Page 144 - IMDR JOURNAL 2023-24

IMDR’s Journal of Management Development & Research 2023-24

is versatile because it may be used not only on individual stocks but also on index options such as the Nifty
and Bank Nifty. This tool excels at adapting to changing market conditions and accurately capturing short-

term positive trends.

Strategy: 3
In the world of options trading, a sophisticated technique has arisen to capitalise on short-term negative moves

by using the Relative Strength Index (RSI) across different time frames. This approach is precisely created for
options trading and can be used to individual stock options as well as indices such as the Nifty and Bank Nifty.

It includes precise criteria based on RSI readings from the 1-hour and 15-minute chart timeframes.
The technique unfolds with caution over the 1-hour chart timeframe, when the RSI falls below the 40 level.

This indicates the onset of bearish momentum in the underlying stock or future contract. Simultaneously, on

the 15-minute chart timeframe corresponding to options, the RSI crosses below 40, confirming an
amplification of bearish emotion over a shorter period. This synchronization of RSI signals acts as a cue to

initiate short positions in put options (PE), anticipating negative price moves.
Traders should use a trailing stop-loss mechanism to manage risk exposure after the trade is executed. This

entails dynamically modifying the stop-loss level as the option price moves in the expected direction, securing
potential profits while minimizing losses in the event of adverse price fluctuations. It is critical to note that

this technique is meticulously calibrated for options trading and is perfectly suited to capturing fleeting

negative movements. By combining RSI signals with precise entry and exit methods, traders may effectively
navigate the dynamic options market and capitalize on favorable price dynamics.

Findings:

 Performance data: Empirical data shows that trading methods in the Indian stock market perform
differently, with some generating consistent returns and others underperforming or exhibiting increased

volatility. Fundamental analysis-based techniques, such as value and quality investment, tend to
perform well over time, but technical analysis-only strategies may produce inconsistent results.

 Market Dynamics: The findings underscore the dynamic nature of the Indian stock market, which is
marked by volatility, liquidity swings, and quick shifts in investor opinion. Trading methods must adapt

to shifting market conditions and use risk management tactics in order to navigate efficiently and
reduce downside risk.

 Technical breakthroughs: The study emphasizes the growing importance of technical breakthroughs,

such as algorithmic trading, machine learning, and big data analytics, in determining trading techniques
in the Indian stock market. These technologies provide opportunity for automation, optimization, and

improved decision-making, but they also present issues in data privacy, cybersecurity, and regulatory
compliance.