5 EMA TRADE

Here is a simple method based on 5 day EMA on highs and lows and your blog readers may want to investigate further. Signals are generated at EOD and executed on the next day. The position is closed until the next signal comes. There is also the option of stop and reverse ( instead of just closing a trade.)
Please see the chart below:

TREND FOLLOWING TRADE

The direction of the stock/index price movement is called aTREND. Prices either be rising or falling or moving narrowly(flat)."Trend is your friend"-the often repeated phrase carries its weight in gold. Pay heed to this phrase all the time to become an unbeaten market player.

The most basic Trend analysis: 
Uptrend: Prices are rising and making higher tops and higher bottoms.
Downtrend: Prices are making lower bottoms and lower tops.
Sideways or Flat trend: Prices are moving in a narrow range with choppiness.
The terms bull market and bear market describe upward and downward market trends, respectively.

Prices do not rise or fall in a straight line but gets interrupted with counter moves in the opposite direction. These counter moves can be of zigzag or flat or some kind of triangles giving rise to minor tops & bottoms against the main trend.
For eg: If the trend is up, prices after a significant upmove will pause and make minor lower bottoms & lower tops- called corrections/ counter trend rally. Once this correction is over, the main trend will assert itself by taking the prices to new highs.

A top: is nothing but a price level from which the stock reverses direction to move downwards.
A bottom: is that level from where the scrip reverses the downmove and starts to rise.
A TREND: is the position of these tops and bottoms that determines the trend at any given point of time.
At any given point of time an investor or a trader has three options - to buy, sell or stay away from the market. If the trend is rising, he would do well to buy. If the trend is falling, he should be selling, and if the trend is flat, it is best to stay away unless you are capable of handling micro movements. Most of a trader's losses arise from trading in a flat market . Patience plays a vital part when market moves in a sideways, choppy mode.
Trend following for Medium to Long term Investing:

This weekly chart shows the benefit of trend following for the maximum gains requiring highest amount of discipline and patience.
A falling market cannot keep falling and at one point of time it is vulnerable to change. This change in the direction of the trend is called a trend reversal. Once reversed, the new trend will make higher tops & higher bottoms until exhaustion sets in and it starts to make lower top and lower bottom.
Technical Analysis is this process, whereby one can spot trend reversal at an early stage and can ride the trend till the weight of evidence proves that it has reversed directions.
Trend following for short term Trading(Hour):
Short term traders will do well to follow closely these minor price tops & bottoms and plan their trades. Many traders mix up the time cycle while following the trend and end up holding a losing position. For eg: One goes long spotting a trend change in the hourly time frame but hold on to it in spite of a continuation of the downtrend in the daily time scale. Every trading position has an "Expiry date" to it. If the anticipated price does not unfold within a set of time frame, exit thereby protecting the capital.

Trend following for short term Trading(Day):
This simple concept of observing tops and bottoms posted by the stock can help the investor/ trader in riding the trend and spotting trend reversal.The short term trader must keep the daily trend as the main factor but use the hourly trend for entry & exit.

I label all the critical pivot points in numbers(tops & bottoms) which help me tremendously to follow the market as numbers stay on in my mind longer and number is what I see on the trading screen.
Price: One of the first rules of trend following is that price is the main concern. Traders may use other indicators showing where price may go next or what it should be but as a general rule these should be disregarded. A trader need only be worried about what the market is doing, not what the market might do. The current price and only the price tells you what the market is doing.

Money Management: Another decisive factor of trend following is not the timing of the trade or the indicator, but rather the decision of how much to trade over the course of the trend.

Risk Control: Cut losses is the rule. This means that during periods of higher market volatility, the trading size is reduced. During losing periods, positions are reduced and trade size is cut back. The main objective is to preserve capital until more positive price trends reappear.

