Rebound after a 2% fall
Sharp one-day falls in an index are often followed by a partial bounce as sellers run out and bargain hunters step in. This strategy tests that idea on NIFTY futures in its simplest form: when a session closes 2% or more below the previous close, buy one lot at the next morning's open and sell at the close of the fifth session. There is no stop and no target, and after each event new signals are ignored for ten sessions.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
Three trades cannot show which conditions suit the strategy. What they do show is how much rides on one rebound: the single trade held while NIFTY rose more than 1% made ₹59,911, while the other two, held through a market that stayed within 1%, together lost ₹559. A five-day long after a sharp fall has no stop, so its result is simply the market's direction over that week. When the fall is a one-off shock, buyers return and the position gains; when selling continues, the long carries the full loss until the fifth close. The rule never chooses its market; it just waits for a large down day.
About this strategy
- Each day, measure the close-to-close return of the near-month NIFTY future.
- If it is -2% or worse, the session is an event. Sessions right after a futures expiry are skipped, because their return compares two different contracts.
- After an event, ignore new events for the next ten sessions.
- Buy one lot of the near-month future at 09:16 on the session after the event.
- Hold with no stop or target and sell at the close of the fifth session, counting the entry day as the first.
- If a monthly expiry falls inside the hold, close at 15:15 on expiry day and buy the next month's contract at the next session's first tick.
Why traders use it
Large down days are often driven by forced selling, stop-loss cascades and panicky news reactions, which can push prices below where patient buyers see value. A short-term rebound has historically followed many such days, which gives the trade its appeal: it is simple, waits for a clear trigger and holds for only a week. It is also a well-known statistical pattern that traders like to test on their own market.
The year in plain words
On NIFTY futures from 1 Oct 2025 to 30 Sep 2026, only three falls of 2% or more qualified after the cool-down rule. Two trades won and one lost, for ₹59,351 before costs. Almost all of it came from one rebound in February 2026, which made ₹59,911; the March trade lost ₹6,422 and the July trade made ₹5,863. With only six orders in the year, costs barely mattered: after ₹20 per order and bid-ask slippage the profit is ₹59,264. Three trades are far too few to tell whether the rebound pattern holds, and one good week drove the whole result.
What the settings do
Risks
- There is no stop loss, so a long futures position is fully exposed if the sell-off continues for the whole week.
- Events are rare, and a single trade can decide the year.
- Positions are held overnight, so gaps after further bad news are taken in full.
- Historical studies of this pattern show results leaning on a few crisis rebounds and deep drawdowns along the way.
Who it suits
Positional traders interested in simple, contrarian rules who can hold a NIFTY futures lot through volatile weeks with enough margin and accept very few trades a year.
Questions traders ask
Does NIFTY bounce after a big fall?
It often does in the short term, but not reliably. In this test, three qualifying falls led to two winning and one losing five-day trade. Long-run studies find a small average rebound that depends heavily on a few crisis periods.
Is buying after a 2% fall profitable?
In this backtest on NIFTY futures from 1 Oct 2025 to 30 Sep 2026 it made ₹59,351 before costs and ₹59,264 after ₹20 per order and bid-ask slippage, but from only three trades, one of which made almost all of it. Past results do not guarantee future results.
Why is there a ten-session cool-down?
Big falls tend to cluster. Without a cool-down, a run of bad days would trigger overlapping trades on the same sell-off. The cool-down limits it to one trade per episode.
Why skip the session after a futures expiry?
The strategy uses a continuous series of near-month futures. On the first day of a new contract, the price change compares two different contracts and includes the change in basis, which could look like a fall that never happened.