Renko | Nifty Short Options | Swing Trading System
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Intro:
I have always been fascinated with Guppy MMA (https://www.definedgesecurities.com/library/guppy-multiple-moving-average/), probably because of its visual representation on the chart but more so because it gives me strong conviction about the direction of the trend. An equally favorite indicator for me has been the Donchian Channel. So I combined both of them with an aim to create a swing trading system that would benefit from the change in delta (directional moves) as well as some theta decay while keeping the Gamma impact (avoiding volatility near expiry) to a minimum.I've been trading this system for a little over 8 months now and it has worked well. Based on the experience so far, I recently made a couple of changes to the rules defined in the beginning and rectified a formula that I was using to calculate drawdown. This has resulted in a significant reduction in the DD while keeping the returns intact. Below are the system rules as I trade today, and the statistics.
Instrument & Charting Method: Nifty weekly options; Renko 3% box size, 1-min
Capital & Position Sizing: 4 lacs per lot. Minimum 2 lots (as quantity should be reduced to half when daily P&F X% breadth for Nifty 50 is not in favor).
Indicators:
- Guppy MMA (EMA)
- Donchian Channel (28)
- Nifty P&F X% breadth (DECMA 5-in-1 method)
Rules:
- Sell weekly options - minimum 7 DTE and maximum 14 DTE.
e.g. if Jan 14th is the expiry, start trading that expiry from Jan 1st and stop on Jan 8th - switch to next weekly expiry. - Choose a strike having premium in the range of 270 to 320.
Entry (all conditions necessary):
- Bearish brick is below Donchian Channel LB (28)
- All fast MAs of Guppy MMA group are below the slow MAs.
- Take only long trades (short PE) when the daily P&F X% breadth (box size 1%) is above MA, and vice versa.
- If a short entry signal (short CE) is generated when the daily P&F X% breadth (box size 1%) is above the MA, trade half the quantity. Vice versa for long.
Exit:
- Brick low at 1 is above any of the slow Guppy MMA & brick at 0 is bullish.
- In other words, at least 2 bullish bricks should fully overlap the group of slow MAs of the Guppy MMA indicator.
Statistics:
Confession:
I will admit that I haven't been able to execute this system 100% accurately due to various reasons - trading breaks, psychology issues in the beginning (resolved now), lack of objectivity in the rules in some scenarios (addressed now) etc. However, I believe all these were necessary for me to remove the imperfections, both in the system and myself. Today, I trade this system without any issues as if it is a part of my daily routine like everything else.Example of Entry and Exit:
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NIFTY 17-Jul-2025 CE 25300 shorted yesterday at 276.
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Amazing. Thanks for sharing your study. Will definitely explore this. Sadly, can't test it via scanners because theres no condition "fast below slow MAs" in Guppy MAs.
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Forgot to mention an important trailing/booking rule in the original post. Once the position is in profit by 100+ pts., it should be booked to move to the near ATM strike having premium between 260 to 280. Booked the current position at 125 and switched to NIFTY 24-Jul-2025 CE 25200 having premium 266 and also switched to 24-Jul expiry as per rules.
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Good run... going strong.
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Thank you.. i found it very interesting.. absorbed and implementing in my current system.. keep sharing. happy trading.