Though this concept appears very simple, it is probably the most important concept that can be quite profitably employed in trading the market. In using this concept, one may use either a bar/candle chart or the close price chart. Find the time cycle that best suits your time and nature and follow that trend to find your treasure.
Get rich slowly.

Pivot Points Trading

Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.

The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance levels calculated from that are collectively known as pivot levels.

Every day the market you are following has an open, high, low and a close for the day. This information basically contains all the data you need to use pivot points.The reason pivot points are so popular is that they are predictive as opposed to lagging.

Because so many traders follow pivot points you will often find that the market reacts at these levels. This give you an opportunity to trade.

If the market opens above the pivot point then the bias for the day is long trades. If the market opens below the pivot point then the bias for the day is for short trades.

The three most important pivot points are R1, S1 and the actual pivot point.

The general idea behind trading pivot points are to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.

A perfect set would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position.

If, after starting the day above the Pivot, the Price crosses back through the Pivot, the Pivot will act as a Resistance area. Pivot Points and Support and Resistance levels behave exactly like any historical Support and Resistance level.

Unfortunately life is not that simple and we have to deal with each trading day the best way we can. Combine these with simple channeling, retracement levels, past critical supports & resistances, SAR will enhance the success rate.
Pivot Points - Trading Methodology:
To make the discussion a bit less abstract, let's take a most superficial look at some simple trading methodology employing Pivot Points.
Step 1
"In general, if the day's Price Action starts above the Pivot, it will tend to stay above the Pivot.
This simple observation provides the basic rules for two of the simplest Pivot trading systems.
System 1:
Open is above Pivot: Buy
Open is below Pivot: Sell
System 2:
Place Buy and Sell stops bracketing the Pivot. Whichever is not filled acts as safety stop for the other.
These "systems" are very much too raw for my tastes. Too much chance of getting whipsawed. Let's take it one step deeper. Let's refine these simple systems just a bit more:
Step 2
First Fundamental Of Pivot Trading After the opening range (first 15-30 min. to one hour), if price is above/below the Pivot, Price Action will strongly tend to remain above/below the Pivot for the session.
Although this rule bids us to wait out the Opening Range and thus avoid much of the wildness and whipsawing, overlooking the next Fundamental Of Pivot Trading could be disastrous:
Step 3
If the market opens, or later trades at the extremes (R2, R3 or S2, S3), it will exhibit a tendency to trade back toward the Pivot. Thus, the general rule, 'Avoid buying the High or selling the Low', becomes increasingly more stringent as price moves farther from the Pivot.

I have picked 5 days of last week and what follows are some ideas on how you could have traded those days using pivot points.

NIFTY TRADING SYSTEM

NIFTY (CASH)
5 Day Chart, 5 min Bars, MACD (26,12,9) 
My system :

Entry/Exit:

(1) Always be in a trade.

(2) Entry into long means I have also exited the short.

(3) The faster line (red ) goes above the green - > Close shorts & immediately go long.

(4) The faster line (red ) goes below the green - > Close longs & immediately go short.

(5) Another method to follow now is ... >> To look for the long term trend. >> derived by when the 50 Day EMA crosses the 200 Day EMA. Trade only in the direction of the long term trend and neglect the signals which this system gives in the other direction. This method has shown to drastically reduces losses, thereby increasing profits manifold. Try it out !

Stop Loss: 

An initial acceptable range for the stop depending on your comfort level can be put. As the Nifty moves in your direction , immediately put the the stop at the purchase price + brokerage as soon as possible.

Hedge your Positions Daily :

The Nifty encounters lots of gaps up and down and this could go against our positions due to many market factors / changes which take place overnight. We therefore need to hedge our positions, EVERY DAY before close.

Keep in mind hedge positions are not to make profits. It has to be used as a hedge strictly, however if the hedge position is giving a hefty profit, discretion to close the open position lies with you.

The technique I follow :- If the system is long ( & you are long 500 futures) then 10 - 15 minutes before close buy same quantity (500 in this case) just out of the money puts.

