Ever heard of the term “circuit” in the market? When a stock falls or rises more than 5% in a day, a circuit is imposed by the exchange on that particular stock. But in case of stocks in futures and options segment, this circuit is filtered by the exchange. When a stock falls 5% from its opening price, we take advantage of the situation and buy the stock anticipating it to recover in a particular trading session.
The rules of the strategy are as follows:
- Place a buy limit order at a price which is 5% lower from the open.
- Use 2% as a stop loss in order to reduce your loss.
- Exit the position at 3:15.