Bank Nifty Trend Following Positional Trading Strategy

  • Mar-26-2020

This is a simple trend following strategy that has been tested with 10 years of Bank Nifty historical data. Using this strategy, any body could easily trade and it doesn’t require much manual intervention.

Many users might have noticed how Index or any other instruments follows previous days High or low as support and resistance. So whenever the index tries to move above such resistance levels, there would more selling pressure comes in and whenever it goes near support level(previous days low), more buying pressure comes in.

So we tested a simple rule 

  1. Buy if Bank Nifty crosses above last 2 days highest high
  2. Short if Bank Nifty crosses below last 2 days lowest low.
  3. Exit from Long position if Bank Nifty crosses below prev day low 
  4. Exit from Short Position if Bank Nifty crosses above prev day high

This is how Trend Following when works, makes out standing returns. Short was triggered in the Feb end itself that resulted in huge profits.

GAPS:

What if in case Bank Nifty opens Gap up and opens above our buy level, then the back test results are updated in such a way that first 5 mins close value is considered as entry level, vice versa for Gap down. And the same is applicable for exit as well.

Trader can simply use the NSE site to determine their entry / exit levels, no sophisticated software is needed

  1. Go to https://www1.nseindia.com/products/content/derivatives/equities/historical_fo.htm
  2. Select respective option from drop down

We are going to trade on 26th of March, so find the buy and short level.

Buy level:

What is highest high of last two days? 25th high is 18735 and 24th high is 17949, which is max value? 18735, so today we go long if market goes above 18375.

Stop Loss:

Previous day low value will be our stop loss which is 25th MAR low = 16600

Short level:

Similarly What is lowest low of last two days? 25th low is 16600 and 24th low is 16020, which is minimum value? 16600, so today we go short only if market goes below 16000.

Stop Loss:

Previous day high value will be our stop loss which is 25th MAR high= 18735

We tested the strategy and here’s the performance details after all charges such as brokerage, STT, stamp duty, GST , sebi fee and exchange transaction charges.

During trending periods, it has given phenomenal returns with very limited trades, where total no of orders for last 10 years is just 900 trades, which is just 90 a trades a year.

Here’s the stats of the strategy, with 2 lacs capital one can trade this positional strategy which gives 252% returns with max draw down of -38% after all cost and with a average monthly returns of 2%.

Please note that this is a plain vanilla strategy to prove simple trend following system do work, traders can implement further filter towards the trade logic to reduce the draw down and increase the profits further. The complete back test report can be downloaded from this link.

https://drive.google.com/file/d/1NZWNXHvbjsdbR1LuDFGHxyIn9SscQfBl/view?usp=sharing



  • profile
    Roboji
      13 hours ago

    KPL SWING 2 STRATEGY

    Reply 0 comments
  • profile
    mohan sharma
      4 days ago

    For just Rs 3900 monthly profit, it would be better not to do trading on this strategy. I have much better strategy in which you could earn much more. Contact : 9340509003

    Reply 1 comments
    • profile
      kapil berera
        4 days ago

      kindly share kapilberera@hotmail.com

  • profile
    selvaraj sermathi
      5 days ago

    Have you taken into account the roll over costs?

    Reply 0 comments
  • profile
    selvaraj sermathi
      5 days ago

    If ADX (14day) is less than 20, then not doing trading may help in reducing expenses and drawdown. I did similar (not same) in crude.

    Reply 1 comments
    • profile
      Square Off
        5 days ago

      Yes, adding such filters would increase the profits and decrease the drawdown

  • profile
    Nishant Ratnakar
      6 days ago

    So, it would be like using a Donchian Channel here, but with a short period (2 periods)?

    Reply 1 comments
    • profile
      Square Off
        6 days ago

      It uses 2 period for entry, and 1 period for exits


  • Tags | trend following,Bank Nifty trading strategies,positional trading strategy,swing trading,bank nifty swing trading,bank nifty positional trading system