Although it is very difficult to explain the difference between different indicators at different time frame and setup, but I’ll try to keep it as simple as possible. I will try to explain with 1 example.
Index: BankNifty (BN)
Timeframe: 5 Mins
Trading: Intraday only
Date: 26th Aug
Indicators for Strategy 1: BB + RSI (9) @ 50 + EMA (3) on RSI + WMA (21) on RSI
VS
Indicators for Strategy 2: Pivots + CPR + Previous Day High / Low
Strategy 1 -
1. @ 9:50 BN trading @ 35,560 - RSI is above 50 + WMA is below EMA so it’s a Buy. And exit when situation reverses, RSI below 50 + WMA is below EMA & that comes @ 10:25 when BN was trading @ 35,570. So No PnL generated considering Theta Decay.
2. @ 10:50 when market was trading @ 35,600. Buy call generated, SL & exit again as per indicators and would have gained 110pts by 12:15.
3. Next Entry in Put @ 12:20 when market was trading @ 35,710 & exits @ 35,700 at 13:00 so no PnL.
4. Again @ 14:15 market was showing weakness so entry @ 14:20 entry below 35,685 & exit as per indicators or since its EOD, exit with 100pts profit.
You can check this in 10/15/30 mins time frame; you will get entry & exit at the same point mostly in sideways market. Only on smaller time frame you will get multiple calls.
Benefits of Strategy 1:
1. Nothing to lose even in sideways market
2. Can generate maximum profit in 1 side market since you will be able to ride full
3. Easy to understand and Execute
4. Generates better signal after consolidation
Drawbacks of Strategy 1:
1. Will be difficult to generate profit in sideways market
2. Late Entry & Exit
3. Indicators take time to generate signals as they are based on MA
4. If market is giving crazy moves in small time frame then by the time system generates entry/exit it will be too late
5. If market opens gap up / gap down and continue to move in the same direction whole day then you will be reluctant to take entry in the midway.
Strategy 2 –
1. @ 9:20 BN trading @ support zone of 35420 & 34435. Also, Gap down opening below CPR and since CPR works as magnet and 60 to 70% of the time if market opens gap up or gap down it starts moving towards CPR.
2. So entry above 35435 with the SL of 20 pt below support zone and Target 35,665. And if you watch closely @ 10:05 market touches the target. So 230pts gain.
3. In case SL hits then reverse position again with the SL of 20pts with the target of next support / resistance
4. @ 14:05 when BN was trading near 35,760 one can buy put but since SL would have been above resistance zone i.e. above 35,830 (70pts), Take profit @ 35,665 (95 pts) pivot point (Black Line) and since market is sideways, it was a risky trade and risk reward ratio was not favorable. So avoided this trade.
Benefits of Strategy 2:
1. Early entry & exit
2. Can generate profit even in sideways market also
Drawbacks of Strategy 2:
1. Risky & logic based
2. Will not be able to generate maximum profit in 1 side market
3. Complicated as so many things to consider like; previous day high/low, 1st candle high/low, CPR, Virgin CPR, etc.
4. Takes time to master the skill
5. 2nd Entry very difficult & more risky in sideways market
Observations -
1. If someone followed strategy 2 then they would generate good profit without any risk & would have gained 200+ pts in a day even in sideways market.
2. If someone followed strategy 1 then they would have gain 200+ pts @ SOD only
What I do?
1. I trade with Strategy 2 @ start of the day, since indicators takes time to generate calls due to gap up & down.
2. Now depending upon CPR/virgin CPR/Previous Day High/Low like any candle touched CPR or not/it is moving away or towards CPR. Also, depending upon the market conditions or on which day I am trading, I take my exit.
3. During 2nd and 3rd session i.e. after 11:00, I use strategy 1 since indicators have mostly stabilized and now will be able to give better entry & exit.
Now the question is which strategy you should follow?
1. Those who are new in the market they should definitely go with the strategy 1.
2. Try with 2 lots or more, book 50% of lot when BN gives 100/150pts depending upon the market and remaining 50% as per indicator so either huge profit or no profit on remaining 50%.
3. Start learning strategy 2 by observing market for few weeks/months, get detail knowledge of pivots & CPR, start mock trading and once you are comfortable then start small with 1 lot.
4. Once you have mastered & combined both these strategies you will be easily able to get on an average 100+ pts / lot in options.
Note:
1. These strategies are only for BN
2. Same strategy & Time frame may not work in Nifty / Stocks
3. You can try strategy 1 in Stocks / Nifty trading also but time frame needs to be adjusted based on your holding period
As I always say no strategy/indicator is full proof, but mastering these 2 strategies and executing them together will definitely give you much better results. And most important, it is always easy to say buy this and sell this as an example after the market is closed, but very difficult to execute during live market. Only after practice, practice, practice & discipline you will be able to trade successfully. So keep practicing as no 2 days in the market are same. Don't trade with emotions, trade with logic.
