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Tags: Blanking Manual revert |
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| # MA21 Mean Reversion Strategy
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| ## MCX Crude Oil - Intraday Trading System
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| ---
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|
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| ## Core Concept
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|
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| **Trade pullbacks to the 21-period Moving Average (MA21).**
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|
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| The MA21 acts as a dynamic support/resistance zone. When price pulls back to this zone during a trending market, we enter in the direction of the trend expecting price to continue.
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| > *"The MA is a ZONE, not a thin line"* - Entry allowed within ±25 points of MA21
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|
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| ---
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|
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| ## Instrument & Timeframe
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|
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| | Parameter | Value |
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| |-----------|-------|
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| | Instrument | MCX Crude Oil Futures |
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| | Chart Timeframe | 5-minute |
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| | Entry Precision | 1-minute (for exact timing) |
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| | Trading Hours | 9:00 AM - 11:30 PM IST |
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| | Blocked Hours | 9 AM (market open), 10 PM onwards |
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| ---
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|
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| ## Entry Rules
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|
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| ### 1. MA Zone Requirement
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| - Price must be within **±25 points** of MA21
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| - This defines the "discount zone" for longs and "premium zone" for shorts
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|
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| ### 2. Direction Alignment (Hard Filter)
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| Trade direction MUST align with MA21 slope:
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| | MA21 Slope | Allowed Direction |
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| |------------|-------------------|
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| | Rising (↗) | LONG only |
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| | Declining (↘) | SHORT only |
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| | Flat (→) | Use Multi-Timeframe (MTF) direction |
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|
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| ### 3. Setup Quality Grading
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| Every potential trade is scored on 5 factors:
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|
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| | Factor | Weight |
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| |--------|--------|
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| | Timeframe Alignment | 30% |
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| | Trend Strength | 20% |
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| | Key Level Proximity | 20% |
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| | Entry Technique | 15% |
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| | Risk:Reward | 15% |
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|
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| **Grade Thresholds:**
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| | Grade | Min Score | Action |
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| |-------|-----------|--------|
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| | A+ | 90+ | Trade with full size |
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| | A | 80-89 | Trade with full size |
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| | B | 70-79 | Trade with full size |
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| | C | 60-69 | NO TRADE |
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| | D | 50-59 | NO TRADE |
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| | F | <50 | NO TRADE |
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|
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| ### 4. Probability Zone Filter
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| Based on price position within recent range:
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| - **Top Third**: 80% probability of continuation (favor shorts after rally)
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| - **Bottom Third**: 85% probability of reversal (favor longs after pullback)
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| - **Sideways Market**: Mean reversion logic applies
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|
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| ### 5. Special Pattern: Crash SHORT
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| In sideways markets at top of range:
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| - If big RED bar breaks below MA21 zone
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| - Override any LONG signal to SHORT
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| - Enter the breakdown
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|
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| ---
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|
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| ## Exit Rules
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|
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| ### Stop Loss: 40 Points
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| | Method | Logic |
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| |--------|-------|
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| | Default | 40 points from entry |
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| | Structure-based | Below recent swing low (LONG) / Above recent swing high (SHORT) |
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| | MA Bounce | MA21 value ± 25 points buffer |
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| | Minimum | Always at least 40 points |
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|
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| ### Take Profit: 60 Points (1.5:1 R:R)
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| | Calculation | Value |
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| |-------------|-------|
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| | Target Distance | Risk × 1.5 = 40 × 1.5 = **60 points** |
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| | Alternative | 50% of distance to MA (if > 60 pts) |
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| | Risk:Reward | 1.5:1 (gain Rs 150 for every Rs 100 risked) |
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|
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| ### Timeout: 8 Hours Maximum
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| - If trade doesn't hit stop or target within 8 hours
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| - Exit at current market price
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| - Prevents overnight holding
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| ---
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|
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| ## Risk Management
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| | Parameter | Value |
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| |-----------|-------|
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| | Position Size | 1 lot (100 barrels) |
