The Homma Tightness Trading System
This simple system takes less than 10 minutes a day.
I had one of the most profitable weeks of my short trading career.
After I successfully sidestepped the better part of the correction, I also scaled back progressively right at the market bottom.
PBAs (pullback anticipations), PBCs (pullback confirmations) and Cheat entries were my preferred modes of entry.
I was getting pretty good feedback on the cheat entries. Especially the ones that had a very tight price action.
And I doubled down on them.
I had 4 names under my “Tight” high-priority watchlist.
All 4 of them broke out by the weekend.
In this article, I explain the Homma Tightness Trading System.
A complete Trading system has 6 major Questions in a particular order:
Q1: What is the current Market Condition?
Answer: Bullish or Bearish or Sideways.
We trade aggressively during Bullish conditions, lightly or not at all during sideways, and go fishing during a downtrend.
Q2: Which stocks/instruments should I select?
Answer: Scanning for the Highest Relative Strength stocks.
Q3: Where should I enter using which entry tactic?
Answer: Breakouts, pullbacks, or anticipations. This is determined partly by personal preference and partly by market health. E.g. A sideways market will not favor breakouts at all.
Also, each entry tactic provides different pros and cons.
A cheat entry might give you a tighter risk but with a higher probability that the stock might face resistance at the O’Neil pivot.
An O’Neil Pivot Breakout entry will give you a higher probability of an upmove but also a higher risk.
I have a lot to talk about each entry type and their pros and cons (which will be a separate article) but for now, here are all possible types of entries you can make:
Q4: How much should I buy?
Q5: Where should I put my Stoploss if the trade goes against me? And how should I manage the trade if it doesn’t? ~ RISK MANAGEMENT
Q6: How and where should I sell?
You have a trading system if you have the answers to the above 6 questions.
Now let’s put this together in the context of the Homma Tightness Trading System.
Homma Tightness Trading System:
Market conditions:
Markets have to be bullish. If not outrightly bullish, at least the breadth has to show increasing momentum in the last 5 days.
I have a set of breadth indicators that I monitor every day for this.
Watch this video where I go through a breadth round-up.
Scan for the top 5% strongest stocks in the last 20 and 50 days or both timeframes. I sort the top 100 names according to my RS score out of 2000 NSE stocks in the NSE universe.
I use my proprietary dashboard on chartink (This is available as part of my HPA yearly subscription). One can also use MarketSmith RS above 90 stocks.
I then scan these 100 stocks manually for a tight area (at least 3 candles) with a contraction in price and volume. This takes me around 10 minutes.
I then mark the top of the recent candle or consolidation with a horizontal line and set an alert on Tradingview.
Entry: 2 variations:
GTT ~0.5% above the breakout pivot (the high of the previous candle or consolidation)
Manually entering on the intraday pullback bounce.
The former is a better option for working professionals or those who cannot afford screentime.
How much to buy?
Follow the same as your normal system.
In my recent trades, I have been taking larger position sizes (~20-25% of the portfolio) intraday with margins. And selling a major size on the same day itself. While carrying over only a minor position. This sizing strategy is called “peeling”. I learned this from the legend Pradeep Bonde (Stockbee).
Where to put the SL?
SL is a function of a) the setup and b) the position size.
Below the low of the day (LOD) or the low of the consolidation (LOC). Both do make sense.
If your entry is intraday and the entry point is farther away from the breakout pivot such that LOD or LOC no longer provides you a small manageable risk, you can choose the intraday pivot low.
When and where to exit?
Given the current market conditions where we aren’t sure of a larger bullish move, I look to derisk my position at the first opportunity. Peeling does this for me. But if I were taking a normal position, I would sell half into strength around 2nd or the third day post the move. This can translate to anywhere between 5-20%.
Read this article for more ideas on selling systems.
That's all for today.
The only thing that will help you, not just survive the markets but also make consistent money is “having a system”. And that system has to be personal to you.
I have successfully done that for myself,
and I will help you build that system for yourself in the shortest time possible.
I do that in 2 ways below:
Join the Sakatas Homma TA masterclass for beginners:
A complete course containing 8 Hourly sessions. Once a year.
To register for the next live masterclass, please fill out this form.
Watch the 1st session of the Autumn 2023 masterclass.
To access the full 8 sessions, contact us via WhatsApp @ 9481506784
Homma Private Access membership:
HPA is a subscription-based educational service (on WhatsApp). Benefits include:
Daily Market Breadth, Momentum, Sector Rotation, and Relative Strength Update.
Access to all my scanners including the BBB (buy before breakouts) scanner.
Access to my proprietary Breadth-Momentum-Relative Strength & Sector Rotation dashboards.
Access to my Trading view indicators: Homma Khela Hobe, Buy before Breakouts (BBB), Homma Endgame
Access to live Telegram alerts to Homma Khela Hobe signal.
HPA Weekly: Hourly weekend deep dives and Q&A.
1-year access to The Technical Take premium.
Live updates on my portfolio and the trading setup rationale.
Access to my high probability watchlist.
Yearly membership of 15000/- INR only.
UPI payment & WhatsApp @ 9481506784.
Yours
Sakatas “Tightness trader” Homma.
Thanks for sharing! Great one!