Carry over these puts. Watch the market for the first 10 - 15 minutes next day.

If the market remains long and keeps getting strong, find a good rate to close your puts. As the put was out of the money, the loss from the puts would be less, than the profit from the long.

If the market gaps down or continues going down, book profits on the puts or keep a trailing stop loss which will offset the losses incurred from the nifty long position.

Vice Versa for short positions with calls.

Remember buy "just out of the money" options, which show decent volumes. For eg ; If Nifty Cash closed @ 3920 and you are long, then you should be buying 3900 or 3850 puts.

This will always keep you tension free, what ever be the global or overnight factors.

Also remember, you all need to coax your brokers to charge you a reasonable brokerage. Keep looking for better brokerage options. But keep in mind :

Gaps are more dangerous than brokerage, so you need to secure yourself from them.

Position sizing :

This is now modified and left to your discretion. However please remember, though some people try pyramiding, doing it in the nifty may be hazardous to your bank account. All entries and exits should preferably be done in one go.

Read the system carefully and try to understand it. Make sure you paper trade for some time before you take the plunge.

Simple Intraday Strategies to be followed

Click the above chart to get enlarged

3min - EMA  - Red Line (closely following candle Stick)

13min - EMA - Green Line

34min - EMA - Black Line

55-min EMA - Gold Line

200 min EMA - Yellow Line ( Wont visitble good in white background so i kept it orange )

 

 

Two Simple Rules to Follow

 

1) Go Long if 3 EMA is  above 13 EMA and 13 EMA is above 34min EMA with stop loss below 34 EMA

2) Go Short if 3 EMA is below 13 EMA and 13 EMA is below 34min EMA with Stop loss above 34 EMA

 

Remember : These Two rules wont follow in a range bound market and well behave in case of volatile market

 

If you witness from the stock that at 4870 it is clearly witness from the Intraday chart that 3 EMA is below 13 EMA and

13 EMA is below 34min EMA with Stop loss below 34 EMA. Cool We have founded  the selling point in Nifty.

So one can short the market at this level with minimum stop loss at 4890 above 34min EMA. If EMA pattern reverses  then your stop loss may hit.

But if you notice the chart it is clearly evident that the pattern doesnt changes until the end of the session so one can carry forward

to next day or else can book the profit.

How to take Multiple Trades in Nifty Intraday

The charts shown here is the Nifty Intraday chart on 4th July 2008

Easy Technique to follow in Intraday Nifty Trades

1)Buy Nifty when the Slow Stocastic blue line crosses the red line and slope upwards near oversold region (near 20)

2)Sell Nifty when the Slow Stocastic red line crosses the blue line near slope downwards oversold region (near 80)

Nifty Positional trade based on 70/1030 EMA Strategy

USED Moving Average Crossovers : 1030min EMA & 70 min EMA
Charts Used : 5 day Charts, 5 min Bars 

Go Long Rules
If The faster line (red ) goes above the green - > Close shorts & immediately go long.

Go Short Rules
The faster line (red ) goes below the green - > Close longs & immediately go short.

No other Indicators Needed... Works Well Especially in Volatile Times

Stop Loss
An initial acceptable range for the stop depending on your comfort level can be put. As the Nifty moves in your direction , immediately put the the stop at the purchase price + brokerage as soon as possible.

HOW TO TRADE USE PIVOT POINTS

 i am going to show you the way to trade Nifty future using Pivot points. We will calculate Pivot points on daily basis using daily charts and then use those Pivot levels on 15 minute charts — our main charts — where we will look for entries, stops and exits. We will use 15 minute time frame because it allows catching the best entry and exit opportunities. With hourly charts, for example, when the signal is there it is quite often already too late to react / enter.

