It is pretty easy to do this in excel with simple formulas. I am attaching the file with this post.
I have used it on NIFTY. It does work well on lower volatility instrument /chart timeframe..
In case of high volatility stocks, u might have many Outside day taking away the stops on the day of entry. For such stocks, I will look at higher timeframe so that charts are bit more smooth (say weekly chart),
But the concept of market going thru contraction / expansion is universal. I have observed this pattern on all charts ranging from other global indices to commodities and forex.
It doesn't suit smaller timeframe (say 5min, 15 min) because charts are not so smooth and it is easy to get false wicks on candle there.
In case of failed trade (i.e. in the morning, NR7 Low was broken on downside, and later the NR7 was taken away.
This is classical care of engulfing day.. and certainly, I will play with second break.
In this post, I have mentioned about how to play the breakout.
http://www.traderji.com/technical-analysis/27956-scalping-strategies-2.html#post307876
Backtesting comes up only when we define the complete system rules around it. I have my system around this. Would prefer to develop new system by involving TJ member rather then giving my system here (I strong belive in "teach a man to fish.. ").
Buy in cash on 3.15 pm on NR7 is risky.. cause u don't know the direction of breakout. By buying, u are anticipating that it is going to be bullish break tomorrow. In many cases, market can make runaway gap after such strong contraction.
I am not in favour of such trading (my personal choice). That is why I suggested this 3.15 pm approach with direction neutral option strategy.
If someone wants this, or u have other signals that support bullish trend tomorrow then one can take that call.
Thanks a lot for volunteering. Bandlab2. Sincerely appreciate it.
Keep posting your doubt/questions here so that others can also benefit from it.
Others, don't leave everything to bandlab and me but jump-in and benefit from this. Probably, you won't find the kind of learning that this system development will give you here. If someone wants, then this testing can be taken up for stocks, commodity, Sector indices etc.
This setup occurs approximately 2 to 3 times in a month on NIFTY but it is worth trading.
There are many different ways to chase a trend with trailing stoploss. For a daytrader this could be based on pivot high/low at 60min TF on day 1 but start tightening on day 2 or later to 30min PH/PL.
For swing trader, Prev days / H/L is good and simple enough.
In my view, when we use trailing stoploss, we leave some profit on the table. And all of us have different psychological preference for that. So there is no 1 answer for this.
Personally, I don't like to cut my profit so not in favour of closing all breakout trades quickly . At the same time, there is expected gain in our trading timeframe where I would like to take take partial profit or lock profit by using options.
Happy Trading.
