Prabhudas Lilladher Algo Desks run Index strategies (Nifty and Bank Nifty) for clients interested in trading indices and avoiding whipsaws associated with stocks. This blog is about Traders Edge- Index Algos.
Our Algo Desk has revisited the entire strategy suite and released a new , simpler version of the strategy which is now available from October 7, 2019 across our office network which offers trading via the Fox Trader Terminal installed apart from our HO Dealing Desks.
TRADERS EDGE INDEX STRATEGY : KEY FEATURES
- We advise 1 lot per Rs 2 lakh of margin for any of the two indices where a trade is offered and if you wish to participate in both indices, we advise a minimum margin of Rs 4 lakh.
- The strategy works on a combination of signals
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- SuperTrend Buy or Sell or No Trade Zone
- RSI Crossover of a smoothened RSI Signal Line
- Options Resistance and Support Data extremes
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- Each trade is put on a hard stop loss of 1% and a trailing stop loss of 1% – Meaning that we dont have a specific target in mind when the move is in our favor and continue to move the stop upwards as we enter profits BUT cut a position if it bleeds 1%.
- The strategy is positional in nature at times – so it may be subject to overnight risks
What is SuperTrend?
Super trend is simple and easy to use indicator and gives a precise reading about an ongoing trend. It is built on something called the Average True Range and with two parameters, namely period and multiplier.
The Buy and Sell signal is generated or modifiied once the indicator tosses over the closing price. When the Super trend closes above the Price, a Buy signal is generated, and when the Super trend closes below the Price, a Sell signal is generated.
The average true range (ATR) plays a vital role in ‘Supertrend’ as the indicator uses ATR to calculate its value. The ATR indicator signals the scale of price volatility.
Read more about ATR at https://www.investopedia.com/terms/a/atr.asp
For how this strategy is actioned, read more at https://www.plindia.com/blog/trading-profitably-in-volatile-times/
What is RSI Crossover?
The RSI is a versatile indicator indicating the buildup of strength on sequential price moves, and can be used to provide entry signals during a trend. To get the signals a moving average is applied to the RSI and the intermingling of the RSI versus its own moving average is used to determine the entry or exit signals.
Options Data
Options data often indicates the critical levels of resistance and support in markets. Our Algos now incorporate this new feature to decide whether a particular trade , even if indicated by our other two indicators, should be entered into when price is at its extremes.
Read more about this at https://www.plindia.com/blog/resistance-and-support-with-oi-data/
SIMULATED STRATEGY PERFORMANCE
Our Algo Desk had finalised this strategy by June 2019 and then tested this strategy over the next three months and optimised it further. This finalised strategy with its parameters is being launched on October 7, 2019 as part of the Traders Edge Index Strategies bouquet.
A brief summary of the backtested hypothetical performance, assuming a cost of 0.035% per trade including taxes etc, is presented below. Briefly, 29 out of 53 trades were profitable and the average profit per trade (including loss trades) was close to Rs 3800 – Overall it delivered a hypothetical profit of Rs 2.04 lakh in a year on a margin of Rs 2 lakh.
| Parameter | All | Profit | Loss |
| Trades | 53 | 29 | 24 |
| TurnOver | 88827619 | 48238399 | 40589220 |
| Trans Cost at0.035% | 26648. | 14471 | 12176.766 |
| Net Profit in Rs |
204925 | 371377 | -166451 |
| Net Avg Profit in Rs Per Trade | 3866 | 12806 | –6935 |
VISUAL REPRESENTATION
The image above is a representation of the strategy and how it appears on our Fox Trader Algo terminals – with green lines indicating the Long Trades,
Red indicating Short Trades and white lines indicating areas where no trade was taken,
The yellow horizontal lines indicate trailing stop loss levels.
CONNECT WITH US
Learn more about this product by contacting your relationship managers or by mailing us at tea@plindia.com
You may of course also design your own backtests and trading strategies if you are a Prabhudas Lilladher client by asking us for a subscription to Fox Trader, our Algo terminals. Mail us at plbd@plindia.com for more on this.
Happy Trading!