Although nifty brake 5400 but recovered smartly and manage to close near 5400. we should wait for one - two day to initiate a fresh trade.
Your comments are welcome.
Your comments are welcome.
Tuesday, 20 August 2013
Monday, 19 August 2013
NIFTY SUPPORT
Although Today Nifty breach 5400 but close above it. It give me sense that nifty will take support near it. As far as fresh trade is concern I will wait for one or two trading days.
Yours suggestion and comments are welcome.
Yours suggestion and comments are welcome.
Sunday, 18 August 2013
Market Correction Prediction Strategy
Market Correction Prediction Strategy
Dear Friends,
What I am about to share below is a swing strategy by which a trader can estimate the approximate time by which the market would start correcting against the current trend. This comes in very handy on deciding when to start booking profits and also one can start building a opposite position to the trend in the anticipation of the upcoming correction. PLEASE NOTE THIS A SWING STRATEGY AND TIMEFRAME APPLIED TO IS 'DAILY'.
This is not based on any complex calculations (like Gann/Fibo/EW) but based on a common sense approach and a belief that history 'repeats' itself. (Thats the underlying assumption of TA anyways).
I use this strategy on Nifty futures, once can derive a strategy from it for any particular stock they trade in through some trial and error.
This Strategy is highly inspired by the concept of 'Market Reversion to mean'.
Reversion to Mean rules for NIFTY
- Nifty futures price has to revert to 3 EMA within a maximum of 3 days before it goes anywhere else.
- Nifty futures price has to revert to 15 EMA within a maximum of 6 weeks before it goes anywhere else..
- NIfty Futures price has to revert to 34 EMA within a maximum of 16-18 weeks (4 months) before it goes anywhere else.
- NIfty Futures price has to revert to 100 EMA within a maximum of 28 weeks before it goes anywhere else. (7 months)
How to apply the above rules in Trading
- Look out for any daily candle where the candle body is not touching 3 EMA. Thats a signal for booking any profits and wait for 3 EMA reversion for entering again. If candle body doesnt touch 3 EMA for 2 days, one can open an opposite position and aim for 3 EMA as target price. This is something I extensively use in my 315 Strategy as well.
- Look out for a trend on daily charts where 15 EMA has not been retested for 4 -5 weeks in continuation. This is a signal that markets should correct now (target 15 EMA). One can start booking profits in 4-5th week and can actually open an opposite position in 5th-6th week aiming for 15 EMA.
- Similarly, look out for a trend where 34 EMA has not been tested even once in the last 14-15 weeks. Book any profits in 14th-15th week and one can open an opposite position in 17th week aiming for 34 EMA.
- Similarly, if you see 100 EMA not being tested in last 6 months, start building a positions aiming for 100 EMA retest in next month or so.
This I have found is a very strong tool to predict corrections (price correction or time correction). In my tests the success ratio is above 90% however I am ready to be corrected by anyone who finds otherwise.
PLEASE NOTE THAT THESE TIMEFRAMES ARE FOR NIFTY FUTURES ONLY
What I am about to share below is a swing strategy by which a trader can estimate the approximate time by which the market would start correcting against the current trend. This comes in very handy on deciding when to start booking profits and also one can start building a opposite position to the trend in the anticipation of the upcoming correction. PLEASE NOTE THIS A SWING STRATEGY AND TIMEFRAME APPLIED TO IS 'DAILY'.
This is not based on any complex calculations (like Gann/Fibo/EW) but based on a common sense approach and a belief that history 'repeats' itself. (Thats the underlying assumption of TA anyways).
I use this strategy on Nifty futures, once can derive a strategy from it for any particular stock they trade in through some trial and error.
This Strategy is highly inspired by the concept of 'Market Reversion to mean'.
Reversion to Mean rules for NIFTY
- Nifty futures price has to revert to 3 EMA within a maximum of 3 days before it goes anywhere else.
- Nifty futures price has to revert to 15 EMA within a maximum of 6 weeks before it goes anywhere else..
- NIfty Futures price has to revert to 34 EMA within a maximum of 16-18 weeks (4 months) before it goes anywhere else.
- NIfty Futures price has to revert to 100 EMA within a maximum of 28 weeks before it goes anywhere else. (7 months)
How to apply the above rules in Trading
- Look out for any daily candle where the candle body is not touching 3 EMA. Thats a signal for booking any profits and wait for 3 EMA reversion for entering again. If candle body doesnt touch 3 EMA for 2 days, one can open an opposite position and aim for 3 EMA as target price. This is something I extensively use in my 315 Strategy as well.
