The Union Budget 2019 is scheduled for the 5th of July 2019. In general, the budget days are typically volatile where sharp up and down moves take place in the market throughout the day. So novice traders lose money trying to trade that volatile market. Now how to survive this kind of market and pull out big profits using simple tricks? In this post, I shall discuss my simple line break chart strategy to survive the budget day trading. But before that keep an eye on overall technical analysis of the index.
Why Technicals Are Also Important in Budget Day Trading Strategy?
This is a case study from 2015 just before the budget day. Nifty was moving in 2 symmetrical triangles. Long term symmetric triangle shows breakout in close above 8875 and break down below close below 8690. Check the chart below.
And short term symmetric triangle shows breakout has taken place that day above 8804 and in case of a positive breakout and close above 8875 tomorrow will confirm bulls are back. On the other hand, failure to close above 8875 will confirm bears are still alive. Daily 5,3,3 stochastics is in buy mode whereas Daily 9,3,3 stochastics is in sell mode.
On the budget day, the market actually has broken out on the upside. But check the breakout candle below that the market moved down with wild swings before moving and close upwards. So we should have an idea on which side the market can actually move. Because of intraday chart actually follows long-term charts. So the intraday trend follows the daily and hourly trend.
Three Line Break Chart
In my previous post, I have already discussed Three Line Break Charts in my post: How To Use Three Line Break Charts? Download TLB Amibroker AFL. You already know that line break charts will print a candle of a different color if high or low of a specific number of previous bars are broken. So three line break charts will show reverse candle only if high or low of previous 3 bars are broken. If you do not have access to line break charts you can get it in Zerodha Pi OR Zerodha Kite.
A Small Tweak in the Line Break Charts
We will make a small tweak to line break chart strategy to trade the volatile market. Not the only budget day, but you can also trade any volatile market. You can trade any news event with this strategy. So what is the strategy? First login to your Zerodha Pi or Kite. This strategy can be used on either Zerodha Pi or Kite with the same settings. Open your scrip, say Nifty-50 index. Now open a 1-minute candle chart. Now change the candle chart to line break chart and select line break parameter as 6 instead of 3. So our setup for the volatile market is a 1 minute 6 line break chart. Now check the image below.
6 line break chart on the 1-minute time frame you can get even 25-30 candles in the same direction. So almost zero whipsaws and you can ride the trend fully on a volatile day. This budget day trading strategy will eliminate the chance of getting in and getting out too early. You can avoid entries in small whipsaws and once you enter in trade once again, small whipsaws can’t get you out. Test this line break chart strategy this Union Budget Day 2019 and send me your results in the comment box below.
In fact, traders should not use normal candlestick charts on volatile times, because normal candles will produce frequent whipsaws in volatile days. Rather use advanced candles like Renko charts or line break charts to trade a wild market.
Snapshot of My Budget Day Trading Strategy:
- Trade only frontline stocks or major indices like the Nifty index OR Bank Nifty index.
- Avoid trading unknown stocks or counters.
- Use a 1-minute 6 line break chart.
- This setup can give you very little whipsaw and you can catch one sided major intraday moves on a volatile day.
- Keep stop losses few points below the recent swing high or swing low.
- Trade with a definite stop loss and target.
- Use less margin as your broker may lower the margin that day.
- Don’t panic, keep your heads cool.
- Book profit and close your terminal once your daily profit goal is achieved. Don’t overtrade on a volatile day.
- Attach the line break chart as shown below.
Why instead of a 3 line break chart, that is normal, I suggest you use a 6 line break chart on a 1-minute time frame? Because this simple tweak can make a faster entry and a faster exit with no compromise on the whipsaw. Once the budget speech starts as well as the market action starts, open up a buy or sell order in the direction of the line break trend.
Use this technique tomorrow and let me know how you implemented my volatile market trading strategy on budget 2019.
Sir, Its lagging in zerodha pi. Even renko is lagging..
Vish, line break chart can be lagging but very less whipsaws. Just test it tomorrow and post your feedback here.
Mr.Indrajit Mukherjee can you provide me “Line Break Chart Buy Exploration” formula for Metastock. I am ready to pay for it.Please reply.Thanks.
Akhlaque, I am not a good coder for MetaStock. However, if I get anything on this, definitely will buzz you.
In the line break chart shown do we enter or exit for every change in the color of candle. How do we know for how lobg a particular trend will continue
Arun, always the last x bars high or low is your entry point and SL, but wait for at least one cande to close as confirmation. For a 3 line break chart x = 3, for a six line break chart x = 6.
In Kite – Line Break chart, how to change parameter from 3 to 6, kindly help
Ramachandra, read my post, this is a Pi only strategy. In kite you cant change parameter of line break charts.
Thank you Guruji for reply, i tried in kite not possible to change the line break charts