Trading Nifty Futures For A Living By 'Chartless Trader’ Vikram SinghTRADING NIFTY FUTURES FORA LIVING By Vikram Singh ‘Chartless Trader’ “The game of speculation is the most uniformly fascinating game in the world. But it is not a game for thestupid, the mentally lazy, the person of inferior emotional balance, or the get- rich-quick adventurer. They will die poor.” — Jesse Livermore Disclaimer: Although every effort has been made to accurately represent the method and the application of it in live trades, but the author and the pub- lisher disclaim all legal or other respon- sibilities for any losses which investors or traders may suffer by investing or trading using methods described in this book. There is no guarantee that this method will make you money in investing or trading. Examples of live trades are not to be taken as guarantee or promise of earnings. Making money in trading takes more than just knowl- edge of trading system. We (publisher & author) are not advising our system to be ‘Get Rich Quick Scheme’ or ‘Sure Shot Earning method’. Readers are ad- vised to seek professional financial, legal and taxation advice before mak- ing any specific investments or beforeplacing any trades. Copyright © 2017 by Vikram Singh. All rights reserved. First eBook Edition: 2017 No part of this publication may be re- produced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photo- copying, recording, scanning or other- wise, except as permitted by local legal laws, without the prior written permis- sion of the author or the publisher. Location 23 6%About the Book: If you think that:- a) Trading can not be done for living b) Trading can not give you addi- tional income by putting in hardly 15 minutes a day c) Trading needs knowledge of charts and technical analy- sis like candlestick patterns, price patterns, various indicators like MACD, MA, RSI, studies like Elliot wave, Gann, etc. d) Trading needs ability to predict market e) Trading needs continuous up- dates on news f) Trading needs winning at least 60-80% of trades 8) Trading is very stressful h) Trading needs subscribing to tips service then you are in for big surprise. Vikram Singh will show how he trades for a living with real money in real mar- Location 34 9%ket and executing real trades without using charts, indicators, studies, news, tips service, etc. He publishes his real contract notes as a proof (never done before) that how he devotes less than 15 minutes a day to earn his living. He puts in trade for next day the previous night and so he is literally free next day unless market stops him out. In this book, he explains how to be- come successful trader by using his trading system, psychology and money management concepts and then shows how he applied this knowledge in real market to make money for his living. He is 8 times winner of Zerodha 60 day trading challenge and trades for living. This book shows you how you can also trade for a living or earn additional in- come without leaving your job. “Trading is simple and I will show you how with real proofs” — Vikram. About the Author: Page 1 of 34 17%After leaving his corporate life of about 18 years, Vikram Singh has been trad- ing Nifty futures for a living. He was not trading actively before but was in touch with the Indian stock market since mid-90s. As an investor, he has experienced the bull and bear markets since then. Just like a typical trader’s journey, he read more than 200 trading books and tried many things before settling at his own unconventional ‘chartless’ way of trading. He currently trades Nifty futures posi- tionally (not intraday) for a living. He has won Zerodha’s 60 day trading chal- lenges 8 times. He manages his own fund whose exposure runs into crores. Recently, he started off as Futures Trad- ing coach as well. His passive trading style has become popular with full time working professionals and gives them the ability to earn passive income by Page 3 of 34 17%devoting hardly 15 minutes a day. He can be contacted through his LinkedIn profile - https:// in.linkedin.com/in/vikramsingh72 Page 3 of 34 19%Table of Contents WHY NIFTY FUTURES? SUCCESSFUL TRADER TRADING SYSTEM TRADING PSYCHOLOGY MONEY MANAGEMENT 15 MINUTES A DAY REAL TRADES CONTRACT NOTES FINAL THOUGHTS Why Nifty Futures? Page 4 of 34 21%Every time I mention that I trade mainly in Nifty futures, I get this ques- tion “Why Nifty futures only?” To understand this, let us understand the power of compounding. “Compound interest is the eighth won- der of the world. He who understands it, earns it... he who doesn't... pays it.” —Al- bert Einstein Assuming that I start with 10 lots (750 quantity) of Nifty futures and earn on an average of 4% per month, then it would become approx. 1000 lots (75000 quantity) in 10 years and approx. 