The 315 Strategy for EOD trading The first step is to understand what is 315 .. its advatages and disadvantages. The second step is to understand some rules I have derived to use it effectively. Rules are related to effective entries, effective SL management, effective profit bookings, effective re-entries and in the end effective money management or effective safeguarding the capital. In this post I would focus on step 1 i.e what is 315 etc. 315 Strategy for swing trading 315 is a simple swing technique which tries to identify a trend very early. In this strategy we use only EMAs name EMA 3 & EMA 15 (hence the name 315). People ask me why EMA 3 and EMA 15 .... for me last 3 days define the immediate average price ... to find the slightly longer term trend i use the factor of 5. This is becuase 5 has an interesting relevance to markets.... we have approx 5 hours of trading everyday, 5 trading days in a week, almost 5 trading weeks in a month .... So I simply multiple 3 by 5 to get my 15 EMA which defines my medium term average price. Now in simple terms, if our immediate average price is higher than the medium term average price that means we are entering in a bull swing ... and visa versa. Hence the strategy entries are: 1 Enter Long when 3 EMA goes above 15 EMA 2 Enter Short when 3 EMA goes below 15 EMA Advantages of following 315 strategy 1. A simple technique using just 2 EMAs, no other oscilattors or indicators required. NO advanced charting softwares required. 2. System is based on following the ULTIMATE indicator available i.e price action. 3. Keeps a trader in the trend, lets the full swing to complete. Never gets a trader against the trend. 4. Since we are just following price action, we dont need to worry about divergences etc. Disadvantages of 315 Strategy 1. Works brilliantly in a trending market but can whipsaw in extremely ranging markets. However this can be overcome by certain rules and money management to be explained later in this thread. Coming back to my rules... I will talk about Entries, position sizing, pyramiding and Exits (yes, its not always in a trade method) !! BUT FIRST OF ALL, PLS APPLY 315 TO EOD ... believe me i have thought (and tried) applying 315
to intraday but success ratio is too low. 315 is for traders to trade less and make more money. Coming to rules.... Entries Entries are simple, you wait for a candle to close above 15 EMA, next candle to open and see if 3 EMA is above 15 EMA or not. If the answer is 'Yes' you go long. For shorts you need an exact opposite setup. An Improvization possible is: I would go long as soon as crossover is clearly visible. Losses can be substantial only if the candle which created the crossover is a hige wide range bar. In that scenario you can skip the trade. Position Sizing Since in this system SL cannot be defined as a 'level' your initial position sizing has to be small. Depending on the trading capital, you dont want to put more than 25% capital which you want to put in this trade in as the first trade i.e assume if you can trade a total of 4 lots max, you will start with 1 lot. Rest 3 lots we will add later as our position moves into profit. Pyramiding Pyramiding or 'adds' are obviosly done once our position has 'swung' into profits. The rule is we add when the markets correct after a swing, price comes and touched 15 EMA again (but 3 EMA hasnt crossed over). This means that we add very close to our SAR hence keeps the risk small and also ensures that even if SAR is triggered we still end up in net profits (since our initial position is in profits hopefully now). [1 more condition added later and the high/low of previous day is breached for longs/ shorts respectively. ] Exits Yes, we do exit at certain points even when our SAR is not hit. These exit points are obviously when our position is suddenly in deep profits becuase of an extreme rally or crash in our favour. The exit points are where you find our 'current' EOD candle is not touching 3 EMA at all. On this candle, we book profits and wait for markets to correct back and touch 3 EMA again. As soon as 3 EMA is touched we jump back into our initiaal position. So in a way we stay with our position, we just exit it once and get back in after a small correction. Improvisation for Re-entry as suggested by raj_usb Before jumping back to our initial position I suggest to look for trend of 3 EMA. If it is in the direction of the original trend (Up for Long and Down for Short) then we should jump back into our initial position. BUT if 3EMA direction is against our original position then I suggest to wait and watch. Once 3 EMA turns in the direction of our original position then we can jump.
In the end, I would try and touch the most important piece which is 'how to protect capital from whipsaws' .. but thats later.....
Sar=stop and reverse OK - so seems we have digested the 'basics' of 315 and its time to move to advanced '315' which takes care of how to avoid whipsaws and protect capital. I will first give you an example of the most painful trade that you can come across in 315. please have a look at below example. The EOD candles are from 4th Feb to 17th Feb with 3 EMA (red line) and 15 EMA plotted.
Now as you can see, 315 generated a buy on 6th Feb since EMA crossover was almost confirmed so we entered longs at around 3.25PM on 6th Feb at 2830. Now, Nifty swung up until 13th Feb and made a high of 2974 on that day.(If you notice that day was actually our Exit day since again candle body didnt touch 3 EMA). However, for sake of this example, please assume for a moment 3 EMA did touch the candle and we stayed with our longs. However next trading day (16th Feb) it crashed and touched 15 EMA at around 2850. This is technically where we 'ADD' as per the strategy. So if we add at 2850 we then have 2 lots long at average price 2840. The day ended at 2831 but since 3 EMA was still above 15 EMA we will hold as per the strategy. Now next day it gaps down against our position, opens at 2800 and finally closes at 2753. Thats when
our SAR is hit since 3 EMA crossover is confirmed and we jump into shorts. We have lost a hefty 100 point per lot or total 200 points overall. As a trader, the first thing I ask from myself here, what could i have done to avoid this whipsaw completely? The answer comes back - NOTHING. The second thing I ask from myself is - what can i do different to reduce the overall loss in such situations? The reply comes back - well I can be slightly less greedy and delay my 'ADD' to a point where I have some confidence that the correction is over and the markets are swinging back in the main trend's direction. So I amended the ADD rules slightly. I said I will add only if below 2 conditions are fulfilled: 1. 3 EMA is still below 15 EMA for shorts and visa versa AND 2. The current candle breaches previous day's lows for shorts (previous days highs for longs) This means that I add longs when i see fresh buying has started after the correction. This is slightly high probability add though it means I dont add exactly at 15 EMA but slightly away from it. So coming back to the example below, I actually dont add on 16th Feb becasue I am waiting for 17th candle to go above 16th candle which never happened. So I just had 100 point loss instead of 200. This is how I protect capital by 'ADDING' effectively. In coming days i will talk about 'effective SLs' and 'effective' profit booking. For the time being, please absorb and post any questions. We will see in live soon how we will do an 'effective' ADD if markets start to fall again.