We know we have to calculate Pivot points every single day, so that each morning we start with new fresh daily Pivot points, calculated from last trading day's High, Low and Close. Let's look at today's Nifty future 15 minutes chart to see how Pivot points were found. As you can see we use only 5 major Pivot point levels: R2, R1, PP, S1 and S2.

After Pivots are in place traders should start taking notes. First, they should note where the market has opened today in relation to the Pivot Point (PP): above the Pivot Point or below it. The answer to this question provides the first clue about traders' biases for the day, e.g. if the market has opened above Pivot Point, traders will be bias towards taking long positions, on the contrary, opening below the Pivot Point would suggests shorting for the day.

Then traders should look at how far the price opened from the Pivot (PP), and make extra notes when it opened below S1 or above R1 level which is considered to be a quite distant open.

With some small distance away from the Pivot Point it is considered to be a good morning for trading. It is very much suggested to wait for a pull back towards the Pivot line before taking a position. 15 minute charts in this case help to catch the right moment for entry.

With the second — distant opening (below S1 or above R1) — we have very high expectations that the price will try to correct such "distant irregularity" and thus instead of progressing further away from Pivot Point it will try to move back towards the Pivot — the gold-middle point of the day. As a result, we will typically see a ranging market which does not produce much of the trading opportunities. The expectations are that the price will revolve around Pivot Point for the rest of the day — nothing to do for us, we should stay out. (Some of the writings are excerpts from Pivot Points Strategy by Jeff Boyd Authors & Publishers Inc.)


Why do pivot points work? The whole Pivot point trading technique is based on two main market concepts: existence of support and resistance. These two tendencies form the core of the market moves and therefore receive full attention from the vast majority of professional traders who trade on behalf of all kinds of large, medium, small financial institutions, funds as well as for themselves.

Because Pivot points are easy to calculate, millions of automated trading systems in the world automatically execute buy / sell orders analyzing the market moves in relation to the Pivot points. Also, there are very little variations that can take place when calculating Pivot points (those are only timing factors, but even then pivot points can quite often suggest the same data).

These precision in targets and mutual "agreement" among traders on certain key levels for the day cause the market to really shift, turn and move as huge percentage of traders pull in the same direction using basic Pivot points trading rules.

With EMAs crossing, for example, every trader can set different indicators and thus timing and reaction will not be so well coordinated. Also take Fibonacci, where for each time frame traders pull their own Fibonacci levels, same for trend lines — there are as many opinions out there as traders trading Nifty future. But when it comes to Pivot points, no matter what chart you use your Pivots will be the same = levels of support and resistance, where everyone hits the same button at the same time. Pivot points outperform other trading techniques and indicators also because they are predictive as opposed to lagging.

Because so many traders worldwide use Pivot points for trading, all major indices and stocks react at these levels in a quite predictable manner, respecting support and resistance levels and creating a lot of trading opportunities. (Courtesy - Jeff Boyd for a part of this writings)

Now lets see, was there any trading opportunity today using Pivot points in Nifty future. Nifty future opened above the pivot level of 4641. So, the bias for the day was positive and one could only buy near pivot point if the pivot point is respected in the 15 minutes chart (see my earlier post) for a target of R1 (4701), or one can buy for a target of R2 (4741) if R1 is penetrated and sustained. Nothing of them happened, and so it was a no trade day for Pivot Point traders and my god, you are saved from being whipsawed in comparison to other trade methods as Nifty future moved the whole day in narrow ranges.


We already now know what are PivotPoints. We already know the basics of how to trade them. Now of utmost importance to know, daily pivot point values tend to be touched or traded through roughly 75% of the time. In other words, seven out of every ten sessions for any liquid market will see the daily pivot point come into play at some point during live trading.

Isn’t that amazing! To know that a certain spot on most any chart will be touched more often than not can be a powerful tool. Unfortunately, unless one knows what to do with that information it is worthless at best or harmful at worst. Believe me, more traders LOSE money with this knowledge than actually makemoney. Some of the worst trading sessions touch their pivot points several times (sideways choppy session) while some of the best trading sessions miss touching the daily pivot at all (gap & go trend sessions).

