Principle based day trading strategies

[rajesheck]

What is a principle ?

A principle can be an universal truth, philosophy, intuition or insight. Creative thinking is the way to explore truth. Joy is in seeing, knowing and being. That is creative life.

Trading business is a creative journey of exploring business philosophy and revenue generation is a by product while joy, love, passion and curiosity are the raw materials.

 

[Pelt]

Principle based intraday strategy

When successful investors make principles based investment why not a day trader?

In fact the success rate in day trading will be higher than in investment because there is virtually zero external influence beyond the open price within day trading when compared to investment or even positional trading.

I created a day trading strategy based on a single principle : Never lose your money.

The reason to choose this principle is that the probability to lose money in trading is very high than to gain.

"Never lose your money" is not a technique but a trader's attitude. Which means the primary focus is on minimizing, or if possible avoiding, losses in every single trade. Profit making will be the secondary focus which aligns with the primary focus of protecting the money.

For that the entry and exit rules must be the same. The same reason (rule) which a trader enter the trade is to be used to exit if the reason (rule) does not exist.

The entry rule has to be configured in such a way that the possible loss will be minimal.

Entry Rules

1# A RALLY of X% or more within 20 minutes.

For example if the script is trading at price P then a rally of X% means rally from P to P + P * X/100 or more



2# WAIT for 2 minutes if the rally is gradual. If the rally is a bit faster then wait for 10 minutes.



3# ENTER when there is a crossover of the rally before 60 minutes.

For example if the rally touches price P by 10:10 am and crossover the same before 11:10 am.



Note : The rally need not be a breakout of the day's high/low breakout. The rally can be either with the trend or against the trend.


Target : Open target. Let the day decide it.

Stop loss : Exit immediately when the crossover of rally is reversed.

X values across segments:
1. Index Futures : 0.18%
2. Equities : 1%
3. Forex : 0.12%
4. Commodities : 0.5%

Do you need charts to do this? Are they necessary beyond knowing for example what the CURRENT price is, what it was x-minutes ago?

 

[rajesheck]

Do you need charts to do this? Are they necessary beyond knowing for example what the CURRENT price is, what it was x-minutes ago?

This is basically a simple momentum trading strategy.

You just need a simple intraday chart (without any technical charts for eg. moving averages) to follow the momentum, which is price action against time.

 

[Pelt]

This is basically a simple momentum trading strategy.

You just need a simple intraday chart (without any technical charts for eg. moving averages) to follow the momentum, which is price action against time.

I am asking as I once new a guy who said he traded based on 'momentum.' I personally got to see several dozens of his entries, which where usually pretty good(this was years ago). He traded several instruments, and several of what he referred to as 'timeframes.' He labeled himself a chartless trader, although of course he always had charts in front of him.

That is the reason I am asking.

I have been interested in such a concept, but never understood myself how it works.

 

[rajesheck]

I am asking as I once new a guy who said he traded based on 'momentum.' I personally got to see several dozens of his entries, which where usually pretty good(this was years ago). He traded several instruments, and several of what he referred to as 'timeframes.' He labeled himself a chartless trader, although of course he always had charts in front of him.

That is the reason I am asking.

I have been interested in such a concept, but never understood myself how it works.

By "chartless" i guess he is referring "no technical charts" (eg. moving averages).
(https://www.elitetrader.com/et/threads/day-trading-basics.305348/page-7#post-4383960)

Momentum trading is nothing but the "timely price action", a two dimensional measure : price action and time.

This is an edge over regular price action strategies that wont include "time factor".

Momentum trading setup :

 

[Pelt]

By "chartless" i guess he is referring "no technical charts" (eg. moving averages).
(https://www.elitetrader.com/et/threads/day-trading-basics.305348/page-7#post-4383960)

Momentum trading is nothing but the "timely price action", a two dimensional measure : price action and time.

This is an edge over regular price action strategies that wont include "time factor".

Momentum trading setup :

I think I understand what you mean by the whole idea. But the guy I mentioned made note of trading with momentum, and how he used excel for example to plot out where his 'momentum' was.

With regards to what you've been posting, similar to your chart you just posted, I created a script that would plot the rallies that occurred within 20 minutes or less. So just to plot bars that had this condition, I manually am looking afterwards for the 20-60 minute windows.

I actually did two versions, initially where it is just a bar count, irrespective of actual clock time. I created another that actually looks at the time, and subtracts say, 20 minutes from the current bar to compare the current price to the price 20 minutes ago, and checks if the percentage move has occurred. I wanted to do the second version so I could visually look at a range bar chart to check out the idea of the stoploss being immediately replaced with entry.

It seems there are rare occasions where you could 'IMMEDIATELY' replace your stop? This occurrs sometimes, but it seems as if it is the exception.

Shown in the pics are dots where the rally condition was met, you can see that sometimes it continues for multiple bars consecutively. But with the "WAIT" portion of the idea, when the xover, happens, I don't see too many opportunities for IMMEDIATE stoploss replacement.

 

[rajesheck]

I think I understand what you mean by the whole idea. But the guy I mentioned made note of trading with momentum, and how he used excel for example to plot out where his 'momentum' was.

With regards to what you've been posting, similar to your chart you just posted, I created a script that would plot the rallies that occurred within 20 minutes or less. So just to plot bars that had this condition, I manually am looking afterwards for the 20-60 minute windows.

I actually did two versions, initially where it is just a bar count, irrespective of actual clock time. I created another that actually looks at the time, and subtracts say, 20 minutes from the current bar to compare the current price to the price 20 minutes ago, and checks if the percentage move has occurred. I wanted to do the second version so I could visually look at a range bar chart to check out the idea of the stoploss being immediately replaced with entry.

It seems there are rare occasions where you could 'IMMEDIATELY' replace your stop? This occurrs sometimes, but it seems as if it is the exception.

Shown in the pics are dots where the rally condition was met, you can see that sometimes it continues for multiple bars consecutively. But with the "WAIT" portion of the idea, when the xover, happens, I don't see too many opportunities for IMMEDIATE stoploss replacement.

Nice work !

I guess this strategy cannot be or difficult to automate.

I do manual trading only. Replacing the entry with stoploss needs to be taken as an art to be perfected through practice rather than a science.

 

[Pelt]

Nice work !

I guess this strategy cannot be or difficult to automate.

I do manual trading only. Replacing the entry with stoploss needs to be taken as an art to be perfected through practice rather than a science.

That sounds reasonable.

But I wasn't looking to automate(as in automate a strategy), as I don't really think that's a useful thing for a retail trader. But rather just looking to highlight those times where a certain type of rally has occurred.

I have tried to look at rallys/declines many times, typically with using zz swing filters(of many different types), to look for ways to enter. But I had not approached it in the way you describe so it seemed interesting to me.

 

[Pelt]

I do manual trading only. Replacing the entry with stoploss needs to be taken as an art to be perfected through practice rather than a science.

Also just to clarify, you only consider the stoploss replacement as the 'art?' And not the rally identification?

 

[MarkGroes]

Is your "Principle based day trading strategies" the only principle in your trading or several ones are possible to use together?