- Look out for a trend on daily charts where 15 EMA has not been retested for 4 -5 weeks in continuation. This is a signal that markets should correct now (target 15 EMA). One can start booking profits in 4-5th week and can actually open an opposite position in 5th-6th week aiming for 15 EMA.
- Similarly, look out for a trend where 34 EMA has not been tested even once in the last 14-15 weeks. Book any profits in 14th-15th week and one can open an opposite position in 17th week aiming for 34 EMA.
- Similarly, if you see 100 EMA not being tested in last 6 months, start building a positions aiming for 100 EMA retest in next month or so.
This I have found is a very strong tool to predict corrections (price correction or time correction). In my tests the success ratio is above 90% however I am ready to be corrected by anyone who finds otherwise.
PLEASE NOTE THAT THESE TIMEFRAMES ARE FOR NIFTY FUTURES ONLY
Just to give an example to make it more clear.
Last time when 3 EMA was tested by NF daily candle = 30th Dec 2009
Hence next 3 EMA touch has to happen before end of day 5th January 2010 (3 trading days from 30th Dec)
Last time when 15 EMA was touched by NF daily candle = 23rd Dec 2009
Hence next 15 EMA touch has to happen before 1st week of Feb 2010 (6 weeks from 23rd Dec)
Last time when 34 EMA was touched by NF daily candle = 23rd Dec 2009
Hence next 34 EMA touch has to happen before 23rd April 2010 (4 months from 23rd Dec)
Last time when 100 EMA was touched by NF daily candle = 4th Nov 2009
Hence next 100 EMA touch has to happen before 4th June 2010 (7 months from 4th Nov)
Last time when 3 EMA was tested by NF daily candle = 30th Dec 2009
Hence next 3 EMA touch has to happen before end of day 5th January 2010 (3 trading days from 30th Dec)
Last time when 15 EMA was touched by NF daily candle = 23rd Dec 2009
Hence next 15 EMA touch has to happen before 1st week of Feb 2010 (6 weeks from 23rd Dec)
Last time when 34 EMA was touched by NF daily candle = 23rd Dec 2009
Hence next 34 EMA touch has to happen before 23rd April 2010 (4 months from 23rd Dec)
Last time when 100 EMA was touched by NF daily candle = 4th Nov 2009
Hence next 100 EMA touch has to happen before 4th June 2010 (7 months from 4th Nov)
Yes, before means it can happen today, tomorrow or day after ... but will happen before 23rd April.
The fact that we know it will revert to 34 EMA helps us if we see around 2nd week of April that this reversion has not happened yet ..we can exit our current trend following positions and open opposite positions aiming for 34 EMA.
i will give you an example.
Check our 21st August 09 that was the day when Nifty futures tested 34 EMA at around 4450. That meant that the max days NF could have stayed away from 34 EMA was 4 months from that date i.e 21st December 09.
34 EMA was retested again on 26th October 09 ( 2 months 1 week). We could not trade this correction. However had this trend stayed on for 4 more weeks (i,e till Nov end) .. I would have started to build short positions from that point onwards aiming for 34 EMA.
In 80% of cases 34 EMA is restested with 3 months .. 4 months is only once in 2 years.
The fact that we know it will revert to 34 EMA helps us if we see around 2nd week of April that this reversion has not happened yet ..we can exit our current trend following positions and open opposite positions aiming for 34 EMA.
i will give you an example.
Check our 21st August 09 that was the day when Nifty futures tested 34 EMA at around 4450. That meant that the max days NF could have stayed away from 34 EMA was 4 months from that date i.e 21st December 09.
34 EMA was retested again on 26th October 09 ( 2 months 1 week). We could not trade this correction. However had this trend stayed on for 4 more weeks (i,e till Nov end) .. I would have started to build short positions from that point onwards aiming for 34 EMA.
In 80% of cases 34 EMA is restested with 3 months .. 4 months is only once in 2 years.
Yes, thats the whole point. We learn Maths and Science separately but their true magic is revealed when they are applied together....!
These are basic rules which I keep at the back of my mind always when I am trading based on 315 or 534 or EHL5 or contrarion etc. Their combination gives amazing results and leaves others wondering 'How the hell did he time it so beautifully? ' !
I will give you another example.
