Is it just me or all evolved (people with enough experience of getting the hands burnt) people have realized that there is no Holy Grail in trading.
So how do u earn money in a field where there is no certainty.
Charlie Munger quotes a famous mathematician named 'Jacobi'. When ever you have trouble finding a solution to a problem, INVERT it on its head and the solution will pop out.
While Jacobi did that for math problems, turns out this strategy works for anything in LIFE.
Using the Invert analyses, I asked myself what is the most certain thing happening in the stock market
I realized that a) insiders are earning truck loads of money while SEBI is busy shagging and B) 90% of the OTM calls and PUTS expire worthless.
While I cannot do anything about A. It is B that can be worked out profitably.
Come to think of it, even before the strategy is formulated, we single out (screening) a scrip which has historically 90% chances of going in one direction only.
Now Step 2.
As per ed seycota only 03 things decide ur result in trading. Risk, payoff and luck and out of these 03, risk is the only thing u can manage.
To manage risk, we employ a ATR (2.5, 5) 2.5 is the multiplier and 5 is the period which acts as a trailing stop loss for our positions. (can be optimized).
timeframe needs to be decided basis individuals appetite, risk tolerance and corpus size.
basis the points to stop loss, we risk 2-3% of our corpus on any given trade.
Step 3. Instead of trading OTM calls and puts all the time. We would trade them in the last 05 days before expiration. The accelerated fall happens in the last 05 days (this no. of days can be optimized)
so there we have it; a simple system with a backdrop of 90% movement in our direction. Even with that assurance a money management discipline of not losing more than 2% on any trade.
Now for the logistics.
I have the AFL which does the ATR sell thing. What I need is the code which tells the AMIBROKER to do it only on last 05 days (optimizable) of expiration
Once we have that, we can back test it for the last 10 odd years of data on options lets say 300 points away from CMP and see if it has been a consistent money churner or not. and also what has been a draw down.
Please help me in my endeavour. I think on paper at least this looks like a winner. ATR buy/sell any ways is a trend following system, so one gud trend pays for em all and if there is 90% probability of direction, it looks like a no brainer 2 me.
your comments are welcome. Back testing and coding is more welcome.
warm regards,
Manish Dhawan.
Mystic Funds
So how do u earn money in a field where there is no certainty.
Charlie Munger quotes a famous mathematician named 'Jacobi'. When ever you have trouble finding a solution to a problem, INVERT it on its head and the solution will pop out.
While Jacobi did that for math problems, turns out this strategy works for anything in LIFE.
Using the Invert analyses, I asked myself what is the most certain thing happening in the stock market
I realized that a) insiders are earning truck loads of money while SEBI is busy shagging and B) 90% of the OTM calls and PUTS expire worthless.
While I cannot do anything about A. It is B that can be worked out profitably.
Come to think of it, even before the strategy is formulated, we single out (screening) a scrip which has historically 90% chances of going in one direction only.
Now Step 2.
As per ed seycota only 03 things decide ur result in trading. Risk, payoff and luck and out of these 03, risk is the only thing u can manage.
To manage risk, we employ a ATR (2.5, 5) 2.5 is the multiplier and 5 is the period which acts as a trailing stop loss for our positions. (can be optimized).
timeframe needs to be decided basis individuals appetite, risk tolerance and corpus size.
basis the points to stop loss, we risk 2-3% of our corpus on any given trade.
Step 3. Instead of trading OTM calls and puts all the time. We would trade them in the last 05 days before expiration. The accelerated fall happens in the last 05 days (this no. of days can be optimized)
so there we have it; a simple system with a backdrop of 90% movement in our direction. Even with that assurance a money management discipline of not losing more than 2% on any trade.
Now for the logistics.
I have the AFL which does the ATR sell thing. What I need is the code which tells the AMIBROKER to do it only on last 05 days (optimizable) of expiration
Once we have that, we can back test it for the last 10 odd years of data on options lets say 300 points away from CMP and see if it has been a consistent money churner or not. and also what has been a draw down.
Please help me in my endeavour. I think on paper at least this looks like a winner. ATR buy/sell any ways is a trend following system, so one gud trend pays for em all and if there is 90% probability of direction, it looks like a no brainer 2 me.
your comments are welcome. Back testing and coding is more welcome.
warm regards,
Manish Dhawan.
Mystic Funds