For me 15 EMA is my indicator.. an upward sloping 15 EMA means uptrend and downward sloping 15 EMA means downtrend. A flat 15 EMA means no trend. Effective add is after 15 EMA is touched and previous days highs are breached
How do you handle the gaps? when open is below our SL, then exit at any cost at open? Hi Bandlab, if it opens below our SL, yes we would exit at the open unless the 3 EMA is not touching the candle. If 3 EMA is not touching the candle, I ususally hold and exit only once 3 EMA is touched. alternatively, you can also play for openiing range breakout of first 5 mins i.e hold if after a gap down markets go above the first 5 minute range keeping an SL slightly below the range's low. no strategy would give you profitable trades 100% of the times. As a trend trader I am happy to take these small losses to get that big profit trade. I am patient and happy to wait... 315 is like a hen which lays a golden egg every once in a while ... but not everyday I find trading at 3.25 PM to be safe since in the last 5 mins once a EOD crossover is still visible 99% of the times markets wont move so violently to suddenly negate that crossover... and in any case if at 3.29 the crossover is negated you can always exit. Quote: Which prices do we need to use to check to determine if a 3/15 cross over has occurred or not ? Do we use the SPOT prices or the FUTURES prices ? For e.g., NIFTY FUTURES can sometimes trade at +/-1% premium/discount to NIFTY INDEX. Therefore, the moving averages for the NIFTY FUTURES may be entirely different from the SPOT. One should consider FUTURE data only for 3/15 Crossover.The discount/Premium over spot is severe especially at the time of Exipiry of futures. Good morning.... most of these stocks are now testing 100 EMA zone hence booking all shorts ... once 15 EMA crossed 100 EMA bearishly that would mean offical bear market for me until a reverse crossover happens again. Note: Be carefull around 50/55, 100/144, 200/233 DMA Quote: Originally Posted by Tradewithhunter What I meant by candle close was that we should not jump into trade at 12 noon just becuase at that point a crossover is visible.. this is becuase by the day end the price can reverse and there might not be any crossover visisble then by day end. At close to day end, lets say at 3.25 PM just before the market close, if you see 3 EMA crossing 15 EMA the trades should be opened immediately.
I use a software that updates real time i.e i do not have to wait until 7 PM to see how todays EOD candle or EMAs are looking. My EOD candle is real time and so are the 3 EMA and 15 EMA .... since the EOD candle keeps changing shape as market goes up and down during the day .. the 3 EMA and 15 EMA also keeps changing. I wait until 3.25 PM to see how the 3 EMA and 15 EMA are finally closing for the day. If i see any crossover, i immediately open the trade assuming no wild movements in the last 5 minutes.
Quote: Originally Posted by ppmatkari yes i did enter late in SBI & as i said i picked it near the nifty's days low , thereafter market kept on going up. But even if i had entered as per signal on 27th @2204 still i would have had got whipsawed since on both days SBI's intraday high was much higher than 2204 (2339 on 27th & 2232 on 28th)... Plz guide on stop loss to be kept at entry that is crucial thing i feel. Hi, As i explained in my previous post, our SL is when an opposite crossover happens. Please understand this is not an intraday game but a SWING game where both SLs as well as profits will have to be BIG ! so if you have shorted SBI at 2204 you need to wait for markets to swing, your SL is only when 315 gives a bullish crossover even if that happens when SBI is closing at 2400 suddenly the next day. Avoid entering or exiting based on intraday moves.. pls!!!!! 315 is a strategy for patient traders who have nerves to hold positions even when they move in loss (or profits) waiting to exit only at a 315 signal ... its not for traders who have small risk appetite and get scared by intraday wild moves .. (sorry but i call them penny wise pound foolish traders). you might get a 100 point loss each in first 2 trades but the third trade will give you a 600 point profit. Look at SBI itself .. the last buy it gave was at 1752 and after that it went to make a high of 2500 on 17th October.. thats a massive 750 points move... and 17th October was also a 'book profits' day as per 315 rules... but before that SBI gave a couple of false trades since it was rangebound and caused losses of 200-300 points.. a loser won't have traded the third signal which gave a 750 points profit after those failed trades... see my point? you need to ask yourself, do you have the nerves, faith and enough capital to take 100 point SLs and still trade based on 315 after 2 failed trades? If your answer is yes, welcome to the world of successful traders.
Quote: Originally Posted by Mangafreakz @SH You track the Top 20 active securities for your futures trades? Also BNF had triggered sail on 27th i think , can u please confirm as i am still learning your strategy. Thanks. Yes mangafreakz, I track top 20 active securities and trade in them in future. Out of these 20 I trade in upto 5 stocks at one point and keep some capital aside to catch a trend change . Usually in a strong trend I end up with longs or shorts in all 5 stocks, this is becuase in stron trends almost all 20 securties would have same 315 signal. However as trend changes, some securities will start correcting and give opposite signal. For eg if I am long in 5 stocks, and from the rest 15 i see some stocks giving sell signals.. it means these stocks are weak as compared to other stocks and I short them instantly. This hedges my long positions beautifully. So if overall market corrects, my long positions would whipsaw but my shorts will give me huge profits. If the mkts dont correct, my shorts will whipsaw but my longs will move in huge profits Current examples were I was long in RIL, DLF, SesaGoa, Nifty and BankNifty. However Suzlon and RCOM gave sells before anything else and I jumped in shorts in those. Net result is both suzlon and unitech broke down and gave nice profits while other stocks gave sells much later. Net net earned in longs and shorts both. The trick is to be the first to buy a strong stock and sell the weakest stock and there 315 is your best guide.
