T7 Trading System - Trend Shikari - Rules

12 Eyl 2016

I have a trading system which I call Trend Shikari™ with which I generate tips for you. But the success of this system in real trading will come only if you are disciplined enough to follow the below rules religiously day in and day out.

Rule 1 :- Trade in Nifty based instruments alone.

There are so many NSE listed stocks, futures and options out there to trade. But its better to trade only in Nifty because

1. Nifty F&O are probably the most liquid instrument series out their and hence entry / exits are easy and instant with minimal trade slippage.
2. No insider trading and consequent volatile unpredictable moves.
3. No price splits like stocks enabling better historical analysis. Also backfill data for previous years are easily available which is pretty handy in back testing strategies.

Now Nifty Index cannot be traded as is. We can only trade in derivatives of Nifty like its futures or options. For the beginners my advice is to go with NIFTY futures. When NIFTY triggers my entry signals enter positions in Nifty Futures and when my profit or stop levels are touched by NIFTY index exit the future positions. You do pay more in charges trading futures compared to options but futures are much simpler to understand and trade in compared to options. To reduce your trading charges open an account and trade with discount brokers like Zerodha, Tradejini etc. For those who are comfortable with options better to trade in "at the money long calls or long puts" depending on my signal direction. Note that you need to trade in at least 2 lots of at the money options if you want a roughly similar point variation in your trade compared to the Nifty Index.

Note that which ever instrument you choose to trade stick with that particular instrument for at least a year before you make a switch to any other instrument.

Rule 2 :- 1% position size

Put 1% of your total capital at risk for each trade. That means if you hit stop in a particular trade then you should not be loosing more than 1% of your total capital. Based on this 1% rule size your positions for every trade. Also make sure that the number of lots of Nifty F&O instrument you start trading with remains constant at least for a year even if the accumulated profits may allow you to put in more lots.

Rule 3 :- Take all signals

We don't win always. We don't loose always. But we don't know absolutely when we are going to win or loose. Also I have a system where most often when I win I make more money than when I loose. Also my hit ratio is slightly above 50%. This means if you take all my signals with the same position size, then in the end you are most likely to make money from my system.

Rule 4 :- Put advance limit orders whenever possible.

I usually give signals much before the price is at the entry levels. When ever you get my signal enter an order in the broker trading terminal with the appropriate entry price, profit and stop loss levels marked. This way your trade entries and exits happen easily with less slippage. You also void the possibility of missing signal entries / exits.

Sometimes though I do give the entry level at CMP in which case enter the trade immediately.

Rule 5 :- Do not break any of the four rules above.

Hope this info helps you to become a better trader. Thoughts, questions and suggestions are welcome.