RHYTHM – A Futures Positional Algorithm

Our various Algorithms – The Strategies Trio:

  • RHYTHM: Stock Futures Positional Algorithm
  • MATRIX: Swing Trading System for NIFTY, Gold, Crude Oil and USDINR
  • COMPRESSION: price / volatility compression breakout on Stock Futures
  • And, Elliott Wave Analysis on NIFTY

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In RHYTHM, we first decode the Technical Structure of the stock (as in the image above) in the Daily time frame and then delve further into our preferred lower time frame (125 Min / 75 Min) for Execution.

The Algorithm is not purely based on wave principle, while the core structural basis has been taken from the wave principle and a few patterns are a part of it, a lot of Math and Stat has been used to construct and identify the Structure.

Identification of Structure is the first and important part, while Executing the Trade is another. Under Execution, we mean the where’s and the how’s to Enter and then staying on guard till Exit. Quite a lot of Indicators have been used for the same.

The idea is to look for Low Risk / High Probability set-ups.

The accuracy rate of > 70%, a controlled Maximum Drawdown of 15-20% vs the Annual Net Profits in the range of 40-60% are some of the key performance metrics of this consolidated System.

The focus is deeply on Risk Management with Reward : Risk being at 1.5 – 2, having the initial maximum fixed stops at around 3-4% from Entry Price, whereas the Maximum Profit Targets being at 6-8%. The other Exit Strategy components active in real-time are Pattern Invalidations and Trailing Stop Methodology on the adverse side and Early Exits depending upon Volumes based Accumulation/Distribution, Standard Deviation Bands on the favorable side.

The screenshots of the Back-Test Performance Reports from Ninja Trader are attached here, as generated by the software. The Universe is those stocks from NIFTY 200 Index that are in Futures segment and it further omits any stock that’s priced under 50. Stops are placed at 3-4% from Entry price, but in backtests it doesn’t show execution of such Stops if that happens in the middle of the bar. Hence, in some cases, it shows greater percentage of largest loss, which will not be the case.

Backtest Period: December 2017 – August 2021 (Kindly Zoom the image below)

RHYTHM / Momentum


RHYTHM / Mean Reversion

Actual Trades from April 2021

MAE = Maximum Adverse Excursion: On an average, how much a Trade runs-down or goes in the adverse direction after Entry. Negative Mark-To-Market.

MFE = Maximum Favorable Excursion: On an average, how much does a Trade move in the favorable direction after Entry and before Exit. Positive Mark-To-Market.

ETD = End Trade Drawdown: Shows how much does the Strategy give back from the best price before the Trade is Exited.

  • Capital: 10 Lacs.
  • Max Drawdown: 1-1.5 Lacs under Normal circumstances. In 2020, it was up to 2 Lacs. So, 20% should be Max.
  • Long and Short Both. Futures Only. No Options.
  • No of Trades in a Month: 4-8, depending upon volatility in the Markets.
  • Max No of Open Positions at a single time: Usually, 2-3. Cap is at 4.
  • Fixed Maximum Stops from Entry Prices: about 3%. Can Exit early on pattern invalidations.
  • Fixed Maximum Targets from Entry Prices: at least 6%. Can Exit Early if the Move is not as per anticipation.
  • Risk / Reward = Greater Than or Equal To 1:2.
  • Accuracy: about 72%

Contact +91-9082061030 (WhatsApp/Telegram) for more details.

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