Yes 315 is a trend following strategy and in rangebound markets you might get whipsawed. However depends on how tight the range is .. if the range is 300 points on Nifty .. you can still make money in 315.. but if the range is 150 points.. nothing can help you except patience and acceptance of these small losses. However a tight range often signals an upcoming big move so no reason to give up following the signals even after some consective losses.
Quote: Originally Posted by tradenifty Hi Stockhunter, Thanks for your reply. I have an another question. I have understood that I make an entry on 315 ema crossover at 3:25 p.m. However, the day when 3ema is not touched do i exit at 3:25 p.m. Also, the day when 3ema is touched do i reenter at 3:25 p.m. ? No you should not wait for 3.25 for Exit .. you should exit as soon as you see current days candle not touching 3 EMA. 1. Immediate previos day is what matter ... so if on 16th low of 15th is breached we go short again. 14th low becomes irrelevant. 2. Yeah I reverse and go short immediately. I keep doing it no matter how many times i get whipsawed. Please understand, on a real time basis your EOD EMAs will by dynamic i.e if NF is trading at 5000 and we see 15 EMA at 4850, we cannot blindly ADD at 4850. This is because by the time markets falls to 4850 during the day, 15 EMA would have dropped too to lets say 4820. This is where 'visual' retest of 15 EMA is important. Hence we add only when we see a visual retest which might happen at 4820 or 4810 or even lower. Lets say we ADD at 4820 when visual retest happens and markets rise later in the day and mkts close at 5000, 15 EMA would close around 4850. By waiting for a visual restest to ADD we were just able to buy at a lower price (4820 instead of 4850). Conversely, if the markets dont rise but keep falling, its possible a bearish crossover happens at 4700 levels which forces us to exit longs and open shorts. Again we are not worse off since we added longs at 4820 and not 4850. Visual retest works in our favour both ways since it delays our add when market is correcting against the trend. I do not keep any filters becuase I cannot define any % to be used as filters since the underlying 15 EMA value keeps changing during the day. So my thumb rule stays as 'Add only when you see price retesting 15 EMA without waiting for candle to close'. Rest is upto the users and their improvisation, they can always better this system with their experience.
Quote: Dear SH, I am watching this thread for quite some time. I have attached below Mini Nifty Futures chart (EOD). If you could see from the chart there were so may whipsaws in Aug'09 which i have marked in a box. Please guide us on how to place entry, exit & sl in this scenario as it will be very useful and will cover all the thing. Dear Karthik, There were 3 whipsaws in August (first short entry, then long entry & then another shorts all whipsawed). This was due to a small range that market developed at that time. Unfortunately we can not control markets and we will have to stay open to such rangbound days and should always stay ready for some consecutive whipsaws. I have written some posts in the past of effective money protection and you can read them. The good news is that after each rangebound period comes a strong trend and hence its important to keep trading each signal without losing hope and patience. This strong trend will be enough to cover all your losses made and will be able to giev some profits on top of it. As you see in your example itself, after 3 whipsaws in August came a strong one way rally from 4650 to 5150 and that proves my above point. Even within that rally, there were 2 ADDs and multiple profit booking candles which makes this 500 point rally to something like a 1000 point profit.... Its 3.23 PM now .. 7 minutes to go and NF is at 4946 (below my SL point). Exiting longs at 4946. 3 EMA has given a bearish crossover but not touching today's candle hence tomorrow we can see an upmove. However to respect the bearish crossover, I am opening 50% of Nifty shorts today.NF opened at 4920 levels (below my SL) and kept sliding since open. 3 EMA was not touching todays candle body hence i held longs and waited for 3.20 PM to exit longs and enter shorts since, as i have already said earlier, we wait until EOD close to get a confirmed signal. Quote: Originally Posted by mmca2006 TH , one aspect is not clear i.e we have opened short because of 3-15 bearish crossover but on same day candle body was not touching to 3 EMA and it is one of the criteria to book profit , ie. same candle insisting us to go short because of 3/15 crossover and also insisting to book profit because candle body is away from 3 EMA.In such situation what should be our course of action. I might be wrong , please correct me. Answer is simple mmca, it cannot be 'book profit' candle since we did not have shorts .. if we didnt have shorts ..how can we book profits? It is a plain 'open shorts' candle. However since 3 EMA is not touched by the candle there is a possibility Monday we get a +ve opening which makes the Monday candle touch 3 EMA and then its 'business as usual'. This is why i opened only 50% shorts on Friday, rest 50% to be added when 3 EMA is touched. From that point if Nifty falls ..very well for my shorts. But if Nifty
keeps going up we will end up with a bullish crossover and I will exit shorts and enter longs again. Depends how 315 looks at 3.25 PM on Monday. It can be another whipsaw for what it takes... but i dont mind whipsaws....for 315 gives me enough profit in the long run to bear whipsaws with grace. Like for every bad thing there is a good thing in this world.. similarly for every whipsaw there is a profitable trend waiting to be encashed in future... Quote: Originally Posted by rkkarnani TWH, Dont we wait till just before close to see whether or not a Bar has touched 3 ema or not and then exit!!! My understanding is that there will be very many days when price gaps up a bit stays up w/o touching 3 EMA and in latter half come down to touch it. Was this action preempted by you or this we follow as a rule!! Now today if the Price bar does not come down and touch the EMA do we exit long ? Please reply per your convenience!!! Regards. -R K Karnani This is an excellent question RKKarnani and worth spending time to answer it at length to make it clear. The thumb rule is that if the current candle is not touching 3 EMA we exit immediately irrespective of whether its 10 AM in morning or 3.25 PM. We exit at that point and re-enter when we see a current EOD candle touching 3 EMA. However this is relevant when we get a BIG gap up (or down for shorts). On small gap up days where the distance between todays candle and 3 EMA is not