Do you want to know my setup that has returned 337% on 15-minutes time frame in just 5 months of 2020 and 286% on daily time frame. What's more, the set up has returned 2600% since 1990. That is WITHOUT compounding. Read on.
First let me give a brief introduction on my 3+ Trading Methodology. You may read the full details here. It involves 3 factors that decide the trade. Together these three factors offer better returns through synergy and flexibility for managing trade, should the trade go against me.
Three deciding factors are
Understanding Market mood
Awaiting high probability technical setups and
Deploy option-spreads that offer statistical edge
Let’s talk about the second factor that is high probability technical set ups. I initially was not a fan of technical analysis because it often fails to predict the future price movements second, the signals generated lagged quite behind the price. As I gained more experience in trading, I found out that technical set ups and chart reading are not about predicting future. That’s impossible anyway. Technical setups are more about probability than prediction. They show us entry and exit points with high probability of wins. That is how it works as a great risk management tool. To choose trades with great risk reward ratio. (Know more about technical indicators here) Therefore, with the knowledge I gained from trading, investing and analyzing data, I set out to create my own technical indicators with two aims:
Indicator that does not lag behind price
That should suit my trading style.
My style of trading: I am a swing trader and not keen on exiting trades within a day. I use option spreads/hedging to manage overnight risks. That is actually the third factor of my trading methodology.
Here I present the back-test results of my two indicators:
a) one for 15 minutes time frame and
b) another one for daily time frame.
I would also explain the basic structure of the indicator. But I hope you will appreciate that I can’t disclose the full details of the indicator or the software codes used for back testing the setup.
The basic structure of indicator for daily time frame:
Standard deviation bands of two measures (i.e. called series in pine script) that are not moving averages. (I basically do not like moving averages because they either lag behind if higher number of bars is used or often go wrong if smaller number of bars are used)
How the standard deviation bands of two series compare with each other
How the two standard deviations bands compare with price movement
The buy signal is based on how price and two standard deviations bands move
There are two exit signals one- intraday, if price moves beyond volatility stop (actually slightly modified version of volatility stop)
The second exit is end of day signal, if the end of day price does not comply with or violates entry signal, I exit the trade.
The basic structure of indicator for 15-minute time frame:
Although entry and exit are based on 15-minute candles, it is not an intraday set up. The trade will continue for any number of days till system generates an exit signal.
Similar to signal generated by daily time frame indicator. Except for the following
The 15-minute standard deviation bands are compared with daily standard deviation bands
Entry signal is based on combination of 15-minute standard deviation, daily standard deviation bands and 15-minute price movement
Exit signal is based on daily standard deviation band and 15 minutes modified volatility stop. There is no end of day exit signal.
First let’s see how the daily time frame setup has performed.
I tested the set up for 2020 (till date), 2019 and 2000-2020(till date) on Nifty index. The performance results are awesome:
The testing parameters were conservatively chosen and are as follows
Capital : Rs.120000/- Initial capital deployed to trade one contract of Nifty
Lot : 1 lot (75 contracts)
Pyramiding : No compounding of profits. That means back test will continue to trade only one lot and will not increase position size just because profits are increasing.
Slippage : 5 ticks – Basically this is how much bid/ask spread and other etc., cost each trade.
Net return : Gross profit minus Gross loss
Percent profitable : No of winning trades out of every hundred trades
Max drawdown : Maximum percentage of fall of total funds from each new peak
Profit factor : Total profit divided by total loss
Screen shots of performance summary:
Full details of back test of Daily Time frame set up is available Below.
Now let’s see how the 15-minute time frame setup has performed.
I tested the setup from Aug 2019 to till date on Nifty index. Because 15-minute data availability for Tradingview free version is limited. The performance results are great again. The testing parameters were as usual conservatively chosen and it is similar to daily time frame set up as mentioned above
Screen shots of performance summary:
Full details of back test of 15-Minute Time frame set up is available Below.
Now you may ask, did I make so much money trading this set up. Answer sadly is NO ☹. Why?
The setup itself was developed recently after so much of research after quite bit of trial and error.
I initially had trust issues with the setup
However, I have been making decent money from the set up recently.