I was trading based on 315 and was long since 24th August 09 in Nifty futures. As on 1st October 09 my Nifty futures were in 400+ points profits (it was a huge 315 trending move).
However at that point I saw that Nifty futures had not retested 15 EMA since September 4th (that was almost 4 weeks on 1st October). As per the 15 EMA reversion rule I hedged my longs with buying puts ... Nifty corrected and touched 15 EMA on October 6th which saved me a good 100 odd NF points in puts.
The big correction that i caught later was due to 100 EMA rule. By October 20th I had realised that Nifty futures had not corrected to 100 EMA since last 6 months (last 100 EMA touch was on 1st April 09). Hence I started adding puts in my portfolio to hedge my longs again.
NF generated a sell on Oct 24th at 5008 (based on 315). I immediately closed all my longs and immediately shorted double quantity in NF knowing that 100 EMA retest was almost inevitable now. I also held onto my puts that were bought earlier by me as a hedge for NF longs.
100 EMA at that point was at 4650... I kept 4600 as my target for shorts .. 100 EMA finally got retested on Nov 3rd (thats exactly 7 months and 2 days from 1st April). From 5008 to 4600 .. I was able to catch a 400 point massive correction ! THAT RESULTED IN HUGE PROFITS WHICH I BOOKED in shorts.
Also, that left a lot of my followers wondering ' Hell how did he predict it so nicely'
The secret is out in the open now
These are basic rules which I keep at the back of my mind always when I am trading based on 315 or 534 or EHL5 or contrarion etc. Their combination gives amazing results and leaves others wondering 'How the hell did he time it so beautifully? ' !
I will give you another example.
I was trading based on 315 and was long since 24th August 09 in Nifty futures. As on 1st October 09 my Nifty futures were in 400+ points profits (it was a huge 315 trending move).
However at that point I saw that Nifty futures had not retested 15 EMA since September 4th (that was almost 4 weeks on 1st October). As per the 15 EMA reversion rule I hedged my longs with buying puts ... Nifty corrected and touched 15 EMA on October 6th which saved me a good 100 odd NF points in puts.
The big correction that i caught later was due to 100 EMA rule. By October 20th I had realised that Nifty futures had not corrected to 100 EMA since last 6 months (last 100 EMA touch was on 1st April 09). Hence I started adding puts in my portfolio to hedge my longs again.
NF generated a sell on Oct 24th at 5008 (based on 315). I immediately closed all my longs and immediately shorted double quantity in NF knowing that 100 EMA retest was almost inevitable now. I also held onto my puts that were bought earlier by me as a hedge for NF longs.
100 EMA at that point was at 4650... I kept 4600 as my target for shorts .. 100 EMA finally got retested on Nov 3rd (thats exactly 7 months and 2 days from 1st April). From 5008 to 4600 .. I was able to catch a 400 point massive correction ! THAT RESULTED IN HUGE PROFITS WHICH I BOOKED in shorts.
Also, that left a lot of my followers wondering ' Hell how did he predict it so nicely'
The secret is out in the open now
How to earn 25% to 50% ROI per trade twice every year
First of all, the trades are done in options. If you invest 50K in buying options, you can expect the options to become 60K to 70K within a month (sometimes more!) and hence 25% - 50% returns on investment. Anyone ready to invest larger amounts, My suggestion would be to start booking gradual profits starting from 10% onwards.
Success Ratio is again above 90% (based on my backtest which is usually pretty RAW since I dont know how to build AFLs etc). I am more than happy to be standing corrected if success ratio is lower than that.
This is also a market neautral strategy i.e it doesnt matter whether market goes up or down .. a trader will still earn.
Trade Setup
Ok - I have already explained how NIfty Futures likes to return to some key EMAs within a definite period of time.
One of the key EMA is 100 EMA which Nifty has to retest within 6-7 months. HOwever please note .. Nifty HATES 100 EMA ... i.e it doesnt like to stick around 100 EMA for long. It will either shoot back towards the main trend after getting resisted/supported by 100 EMA or if its a reversal it will shoot off in the opposite direction.
The key word is it 'shoots off' in one direction or the other but in no way it will stick around 100 EMA for long.
Now once we know this, how do we exploit this knowledge to our advantage?? Simple... As soon as Nifty touches 100 EMA ... we buy OTM (out of money) calls and puts both and hold until one of them becomes ITM (In the money). As soon as one of the option becomes ITM .. it will give you 25% to 50% returns over investment (even if the other option leg is expiring worthless).