that great, you can hold your positions instead of exiting immediately until 3.25 PM. This is becuase its possible that markets continue to go up throughout the day and hence pull the EMA up with it making it touch the candle at the candle's lower body. Alternatively on small gap days, you can book at opening price, check where 3 EMA is at that point ... and re-enter at that level without waiting for visual 3 EMA touch. For eg today this is what I did today, NF booked at 5142 in the morinng itself since 3 EMA was not touching at that point. I checked 3 EMA level and it was at 5108 at that point. I placed a buy order immediately at 5108. I also put in a stop loss buy order at 5160 in case NF went up later in the day which would have pulled the 3 EMA along with it making it touch the candle. Mkts fell and my 5108 buy order got filled. Now mkts have closed at 5122 levels and 3 EMA is still not touching the candle. Hence I should have booked my NF longs as per 315 today at 5122 around 3.25 PM Basically the net result of the 315 trade till now should be: Bought NF at 5025 sold at 5142, profits = 117 points
Bought NF at 5108 sold at 5122, profits = 14 points Now as per 315 people should be empty handed waiting to enter longs again at 3 EMA touch. (Pls note though that I am still long in NF and short in ICICI Bank at closing price based on some other strategies I use along with 315) Hope this helps rather than confuse further.... Cheers SH Quote: Originally Posted by spiritunit as per 315, I believe tomorrow NF may test around 5070 level as 3 EMA did'nt touch today's candle, so shorting tomorrow for sometime is good.. I like the way you are trying to derive a short here spiritunit.. But please note a couple of very important things: 1. Even a flat start today morning can mean 3 EMA touching todays EOD candle since 3 EMA will inch up gradually today. Remember last two closing prices have been around 5125 and today any open around 5125 will mean 3 EMA at 5125 (hence candle touch). 2. Most importantly dont forget the foundation rule, NO SHORTING till the time 3 EMA is above 15 EMA .. think of only longs. Cheers SH The beauty of 315 is that it gets you in the trend even before its visible to a naked eye. So trust 315 and dont wait for the trend to be visible to general public. Q) Do I do a mass scan of stocks or manually check a list of stocks to identify entries. I trade in futures, I have my set of 20 odd stocks which i track daily and trade based on 315. At no point I open more than 5 positions. So basically in a raging bull mkts you will assume all 20 stocks to be bullish as per 315 and hence I will have 5 long positions in 5 of the stocks. Now I continue holding these 5 stocks and book profits/re-enter as per rules in them while i continue to track the rest 15 stocks. Now as the bull mkts matures, I will see some stocks correcting and giving a sell signal while other will stay bullish. I will take the first 2 stocks that give me sell signal and short it (I will close 2 underperforming long positions to keep my portfolio to 5 stocks overall). Now I will have
2 short positions and 3 longs so I am kind of hedged. If the downtrend continues, I have shorted the weakest stocks already of the 20 stocks ( weakest since they gave sell first than others) and hence my chances of making good money in shorts are huge. I will monitor the rest 3 long positions.... if i get another sell on some other stock, I will short that stock and book an underperforming long to keep my portfolio to 5 again. If the downtrend continues, I will end up with 5 shorts ... probably the weakest one's from my 20 stocks and hence good chance of outperforming. And the process continues until the downtrend starts getting exhausted and i start getting buy signals..... I do not have amibroker or any other software to mass scan the universe for signals and i dont want to do it anyways. If you just focus on some handful of stocks that are volatile and liquid, its enough to make you stinkingly rich. Even if you just stick to Nifty, its enough for you to make you good money. But i like to outperform Nifty by shorting the weakest and buying the strongest and hence have 20 stock watchlist. Q) Timing of identification Short and simple answer is you enter at the crossover... forget about buying value and all.... we dont want to buy value but we want to buy a bullish wave or sell a bearish wave. However my ADD at 15 EMA touch is inspired by AE ( I am an avid fan of Alexander Elder and whatever I have learnt in TA is inspired by him) Cheers SH
Summing up my understanding: Dos:
Apply this strategy to only selected 10 - 20 high volume large cap/mid cap stocks. Apply this strategy to EOD charts only. Preferably choose futures so that both long and short can be tried. Use SL and money management for profit management.
Donts:
Do not apply this to intraday. Do not apply to options Do not apply if the entry criteria is not fully met. Do not apply to low volume stocks as it can whipsaw.
To Enter: Apply 315 strategy to the selected high volume stocks and wait for cross over. Enter long or short depending strictly on the cross over. To Re Enter: Renter when the candle which moved above the 3 EMA returns back and touches 3EMA. To Add more lots: Add second lot when the candle touches back 15 EMA after moving above it and also the candle high is above the previous candle high. To Exit: Exit when the candle moves above 3EMA. Also another chance to exit is when reverse cross over happens. In addition to these, exit, when you realize you have made huge profit and huge is subjective. (5% for stocks ??) Now that I have some clarity on this, I am also keen to know the qualitative aspects of trading such as: 1. What kind of capital is required to do this kind of trading ? Watching 10 - 20 stocks and taking position in 4 - 5 at a time, and that too in futures market and on large cap/mid cap stocks which are normally above Rs 300 per stock and considering M2M cost and others, does one require some substantial amount to start this trade ? 2. In futures trading, should we target only current month and square off at the end of month whether exit conditions are met or not ? How does one predict the duration of the rally/crash ? 3. What is the typical frequency of trade ? The typical duration of holding the trade, the frequency/number of trades one make per month based on this strategy ? Do we see so many cross overs first to begin with ? 4. Regarding protecting profit, one idea mooted here was to place SL when the profit moves up 100 points. If the profit does not move up 100 points but reverses after going up a few points ? I presume this is the case where we can do nothing but still wanted to raise this question just for clarity.
