While building and trading systems, here are some things I've found helpful:
1. Keep it as simple as possible. You do not need fancy indicators/ charts to make money. Simple works the best. (1/4)
2. There will always be trades which would've worked better had you used some other indicator/method - but that's okay. Don't let it become a reason to tweak your system too often. (2/4)
3. Look at the larger picture - 100, 500 trades - then make an assumption about the performance of one indicator/method vs. another. Never base it on that one trade which is in front of you. (3/4)
4. The most important - discipline. Once you've formulated and deployed a properly tested, positive expectancy system, follow it religiously. Because that's the only barrier between you and profits. (4/4)
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Have random movements increased in Bank Nifty off late? Why have some popular option strategies underperformed in 2023?
Price Density and VIX analysis have the answer. Let's take a look .. 🧵 (1/n)
Everday market forms a range (high-low). How the market moves within this range determines what kind of strategies make money. A low noise environment is best suited for trend following while mean reversion strategies can benefit from noise. (2/n)
Price Density puts a number to this noise. Simply put, Price Density analysis compares the range (H-L) of individual candles versus the entire day/week/month/year's range. That gives us an idea of how price behaved within the larger range. (3/n)
Is investment in index/ mutual funds an easy way to grow your money?
Here's a detailed analysis of the index performance and how drawdowns affect your investments. 🧵
Nifty has given a CAGR of around 13%. That is a reasonable return to expect from the index over the long run. A large chunk of mutual funds and PMS underperform the benchmark, so you know what to expect there.
Large returns (>20%) are concentrated in a few years (2014, 17, 21).
Earlier (prior to 2010), we had back to back years where returns were > 20%, however in the past decade, the frequency of such years has dropped - 2012, 14, 17 and now 21. If we look at CAGR starting 2010, it has dropped to 10% compared to 13% for past 2 decades.
Limit Price Protection (LPP) range shall be the range on both sides of the Reference Price (RP) to validate price of limit orders. LPP is applicable to both limit and SL-L orders in index options.
Here's how RP and LPP will be computed 👇
RP during market hours shall be computed as follows: 1. For contracts that have traded in the last 30 seconds:
> simple average of trade prices of the contract in the last 30 seconds
> this reference price shall be revised throughout the day at 30 seconds interval (2/n)
.. This means that this RP is dynamic and keeps changing and will affect the LPP computed below in real time. (3/n)
I suppose lot of people want to know more about Cash Secured Puts (CSP). Simply put, there are 3 scenarios for trading a put:
1. Hedging - put long 2. Speculation - put long/short 3. Investment - put short
Point no. 3 is what CSP is all about. (1/n)
The most obvious way to invest in the market is to simply buy a share. However, another way (and a great one) is to short puts. You decide upon a strike (level) at which you're willing to buy the stock and short the put there. (2/n)
The premium you receive for the same is your maximum profit on the put. In case the stock falls and remains below that level at expiry, you get delivery of shares (atleast one lot) at a price equivalent to (strike price - premium received). (3/n)
People often ask "how do I setup a workout routine?", "what exercises should I begin with" etc
I always say - Can you take out just 5 mins a day to workout?
The answer: YES.. but what will 5 mins do? I can take out 30 mins, no problem
.. And that precisely is the problem (1/4)
That 30 mins continues for a day .. 2 .. a week .. and then starts going down .. 20 mins .. 10 mins .. off day .. 15 mins .. off day .. Then bye bye .. (2/4)
The thing is we've to make a task so small that it seems effortless to do. Once we get into the habit of doing that effortless task for a few days, it's easier to push ourselves a little more. With time, the task automatically starts appearing effortless, even if it's not.. (3/4)