NEXO Strategy Bearish

Strategy Type: Intraday
Direction: Bearish
Instruments: Options Buying (Stocks and Index)

This is a chart pattern-based Algo on Options charts. You can define your own group of instruments, apply filters, decide the investment amount or quantity, and customise it as per your preference.

We can also plot Point & Figure charts of options.

What if we trade the price patterns directly on options charts?

The patterns are equally effective on options, as they are on the underlying.

There is one such pattern—defined using multiple swings, which are clearly visible on Point & Figure charts.

Price breaks above the highest high of the last five swings, marking a significant breakout through a strong resistance zone.

This is conceptually similar to the traditional Turtle Breakout strategy, where a bullish signal is generated when price moves above the highest high of the last 20 candles. While the original Turtle Trading system, developed by Richard Dennis and William Eckhardt, includes additional rules, that is a separate discussion.

The key difference here is the use of swing-based highs instead of time-based highs. This approach filters out minor or narrow sessions and focuses on meaningful price structures.

As a result, this setup becomes particularly effective on Point & Figure charts.

I have explained this formation in detail in my book Trade the Markets the Point & Figure Way, where I refer to it as the P&F Turtle Breakout pattern.

This pattern can be traded in stocks as well as Option charts.

Below is a strategy idea to trade it on Options charts.

Below are strategy details:

• Strategy Name: NEXO Strategy
• Instrument: Top 50 Stock Futures having Liquid Options. (Ready-made group)
• Type: Intraday
• Max Open Positions: 10
• Max Trades in the day: 30
• Timeframe: 1-min
• Brick-size: 3%

For bearish strategy

• Action: Long
• Market Trend Filter: Nifty Futures 0.05% x 3 below 10-column Moving average
• Entry Condition: Turtle Breakout – Bullish in ATM Put Option of underlying
• Action: Long ATM Put Option
• Exit Condition: Price falls below 6-period D Smart indicator or falls below 25% from entry price
• Action: Exit Put Option

NEXO stands for Noiseless Execution on Options charts.

It is a strategy built around applying noiseless price patterns to options charts.

The Turtle breakout is just one example.
There are several other patterns that can be effectively traded on options charts.

That is why the name NEXO—it is not limited to a single setup.
Any noiseless pattern can be applied to options charts within this framework.

In fact, many of the setups discussed in earlier chapters can perform equally well when applied to options.

The strategy is available for deployment on the Algostra platform.

Forward test it, observe its behaviour, and refine the parameters before going live.
This is a sample strategy designed to help you explore the structure further.

You can also apply this strategy in top 10, 20 or some other number of instruments having liquidity in their options. There are ready made groups available in Definedge platforms and they are updated on daily basis. You can also create your own group.

Filters

You can further enhance the strategy by adding filters: additional rules, indicators, or pattern-based conditions.

One effective approach is to incorporate a higher timeframe trend filter, such as the daily trend of the stock.

You can also apply intraday-specific filters to improve trade quality.

With the right filters, you can further refine and personalise it to suit your trading style.

You can modify it, test it, and deploy it on the Algostra.