Hello friends.
I like the last lecture where we discussed a long term trading strategy and doing a back dusting off
that strategy moving forward.
I'll be discussing intraday trading strategies.
And that's because I get a lot of interest from my students who want to discuss in credit rating strategies
because that's the kind of creating they are in do.
And if you are like more of a long term trading person than it does not mean that this video is not
suitable for you.
I would encourage you to take these strategies these intraday trading strategies and try to replicate
the same thing on a longer trading horizon.
You may have to change some parameters which I'll discuss while we are going through the Python implementation
but other than that if our strategy is working intraday it should work on a longer grading horizon as
well.
Having said that let's jump into discussing the intraday trading strategy called Resistance breakout
so resistance breakout is a technical creating dumb and this means that the price of a stock or an asset
has breached a presumed resistance level resistance level is determined by the price chart.
So this is quite a mouthful and I think it'd be better if I show it to you on an actual stock price
chart.
So let me show you.
So this is the price chart of a stock.
So as you can see this stock was fairly plastered for quite some time but all of a sudden something
happened.
A spike happened and then the strong uptrend ensued.
So this is a classic case of resistance breakout and I'll just tell you what exactly happened there.
So let me get a horizontal line.
Yeah that's fine.
So this is this.
OK.
So yeah.
So if you see what happened here is that for this bar a long term maximum of like the ruling maximum
value was breached.
Right.
So this is what's called the resistance.
So if you're a trader and if this thing has not happened yet.
Right.
So and you are a trader you know that this trade is has a higher resistance of around three hundred
eighty three.
Right.
You can see that every time the trade comes to this level it goes down.
It again tries to come up to this level it again goes down.
So if you're a trader you've got this presumption that this three eighty three is like the upper resistance
level of the stock.
And likewise if you go for the minimum It's guarded.
It's called the support.
So this is the the upward line is the resistance the lower line of support.
So if you're a trader you.
You see that the straight trade is bouncing around just like the resistance and the support line right.
But something happened at this level right.
So at this level this long term resistance was breached right at this bar.
So this was very easily breached and with conjunction off the price action.
That means a price going above the resistance level.
There was also a corresponding spike in volume and this volume is also the ruling Max or like Boston
225 media.
Right.
So this is a classic signal of a resistance break out.
And if this happens chances are high that the that the stock will go on an uptrend.
OK.
So I hope but this chart did a better job of explaining what is the resistance breakout.
OK so now we need to implement this infighting.
But let me first discuss some more features about resistance breakout strategy OK so some other things
to keep in mind when you're trying to implement an intraday resistance strategy is that you need to
choose high volume high activity stocks.
So I mean if you look at if you go with a stock that tends to be very placid I mean not much activity
is happening then you won't get the same kind of you know output if you are using a high volume high
activity stock.
So if you are if you want to pick the stocks that you want to implement this strategy on I would urge
you to look at pre market movers right.
Because like the pre market movers give a good indication of which stocks are going to be in play for
a given trading session.
Right.
In addition to that better than pre market movers I would say go for historically high volume stocks
so go for a sector that you know is fairly volatile or that sees a lot of activity.
So my favorite is tech sector right.
So you can go.
But like you know historically high volume stocks in a sector that sees a lot of action.
OK.
And that's very important just picking the right stock universe for this strategy is of critical importance
right now.
Once you have the stocks you need to define a breakout role.
OK so usually the breakout tool is what I discussed in the price chart.
So you look at the resistance level you define your resistance level and then you also you look for
the price action and then you also look at the corresponding volume change rate.
So I'll be using this breakout formula.
So for me the rule is that I'll be using a 20 period rolling maximum or minimum price on price.
Right.
And if the if my gross price goes above the resistance or below.
Sorry.
Yeah above the resistance and below the support and there is a corresponding spike in volume which means
the volume has also breached the rolling max volume.
I'll go long or short accordingly.
Right.
So this is my rule and I'll be showing you in the next video below.
I'll be showing a Python implementation but if you have a different break out rule by all means use
it.
Okay.
And then back to it.
You also need to define the exit and stop loss signals right.
I would argue to you Stop Loss signal because in these strategies there is a lot of time then better
than you will see a significant you know move from one period to another and that's by a stop loss is
very important because that kind of caps your if if the trade has moved in your direction then it can
kind of say you can bank the earnings that you have right rather than just keeping it open.
And one big move wiping out all your accrued gains from that particular trading signal.
So I would urge you to use stop losses and I'll show you in the implementation how I go about doing
that.
Okay.
And then far for my exit signal I'm going to use the previous price plus minus 20 p at 80.
Right.
And we all know what is ADR.
So this is the exit signal that I have defined.
Right.
And then once you do it B once you have the rule and the signals you you will get feedback testing you
will get know daily not daily but you will get period by period are done and then make a cumulative
or done chart which is also known as the equity line and based on that perform your back testing right.
So in the next video bill that we'll see a Python implementation off intraday or instance breakout strategy.
And that should make things more clear for you.
Thanks a lot.