Live Case Study - My intraday trade set-up

Summary

In this video, the trader discusses their intraday trading setup, emphasizing the use of multiple charts and indicators to make decisions. They explain the importance of factors like VIX, straddle premiums, and super trends when determining whether to engage in directional or non-directional trades. The trader shares a case study from December 16, 2024, where they demonstrate their analysis and trade decisions, highlighting the difference between volatile and stable market conditions. They also provide insights on stop-loss strategies and offer practical advice for traders to stay agile in shifting market conditions.

Takeaways

• 😀 The trader uses a 4-chart layout on TradingView, including Nifty, straddle, and individual put/call charts, to analyze the market in real time.
• 😀 VIX (Volatility Index) is the first factor the trader analyzes. An increasing VIX signals volatility, making neutral trades less viable.
• 😀 Straddle premium behavior is crucial in determining whether neutral trades (straddle/strangle) are appropriate for the day.
• 😀 If the VIX is rising, even directional traders should avoid selling options, as increased volatility makes it riskier.
• 😀 The trader prefers buying options in a volatile market rather than selling them, ensuring better control of risk.
• 😀 The trader's preferred stop-loss strategy includes two parts: a closer stop-loss for half the position and a further stop-loss based on the super trend for the remaining position.
• 😀 A bullish or bearish bias is determined by the movement of the super trend, RSI, and the VIX's behavior throughout the day.
• 😀 When the VIX is declining early in the day, it’s a good signal for neutral trades like short straddles or strangles, as it indicates lower volatility.
• 😀 On December 16th, 2024, the trader decided it wasn’t a good day for non-directional trades due to a rising VIX and stable premium for both put and call options.
• 😀 On December 11th, 2024, the VIX was declining, and the trader identified it as a good day for neutral trades as the straddle premiums remained stable and below the super trend.
• 😀 The trader plans to release a PowerPoint presentation summarizing these strategies, offering a convenient reference for future trades.

Q & A

What is the primary trading setup used by the speaker?

The speaker uses a four-chart setup on TradingView. The top-left chart is for Nifty, with Super Trend, RSI (60/40 bounds), and VIX indicators. The bottom-left chart tracks the straddle premiums, and the right charts focus on the Put and Call premiums.

What does the speaker look for in the VIX indicator?

The speaker monitors VIX to determine market volatility. A rising VIX suggests an uncertain market, indicating that it’s not a good day for non-directional trades, while a declining VIX may signal a more stable environment for neutral strategies like straddle selling.

Why is the speaker cautious about using neutral trades like straddles when the VIX is increasing?

When VIX is increasing, it signals higher market volatility, which makes straddle or strangle trades less favorable. In such conditions, straddle premiums tend to remain elevated, and the market may reverse quickly, making neutral strategies risky.

What specific conditions does the speaker recommend for using a straddle strategy?

The speaker recommends using a straddle strategy when the VIX is declining, typically in the morning. The premiums should also be low enough, and the market should not be overly volatile. The speaker suggests that this strategy is best when there is a stable trend and minimal risk of significant reversal.

How does the speaker manage stop-loss when buying options?

When buying options, the speaker uses two stop-loss levels. The first is based on the low of a large candle (e.g., 66 rupees), which is a tighter stop-loss for partial quantity. The second stop-loss is set at the Super Trend level (e.g., 54 rupees), used for the remaining quantity.

What is the recommended strategy when the market shows a bearish bias but the VIX is rising?

In this situation, the speaker suggests avoiding non-directional trades and being cautious with directional trades. They recommend buying options rather than selling them, as the increasing VIX makes it too risky to sell options. Traders should also be prepared to exit quickly if the market reverses.

What are the differences between the market conditions on 16th December and 11th December?

On 16th December, the VIX was rising, making it unsuitable for neutral trades and requiring a cautious, directional approach with tight stop-loss management. On 11th December, the VIX was declining, which created an ideal environment for neutral trades like straddle selling, as premiums stayed stable below the VWAP.

How does the speaker use Super Trend in their trading strategy?

Super Trend is used as an indicator to identify the market trend and to set stop-loss levels. If the price is above the Super Trend, it indicates an uptrend, and if it's below, it signals a downtrend. The speaker uses the Super Trend to decide when to enter or exit trades.

What role does the straddle premium play in the speaker's decision-making process?

The speaker closely monitors the straddle premium as it reflects market sentiment. If the premium is rising or staying elevated, it signals high volatility and makes neutral trades like straddles or strangles risky. Conversely, if premiums decrease, it suggests the market is stabilizing, making it more suitable for neutral trades.

What advice does the speaker give to traders who prefer option selling?

The speaker advises option sellers to be cautious when VIX is rising, as it indicates increased volatility, making it a bad environment for selling options. If a trader is more comfortable with option selling, they should consider taking a break and not engage in trades until the market conditions stabilize.