Higher high lower low strategy

2014-01-22_22-10-17

Author – Screentrader (@screentrader13)

Hi I am screentrader & trade only price patterns. I will be updating charts & strategies related to pure price action regularly in ‘Price Action’ category.

This is very simple strategy. In broader spectrum we can call it higher high and lower low method. I am a simpleton so don’t want to make too many rules.

Requirement –
This is very very conservative day trading strategy.
Time frame is 30 minute, chart is either candle stick or bar chart. High and low of the candle is important for this method. Instrument will be nifty future. Only price data is enough but sometimes we may refer volume data based on situation.

Rules-

1. 1st rule is based on open range breakout. We wait till 10 AM then we’ll take high and low of that opening range then add or subtract 7 point as filter and wait for breakout on either side.
Example. 6200 is high and 6170 is low of this opening range. So we add 7 point in that high 6200+7 = 6207. (7 is a filter which we use to avoid false moves.) With same logic we reduce 7 from low of opening range = 6170-7= 6163. So we will be long if price move above 6207. We will be short if price move below 6163.
If price move above 6200 but couldn’t cross 6207 till 10:30 AM and make new high say 6203 then we’re still waiting. Now for the next candle from 1030 onwords we will add 7 as filter in 6203 and wait for the breakout above 6203+7 = 6210. Same applies for 6170 as opening range low.

2. 2nd rule is congestion zone. As shown in the chart with blue squares where we can see cluster of candles in a range not going any direction. Such clusters are ticking bomb going to explode in any direction. So basically we take high and low of such cluster add or reduce 7 point filter and go long or short of that breakout.

3. In vertical V shape moves we take high or low of last 2 candles.

4. We can add in existing positions if market moves in our favor however such situation comes very rare. Also after 2:30 PM we don’t take any fresh position and will be looking for exit. After 2.30 there are no rules to exit, it is pure discretion. Idea is to gain from days action & avoid whipsaws in last hour.

5. The whole strategy is such that once we get into initial position we are always in the trade till the day ends because when our stops hit we immediately reverse our position. Say if a stop-loss hits when we are long (which will always be the low of congestion zone in case of long position) then we sell existing position and short the market. In technical analysis term it is called as stop and reverse SAR.

Drawback & strength of the strategy lies here, usually SAR targets are very high so stops are very big but it also avoids whipsaws. Usually as an averageĀ  2 or 3 trades trigger per day. As a personal experience trading this strategy for many years it is safe to say that, this strategy is not for margin accounts, big stops often tend to scare traders & they exit prematurely in the name of aggressive approach.

With example it will come very easy so if you don’t understand right now no issues. i will update trades live on Twitter so within 1 or 2 days you will get the picture.

Add/edit – These are yesterday’s tweets. You can refer above chart for this example.

As always for real time updates follow us on twitter @nf_es & @screentrader13

Notice: There is substantial risk of loss trading
futures & not suitable for all traders. Past
performance not indicative of future results.

 

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