3 PM Strategy for Nifty & Bank Nifty on Expiry Day

The 3 PM Strategy for Nifty & Bank Nifty on Expiry Day

The 3 PM strategy is a popular scalping approach specifically designed for Nifty and Bank Nifty options trading on expiry days. Traders aim to take advantage of the sharp intraday movements that typically occur in the final hour of trading (3:00 PM – 3:30 PM).

📊 Why the 3 PM Strategy Works

  1. Time Decay (Theta Decay): By 3 PM, the time value of options premiums has eroded significantly. However, sudden directional moves can still offer quick scalping opportunities.
  2. Institutional Activity: Big players like FIIs (Foreign Institutional Investors) and DIIs (Domestic Institutional Investors) often close their positions or roll them over.
  3. Short Covering or Profit Booking: Traders who have written (sold) options may square off their positions, leading to sharp directional spikes.
  4. Liquidity: Expiry days ensure high liquidity, especially in At-the-Money (ATM) and slightly Out-of-the-Money (OTM) strike prices.

🛠️ Setup for the 3 PM Strategy

  1. Focus on At-The-Money (ATM) Strikes: Look for ATM Call (CE) and Put (PE) options.
  2. Trend Identification: Use 5-minute or 3-minute charts to identify trends. Look for:
    • Breakouts of support/resistance.
    • Volume spikes confirming the move.
  3. Key Indicators to Use:
    • 9-EMA and 20-EMA Crossovers
    • VWAP (Volume Weighted Average Price)
    • RSI (Relative Strength Index): Look for RSI crossing above 60 (for bullish trades) or below 40 (for bearish trades).

📈 Strategy Execution

  1. Bullish Setup (Buy CE):
    • Price breaks above a strong resistance level around 3 PM.
    • RSI > 60 and rising.
    • Volume spikes.
  2. Bearish Setup (Buy PE):
    • Price breaks below a strong support level around 3 PM.
    • RSI < 40 and falling.
    • Volume spikes.
  3. Stop-Loss & Target:
    • Stop-Loss (SL): Place a 15-20% SL on the premium price.
    • Target: Aim for a quick 30-50% gain on the premium.

📌 Pro Tips:

  • Avoid Over-Leveraging: The market can reverse quickly; use proper position sizing.
  • Avoid Trading in Choppy Markets: If the market shows no clear direction by 3 PM, avoid trading.
  • Expiry Day Premium Erosion: Premiums of far OTM strikes may erode completely. Stick to ATM or slightly ITM (In-The-Money) strikes.

🧠 Psychology in the 3 PM Trade

  • Scalping requires quick decision-making.
  • Have a defined entry and exit plan before taking any trade.
  • Stay disciplined with your stop-loss and target.

This strategy works best when combined with proper risk management and clear technical confirmation.

📑 Trading Plan for the 3 PM Expiry Day Strategy (Nifty & BankNifty)

A structured trading plan ensures discipline and minimizes emotional decision-making. Below is a step-by-step guide tailored for scalping with CE or PE on expiry days:

✅ 1. Pre-Market Preparation (Before 3 PM)

  1. Select Underlying Index: Choose either Nifty or BankNifty (prefer the one showing clear trends).
  2. Identify Key Levels:
    • Support and Resistance zones (from 5-min, 15-min charts).
    • Day’s High and Low levels.
    • Pivot Points (R1, R2, S1, S2).
  3. Set Up Indicators:
    • 9-EMA and 20-EMA Crossovers
    • VWAP (Volume Weighted Average Price)
    • RSI (Relative Strength Index) (watch for levels 60 and 40)
  4. Select ATM Strikes: Identify At-The-Money (ATM) CE and PE options.

✅ 2. Market Observation (2:45 PM – 3:00 PM)

  • Watch for breakouts or breakdowns near key levels.
  • Pay attention to volume spikes confirming the move.
  • Check if Nifty and BankNifty are aligned in direction (helps in strong trend confirmation).
  • Avoid choppy or sideways movement.

✅ 3. Entry Rules (3:00 PM – 3:15 PM)

📈 For CE (Call Option Buy):

  • Condition 1: Price breaks above resistance with increased volume.
  • Condition 2: RSI crosses above 60.
  • Condition 3: Price stays above VWAP and EMA lines.

Entry Example: Buy ATM CE when the above conditions align.