In general, a market trading above its pivot point value is acting bullish while a market trading below its pivot point is bearish. That's the most general rule for using these price measures, and it holds true most of the times. Fact is, the same trend filter applies to all charts and trading timeframes: intraday charts or even daily and weekly charts.

Pivot point values are not exclusive to day trading at all. We can use them in swing trades and even position trades for long-term stockholds in DP accounts. Depending on our time horizon of trading chart, the applicable pivot value works there too.

Using daily charts for swing trades in any liquid market would mean we want to keep track of the weekly and the monthly pivot points. That much is easy: once a week we calculate the previous week's price values for a weekly pivot point. The beginning of each month we calculate previous month's price action for monthly pivot points. Simple as that!

OPENING RANGE BREAKOUT TRADING METHOD

****OPENING RANGE BREAKOUT********
--Do not trade for first 15 minutes i.e. upto 10.10 AM.
--first 15 minutes of trade is known as OPENING RANGE. (O.R.)
--Write down High and Low of Opening Range.
--now whenever trades above high or below low of Opening Range then it is known as OPENING RANGE BREAKOUT. (O.R.B.)
--If O.R.B. is up then stoploss will be low of ORB for intraday.
--same way, If ORB is down then stoploss will be high of ORB for intraday.
***********HOW TO TRADE FOR POSITIONAL CALLS USING O.R.B.*******
--------When call is 'HOLD LONG'

•Do not trade for first 15 minutes.
•now if OR breaks up then hold your longs keeping low of OR as stoploss for trading upto 3.00 PM.
•after 3.00 PM if trading level is above our closing stoploss level then carry forward the long for next day.
•If during inraday, low of OR is broken down and you have closed the long for intraday, then re-examine the level after 3.00PM. If trading above our closing stoploss level then re-enter long to carry forward for next day and if trading below our closing stoploss level, then do nothing.
--------When call is 'HOLD SHORT'
--If OR breaks up then close your short. Re-examine at 3.00PM. If still trading below our closing stoploss level then re-enter short and carry forward it for next day. and if trading above our closing stoploss then do nothing.
--If OR breaks the OR down then hold the short for intraday keeping high of OR as stoploss.after 3.00PM decide as per closing stoploss level.
----------When call is 'INITIATE LONG'
--If OR breaks up then initiate long.
--If OR breaks down then avoid the call.but re-examine after 3pm,if trading in green then initiate long and carry forward the long for next day.
---------When call is 'INITIATE SHORT'
--If OR breaks up then avoid the call.
--If OR breaks down then initiate short.but re-examine after 3pm,if trading in red then initiate short and carry forward the short for next day.
************CONCLUSION*****
--Do not trade upto 10.10 AM.
--From 10.10 AM to 3.00 PM trade with three levels(OR high, OR low, Closing stoploss) and one strategy (Long or Short).
--after 3.00 PM trade with one level(Closing stoploss) and one strategy( Long or Short).

--in short be alert when you are long and stock is trading red or be alert when you are short and stock is trading in green

NIFTY TRADE IDEA

There is one simple remedy for this: Sell only when Nifty trades below 5 day or 3 day averages/ emas(Depends on your risk appetite) and preferably after a negative divergence is spotted & reverses.

In my tech Table, you will find the "high ema" of week, Day & Hour. When we reach "OverBought" area(Identify with stochastics above 90 & reversing or macd in +ve area at high level & turning down), Nifty initially closes below the hour high ema and that is a starting place for aggressive sell. A point to remember here is, not to short when just out of a good consolidation range but allow it to run out of steam..Elliott wave labelling(Simply a marking post or mapping strategy) helps here of more upsides, etc.

This will minimise your errors. It happens when we try to preempt the market, expecting a top. If you can study Elliott wave analysis you can sell quite close to the top but it is a challenging study. Similarly, TA study offers some target level calculations based on certain price patterns.