5. How can we protect the capital ? Profits can be to some extent protected by SL. Are there any best practices to protect the initial capital itself ? One option seems to be restricting our 'add' lots to not more than 2. ie. even when we observe a pattern where in we do not get a chance to exit but the candle moves above 15 EMA and comes back and touches 15 EMA, we do not keep adding lots but just stop after adding the second lot. This way we may be able to protect some capital but I am not sure about best practices to protect already invested capital. Ideas are welcome. Well, these are just a few thoughts which I phrased as questions. Any further elaboration by others is quite welcome. If I get more clarity on these questions, I will try to answer these myself. For now, the simple answer appears to be "It depends" and depends on quite a few factors I suppose. Thank you one and all. Quote: Originally Posted by sureshciyer Summing up my understanding: Now that I have some clarity on this, I am also keen to know the qualitative aspects of trading such as: 1. What kind of capital is required to do this kind of trading ? Watching 10 - 20 stocks and taking position in 4 - 5 at a time, and that too in futures market and on large cap/mid cap stocks which are normally above Rs 300 per stock and considering M2M cost and others, does one require some substantial amount to start this trade ? 2. In futures trading, should we target only current month and square off at the end of month whether exit conditions are met or not ? How does one predict the duration of the rally/crash ? 3. What is the typical frequency of trade ? The typical duration of holding the trade, the frequency/number of trades one make per month based on this strategy ? Do we see so many cross overs first to begin with ? 4. Regarding protecting profit, one idea mooted here was to place SL when the profit moves up 100 points. If the profit does not move up 100 points but reverses after going up a few points ? I presume this is the case where we can do nothing but still wanted to raise this question just for clarity. 5. How can we protect the capital ? Profits can be to some extent protected by SL. Are there any best practices to protect the initial capital itself ? One option seems to be restricting our 'add' lots to not more than 2. ie. even when we observe a pattern where in we do not get a chance to exit but the candle moves above 15 EMA and comes back and touches 15 EMA, we do not keep adding lots but just stop after adding the second lot. This way we may be able to protect some capital but I am not sure about best practices to protect already invested capital. Ideas are welcome. Thank you one and all.
Ok lemme try to answer them for you. 1. looking at margin requirements of trading in futures, you would need atleast 4 lakhs + another 2 lakhs for M2M to start with. My suggestion is that a new trader should start with just Nifty (capital of 30K margin + another 30K for M2M). Earn for 6-12 months in just Nifty, raise confidence and build the descipline while trading in live markets and then gradually start increasing the number of stocks. 2. This is a swing trade which can last for months. So at expiry you simply rollover your position i.e if holding longs .. you basically close this months futures and immediately buy next months futures. No need to predict anything, the beauty of not predicting and just sticking to teh charts is that you dont attach any ego to your trade. As soon as you start predicting, your ego comes in your way of desciplined trading. 3. Can be many trades in a rangebound mkts (3-4 trades per month per stock) and can be no trades at all in the month if the trend continues and cuts across many months (March 09 to June 09). Depends on the state of market. 4. If it reverses it reverses, be ready to reverse your position as well. The way I reversed to shorts yesterday. 5. Can't answer this question since money management for different people is different. A high risk appetite trader can go 'slam bam' in the markets and a conservative trader might buy options to hedge the future positions. One way is that you start with the capital, make money, once you have made 100% of your capital invested you remove your capital and just trade with the markets profit. Lock your initial capital in a bank's fixed deposit to protect it Cheers SH A few pointers to scare the weak bulls: - 315 is bearish on EOD currently - MACD gave a sell signal on daily charts a few days back. - Above coupled with the fact that MACD on weekly charts are in sell mode for a long time now - deadly combo! - Negative diveregences on Weekly timeframes and on daily too clearly visible. A few pointers to bring back smiles to strong bulls/investors: - Long term chart setup is still bullish meaning a new highs can still come in coming months. - 315 on weekly is still bullish so long term investors - no need to panic
Cheers SH
Quote: Originally Posted by observer SESAGOA has whipsawed too much Sesa must be going through a tight range ... avoid it. Cheers SH
Ok folks, let me try to put the doubts at rest once again. Dear rh6996/Kanchan - Yesterday's whipsaw was one of the worst whipsaws you would come across while trading 315. Similar to the whipsaw we had on the dubai debt crisis news. You really dont want 3-4% index moves against 315 that too near 15 EMA. It will hurt for sure, It hurt me and my profits. And the trouble is, and I am being honest here, I dont know how to avoid such whipsaws. I am not even sure if anyone would know for if they knew they would be holding the secret to the Holy Grail. And I dont believe in Holy Grails. Even Gann used to lose money big time. Yesterday whipsaw was because of our blessed FM suddenly came out with his fancy predictions on GDP for next 3 years and I dont think any technical analysis can predict these things. I am sure FM was trying to save his losses on his longs. Now as far as ADDs are concerned, I have posted two styles in the past for ADDS.. one for agressive traders and the second one for conservative traders who want to protect their capital. The ADD which you did was the 'aggressive' style where you ADD at 15 EMA touch without waiting. the ADD rule which Ankit Garg and KKR5 are highlighting are the 'Conservative' style of ADDs where you wait for the trend to resume again by waiting for previous candle lows breach. Being aggressive or conservative for me depends in what markets we are going through vis-a-vis my positions. In a Bull market, I am aggressive with my Longs but conservative with my Shorts and visa versa. So you saw I ADDED longs on 15 EMA touch a few days back.. but yesterday I did not ADD shorts at 15 EMA touch but waited for previous days lows to be breached. This is because we are still in bull markets. It also depends on how my original position is faring, if my original shorts are in huge profits when 15 EMA retest happens.. I can go short at that point being aggressive. How do I define bull markets and bear markets? My logic is again based on 315. If on weekly charts 315 is bullish, we are in a bull market and visa versa. KKR55 - Hope above clarifies your confusions as well. Observer - Yes you are right, if your original positions are in profits, you can ADD at just 15 EMA touch since you are risking markets money in your ADD here. Arti - As per the rules you enter longs at 3.25 PM on the day the crossover happens. So yesterday I went long at 3.25 PM around 5145. tips.seeker - Sorry no backtest data. In the end, I will again appeal to all users to be pateint and persistent with 315 for atleast 6 months. I can understand people losing faith when they see such whipsaws. But I can remain confident with 315 since 315 has helped me capture huge 1000-2000 points moves in the past and without doubt no such move in future will be missed if I stick to 315. Take these whipsaws as business expenses .....
