer, up by 3.5%.
• Note the 10:30 AM high.

Entry Point:

• Enter when the 10:30 AM high breaks.
• Set a 1.5% stop loss and a 3% target.

Example:

• Chambal Fertilizer’s 10:30 AM high is noted.
• When this high breaks, enter the trade.
• The target is achieved, as the stock moves upwards significantly.

Phase 3: Real-Time Example (2:15 PM - 2:30 PM)

Observe Market Movement:

As I mentioned earlier, from 2:15 PM to 2:30 PM, if the market changes its movement, it will create panic in the stocks we entered earlier.

Example:

• On July 20th, if the market continues to move up from 2:15 PM to 2:30 PM, there will be no panic in the stocks.
• Let's look at Chambal Fertilizer again: If we see the market moving upwards continuously without any significant drop, there’s no panic.

ICICI Bank Example:

• On July 19th, Nifty was down from 9:15 AM to 10:00 AM, so we selected ICICI Bank as a top gainer.
• If Nifty changes its direction around 2:30 PM, expect ICICI Bank to panic.

Example:

• Observe ICICI Bank at 2:30 PM.
• If the market direction changes at 2:30 PM, ICICI Bank should show a reversal.
• If Nifty changes from down to up at 2:15 PM, ICICI Bank should panic and drop.

Conclusion:

This strategy emphasizes simplicity and discipline. By dividing your trading process into clear phases, you can make more informed decisions. Remember to always test and validate this strategy with historical data and start with smaller lot sizes to practice. This structured approach can help you trade with more confidence and reduce unnecessary risks.

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