Most importantly understand the time cycle you are bearish on...If you are bearish in intra day, don't carry the shorts home. Besides, if you expect the hourly sell to manifest in lower prices, don't wait longer than few hours. If it does not fall in fewer hours, the supposed bearishness would be weak and should be abandoned.

"Always want to short the market"...it is not peculiar to you. It is universal. Experts have been shorting the market and citing bad economy..We are traders and should always follow prices..More shorters in the market, the "shorts" alone will keep the market from falling and you don't need a booming economy..

Short:
1. when a channel is broken.
2. When macd turns down and nifty closes below short term avg
3. when a 5 wave move or an "abc"(1,2,3) wave is completed upwards in a falling market.
4. When OI)Open Interest) is rising and prices are falling or OI is falling and prices too.
5. Short..Short when after a negative divergence, prices are at a target or reversing..
6. Short in a "ORB"(Opening range break out(in the 1st 15-20 minutes), the prices break the lower range.

Shorters are the most successful traders but you need to fine tune that art. Your instinct to short seem to be natural gift. Develop it.

NIFTY TRADING PLAN -2

Earlier also I have told in my trading career I have come across, many charting softwares and sites, costly or non-costly. But I again repeat even a novice can successfully trade Nifty future using only free Yahoo Chart. For that purpose I have attached an auto refreshing Nifty chart from Yahoo Finance in this blog at Live Niftysection. An auto buy sell decision is attached with the Nifty chart in the blog.

In my last post on Nifty Yahoo Chart I discussed on EMA crossover technology. This time I will discuss Stochastic-RSI Technology.

Let me tell you how have I made 66 points in Nifty trading today using the Nifty Yahoo Chart? Rules are again simple: simply follow the auto signals. Buy Nifty when stochastics crosses blue line over red and confirm that a full white candle is formed above the 21 EMA, the red line. Short Nifty when stochastics crosses red line over blue and confirm that a full blue candle is formed below the 21 EMA, the red line. Exit criteria RSI reaching overbought or oversold zone. Also, sometimes the auto signals will tell not to short at all, or sometimes it will tell not to buy at all. My today's trades are represented graphically. Your comments are welcome in this matter to take this discussion to a further height.

NIFTY TRADING PLAN

In my trading career I have come across, many charting softwares and sites, costly or non-costly. The list is becoming endless with the advancement of technology:Metastock, Amibroker, TradeStation, Advanced Get, FCharts, ICharts, JCharts, BazaarTrend. But may be we traders are ignoring a hidden free gem like the Yahoo Finance Charts. Thanks to Yahoo, we Indians get absolutely live charts for our indexes from Yahoo charts absolutely FREE. I have attached an auto-updating real time Nifty chart from Yahoo Finance @ Live Nifty section of this blog athttp://niftytradingchart.blogspot.com/.

I repeat even a novice can successfully trade Nifty future using thischart. But how? Rules are again simple:

Buy Nifty when 3 mins EMA goes above 13 mins EMA and 13 mins EMA is also above 34 mins EMA. Comfirm the RSI and Stochasticsboth in uptrend and has not reached the overbought zone of 80. Exit Nifty longs when RSI and Stochastics both starts coming down from the overbought zone.

Sell Nifty when 3 mins EMA goes below 13 mins EMA and 13 mins EMA is also below 34 mins EMA. Comfirm the RSI and Stochastics both in downtrend and has not reached the oversold zone of 20. Exit Nifty shorts when RSI and Stochastics both starts moving up from the oversold zone.

Now lets see how I have made 45 points in Nifty yesterday (i.e. 8th May 2009), just by trading the FREE Yahoo charts. I know a picture worth a thousand words, so I attached a picture of yesterday's trades. Your comments are welcome to extend this discussion to a further height. Cheers!!