Strategy:Reversal-Catcher

2023년 8월 27일

What
This is a plain and vanilla reversal based strategy for intraday (15m) timeframe on Futures prices of the assets.

Now what all it comprises of?

1. It finds out the dynamic support & resistance from Bollinger Band (20 period, 1.5 std dev).
   
2. It finds out the potential divergence of price deviation from 5 period exponential moving average (EMA).
   
3. If the previous candle (N-1) shows a divergence it confirms the reversal by checking the present candle (N) to be closed inside the Bollinger Band.
   
4. It confirms the momentum by checking RSI shows a crossover/crossunder to oversold (30) / overbought (70) region.
   
5. It also confirms whether the trend is up (then only reversal trade to short) or down (then only reversal trade to long). The trend is checked with EMA-21 and EMA-50.
   
6. Re-affirmation Condition: It re-affirms the position of two successive candles called as `hhLLong` and `hhLLShort` in the script. [Described below]
   

Why

In Indian context, retail participants are pre-dominantly (yes- 80% of Indian daily volume) Options buyers mainly in weekly indices (Nifty, BankNifty, FinNifty, CNXMidcap, Sensex, Bankx .. well everyday is expiry now in India, except -- Thank God -- Saturday & Sunday).
And in Index Options the momentum plays a big role.
If one can catch a good reversal point the potential of high Risk-to-Reward trade (hence earn handsomely) is very likely (please note: there is no holy grail in trading. Nothing works 100%).
So this is the attempt to catch a reversal.


Re-affirmation of Reversal

1. hhLLong: It's a reversal point after an uptrend. It checks the relative positioning of current candle compared to that of previous candle. [The details are in the script. Check for variable

   hhLLong

   in script.
   
2. hhLLShort: It's a reversal point after a downtrend. It checks the relative positioning of current candle compared to that of previous candle. [The details are in the script. Check for variable

   hhLLShort

   in script.
   

Unique-ness

What's unique in it? Why we decided to publicly share this:

1. Already given the context of The Great Indian Options Buyers community. It should be helpful to them, we believe.
   
2. It takes Very Less Number of Trades with High Accuracy. Please check the result in NIFTY1! in 15m timeframe. 71% accuracy with roughly a trade in a month.
   
3. There is no point giving brokers' the brokerages taking 10 trades a day and ending not-so-good EoD. Better lets take less trades with better result possibility. [The ultimate result is same .. you take 10 trades .. 200 trades a month and earn something. If you can get same with lesser number of trades - hopefully - that's better as it perceived generally].
   

Mention

1. There are many people uses this variation of Bolling Band, 5EMA
   
2. Many people use RSI, trends and relative positioning of candles.
   --> We are grateful to all of them. It's really difficult to mention everyone's name. But all people somehow influence the thought process. Thanks for all of them.
   
   Statutory Disclaimer
3. There is no silver bullet / holy grail in trading. Nothing works 100% time. One has to be careful about the loss (s)he can bear in case of the trade goes against.
   
4. We, as the author of this script, is not responsible for any trading or position decision one is taken based on the outcome of this.
   
5. It is our sole discretion to change, add, delete the portion or withdraw the whole script without any prior notice or intimation.
   
6. In Indian Context: We are not SEBI registered, will never be SEBI registered.