Overtime I have observed that market structure changes in every 6 months. That is why one needs to constantly evolve with the markets and re-invent oneself. Failure to change can be disastrous even when you do nothing wrong. There are two updates.
After record run till September 2020, I hit 2 break-even (personally 1 loss) in October and November 2020. What used to work, stopped working. After detailed analysis, I found weekly options to be extremely draining psychologically and risky for positional trading. You cannot grow if you are in constant fight mode with the market. So from December 2020, I divested my self from weekly into bi-weekly or monthly or next monthly options. This is change no. 1 which resulted in peaceful trading.
I always knew technical analysis. I was so much into Nifty and Bank Nifty that I kept fighting on positions never trying that there are stocks beyond index which give perfect setup for one to initiate position. When you know aspects of technical analysis i.e. you know some stock is going to go up, you can do following:
Buy Stock
Buy Future
Sell Put
Buy a Call
Or do nothing
We have to do something. When we know value of something is going to increase, then we must act. Its called execution power. So rather than fighting with Index at wrong points, I started looking for high probability trades on perfect setup I already knew on stocks also. Results were astounding and again with less emotional and psychological draining. This is change no. 2.
I have not completely stopped Weekly Options trading. But I prefer to do trades where Risk:Reward is very good like 1:4 in Call Butterflies. With shorter duration of expiry, gamma risk is more in weekly options which keeps you on the edge till the last moment. So going forward, I am doing less weeklies and also ventured into stocks.
It has already rewarded me with 3% return without any psychological drain.
Our motive is profit. Not adrenaline rush of trading. Then even if it comes at the cost of boring trading, I am okay with it.
Going forward I have divested my self into 3 types of trading now:
Index Options Trading
Stock Options Trading
Futures and Equities
The way I operate in index options is already known to my followers. Through this post I want to convey how I operate in Future and Equities. I monitor Futures and Equity in 2 time frames.
Futures - Daily and Hourly Time frame
Equities - Daily Time frame
My option trading is completely discretionary. But Stocks based future and equity trading is totally systematic. Its a mix of minervini/darvas trading methodology. I do not trade intraday. All trades are positional. Hourly trade can run for 1 - 10 days. Future Daily Time Frame trades can run from 5 days to 2 months. Equity Daily Time Frame trades can run from 1 month to 6 month or more also.
One has to understand that Intraday trading was introduced to traders post the computer age. Before that every analysis was made on daily charts. That is where I apply my technical analysis. Fluctuations are easy to control in bigger time frame.
I scan the stocks manually. I determine buy/sell levels with SL from charts. SL-Buy orders are punched for this which means that all orders are in system at market open. We just wait and watch the trigger. When price is triggered, we place a GTD SL order and trail the profits. So when I scan stocks with level, if level is not hit within day or two; does not mean that trade is invalid. It means it hasnt triggered yet. We have two watchlists. One is Open Positions and another Watchlist. In watchlist are the stocks which are pending trigger. In open positions, as the name suggests lies open positions. many times, our intended stocks triggers after 7 days of waiting. We do not take a forced entry. For eg. this is my SL or Buy-SL trigger list
This is how my Equity, Future trading works. If option positions are to be taken, they are taken manually based on triggers. For eg. this is my Options Open Positions based on my triggers:
So going forward, I will be doing everything of what I know. No holding back to Nifty and Bank Nifty only.
Happy Trading
Rohit Katwal