100,000 lots (7.5 million quan- tity) in 20 years. Even if I reach half of this quantity, which instrument can handle this much volume without giv- ing me too much slippage? I guess only Nifty futures. Will it be possible for me to change my trading system when my quantity is high just because the in- strument is unable to handle the large Page 5 of 34 25%quantity? Of course, not! As manual trader, will I be able to handle multiple instruments using same trading style? Very difficult! If I trade stocks or stock futures, then I will have to keep track of company’s an- nouncements (results, dividend decla- ration, bonus issue, rights issue) and its news (competitor news, supplier news, government policy impacting sector, etc.). Page 5 of 34 29%Nifty futures is very liquid. Moreover, we need to keep track of only macro events like elections, Brexit, Fed policy, RBI policy, etc. These events are known. well in advance and markets most of the time discount the obvious. More- over, we can exit before such big events. Of course, we can not avoid black swan events. So, keeping end goal of trading high quantities in distant future, I stick to Nifty futures as my main trading in- strument. Page 6 of 34 29%Successful Trader Successful trader needs positive ex- pectancy system, discipline to stick to the system, and right position sizing based on the capital and drawdown of the trading system. 1) Positive expectancy system means that system must be able to generate profits over a large sample size. Mathematically, it is [(probability of win * average win) - (probability of loss * average loss)] Average win must be calculated after deducting transactions costs (including slippage). Similarly, av- erage loss must add up these costs to present real situation. 2) Once you have positive ex- pectancy (or positive edge) system, next is calculating right position size based on capital. Right posi- tion size concept will be clarified in money management section. It en- Page 7 of 34 29%sures that you can trade for a living for long period of time. 3) Asa trader, once you have pos- itive expectancy system and the money management figured out, then comes discipline to stick to it. Remember, discipline is very im- portant and takes time to learn. Trading should become second na- ture with right practice over time. Just like driving car, when you are new, you get nervous when you see the truck approaching from the op- posite side, but with practice, driv- ing car becomes easy. Page 7 of 34 33%All the above three components are key for successful trading. If you have strong discipline but negative edge system, you will lose over pe- riod of time. Similarly, if you have positive edge system and discipline but overleverage, then one black swan event will shut down your trading business. “Men who can both be right and sit tight are uncommon.” — Jesse Livermore Page 8 of 34 36%Trading System Rules:- My trading system is pretty simple. I just use Previous day high (PDH) and Previous day low (PDL) as my guiding posts. If lam long, then PDL is my sup- port level and ifI am short, then PDH is my resistance level. So, basically I take Breakout (BO), Break- out Failure (BOF) and Breakout Pullback (BPB) at these decision making levels. That’s it. Most of my trades are based on this tule. I do take discretionary trades but they are rare. I am almost always in the market either short or long using SAR (stop and reverse meaning keeping stop loss with double quantity). So, if I am long and my stop loss gets hit, my long gets squared off and my short po- sition also get opened. Instead of showing you well-chosen ex- Page 9 of 34 36%amples, I will show you my one month live trades (with marking on charts) based on the trading system. Since this one month of trading can not cover all the cases of BO, BOF and BPB of PDH and PDL, so I will keep publishing my trading diary with live examples in up- coming volumes of this book. Page 9 of 34 39%Marking on charts does not mean that Iuse charts and you will see that in my live trades. I use charts rarely. I note down PDH and PDL levels from my ter- minal after day ends and use them as my guiding posts for next day trading. I keep stop loss the night before and I rarely pay attention to the intraday moves and do not move my stop loss based on intraday movements. Performance:- This is very generic system based on market levels so that it can perform in all phases of market (be it bull mar- ket, bear market, parabolic rise, dead market, range market, trend market etc.). Month to month, quarter to quar- ter and year to year performance will be different based on the phase of the market. As a trend trader, almost 65 - 70% of my trades result in aloss and 30-35% of the trades result in a profit but my aver- age win is much larger than the average Page 10 of 34 39%loss (based on trend trading concept — cut your losses and ride your profits) thereby resulting in net profit over a large number of trades. I always trail profits and rarely book profits. Ihave been using this system for last 10 quarters in live market with real money and have been profitable for 8 quarters. My loss in one of the quarter was only approx. Rs 1000 and my loss in another quarter was not because of system but because of psychology issue out of overleverage in highly volatile market. More about the performance with re- spect to drawdown is explained in money management section. Page 10 of 34 43%Trading Psychology For my system to be successful, you should be conservatively leveraged and you should not be careful before you mix my system with other system or before you fine tune my system to make it more specific to current market con- ditions. If you do not overleverage, it will solve most of your psychology issues and you will have nice sleep. Just try it! Most of the other psychology issues will