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00:00Swing trading is all about capturing short to medium term price movements in quality
00:03stocks. In this video, I'm going to be sharing with you one of my favorite strategies that
00:08is not only simple to understand and implement, but also has a very high success rate, at
00:12least based on my own personal experience. Hello everyone. Welcome to FabTrader. In this
00:16video, it has three parts. First, I'll cover the strategy itself, its rules and the risk
00:20management principles. Secondly, I'll introduce you to a free Python screener that I've built
00:25that you could use. And lastly, I'll share with you the actual performance of the strategy
00:28in one of my own trading accounts. Let's get started.
00:31If this is your first time here, welcome. My name is Vivek and I'm a financial independent
00:36algo trader. This channel is all about building a community of algo traders. We discuss everything
00:40about algo trading using Python, building and backlisting trading strategies, market updates,
00:43and much more. Please do visit our community website fabtrader.in. Also, do check out my
00:47other YouTube channel, FabWealth, where I talk about my own financial independence journey
00:50and share tools, methods, and strategies that help me achieve my financial freedom. Thank
00:54you.
00:56The details that I'm about to show you is already fully covered in this blog article
00:59on our community website fabtrader.in. This not only contains the rules of the strategy,
01:04how the core logic on how it works, what is the screening mechanism that is already built
01:08in. You have the free Python code that you could use to screen suitable stocks. And also
01:13it tells you how to trade those, including the risk management principles of it. Let us now
01:17jump into the actual strategy and look at the details. This is a breakout strategy. It's also
01:22a swing strategy. The timeframe that we would be following is daily candles. The trade direction,
01:27you could only take long trades in this, no short ones. And then in terms of the indicators
01:31used, you would need a 520, 50, 100, and 200 day moving averages. In terms of which segment
01:36you want to trade it, cash segment. And then the Nifty universe that I personally use is a
01:40Nifty 200. You could also consider Nifty 500, but you'll have to be really careful about the
01:44liquidity. So ensure only stocks that have high volume. The screen that I'm about to provide
01:49you, you could run typically at the end of the day after the market is closed, and then it will
01:53give you a list of stocks that are eligible. And then based on that output, you could take the top
01:58one or the two based on the highest volume within it, depending upon how many stocks you would like
02:02to trade each day. The next day, you could, you could either put this on your watch list and
02:07manually monitor it and then get into a trade when the consolidation level breaks out. Or you could
02:12also place a GTT and leave it there to be automatically traded. The logic of the strategy is
02:16pretty straightforward. And that's what makes it one of the most simplest and efficient
02:19one. You're considering 520, 50, 100, and 200 moving averages in this case. As you know,
02:25this basically represents the broad spectrum of the price movement trend, starting from the
02:28very short term, all the way up to the long term. Whenever you see these five EMAs of a stock,
02:34all coming together into a very tight range, often within 3% of the current market price. For example,
02:40if the market price is 100, then all of these five EMAs would stay within the range of between
02:44103 and 97. This means that the stock is undergoing a tight consolidation.
02:50This tight consolidation is usually followed by a breakout and then a rally on the upside. And this
02:55is exactly what we are looking for. If this all sounds a bit confusing, don't worry. I'll explain
03:01our chart and then I'll give you a real example as well. In terms of the rules of the long trade,
03:06the entry conditions are that you run the daily screener at the end of the day after the market hours.
03:11You can do that in two ways. One is you could run the charting screener, which I'll provide the link
03:16to, or you could run the Python screener, which is again nothing but it extracts the charting screener
03:20results. The screener would typically give you a long list of stocks that are currently
03:26consolidating. You don't have to consider all of those. Depending upon how many of those you want
03:30to trade per day, either one or two, you can consider one or two out of the list, usually by sorting that
03:35list by descending so that you have the stocks that have the maximum volume of trade. So that's
03:41always safer. You pick up the stocks where there is maximum volume of trading happening and then
03:45you mark the high of the consolidation zone and then you wait for the price to break out of the
03:49zone and then you either manually monitor it and trade it or you can put in GTT orders
03:53so that the automatic entry is enabled. In terms of risk management position sizing,
03:58the way I'm currently doing it is I limit my position size to either 10,000 or 15,000 max.
