This is an initiative by DECIBEL CAPITAL that aims to identify and trade "High Probability - Low Frequency" signals in Nifty and BankNifty index.
These short-term signals may arise due to several imbalances in the market. From momentum to mean-reversion, there is no fixed rationale behind a particular signal. However, these signals are backed by data and undergo robust testing before being brought to live environment.
These signals present themselves on a sporadic basis, but with a higher than average win rate. The trades arising from these patterns are expected to have short holding periods (2-6 market hours) and are thus akin to "Quick Singles" in a Cricket match. The idea is to benefit from these DATA-DRIVEN signals, which may be hard to explain with an intuition behind them.
Jim Simons, in the book "The Man Who Solved the Market", mentions that Edge is important - not the story why it exists. While his expertise is way beyond our capacity, we intend to follow a similar approach for this strategy.
"I don't know why the planets orbit the sun. That doesn't mean I can't predict them"
- Jim Simons (Pg. 151)
Currently, the strategy is being created with ONE such signal to enable forward testing. However, as our research grows/continues, we will add more robust signals to it. The current signal is expected to have on average 2-4 trades on each index on a Monthly basis.
These signals are going to be executed using Buy Options execution. This choice of instrument offers two benefits:
a. It allows max loss being defined at the start of the trade and thus no additional SL is needed.
b. It allows a lower point of entry into the system to trade, while offering a diversified income stream to investors.
The strategy will buy ATM Calls and Puts at the time of signal generation. It will buy 2 Lots of Options for each signal (and thus positions have a Delta of 1 at initiation) per trade for the given capital requirement at 1x. Since the holding period is small, it is expected that that performance will be similar to that of futures.
This strategy does not close positions Intraday. It will carry them overnight.
Please Note, the backtest of the strategy is on index data. The signals can be executed both using Futures or Options.
This strategy aims to put to use the extra capital that we keep as a buffer for our Principal Trend Following Method - DYNAMIC. Since Quick Singles trades sporadically, it is not fit as a standalone strategy. However, the idle capital can be used for these high probability quick trades to generate additional returns at limited additional risk.
Click Here to learn more about DYNAMIC - Trend Following System
Back Testing Results
Date of Inclusion in Quick Singles: 10-Mar-21
Backtest Time Period: Jan'14 to Feb'21
Position Size: 1 Lot of Future traded with 2 Lakhs as Capital
Costs: 0.03% of turnover for slippage and commission
Instrument : BankNifty
Instrument : Nifty
LIVE TRADING PERFORMANCE
The algo was started on LIVE Trading on 10-March-2021. You can view the Live performance of the algo by clicking on the following link:
This algo can be LIVE Traded on your account by clicking on the following link. It trades ATM Weekly Options on Nifty and BankNifty.
Also includes LIVE Telegram Alerts as part of Subscription.
LIVE TELEGRAM ALERTS - Monthly
Disclaimer: As with anything in trading, there is no guarantee that such signals will continue to present themselves profitably in future. Statistical patterns from past may deteriorate in future. Past performance is not indicative of future performance. Nonetheless, we keep a track of the performance of each signal and will replace/improve them with time based on their performance.