get resolved once you have un- learned your previous knowledge. For example, if you are used to booking profits, then you will have problem with trailing and leaving profits on the table. If you are used to day trading, then you will have problem in keeping stop loss far and you will focus on even minor movements of the markets dur- ing the day. So, you need to unlearn (empty your cup) to adjust your disci- pline as per my trading system. Page 11 of 34 45%Please note that it takes hardly one day to learn my system but takes couple of months’ practice to build discipline to stick to my system. This discipline can only be learnt with practicing with real money in real market. As part of my on- line training program, it is mandatory for student to start trading from day one. If you do not have any position in market, you will not feel emotions. How can you control emotions and build discipline when you are not feel- ing it? Page 11 of 34 45%Money Management Since I trade for a living with trading as my primary source of income, I keep myself very conservatively leveraged. I take trading as my business and I can not let my business go bankrupt be- cause of drawdown beyond my histori- cal maximum limit or because of black swan event. I have seen drawdown of upto about 400 nifty future points. Statistically, I can have about 35 consecutive losses and so, I should be prepared for loss of 700-800 points. This does not take into account black swan event. Apart from this, I need at least 700 points for mar- gin. To take care of all this, I keep capital to take care of at least 2700 Nifty fu- ture points (30% of Nifty future value) to keep my business going. This extra capital can be in FD, debt mutual funds, etc. This means that I use leverage of slightly more than 3 times. Page 12 of 34 48%Based on 2700 nifty future points, my max drawdown in normal cases should be about 15% (400 points) with aver- age drawdown of about 150-200 points (less than 10%). My average profit, based on system, is about 1500-1800 Nifty future points annually. This comes out to be about 55-65% returns on total capital. Overall, this means that my system gives me about 60% returns with max drawdown of 15% in equity. Obviously, this can change from year to year de- pending on the phase of the market. Page 12 of 34 51%So, for 1 lot (75 quantity) of Nifty fu- ture, I should have capital of at least Rs 200,000 (2700*75) and expect an average annual returns of about Rs 120,000 with max drawdown of about Rs 30,000. Let us assume that black swan event happens overnight and Nifty opens 10% down (900 points). That means loss of about Rs 67,500 per lot but I I will still have Rs. 1,32,500 per lot and I can survive for another day. I will re- duce my position size but at least my trading business will not shut down. Remember, above money management is based on assumption that you do not have other source of income. If you have other source of income and your position size is small, then you can be little aggressive in leverage but keep re- ducing the overleverage as you grow your position size and as your trading income starts becoming main source of income. Page 13 of 34 55%Remember, trading is not ‘Get Rich Quick’ scheme. Page 13 of 34 53%15 minutes a day Let me explain how I or my students who work full time are able to earn in- come from trading Nifty futures. In my system, stop loss is known one day be- fore and so we can put AMO order in evening for next day. It takes hardly 5 minutes. Unless that order is hit, I do not have to do anything. Most of the days, it is just putting new stop loss next evening. My average trades are 15-18 in a month. It comes down to less than 1 per trading day. There are days when I have to put 3 trades in a day, but when markets get into a trend, then I have to put only 1 AMO trade in evening to keep trailing the trend. Ido not put any importance to intraday moves and put new order only once my stop loss is hit. If you are using any soft- ware that can send you alert once your stop loss is hit, then you will be free for the day till you get the alert. Page 14 of 34 55%As I am using my positional trading method, I work on multiple things dur- ing the day. So, it’s like market is mak- ing money for me even though I am not actively trading. As you will see my real trades in an- other section, you will see how much time is really needed to execute those trades. Most of my students are/were full time working professionals and are using this passive positional nifty fu- tures trading system. Real Trades After explaining about trading system, psychology and money management, let me explain how I traded in January 2017. Note that these are real trades taken in live market (contract notes Page 14 of 34 58%have been provided in another section as proof of my real trades). I will discuss only price action based on my rules. Prices have been rounded off to nearest unit. Please note that the charts below are of 15 minute timeframe candles. These are used to show my trades but you will observe that intraday moves are not being used unless my price levels are broken. Please note that 1 lot Nifty future is of 75 quantity as of January 2017. This means that 1 point move is equal to Rs 75. So, if I make 100 net points, it means that I made Rs 7500 on 1 lot of Nifty futures. Actual profit and returns depend on the positon size (number of lots) and the leverage used. I made about 431 points in Janu- ary. That means profit of about Rs 32,000. The margin requirement is of Rs. 50,000 per lot. So, this essentially means about 60% returns in 1 month Page 15 of 34 58%on margin capital. However, this is not recommended. For average points and right leverage, please refer to the money management section. Page 15 of 34 63%Summary of trades in Jan- uary 2017. Page 16 of 34 64%The actual trades with marking on charts and also the contract notes are de- tailed below. 