IST: Low risk - High Reward strategy

Hello all

IST stands for "Infrequent Small Trades" (in Nifty futures).

Para 1: How it works: Between 10:30 am and 12:30 pm complete ONE trade of 10 points. SL 15 points.

Do not trade on days when some news is expected (like Brexit, budget, RBI policy, Fed decision). Generally every week trade only on three days so as to minimize risk.

Basis of trade: Visible price movement of Nifty futures and its recent highs and lows. No graphs / indicators required. In the two hours mentioned, the movement is anyway narrow.

Two things are very important: Intra-day multiple allowed by broker and brokerage charged.

Para 2: Choice of broker

From whatever I know, three brokers were shortlisted (bracket shows multiple allowed and brokerage charged)

(A) Zerodha (2.5x, Rs 40 per pair trade)
(B) Astha (10x, Rs 1000 per Rs 1 Crore of trade)
(C) SAS online (5x, Rs 999 pm unlimited trade)

Considering both criteria together, the best is SAS online for IST technique.
(In case of Astha the multiple of 10x is attractive but brokerage would be Rs 12000 per month ... cannot afford that).

Para 3: Profit calculation (per month)

Capital : Rs 1 lac (can be increased later)

(A) With 5x multiple, it is possible to trade 8 lots of Nifty futures (qty 600).
(B) Total points per month: No. of trades is 3 per week OR 12 per month. Assume SL hit 2 times in month.
( C) Net points per month : 70 (this is how --- Profit 10 x 10 = 100 points. Minus Loss 2 x 15 points = 30 points).
(D) Gross profit per month: 600 qty x 70 points = Rs 42 k
(E) Expenses per pair trade assuming Nifty fut as 8200: Trade volume is 8200 x 600 qty x 2 (buy txn and sell txn) ~ Rs. 1 Cr. So the expenses are as follows:
STT 500, NSE turnover tax 210, SEBI charges 20, Stamp duty (Maha state) 200. Total exepnses per pair trade: 930.
(F) Expenses per month: 930 x 12 ~ 11.2 k
(G) Add brokerage 999 + 14% tax ~ Rs 1140
(G) Net profit per month ~ 30 k (a cool 30%).
(H) What if the Stop loss is hit 3 times in a month? Net profit is still 15 k.


This is quite opp. of scalping/jobbing where no. of trades are very high (like 20 per day or 400 per month).

Is anybody been doing this? Request the experienced traders on this board to comment whether this is feasible or not. Also point out if there is any mistake in profit calculation above or suggest a broker who allows 10x multiple AND fixed brokerage per month.

My own experience of loss making reveals that the only reason for loss was "trading every day, that too every now and then". Restricting to 3 trades per week, that too during 10.30 am and 12:30 pm can minimize losses.

In my next post I will give details of my dry run last week (12-16 Dec).

Thanks for your time. Take care.
pos_trader

IST: Low risk - High Reward strategy