04:03I do not exceed that limit per order. The exit condition is quite simple. There are two ways of doing it.
04:08One is you can have a set target percentage, which in this case is 5%. Or if you're somebody who don't
04:13mind sitting on a trade for a longer time and want to ride out the trend, then you can start,
04:17you can keep trailing it. The only difference is in the first case, people who want to churn their
04:22trades quicker and then move on to the next trade, don't want to sit on a trade for months. They
04:26prefer a set target like 5%. People who don't mind basically their money in the market for a longer
04:31time and they can ride it out for a month or two or more, they tend to typically trade it. So depending
04:35upon your risk appetite, you could use one of those methods. For stop loss, I usually don't keep any
04:41stop loss given this trend following. And I've picked up only good quality stocks from
04:46Stock Universe, like say NFT 100 or 200 with good liquidity. I don't worry too much about that stock,
04:50no striving. So that's why I personally don't keep stop loss. But again, it depends on your risk appetite.
04:56If you haven't joined our Telegram group, please do so. I share market insights,
04:59algo trading tips, new video notifications. And this way, you can stay up to date with our community news and events.
05:05I talked about providing two types of screeners for it. This is the first one, which is a charting
05:08screener. The logic that we already discussed is already coded in. The link to this particular
05:12screener, I'll provide it within the blog article. At the end of the day, you can do a run scan and then
05:18you will get the list of stocks that are currently consolidated. Always do remember to sort this based
05:22on volume so that way you pick up the stocks that has the most volume here. The Python utility in
05:26question is going to directly scrape this particular screen and then download the output from this
05:31screen into a data frame. And this is the Python utility that I'm talking about. You would need
05:35to install these dependencies, which are requests, pandas, and dutiful soup 4. And the utility takes
05:40two, primarily two inputs. One is the URL of the screen, which is this typically. And then the number
05:48two is the scan clause. To find out the scan clause for your respective screens, all you need to do is
05:52just right-click on your webpage, go into inspect, then go to network and then try running scan. You would see
05:59a process. One of these processes comes up and then click on it and then go into payload. And the
06:03scan clause is right at the top. So all you need to do is just copy this part and then input that
06:11as part of your input into the function here. So as I said, it takes two inputs. One is the URL that we
06:19looked at and then the scan clause. And then once you provide this and then run, you would get the exact
06:25same results as you see on the scanner itself. And this is in a data frame. So now you can go
06:31ahead and use this directly in your algo and then apply various strategy tools on top of it. So this
06:36is how simple it is. Description. Now that you know how the utility works, let me just give you an
06:39example of how I use it for my strategies. In fact, I use charting screener for multiple strategies of mine.
06:43Here's one example of how I do. For example, in the scan that we just ran, HDFC came up as one of those
06:49eligible stocks. So you see there is a tightening of all the SMAs happening here. The SMAs are all squeezed up in a
06:54very tight spot within the 3% range of the last closing price. And then whenever this happens,
06:59for example, in the previous time this happened, you see this huge breakout rally happening. And
07:03this is what we are actually looking for. And this is my algo dashboard that I built as part of my
07:07algo trading platform. And today we have been running this on one of my smaller accounts. And
07:12the brown part is the equity curve of the strategy and the white part is the nifty 50. So you see the
07:18equity curve looks pretty good. The drawdown, the underwater plot is also like less than 3%. This is
07:22actually 0% because this particular strategy does not have a stop loss. I'd made a couple of mistakes
07:27due to which I had to close two of the trades because of which you see this. Otherwise,
07:30you don't close any trades. You just keep it open until your targets are hit. And even if you look
07:34at the benchmark versus strategy, there's almost a 3 multiplier difference because the strategy beats
07:40the benchmark. So it's a very simple strategy and yet at the same time very effective. Hope you like
07:44this strategy. If you'd like to see more content like this, please do like this video and that will
07:48motivate me to keep doing this. If you'd also like to share some of your strategies with the community,
07:52or you'd like me to back test any of your strategies, please do email me with the details
07:55and I'll do my best. Thank you. If you genuinely found this video useful, please consider subscribing
07:59and liking the video and I will see you soon in another video. And until then, take care and happy trading.
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