My positions: reversed to longs at 3.25 PM yesterday at 5145. Loss in shorts 105 points per lot, had booked 32 points already in those shorts hence net loss 73 points. Happy Trading SH
By the way, I can give you another suggestion here to protect the capital and some profits here .. you can accept that or ignore it based on your trading style. When your positions are 150-200 points in profit, close your Nifty Futures and book profits. Out of that profit ... buy at the money option ('Call' if the 315 is bullish & 'Put' if 315 is bearish). They usually trade at 140-150 points at the start of the month and you can get it cheaper if your are doing it in the middle of the month .....This way your entire risk in mkts is the profit you have already made in the trade. If the trend is strong, even your options will earn profits.. if its weak and has to whipsaw.. you will be able to exit that option for 50% of its value (remember that 50% is still your profit)... and at crossover start afresh with NIfty futures. This is again one innovation/common sense one can take to preserve capital and preserve profits (IF my positions are 500 points in profit.. I would not leave all that on the table, I usually get into options immediately). By this, probably the annual returns would become 150% from 300% ... but even the risk goes down significantly. Quote: Originally Posted by VJAY Dear Tradewithhunter, Wishing you a happy & prosperous new year-2010...Am new to this thread....I liked your strategy...looking to papertrade it...have some doubts please reply.. 1.We enter trade at closing....looking the crossover...if it ema crossover is just happen @EOD then can we wait for next day or enter it immediately? 2.Add comes when price go towards our trade then reverse to touch 15ema...here we wait for complete the bar which touches 15 ema or at touching price? 3.same doubt when we exit the trade if price not touch 3 ema and then reenter when price touches 3 ema again.......here also wait for last minute of that day or enter it when price touch 3 ema? Dear Vjay - I have answered these questions several times in the past. I know the answers are lost in so many pages now. I will again answer these for you. 1. Enter it immediately. If cant enter today, enter tomorrow morning.
2. ADD at touching the 15 EMA if your original positions is already in good profits OR if you are a high risk high returns aggressive trader. If original position not in good profit, dont ADD (what is good? I would say 100-150 Nifty points). 3. 3 EMA rule is simple... re-enter when you see 3 EMA touch. However you will see that as Nifty falls 3 EMA will also fall. so you can sometimes not wait until a 3 EMA kiss but enter 1015 points higher than 3 EMA (this is becuase if NIfty reverses from that point and goes up you will find 3 EMA is pulled up and it kisses the candle at your entry point). Cheers SH Quote: Originally Posted by forestflower Dear SH, I made that move on 31-12-09. The switch cost me 12 points. But even as of yesterday when the nifty was at 5190 the 5300 call was at 95 [the call was sold at 85 on 31-12-09] . If nifty breaks the 5300 barrier we could exit the 5300 call at about 100. Cann't thls be generally adopted when price is not touching the 3 EMA instead of exiting our positions. Thanks Dear Forestflower, Yes this is also a good way of exploiting the 3 EMA situatuions. Instead of exiting longs and entering on dips at 3 EMA, we can continue to hold longs but write an ATM call. The written call is completed covered by the futures. Cheers SH Quote: Originally Posted by observer Why are you still long in SAIL? I took position in SAIL but got whipsawed twice (last two days), overall SAIL was not looking weak, so closed my position at loss. oops sorry observer .. I follow 534 for SAIL since its a less volatile stock. I was just putting my positions. Cheers SH
Quote:
Originally Posted by observer If the stock IS too volatile, should we not use 534 to filter out noise? Or is it the other way round? the way I see it.. in more volatile stocks you want to get into a trend as soon as possible so that you can encash a fast move either ways... hence 315. A less volatile stock would not tend to move fast in either direction hence no need to get into a trend early.. hence 534. Raj - in 315 we exit if 3 EMA is not touching the candle and re-enter when it touches. In 534, we still exit at 3 EMA not touching and re-enter. We do not use 5 EMA just becuase we are using 534. Rest crossovers are to be used between 5 EMA and 34 EMA. Cheers SH Quote: Originally Posted by raj_usb Could someone pls explain what is 534 strategy??
Hi Raj, In simple words it's EMA 5 crossover of EMA 34 on EOD chart... Rest rules are same as of 315 Pls find attached below CAIRN chart from 1-Dec-09. Whenever we exit at candle not touching 3EMA one shud wait n watch for next candle touching 3EMA. If the close of candle is below previous non-touching candle or 3EMA is in opposite direction (here downward) then avoid re-entry. Once the 3EMA changes its direction and close of current candle is above previous candle then one can think of re-enrty. Also it is observed that when our position is suddenly in deep profits because of an extreme rally or crash in our favour, the stock tends to correct either way.
All your Comments are always welcome specially from SH and people trading this strategy.
-Raj
Quote: Originally Posted by rkkarnani Observer, Dont we enter long on crossover!!! We were short and are waiting for the 3EMA to cross 15EMA from below to go long!! My understanding is that we enter long at close when we are sure that the 3EMA would remain above 15EMA, we do not wait for the price to retrace to 3 EMA. Retracement to 3 EMA is applicable after we exit our position and to re-enter in the same direction we wait for a retracement. Request SH to confirm my view please!!! Spot on answer !! Cheers SH Try 5 & 34 EMA crossovers for commodities EOD. Book 50% when you get 5% move in your favour... book rest when you get 10% move ... wait for next crossover. I am trading copper on EOD ... bought copper recently at 326, booked 50% at 341 ... holding rest which i will exit if bearish crossover happens or at 356. Cheers SH Quote: Originally Posted by raj_usb Hi SH, Why 5% and 10% move? Is there any reason behind this? Shud we trade commodities Intra-day instead EOD? Thks. - Raj Hi Raj, I am an EOD trader. I Have been buying copper at 326 for last 3 days (34 EMA support) and it closed at 333 yesterday. holding for targets 346. 5% and 10% are just aribtrary profit booking points for me. Usually after moving 10% from the entry point, commodities correct to test 34 EMA where you can re-enter again. By doing this your equity will never go in negative and you will still be able to catch 80% of the trend.
