Positional Trading Strategy
Options trading involves risk and it's essential for traders to have a well-thought-out strategy, risk management plan, and a good understanding of the market conditions.
Breakout trading stands as a widely adopted strategy in options trading, designed to recognize and capitalize on noteworthy market price shifts. This approach relies on momentum, seeking to secure profits from abrupt and substantial price changes typically observed following an extended period of consolidation or trading within a specific range.
When do you gauge that the breakout scenario is sustainable or just a flash in the pan?
Solutions to all the problems above lies in Price + Open Interest Analysis
Price movements supported by increased Open Interest participation are more likely to endure.
Solution --- Price OI Percentile
The term price percentile refers to a statistical measure that indicates the relative position of a particular price within a given dataset. It represents the percentage of prices that are equal to or below a specific value. Same holds true for Open Interest Percentile.
Price Move along with participation (Open Interest Increment) has More Probability of Sustaining
Therefore, certain observations are discussed in this video regarding the dynamics of Price and OI percentile, their thresholds and focal points, which need to be considered, before even considering the importance of a particular directional move, either Bullish or Bearish.
PGDM in finance, having 5+ experience in Equity, commodities , forex analysis and trading.
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