Hi Friends, in the last 2 months of flat and range bound markets, i have learnt a very effective hedging strategy which works wonders and makes good money quiet effortlesly.
i am gonna tell u the secret, however there is 1 condition , that a person using this technique should be good with technicals.
since i dont like to trade in options, also in rangebound markets buying options dont make much money, for hedging, i use Nifty & mini nifty.
for every 100 nifty(2lots) short, i buy 60 mini niftys (3 lots) and vice versa.
for example, i am having positional shorts from 2675 levels, and i am very sure of tgts below 2500.
but during closing today, markets looked like it may give an upmove, also dow futures suggested the same.so for every 100 short i bought 60 mini longs.
this way i am protected in a gap up, and any upmove that comes.this way i can also keep a big and a safe SL for my shorts.ideally nifty wont close above 2690 easily. so my strategy will be to book my longs close to it, and add more shorts there.another scenerio is.. suppose we got a big gap down the next day.....i will anyways be in profits as i have 100 shorts and just 60 longs.
so for 100 points fall, i make 10,000, and loose 6000, so 4k net profit.
now if you notice, i take bigger lot for the primary market direction, and hedge against it.so in case i go wrong, loss will be very small in all scenerios.
also we have the option of booking partial profits whenever u feel like.
by this wht i want traders to understand is that, its just another way of safe trading, as u dont have to worry about the time decay as in options.
u may not make big money by this method, but u will definately be in profits, or small loss if followed properly.
do wirte in to our google group if you have any questions regarding the same at - STOCKRESEARCHER@googlegroups.com
Now for the markets, nifty closed below imp support levels for 2nd day in a row.however may give an upmove due to the news flow.only a close above 2690 fut or 2720 spot will make me book out of shorts.
for intraday
supp - 2628-2613-2597
Resistence - 2661-2674-2691
(EOD chart attached, All Future Levels)