More later on commodities since I am still experimenting. Cheers SH Quote: Originally Posted by raj_usb Hi SH, Have a look at Nickel chart, buy generated at 855.8 and still up and up and up...now 1204. How to handle such situation? As per 534 we wud hv exited @941 and wud hv missed rally upto 1204. Waiting for suggestions. Thks. -Raj Raj - as per 534 I would have held until opposite crossover happens. 10% profit booking is completely arbitrary as I told you earlier. You can chose to follow 10% profit booking rule, or chose to ride the entire trend and exit when opposite crossover happens. Both have pros and cons and the choice is yours. Cheers SH --Dear Sukhi Aatma - My 315 can be used with not just with Nifty but any stock futures. Obviously the stock futures in question should be highly liquid and highly volatile like banking, real estate etc. Regarding shorting at 3 EMA not touching day's candle, let me put the debate to an end.. I think I had mentioned it somewhere on this thread earlier as well. One can book longs and initiate shorts if gap between 3 EMA and current day's candle body is significant ... for example the gap should be atleast 1%-2% of CMP ... and the profit should be booked as soon as you get 50% of that 1%-2%. For example, If current candle opens at 5000 and 3 EMA is at 4920 .. you can short at 5000 with target 4960. The above is a high probability trade, however is also high risk trade and requires good position management and capital to keep shorting at higher levels and averaging in case Nifty keeps climbing up from 5000 levels without touching 3 EMA. As I said, 3 EMA usually gets touched in 2-3 days maximum so this type of trade doesnt last for more that 2-3 days.
I usually take this trade on Day 2 and not on Day 1. Cheers SH
I track below stock futures: 1. Nifty 2. Bank Nifty 3. ACC 4. ABAN 5. DLF 6. Unitech 7. ICICI BANK 8. IFCI 9. IDBI 10. JP Associate 11. L&T 12. RCOM 13. Bharti Airtel 14. Reliance 15. Reliance Capital 16. SAIL 17. SESAGOA 18. SUZLON 19. STERLITE 20. SBI Bank I have explained how I trade in only 5 stocks out of 20 in one of the previous posts. Cheers SH Quote: Originally Posted by arti Help needed,am confused
.
We exit when candle not touching 3EMA and enter again when it touches 3EMA,but in case of DLF,y'day: 1. It gave bullish crossover,so we have to exit our shorts,but candle not touching 3EMA.So how to deal with it? 2. I remember in some posts back,Sukhi_atma said that we should exit our position and enter in opposite direction and exit when candle touches 3EMA.But i observed that candle was above 3EMA when price was around 313 and when it was lingering between 315 and 316,3EMA pulled up to touch the candle,but by the end of the day,candle was again above 3EMA(though price came down to 309). So how much we should wait when candle starts touching 3EMA? I will really appreciate if along with others, SH also replies. Arti
Hi Arti - I have answered this question a couple of times in the past. Even if 3 EMA is not touching after the crossover, we need to enter into the position. 3 EMA rule is only for booking profits, otherwise normal crossovers need to be traded. Cheers SH Quote: Originally Posted by Tradewithhunter Spot on Sujit - I am long now too. If it whipsaws again .. i will go short again with a bigger position size. Cheers SH Yes - a lot of technical reasons related to global markets - For eg a 5% to 10% correction is due on S&P right now before we get the final thrust to 1250-1350 on it. Thats why my position size will be bigger on bearish signals than on bullish signals right now. Secondly - the bearish crossover has already whipsawed and if this bullish signal also whipsaws..it will be two in a row. Usually Nifty and other volatile stocks give a good trending move after a couple of whipsaws. Cheers SH
Quote: Originally Posted by msri Dear Sir, I am very much impressed with your EOD strategy and I have gone through your rules. I intend to follow this very soon. Please clarify my one doubt regarding 'entry' of trade. 3EMA has alreadycrossed 15EMA 4 days back and the trend is up. Can I enter the trade even after the lapse of 4 or 5 days ( i.e. in the middle of uptrend) and continue to hold the position till 3EMA line is not touching the candle? I expect a detailed reply to enable me to step into the trade. Regards Msri No you should not enter in a trend after 4 days if the markets have already trended in the direction of 315. HOwever if the markets are still close to where they were when the 315 buy/sell
was triggered, you can enter the markets. Cheers SH Loss depends on the day when the crossover has happened. If that day is a small candle day you will get an entry very close to 15 EMA. However if that day is a big candle/wide range bar, you will end up entering away from 15 EMA which means larger potential loss if the signal whipsaws. Cheers SH
Quote: Originally Posted by akshah Hi TWH, great strategy for swings . I am a little confused with the ADD part. You mentioned in your post that add should be done only when below 2 conditions are fulfilled: 1. 3 EMA is still below 15 EMA for shorts and visa versa AND 2. The current candle breaches previous day's lows for shorts (previous days highs for longs) So suppose we are short and the candle now comes and touches the 15 EMA. We do not add short but wait for subsequent candle to take out low of this candle. But taking out low means we wait for the close of the subsequent day to check whether it has closed below previous candle low? Or do we add short intraday once the low of the previous candle is taken out, even if at eod the candle closes above the previous days low? Please help to clarify this aspect. Thanks Ash Ash - There are two approaches to ADD. 1. Aggressive method - you simply ADD at the 15 EMA touch provided your initial positions is in good profits. 2. Conservative method - is the one you have explained above. The criteria is not 'closing' below the lows of the 15 EMA retest candle but a mere breach of that candles lows Cheers SH
Quote: Originally Posted by gsri Sell Signal in NF Originally Posted by masticalrun no i think u misunderstood me. i am not bother about loss,i am asking it already given 3 signal in 5 days and might give another sell signal on monday,so how u deal with it,means what will be policy for near trading days or follow same pattern as chart is saying of 315 crossover Yes, positions reversed to shorts again.... As usual, after a good trending move from 5216 to 4800 in shorts .. Nifty retraced to 15 EMA, gave bullish signal and whipsawed today to give short signal again. This usually happens after a good trending move i.e a few whipsaws as the market goes into 'consolidation' or a range after a good trend. My outlook remains bullish and will wait for the charts to give the buy signal to enter longs again. Until then, we will respect the charts and stay short. Interestingly, 534 stays in short zone since 5141. For people who want less whipsaws (at the cost of entering a trend late as well as exiting it late) ... they should trade 534 signals. Cheers SH
