2 Candle Theory | Options Strategies

A scalping strategy for index futures & options →

Hey there!

Today we’ll discuss the 2-candle theory, a scalping strategy for F&O.

The 2-Candle Theory

The 2-candle theory is about finding breakout trades in index futures and index options. To take a trade, you need to find 2 consecutive candles, each having volumes:

  • Greater than 50K, for BankNifty or

  • Greater than 125K, for Nifty

According to the theory, you should take a position at the 3rd candle, and aim for a profit of 100-150 points. Under the right conditions, you should reach your target within 15-20 minutes.

A stop loss can be placed at the low or high of the first candle, depending on whether it’s a buy or sell trade.

Get confirmations from indicators and open interest

A good way to strengthen your trades is to look for the following signs of confirmation along with the 2 candles:

For a Long Trade

  • Open interest should show a long build-up / short covering.

  • Candles should be above the VWAP, Parabolic SAR, Supertrend, & VWMA.

  • The RSI line should be in the 50-75 zone. Avoid a fresh trade if it is above 80, i.e. in the overbought zone.

For a Short Trade

  • Open interest should show a short build-up / long unwinding.

  • Candles should be below the VWAP, Parabolic SAR, Supertrend, & VWMA.

  • The RSI line should be in the 25-40 zone. Avoid a fresh trade if it is below 20, i.e. in the oversold zone.

We’ve covered more about the above indicators here.

Note that for a successful trade, you should consider other factors and data points in addition to the ones mentioned above.

Share this strategy

facebook logo  twitter logo  linkedin logo  mail icon

Combine multiple indicators for a winning scalping strategy ⚡️

Learn to interpret different indicators and data points to devise a winning scalping strategy in Mr. Sivakumar Jayachandran’s Options Scalping Strategy Course. Get the course for just ₹999!

Stay financially fit,
Upsurge.club

Reply

or to participate.