*I am posting chart in 15mins time frame as smaller time frame is not allowed but you can check exact entry & exit in 5mins time frame.
Index: BankNifty (BN)
Timeframe: 5 Mins
Trading: Intraday only
Date: 26th Aug
Indicators for Strategy 1: BB + RSI (9) @ 50 + EMA (3) on RSI + WMA (21) on RSI
VS
Indicators for Strategy 2: Pivots + CPR + Previous Day High / Low
Strategy 1 -
1. @ 9:50 BN trading @ 35,560 - RSI is above 50 + WMA is below EMA so it’s a Buy. And exit when situation reverses, RSI below 50 + WMA is below EMA & that comes @ 10:25 when BN was trading @ 35,570. So No PnL generated considering Theta Decay.
2. @ 10:50 when market was trading @ 35,600. Buy call generated, SL & exit again as per indicators and would have gained 110pts by 12:15.
3. Next Entry in Put @ 12:20 when market was trading @ 35,710 & exits @ 35,700 at 13:00 so no PnL.
4. Again @ 14:15 market was showing weakness so entry @ 14:20 entry below 35,685 & exit as per indicators or since its EOD, exit with 100pts profit.
You can check this in 10/15/30 mins time frame; you will get entry & exit at the same point mostly in sideways market. Only on smaller time frame you will get multiple calls.
Benefits of Strategy 1:
1. Nothing to lose even in sideways market
2. Can generate maximum profit in 1 side market since you will be able to ride full
3. Easy to understand and Execute
4. Generates better signal after consolidation
Drawbacks of Strategy 1:
1. Will be difficult to generate profit in sideways market
2. Late Entry & Exit
3. Indicators take time to generate signals as they are based on MA
4. If market is giving crazy moves in small time frame then by the time system generates entry/exit it will be too late
5. If market opens gap up / gap down and continue to move in the same direction whole day then you will be reluctant to take entry in the midway.
Strategy 2 –
1. @ 9:20 BN trading @ support zone of 35420 & 34435. Also, Gap down opening below CPR and since CPR works as magnet and 60 to 70% of the time if market opens gap up or gap down it starts moving towards CPR.
2. So entry above 35435 with the SL of 20 pt below support zone and Target 35,665. And if you watch closely @ 10:05 market touches the target. So 230pts gain.
3. In case SL hits then reverse position again with the SL of 20pts with the target of next support / resistance
4. @ 14:05 when BN was trading near 35,760 one can buy put but since SL would have been above resistance zone i.e. above 35,830 (70pts), Take profit @ 35,665 (95 pts) pivot point (Black Line) and since market is sideways, it was a risky trade and risk reward ratio was not favorable. So avoided this trade.
Benefits of Strategy 2:
1. Early entry & exit
2. Can generate profit even in sideways market also
Drawbacks of Strategy 2:
1. Risky & logic based
2. Will not be able to generate maximum profit in 1 side market
3. Complicated as so many things to consider like; previous day high/low, 1st candle high/low, CPR, Virgin CPR, etc.
4. Takes time to master the skill
5. 2nd Entry very difficult & more risky in sideways market
Observations -
1. If someone followed strategy 2 then they would generate good profit without any risk & would have gained 200+ pts in a day even in sideways market.
2. If someone followed strategy 1 then they would have gain 200+ pts @ SOD only
What I do?
1. I trade with Strategy 2 @ start of the day, since indicators takes time to generate calls due to gap up & down.
2. Now depending upon CPR/virgin CPR/Previous Day High/Low like any candle touched CPR or not/it is moving away or towards CPR. Also, depending upon the market conditions or on which day I am trading, I take my exit.
3. During 2nd and 3rd session i.e. after 11:00, I use strategy 1 since indicators have mostly stabilized and now will be able to give better entry & exit.
Now the question is which strategy you should follow?
1. Those who are new in the market they should definitely go with the strategy 1.
2. Try with 2 lots or more, book 50% of lot when BN gives 100/150pts depending upon the market and remaining 50% as per indicator so either huge profit or no profit on remaining 50%.
3. Start learning strategy 2 by observing market for few weeks/months, get detail knowledge of pivots & CPR, start mock trading and once you are comfortable then start small with 1 lot.
4. Once you have mastered & combined both these strategies you will be easily able to get on an average 100+ pts / lot in options.
Note:
1. These strategies are only for BN
2. Same strategy & Time frame may not work in Nifty / Stocks
3. You can try strategy 1 in Stocks / Nifty trading also but time frame needs to be adjusted based on your holding period
As I always say no strategy/indicator is full proof, but mastering these 2 strategies and executing them together will definitely give you much better results. And most important, it is always easy to say buy this and sell this as an example after the market is closed, but very difficult to execute during live market. Only after practice, practice, practice & discipline you will be able to trade successfully. So keep practicing as no 2 days in the market are same. Don't trade with emotions, trade with logic.
*I am posting chart in 15mins time frame as smaller time frame is not allowed but you can check exact entry & exit in 5mins time frame.