created : 1 year ago| | live deployment: 11
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. Thus, we deploy this strategy with 300,000 as capital in account. Our overall Trend Following strategy (DYNAMIC) is trading with 9L capital and about 5L of that capital sits idle. We assume to use 3L out of those 5L idle capital for this deployment. That ways the P&L from this strategy contributes 1/3 P&L to overall portfolio.
If you are deploying this strategy along with any other Futures strategy that keeps 50-60% of capital as buffer, then you can trade this with 3L and manage it as 1/3 exposure to your portfolio. However, if you are using this as a standalone strategy or without additional strategies on your account, we suggest you to use 400,000 as minimum capital.
Refer to the following page for details on our Primary Strategy - DYNAMIC:
A monthly fixed subscription of 250 INR and 15% profit share will be charged monthly. If any given month there are no trades on the strategy, additional one month deployment will be offered free of cost. Email us at email@example.com if you have LIVE deployed it for a month with no trades on it. We will send a discount code for you to use and renew your subscription for another month.
LIVE TELEGRAM ALERTS
LIVE Deployments are eligible for LIVE Alerts Telegram Channel to enable close monitoring of positions. Please email us at firstname.lastname@example.org post subscribing to be added to the LIVE alerts channel.
Backtesting + LIVE Results:
Date of inclusion: 10-Mar-2021
Time Period: Jan'15 to Feb'21
Position Size: 1 Lot of future traded for for 2 Lakh capital - No compounding in Back test
Costs: 0.03% of turnover for slippage and commissions on Nifty Index & 0.06% on BankNifty Index
LIVE - PERFORMANCE METRICS
DYNAMIC - Futures - (Capital Requirement - 9 Lakhs):
- - DYNAMIC - Futures : Is our flagship Trend Following strategy that trades on Nifty and BankNifty Futures. It trades on our proprietary trading indicator/strategy coded on TradingView.
DYNAMIC - Options - (Lower Capital Requirement - 4 Lakhs):
- - DYNAMIC - Options : Is Options version of the above strategy. That strategy trades on same underlying DYNAMIC signal, but trades on ATM Call/Put Options
VOL HARVEST - (Capital Requirement - 4.5 Lakhs):
- This is an Intraday Option Selling Strategy that has been designed to complement the base DYNAMIC - Trend Following - Futures strategy above. This strategy trades Intraday Straddles on Nifty and BankNifty on selective days. It aims to capture vol premium/theta decay in option pricing.
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.