For eg look at 3rd Nov candle which retested 100 EMA at 4650 odd levels. At that point one can buy 4800 Calls and 4500 Puts and hold. Since it was start of the month these options would not have costed more that 50-60 odd points each or Total investment of Rs 5000-6000 per pair of call and put taken together.
Now since Nifty hated 100 EMA.. it jumped back in the direction of the main trend making a high of 5024 on 11th November. At this point our 4800 call was selling for 200+ points and our puts were almost worthless. If we square off both calls and puts at that stage we get Rs 10000 per pair which is a WHOPPING 100% returns on investment.
I actually did not wait until 11th Nov but I squared off my option pairs on 9th Nov when Nifty touched 4850 levels and was satisfied with 50%+ profits.
Similarly you can check out what happened after 24th March when 100 EMA was touched at around 2990. After 9 trading days Nifty was sitting pretty at 3350 levels again generating awesome ROI.
you see the game plan?? The thumb rule is as soon as NIfty has moved 5% -6% in any direction after kissing 100 EMA .. your market neautral option strategy should be in 25% profits or above.
Thats how you can get 25% to 50% ROI atleast twice an year (since we know every 6th-7th month 100 EMA will have to be retested).
Happy Backtesting again
First of all, the trades are done in options. If you invest 50K in buying options, you can expect the options to become 60K to 70K within a month (sometimes more!) and hence 25% - 50% returns on investment. Anyone ready to invest larger amounts, My suggestion would be to start booking gradual profits starting from 10% onwards.
Success Ratio is again above 90% (based on my backtest which is usually pretty RAW since I dont know how to build AFLs etc). I am more than happy to be standing corrected if success ratio is lower than that.
This is also a market neautral strategy i.e it doesnt matter whether market goes up or down .. a trader will still earn.
Trade Setup
Ok - I have already explained how NIfty Futures likes to return to some key EMAs within a definite period of time.
One of the key EMA is 100 EMA which Nifty has to retest within 6-7 months. HOwever please note .. Nifty HATES 100 EMA ... i.e it doesnt like to stick around 100 EMA for long. It will either shoot back towards the main trend after getting resisted/supported by 100 EMA or if its a reversal it will shoot off in the opposite direction.
The key word is it 'shoots off' in one direction or the other but in no way it will stick around 100 EMA for long.
Now once we know this, how do we exploit this knowledge to our advantage?? Simple... As soon as Nifty touches 100 EMA ... we buy OTM (out of money) calls and puts both and hold until one of them becomes ITM (In the money). As soon as one of the option becomes ITM .. it will give you 25% to 50% returns over investment (even if the other option leg is expiring worthless).
For eg look at 3rd Nov candle which retested 100 EMA at 4650 odd levels. At that point one can buy 4800 Calls and 4500 Puts and hold. Since it was start of the month these options would not have costed more that 50-60 odd points each or Total investment of Rs 5000-6000 per pair of call and put taken together.
Now since Nifty hated 100 EMA.. it jumped back in the direction of the main trend making a high of 5024 on 11th November. At this point our 4800 call was selling for 200+ points and our puts were almost worthless. If we square off both calls and puts at that stage we get Rs 10000 per pair which is a WHOPPING 100% returns on investment.
I actually did not wait until 11th Nov but I squared off my option pairs on 9th Nov when Nifty touched 4850 levels and was satisfied with 50%+ profits.
Similarly you can check out what happened after 24th March when 100 EMA was touched at around 2990. After 9 trading days Nifty was sitting pretty at 3350 levels again generating awesome ROI.
you see the game plan?? The thumb rule is as soon as NIfty has moved 5% -6% in any direction after kissing 100 EMA .. your market neautral option strategy should be in 25% profits or above.
Thats how you can get 25% to 50% ROI atleast twice an year (since we know every 6th-7th month 100 EMA will have to be retested).
Happy Backtesting again
Support of Nifty
As I have mentioned in my last post, Nifty will not go below the trend line showing in chart. as this trend line is supporting nifty since 2008, but if this trend line broke and nifty will remain below this line for three four days than it will create a big problem. if we go through the chart of Bank Nifty, we found the same trend line there.
Your comments and suggestion are invited.
Your comments and suggestion are invited.
