Exponential Moving Average

Hi all

Does anyone use Exponential moving average/ Crossovers for Positional Trading NIFTY? If yes how has it been your experience? What combinations do you generally use?

I follow Fibonnaci combinations and it works our pretty fine, but the profits are limited. Pls share your views.

 

Hi Shabbir,

Does that mean only candlestick patterns are sufficient? I mean I also get confused too many times with MACD, RSI, EMA etc. Is it anyway useful?

 

try this it works pretty fine with me

follow the 20 day sma. all stocks move along the 20 day sma. it gets above the sma and then below every time without fail.

first understand what is the trend eg short a stock when it has pulled sufficient towards the sma and watch it falling. a little bit candle stick will benefit a lot.

a stock in uptrend will mostly stay above the 20 day sma buy when it touches the sma.

and note whether in up/down trend a stock can never be far away from the sma it will always snap back to the sma on over streching

sounds simple but it works a little bit of practice

 

Hi Ajay

Thanks for the reply.
I am not sure whether i have understood correctly. Pls help

"eg short a stock when it has pulled sufficient towards the sma and watch it falling"

"buy when it touches the sma"

I find both these contradictory. Do you have any excel or chart for us to explain your SMA strategy?

I follow EMA crossovers based on 2 combinations of fibonnaci numbers for positional nifty trading which works pretty well. However the profits are limited and it indicates buy or sell levels only after the trend has begun. I wait for the crossovers to happen and it crosses only after the uptrend or downtrend have already begun.

 

i will try and explain on adani enterprise chart.
first if you see the chart can be divided into two parts first the uptrend and then the downtrend.

see how the price is gyrating around the 20 day sma.

the idea is to first identify the trend since it is uptrend . buy when you see a full green candle near the sma. your SL could be under that very candle. you could purchase complete quantity or a part of it and keep adding on next full green candle. keep adding till you get really away from the sma. sell half when you feel you r really away from the sma. because now it will sell out and it will get back to the sma. keep selling half the qty till you reach the sma. wait till you see a big full green candle near the sma. and the process repeats. in case SL hits wait for the next big green full candle to appear near the sma.

the idea is simple, get to understand the trend, buy near the sma on big green full candles , Sl under the candle, keep adding on such green full candles sell half when you r really away from the sma. dont sell all since sometimes stocks can get unreasonable and keep going higher but it has the max chance of selling out quickly.

you could play counter trend < short in an uptrend> sell when sufficiently away from the sma but very very risky but good gains. since counter trend lasts much lesser it may not work every time, try paper trading first.

similarly try in the downtrend but is difficult since shorting for more than a day can be done on futures which is risky. but short on known candle reversal pattern and keep SL on the high of the reversal candle.

 

thanks ajay. It was very helpful. I would also suggest to bring in one more SMA for example 10/40 SMA (for crossovers) which could add as additional indicator on when to buy and sell.

 

absolutely i agree with you, adding another sma would make the decision of buying or selling more easier.

but i would rather rely on the candlestick because that indicates that buying is being done by big institutions and they all the institutions agree on the fact that it is a buy together. that is why i buy on a big green full candle. it gives me an idea of stop loss if there is no follow through the next day. sma would also give me the signal but since it is a lagging indicator would get me in a little later.

 

thanks ajay. I agree with your views. Do you use only charts or any excel formulas come into play? I am currently doing a study on Exponential Moving average in excel, would post the results when i complete them. Would like to know your and also others view on my strategy.

 

i use charts only

good luck with your experiment but just a point of view, i met a professional trader his view was that trading is an art and may not give results if considered as science.

the point is if it were science the best wizards with the best computing powers would always win but then statistics proves otherwise

 

@ ajay.. totally agree with you..i consider trading as soft science..ti combines both art and elements of science.

 

Interesting discussion.. Good luck Sainath and Thanks Ajay for your tips...

 

FOR intraday TRADERS ONLY

carrying on ahead with the idea that stocks cannot remain too far away from their sma

find stocks which r really away from the sma and look for out three red bars continuously in a downtrend. on the next day wait for it to move up and cross the opening price of that day.buy it for handsome gains for intraday.

if the fourth day candle forms as red , be ready to to buy next day when the price gets higher than the opening price of the day.

if the fifth day the candle formed is red, be really ready to buy because it is violently going to snap back.

happy trading

 

nice post to read.
Keep up the good work.

regards
Veren

 

Good Ajay..
From your experience does it applicable to all kind of stocks?
i.e. stocks which are long time downtrend or uptrend.

Thanks

 

understand this, the markets are like any other commodity they will behave to the rules of demand and supply. it is only when some news or interest of some institutions come in play they become unreasonable but after the euphoria dies it must and every time behave like a oversold and overbought condition. cash on this.

also the basic issue to grasp is that in an uptrend the stock will fall to its sma or a little below it to rise again. and in a downtrend it will rise to its sma or a little beyond it and will start falling again. because trends make money. and trends make money for the big traders with lot of buying powers or sustaining capability. no longer we will see a clean bull run because the big players want to make money while we the retailer buy, they will tempt us and finally fill their pockets by shorting on the highs.

way to profit is ride them on the way up and again ride them on the way down.

a stock which is traded well, will behave this way. it is safe to trade in stocks which trade in the F&O segment. stocks which r way down r not coming up because institutions r not showing interest in them. so watch their charts they meaning the institutions, cant hide from us, their activity will come up imdt. catch them when you see big green or red full candles.

hey where is shabbir??? i have learnt most from him. pl your views.

 

WHAT IS THE FUSS ABOUT FULL GREEN OR RED CANDLES???

this good professional trader told once 'WE DO NOT TRADE STOCKS WE TRADE PEOPLE' and corollary to is stocks dont go up/down because of the qtrly reports or various news but because of how people react to these reports and news. the important issue the PEOPLE.

these big green/red candles r not formed by you, me or other retail traders it is formed by big institutions. let us say there were 10 prominent big institutions playing the indian markets and each having a kitty of 1 cr to trade or invest. that means a total of 10 cr hypothetically.

now lets say five of them feel that a particular stock is a buy and the other five think it is a sell, where do you think the price should head. you guessed it right no where, it doesnt move. lets now say two of five sellers now feel it is time to buy instead of selling, logically the price moves up. and if all ten institutions together feel that it is a buy/sell then that is the time these big green or red full form.

so the sanctity of big full candle. buy green full candles near sma in uptrend and sell red full candles at or above sma in downtrend.

this friend of mine also said it is not doing many strategies makes money but MASTERING A SOUND ONE.