An Intraday Trading Strategy

MID POINT REVERSAL TRICK

Keep things simple

An Intraday strategy that doesn’t uses fundamental and technical analysis. Any novice trader can calculate all levels with simple mathematics.

Risk-Reward ratio = 1:1

Accuracy = 50-70% (if triggered). 

Basic Terminologies:-

Gap Up: - When the price of a financial instrument opens higher than the previous days's price,it is gap up. 

Gap Down: - When the price of financial instrument opens lower than the previous trading day it is gap-down. Gap-downs occur when there is a change in investor sentiments. 

Continuation gap:- It occurs in the middle of a stock's price pattern and indicate a common belief of a group of buyers or sellers in the future direction of the stock.

Stop-loss: -  Stop-loss is a method used by an investor to limit his loss. It works as an automatic order given by investor to his broker to sell a security as it reaches a certain predetermined price. For example, let's say Shailesh buys 200 shares of abs company at the rate of four fifty rupees per share. Shortly, the price falls to 440 rupees per share and he want to limit his looses; so he inputs a stop-loss order at Four hundred and thirty five rupees. If price corrects further to Four hundred thirty five rupees, his broker will sell the share to prevent further losses.

Volatile Market: -Unpredictable and vigorous changes in price within stock market.

This strategy has 5 steps that are explained below:

Calculations:-

STEP 1:- Checking high & low of previous day.

            For example any stock have a previous day   high is 360 and Low is 340

                                    High = 360

                                    Low = 340

STEP 2:- Midpoint Calculation

Midpoint = High + low/2 = (360+340)/2 =350

STEP 3:- Range Calculation

            Range= previous day Stock High – Previous day Stock low è 360-340 = 20

STEP 4:- Deciding where to buy where to sell

Buy point = step 2 -  step3 = 350 – 20 =330

Sell point = step2 + step 3 = 350 + 20 =370

STEP 5:-Stop loss Calculation

·         If  market is very volatile than  1/3  of range is the stop loss: -

For ex: -

1.      In sell side

Range = 20,

Stop loss = 1/3 * 20 = 6.66

Stop loss point = 370 + 6.66 = 376.66

·               If  market is very volatile than  1/4 of range is the stop loss: -

1.      In buy side

a.      Range =20

b.      Stop loss = ¼ * 20 = 5

c.       Stop loss point = 330 – 5 = 325

STEP 6: - 

            Opening: -   Gap UP above Mid-point then go for SELL

                                 Gap down below Mid-point then go for BUY

STEP 7: - Target price

·         In normal market: -                

(1)    Whatever is the Stop loss that is the target.

(2)    For Example: - In buy  side

(a)    In buy side, stop loss = 5 point. Then target price could be Target 1 = 335, 

       Target 2 = 340 and so on.

(b)   In sell side, stop loss = 5 points. Then target price could be Target 1 = 365, 

       Target 2 = 360 and so on.

Note: - We need to consider reversal candlesticks ( 5 to 15 minute ) before taking entry.

Biggest drawback of Mid point Reversal Trick

•     It does not work with big Gap-Up or Gap-down.
•     If open is outside range, then we should not trade on that script and index

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