📉 For PE (Put Option Buy):

  • Condition 1: Price breaks below support with increased volume.
  • Condition 2: RSI crosses below 40.
  • Condition 3: Price stays below VWAP and EMA lines.

Entry Example: Buy ATM PE when the above conditions align.

⚠️ Pro Tip: Avoid chasing the trade if you miss the initial breakout/breakdown.

✅ 4. Exit Rules (3:15 PM – 3:30 PM)

  • Target: 30-50% profit on option premium.
  • Stop-Loss (SL): 15-20% loss on option premium.
  • Trailing Stop-Loss: If the trade moves in your favor, trail SL to lock profits.

🚨 Exit Immediately If:

  • Trend reverses sharply.
  • Volume drops after breakout.

✅ 5. Risk Management

  • Position Size: Invest only 2-5% of your total capital in one trade.
  • Avoid Revenge Trading: If you hit your SL, stop trading for the day.
  • Capital Allocation Example:
    • Total Capital: ₹1,00,000
    • Risk Per Trade: ₹2,000 – ₹5,000

✅ 6. Trading Psychology

  • Stay Calm and Focused: Expiry trading can be volatile; don’t panic during sudden moves.
  • Accept Losses Gracefully: Stick to your SL without hesitation.
  • Avoid Overtrading: Limit yourself to 1-2 trades per expiry day.

✅ 7. Post-Trade Analysis (After Market Close)

  • Review your trades to see:
    • What went right?
    • What went wrong?
  • Maintain a Trading Journal to track your performance.

📊 Checklist Before Entering a Trade

✅ Price action confirms breakout/breakdown.
✅ RSI supports the direction (above 60 for CE, below 40 for PE).
✅ Volume spike supports the move.
✅ Stop-loss and target are predefined.
✅ Trade aligns with the overall market sentiment.

📊 Step-by-Step Guide to Set Up Indicators

✅ 1. Set Up Moving Averages (9-EMA & 20-EMA)

  1. Open Your Chart: Select Nifty50 or BankNifty Index Futures/Spot chart.
  2. Add EMA Indicator:
    • Search for “Moving Average Exponential (EMA)” in the indicator section.
  3. Set Parameters:
    • First EMA: Length → 9, Color → Green (or any preferred color).
    • Second EMA: Length → 20, Color → Red.
  4. Enable Price Source: Set to Close/OK!

How to Use:

  • Bullish Signal: 9-EMA crosses above 20-EMA.
  • Bearish Signal: 9-EMA crosses below 20-EMA.

✅ 2. Set Up VWAP (Volume Weighted Average Price)

  1. Add VWAP Indicator: Search for “VWAP” in the indicator section.
  2. Enable Settings: Keep it at default settings.
  3. Appearance: Make the VWAP line bold for visibility.

How to Use:

  • Above VWAP: Bullish bias.
  • Below VWAP: Bearish bias.

✅ 3. Set Up RSI (Relative Strength Index)

  1. Add RSI Indicator: Search for “Relative Strength Index (RSI)” in the indicator section.
  2. Set Parameters:
    • Length → 14 (default).
    • Add Levels 60 and 40 to the indicator (custom levels).
  3. Appearance: Use contrasting colors for levels 60 (e.g., green) and 40 (e.g., red).

How to Use:

  • RSI Above 60: Bullish momentum (Consider CE entry).
  • RSI Below 40: Bearish momentum (Consider PE entry).

✅ 4. Chart Timeframe Settings

  • Use 5-Minute Chart or 3-Minute Chart for precision.
  • Mark key support/resistance levels manually.

🛠️ 5. Final Checklist Before Trading

✅ Indicators: 9-EMA, 20-EMA, VWAP, RSI – properly set up.
✅ Timeframe: 5-min or 3-min chart.
✅ Key levels (Support/Resistance) are marked.
✅ ATM CE/PE strike prices are noted.

📱 For Mobile Users (Dhan, Zerodha Kite, Angel Broking, Upstox, etc.)

The process is similar:

  1. Go to Indicators Section.
  2. Add EMA (9 & 20), VWAP, and RSI.
  3. Customize parameters.
  4. Use a 5-min chart for analysis.

Let me know:

  • Which trading platform you’re using?
  • If you face any challenges in adding these indicators?

I’m here to guide you through! 📈✨