29°" December: I moved from Nifty Fu- tures Dec 2016 contract to Jan 2017 at 12:50 pm at the price of 8075 ae ? [1s Page 17 of 34 64%30°" December, 2"4 January, 3" January, 4 anuary: I carried long as price did not break previous day low (PDL) 5‘ January, 6" January: I carried long as price did not break previous day low (PDL) 9" January: Price broke the previous day low and my long posi- tion taken from 8075 got stopped out 8254, result- ing in 179 points profits. I Page 18 of 34 66%also went short from 8254. yt os A Vy 10° January: Nifty futures opened and broke previous day high. My short position which I took at 8254 got stopped out and and I went long at 8276. This short position taken from 8254 resulted in loss of about 22 points. 11° January, 12 January, 13" January: Page 18 of 34 70%I carried my open position as previous day low was not broken. awdear o hott y Page 19 of 34 73%16" January: Nifty futures broke my stop loss kept at Previ- ous day low (PDL). I got stopped out at 8388. The long positon which I took on 10" January at 8276 got stopped out at 8388 resulting in a profit of 112 points. To find out if this was real or fake break, I kept my stop loss at day high to test break out fail- ure of previous day low. My stop loss kept at day high got stopped out and I got into long position again Page 20 of 34 73%from 8404. The short posi- tion taken in the morning gave me a loss of 16 points. wed Qe Page 20 of 34 76%17 January, 18" January, 19* January: I carried my open position as previous day low was not broken. 20" January: Nifty futures opened gap down below previous day low. In such cases, I wait for the opening price be- fore putting my stop loss. As market opened at 8400 and started coming back, I put my stop loss at 8400 which was broken at 12:58 pm and so I went short from 8400. So, the long Page 21 of 34 77%positon taken from 8404 got booked at 8400 and gave me a loss of 4 points. | | tat ! yu Mal 7 t‘| i : Vv 23°4 January: Nifty futures did not break previous day high and so Iremained and carried short. 24° January: Nifty futures gapped up above previous day high Page 21 of 34 79%and so I kept my buy trig- ger at opening day high. Nifty futures broke that day high at 9:24 am andI went long at 8434. So, the short taken from 8400 got stopped out at 8434 andI got loss of 34 points in that trade. Page 22 of 34 81%25" January, 27" January, 30° January: I moved from January con- tract to February contract on 25" January by selling January future at 8567 and buying February contact at 8587. So, I got profit of 133 points on the long position which I got on 24" January at 8434 and sold at 8567 on the contract expiry day. I carried long as previous day low was not broken. Page 23 of 34 82%Page 23 of 34 85%31% January: Nifty futures broke previous day low and so I went short at 8626. The long position which I took on contract rollover day at 8587 gave mea profit of 39 points. I closed my short position at 8582 before market close as next day was budget day and I wanted to avoid the volatility. This short posi- tion gave me profit of 44 points and I was done for the month of January. Page 24 of 34 85%| ft fn Mi ale ae wl Contract Notes (Few details like address, PAN, UCC, quantity, etc. have been removed to protect the personal and financial details) 29* Dec 2016 Page 32 of 34 87%Page 32 of 34 89%Page 32 of 34 90%10* Jan 2017: Page 32 of 34 91%16* Jan 2017: Page 32 of 34 91%20" Jan 2017: Page 32 of 34 93%24" Jan 2017: Page 32 of 34 94%25* Jan 2017: Page 32 of 34 95%31* Jan 2017: Final Thoughts My trading is simple and boring but profitable. Iam lazy when it comes to trad- ing. I have understood that trading is not ‘get quick rich’ scheme or any excit- Page 32 of 34 96%cult. So, the key is to be not too happy with profit or too sad with loss. Trading should be treated as business. Just as there are sea- sonal impacts on business, trad- ing may give you more money at times and less money at other times. Trading does not give you a fixed monthly paycheck. If you are working, do not quit the job unless you are trading profitably and consistently for at least 2-3 years and have increased posi- tion size (based on right money management principles) to get average profit at least 3 times of your expenses. This will take care of expenses and savings will keep increasing your capital to take care of inflation and to let you accumulate wealth over time. It Page 33 of 34 97%is a marathon and not a sprint. Just focus on the process (system, discipline, money management) and keep long term goal in mind. Good luck with your trading! “T learned early that there is noth- ing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.” — Jesse Liver- more Page 33 of 34 97%