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| | Risk per Trade | 40 points × 100 = Rs 4,000 |
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| | Reward per Trade | 60 points × 100 = Rs 6,000 |
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| | Max Concurrent Trades | 1 |
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| ---
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|
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| ## Cost Structure
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|
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| | Cost Type | Value |
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| |-----------|-------|
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| | Brokerage | Rs 20 per lot per leg (Dhan) |
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| | CTT (Commodity Transaction Tax) | 0.01% on sell side |
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| | Total Round-trip | ~Rs 40 brokerage + CTT |
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| ---
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| ## Trade Flow Summary
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|
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| ```
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| ┌─────────────────────────────────────────────────────────────┐
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| │ ENTRY DECISION │
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| ├─────────────────────────────────────────────────────────────┤
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| │ 1. Is price within ±25 pts of MA21? → NO = SKIP │
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| │ 2. Does direction align with MA21 slope? → NO = SKIP │
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| │ 3. Is setup grade A+, A, or B? → NO = SKIP │
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| │ 4. Is current hour allowed (not 9, 22, 23)? → NO = SKIP │
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| │ 5. Does probability zone allow this trade? → NO = SKIP │
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| │ │
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| │ ALL YES → ENTER TRADE │
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| └─────────────────────────────────────────────────────────────┘
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|
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| ┌─────────────────────────────────────────────────────────────┐
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| │ EXIT DECISION │
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| ├─────────────────────────────────────────────────────────────┤
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| │ • Price hits STOP LOSS (40 pts) → EXIT (loss/profit*) │
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| │ • Price hits TARGET (60 pts) → EXIT (profit) │
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| │ • Time exceeds 8 HOURS → EXIT (at market) │
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| │ │
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| │ *Stop can be profitable if trailing stop moved in profit │
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| └─────────────────────────────────────────────────────────────┘
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| ```
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|
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| ---
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|
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| ## Equity Curve
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| 
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| ---
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| ## Backtest Results (19 Months)
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| | Metric | Value |
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| |--------|-------|
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| | Initial Capital | Rs 1.00 Lakhs |
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| | Final Value | Rs 26.48 Lakhs |
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| | Total Profit | Rs 25.48 Lakhs |
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| | Total Return | 2,548% |
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| | Peak Value | Rs 28.35 Lakhs |
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| | Max Drawdown | -78.6% |
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| | Total Trades | 7,534 |
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| | Win Rate | 57.6% |
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| | Profit Factor | 1.20 |
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| | Average Win | Rs 3,464 |
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| | Average Loss | Rs 3,904 |
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| | Largest Win | Rs 26,799 |
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| | Largest Loss | Rs 13,217 |
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| | Avg Holding Time | 2.4 hours |
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| ### Exit Reason Breakdown
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| | Exit Type | Count | % | Note |
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| |-----------|-------|---|------|
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| | Stop | 5,444 | 72.3% | Includes trailing stop profits |
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| | Target | 1,716 | 22.8% | 100% winners |
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| | Timeout | 374 | 5.0% | 8-hour limit |
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| ### Direction Distribution
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| | Direction | Count | % |
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| |-----------|-------|---|
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| | SHORT | 6,024 | 80% |
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| | LONG | 1,510 | 20% |
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| ### Setup Quality Distribution
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| | Grade | Count |
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| |-------|-------|
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| | A+ | 3,457 |
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| | A | 551 |
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| | C | 3,526 |
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|
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| ---
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|
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| ## Key Strategy Principles
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| 1. **Trade WITH the trend** - MA21 slope determines direction
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| 2. **Enter at value** - Only when price is near MA21 zone
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| 3. **Quality over quantity** - Only A+, A, B setups are traded
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| 4. **Fixed risk management** - 40 pt stop, 60 pt target
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| 5. **Time discipline** - Maximum 8 hour holding period
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| 6. **No overnight risk** - All positions closed intraday
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| ---
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| ## Source Code Reference
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| All rules implemented in:
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| - `signal_generation_trade_management.py` - Entry/Exit logic
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| - `setup_quality_detection.py` - Trade grading system
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| - `trade_execution_engine.py` - Stop/Target/Timeout execution
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| - `probability_zone_analysis.py` - Zone-based filtering
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| ---
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| *Document generated from code analysis - January 2026*
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