White Paper for beginner level traders!: NU Quantum BreakOuts -
Exploitation of daily breakouts for superior returns for all types of traders, no need to be glued to the terminal!
What is NU Quantum Break Out?
NU Quantum BreakOut is a daily break out, which makes daily close distinctly higher than previous day and also higher than the most recent high close. This breakout can be a signal of new short term or long term breakout, or simply a finite opportunity for a day trader to exploit while it lasts.
Why it is called Quantum Breakout?
Here is a technique to deal with the break outs on a daily basis, in smaller segment, hence QUANTUM. Also, it is a catchy name to draw your attention to it.
Why it is NU?
NU is my name, Nataraja Upadhya. For the rest, it stands for New, new way of looking at daily breakouts.
What is the use of this breakout?
Typically this type of break out occurs either with larger candle body or with a significant gap after previous close, and with or without more than average volume.
A person glued to the terminal through the day can exploit these breakouts better, including the wickers, by exiting and entering multiple times through the day.
But a person who can not be in front of the terminal will miss the breakout opportunity. This technique allows him or her to exploit the script next day. Also, it allows the trader to remain focused on the personal style of trading, whether it is intra-day, swing, or positional. The best thing about it is that it allows the trader to feed in orders in GTT mode and forget about it through the day, to do something else.
Principle context:
Sophisticated traders identify different types of breakout for swing trading or positional trading. It becomes bit difficult for all concerned to identify and exploit it at the genesis of it using advanced graphing. Also, some breakouts fizzle out, and waiting to be cautious about it, one could lose on some exceptional opportunities. Further, this technique is easy for a beginner trader to follow and exploit for superior returns.
Idea is to catch a distinct breakout through today’s market, and make bettings for tommorrow accordingly.
How it works?
The breakout through today needs to establish higher close than yesterday. It also needs to be higher than the nearest top close if such a close is higher than previous day close.
The market offers at least 30-50 such NU Quantum Breakouts per day. So, there is no dearth for quality opportunities.
This technique is used to apply for the next day trading. So, the home work is to identify all the NU Quantum breakouts at the end of today.
One need to identify the following and validate the breakout.
1. Today’s close is higher than previous close.
2. Today’s close is higher than the most recent higher close, if it the most recent close is higher than previous close.
Once this breakout is validated, one will note the Today’s close level, and higher of the Previous Close or the most recent close being higher than Previous close, we will term this together as PrevHigh Close.
Now, for the Trader who can not be in front of the terminal, the trade logic works like this.
1. If you are already holding the script, you can place both the stop loss order and profit booking order optionally for tomorrow, using GTT.
The stop loss order is as follows:
- For the intra day trader, it is Today’s Close.
- For the swing trader, it is the PrevHigh Close.
- For the positional trader, it is the highest close after the highest close before the positional breakout started. If there is no highest close after the positional breakout, then it is the highest close before the positional breakout started.
For profit booking, one can use a logic approximately, as the anticipated tomorrow’s gain = Today’s Close + the difference between Today’s Close and PrevHigh Close.
The profit booking is usually desired by an intraday trader. The other two types of traders may like to skip, as the stop loss order is enough to manage the risks, unless they too are pressed for margins.
Please note this profit booking order is approximate, the order may not take place if that level is not achieved, or the script may zoom beyond this level.
If you do not hold the script yet, but like to play along tomorrow, then entry needs to be above Today Close. One should avoid entry below Today Close, as it may mean reversal of Today’s breakout. Once entered, the stop loss order and profit booking order will be relevant as discussed above.
Illustration using different examples:
1. Example 1: SAIL daily graph as on Feb 6, 2024.
a) Today’s close = 145.5
b) PrevHigh close = Prev Close = 137.15
c) Positional Prev High = the close of the first green candle which is raising above previous short term high. Previous short term high was approx on 01 Jan 2024, and close that day was 124.75. The first green or red candle piercing this level was on Feb 02, with candle high of 128.
Therefore, the stop loss works this weay:
For the intra-day trader it is today’s close which is 145.5.
For the swing trader, it is the PrevHigh Close which is 137.5.
For the positional trader, it is the Positional PrevHigh which is 128.
Now, for those who like to place a profit booking order, it is the same for all types of traders. The level is Today’s Close + Gain thru today which is the difference between today’s close and Prev High close, hence in this example it is 145.5+(145.5-137.15) = 145.5+8.35 = 153.85.
2. Example 2: INGERRAND chart on Feb 6, 2024
a) Today’s close = 3427.5
b) PrevHigh close = Top of third candle behind, which was red = 3298.75
c) Positional Prev High = same as PrevHigh Close = 3298.75.
Therefore, the stop loss works this way:
For the intra-day trader it is today’s close which is 3427.5.
For the swing trader, it is the PrevHigh Close which is 3298.75.
For the positional trader, it is the Positional PrevHigh which too is 3298.75.
Now, for those who like to place a profit booking order, it is the same for all types of traders. The profit booking level is Today’s Close + Gain thru today which is the difference between today’s close and Prev High close, hence in this example it is 3427.5+(3427.5-3298.5) = 3427.5+29 = 3456.5.
3. Example 3: Biocon Ltd on Feb 6, 2024
a) Today’s close = 298.65
b) PrevHigh close = Close on 8 Jan 2024 which is higher than prev close = 292.75
c) Positional Prev High = same as PrevHigh Close = 292.75.
Therefore, the stop loss works this way:
For the intra-day trader it is today’s close which is 298.65.
For the swing trader, it is the PrevHigh Close which is 292.75.
For the positional trader, it is the Positional PrevHigh which too is 292.75.
Now, for those who like to place a profit booking order, it is the same for all types of traders. The profit booking level is Today’s Close + Gain thru today which is the difference between today’s close and Prev High close, hence in this example it is 298.65+(298.65-292.75) = 298.65+5.9= 304.55.
Please note that all NU Quantum Breakthru’s may not repeat for the next day, but it is likely if the short term breakthrough has some juice left still. The shape of the candle (upper wick is negative, bottom wick is positive), volume and price action together today can indicate this possibility better.
One needs to know how to place both the Stop Loss and Limit Order for profit booking using GTT.
One disadvantage of placing GTT order is that one will not be able to dynamically exploit the possibilities of script behavior in real time. For example, if the scrpit has long wicks next day, one can buy and sell many times and expand the profits.
How to get ready for the market next day?
1. Look at the end of day heat map with both market cap and volume as size. Pick up the stocks above 3% daily return. Similarly pick up all the stocks with highest action for the day from various sources, which is either having higher than usual volume (say double) and having more than 1-2% gain.
2. Eliminate all the stocks which do not have their today’s close higher than previous close. Also, eliminate all the stocks which do not have today’s close higher than most recent high close.
3. For the selected ones, compute stop loss level and profit booking level.
4. Depending on margin, place GTT order for the stocks you like to bet offline.
5. Even if one is in front of the terminal, one can observe the chart of these selected ones and confirm whether the NU Quantum Breakout is continuing for the next day too, and exploit accordingly.
6. The one in front of the terminal next day, will catch the fresh break outs through the Heat Map (I use Trading View Heat Map. I set different timelines, and toggle between market cap and volume to get different breakouts in motion as well as accumulated through the day.)
Anticipate more such beginner friendly profit making trends blogs ahead.
Best wishes,
Nataraja Upadhya
+91 9632824391
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