Saturday, 17 August 2013
SUPPORT OF NIFTY
After a big fall on black Monday, Now Nifty is near the technical as well as fundamental support level of 5400-5450. It seems that Nifty will give the respect to these level. Hope fully Nifty will remain in the range of 5400 - 5700 in near term and consolidated here and resume its upward journey in the month of September.
Yours comments and suggestion are invited
Yours comments and suggestion are invited
Wednesday, 14 August 2013
Sorry for not posting since long
Sorry for not posting since long. Now onward I will post regularly for medium to long term stocks. Thanks
Tuesday, 5 July 2011
38 steps to becoming a trader
38 steps to becoming a trader
They are as follows:
1. We accumulate information - buying books, going to seminars and
researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realise we may need more
knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence.
Fear starts setting in.
8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to
take more time and more knowledge than we anticipated.
MOST PEOPLE WILL GIVE UP AT THIS POINT,
AS THEY REALISE WORK IS INVOLVED.
15. We get serious and start concentrating on learning a 'real'
methodology.
16. We trade our methodology with some success, but realise that
something is missing.
17. We begin to understand the need for having rules to apply our
methodology.
18. We take a sabbatical from trading to develop and research our
trading rules.
19. We start trading again, this time with rules and find some
success, but over all we still hesitate when it comes time to
execute.
20. We add, subtract and modify rules as we see a need to be more
proficient with our rules.
21. We feel we are very close to crossing that threshold of
successful trading.
22. We start to take responsibility for our trading results as we
understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our
methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our
results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market
and trade.
28. Our trading results are getting better, but we are still
hesitating in executing our rules.
29. We now see the importance of following our rules as we see the
results of our trades when we don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of
discipline in following the rules because of some kind of fear)
and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more
about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading
becomes boring, but successful) and our trading account
continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had
always dreamed of.
Most traders will identify with this list and should be able to place
themselves within these steps. Keep in mind that very few people
progress through these steps in an orderly fashion. Developing your
trading skills is an iterative process. For example, you may reach
Step 13., find that although you were making money, your basic
premise for trading was flawed (you might have been benefiting from
the bull market, rather than your own trading prowess and then have
been rudely awakened when the market entered a bear phase) and you
may drop back to Step 4. and start 'climbing' the steps again.
Having the proper mindset, attitude and psychological makeup becomes
increasingly important as you progress through the steps. The focus
of the earlier steps is on external issues, i.e. developing
proficiency in the mechanics of trading while the focus of the
latter steps (particularly from Step 30, on) is on internal issues,
i.e. improving ourselves mentally and psychologically, maturing as
trader
They are as follows:
1. We accumulate information - buying books, going to seminars and
researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realise we may need more
knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence.
Fear starts setting in.
8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to
take more time and more knowledge than we anticipated.
MOST PEOPLE WILL GIVE UP AT THIS POINT,
AS THEY REALISE WORK IS INVOLVED.
15. We get serious and start concentrating on learning a 'real'
methodology.
16. We trade our methodology with some success, but realise that
something is missing.
17. We begin to understand the need for having rules to apply our
methodology.
18. We take a sabbatical from trading to develop and research our
trading rules.
19. We start trading again, this time with rules and find some
success, but over all we still hesitate when it comes time to
execute.
20. We add, subtract and modify rules as we see a need to be more
proficient with our rules.
21. We feel we are very close to crossing that threshold of
successful trading.
22. We start to take responsibility for our trading results as we
understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our
methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our
results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market
and trade.
28. Our trading results are getting better, but we are still
hesitating in executing our rules.
29. We now see the importance of following our rules as we see the
results of our trades when we don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of
discipline in following the rules because of some kind of fear)
and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more
about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading
becomes boring, but successful) and our trading account
continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had
always dreamed of.
Most traders will identify with this list and should be able to place
themselves within these steps. Keep in mind that very few people
progress through these steps in an orderly fashion. Developing your
trading skills is an iterative process. For example, you may reach
Step 13., find that although you were making money, your basic
premise for trading was flawed (you might have been benefiting from
the bull market, rather than your own trading prowess and then have
been rudely awakened when the market entered a bear phase) and you
may drop back to Step 4. and start 'climbing' the steps again.
Having the proper mindset, attitude and psychological makeup becomes
increasingly important as you progress through the steps. The focus
of the earlier steps is on external issues, i.e. developing
proficiency in the mechanics of trading while the focus of the
latter steps (particularly from Step 30, on) is on internal issues,
i.e. improving ourselves mentally and psychologically, maturing as
trader
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