However being a technician, I don't trade my views, I trade my charts. And as per charts, I am currently long. Views can be wrong, but the chart is always right ! Cheers SH Quote: Originally Posted by simple_trader Looks like 5260-70 NF correction is finally coming! taken one day more, but it is doing! 5250 NF is support, below this, market could have trouble. Given expiry, it seems to be unlikely. Happy trading! It's likely simple trader, I will tell the reason why it might happen for other traders to understand the game better. 3 EMA got touched yesterday at lows of yesterday's candle so the 3 EMA rule has been fulfilled
(and we have got back into longs). However 5 EMA has not been touched for the last 2 days (I know i haven't discussed about 534 at length in this thread since it is 315 thread). That 5 EMA can pull down Nifty or alternatively markets can stay sideways with 5 EMA moving up to touch the day's candle. Cheers SH Quote: Originally Posted by tmnkin That mean instead of 3 ema touch, we should enter again in 5ema touch, am i right sh, pls explain in details Hi tmnkin - As per 315, re-entry is at 3 EMA touch. However 5 EMA provides a good short term support to corrections so people who missed entries earlier can enter at 5 EMA as well. Remember, different EMAs work as resistance and supports both .... in 315 .. 15 EMA provides the swing support (and hence becomes our ADD point) and 3 EMA provides intraday supports. Cheers SH Quote: Originally Posted by tmnkin hi sh i am trying to develop a comprehensive application to track 315 entry and exit with charts, i developing my own charting software with that, i would like to know the additional tool like RSI,stochastic, macd etc which can accompany 315 in charts, i know as u said u dont want to complicate it, but developing this into software with more tedious trend confirmation will be much added advantage to our users, and i will share that application in this forum once i complete that. You can plot MACD along with it ... any 315 buy signals when MACD line is above its EMA and is above 0 will be a stronger buy signal. Cheers SH Dear Friends, A lot of risk averse professional traders make money using options. Their objective is to make 5% - 10% of investment every month (which compounds to more than 100% returns on investment per annum). Since their objective is to earn 'less' than the future traders do, they try and look for trading
strategies that reduces their risk of losses due to any whipsaws. One of the ways to do that is selling options (also called writing options). A trader who has identified the trend of the market (lets say using 315 or 534) can write options which are likely to go down in value as the market trends i.e: If 315 has given a bullish crossover, the trend is up, the puts will go down in value so sell puts. If 315 has given a bearish crossover, the trend is down, the calls will go down in value so sell calls. Which strike price to sell? Depends how much risk and reward you want. If you are ready to take only a small risk, write out of money options. The reward will be less as well. If you want to take some more risk for a higher reward, you can write ATM (at the money) options. Why is it less risk and higher probabilities as compared to future trades As a seller of an option, both the market trend and the time factor works in favour of the seller. Even if the market trends for a few days in the direction of the 315 crossover and later comes back to the original level, the option will have already lost some points due to time erosion. If the market whipsaws, the option will be up only slightly giving a trader very small loss (as against a future trader). Word of caution - Never write In the money options - Since the options are naked, the seller stands to unlimited risk if the market gaps up/down in opposite direction based on any overnight news. - Given above, never write naked puts since any financial bad news overnight can make an uptrending market suddenly gap down to a lower freeze. - This is used only by traders who are professionals and have deep pockets, not recommended for any trader with small capital (less than 5 lakhs). Cheers SH
Quote: Originally Posted by nick721156 Dear SH, As per 315, I have booked profit today in the opening as candle was not touching the 3EMA. Now, shall I once again enter either @ the value of 3EMA when I booked profit or @ the touch of 3EMA? If market goes down furher, 3EMA will come down and touch the candle, and so the value of 3EMA at which I exited will be higher than the present value. Regards, Raju You need to enter again at the touch of 3 EMA irrespective of whether it happens below your exit level or above. Cheers SH Quote: Originally Posted by kinguncle I dont think so. SH Sir mentioned once that 534 is efective primarily in Commodities. All stocks+their futures do well with 315. Hi - to clarify, 534 is effective on stocks too. If you use 534 instead of 315, your entries and exits would be slightly late .. however you will get less whipsaws and will end up riding the trend longer. Cheers SH TMKIN's view: its 2.3% but remember in some cases scrips bounced back even after touching more than 3% low, but mostly after touching 2.3% low on close low stocks failed to bounce back, and opposite crossover happens sooner or later Quote: Originally Posted by jayan12 Niffty 3ema has crossed 15ema, but not the previous day candle's high. So I should not go long today... and should wait ....yes? Dear Jayan, If cross over happen then must be take long trade...no waiting...trade may get whipsaws...but as per 315 trading we are now in long.....
__________________ Regards VJAY Hey guys its no brainer.... along with 315 on daily timeframe ...I also follow 100 EMA break on hourly ... If markets break 100 EMA on hourly I short ... if they go above 100 EMA I long ... its that simple..... I monitor both 100 EMA on hourly along with 315. Sometimes both are in same direction and sometimes they are in opposite direction. But for the purpose of swing trading based on 315, lets just stick to 315 in this thread. SHorts taken yesterday based on 315 at 5900 are already in 140 points profit. Cheers SH Quote: Originally Posted by trade4joisar Hi SH, you mean still we can go for shorts. Can i catch running train? As per market correction strategy, this is 3rd week, but there is no sign of meeting 3 & 15 EMA lines. Can we will go for shorts? Market already corrected for last 15 days, How you have decided to go for more longs? Dont catch the running train if your platform is too far off (15 EMA) The market correction strategy says price needs to retest 15 EMA .. which has already happened on Friday ... so the next 15 EMA correction watch starts ticking afresh now .... (please note the strategy says price will touch 15 EMA not 3 EMA touching 15 EMA) As per 315, no longs ... only shorts until 315 crossover happens. Cheers SH
Quote: Originally Posted by VJAY Dear SH, Today have chance of getting buy cross over....
....i think many waiting for entry in 315....
Yes ..but remember ,, after a good trend comes a few whipsaws.... I will be keeping my buy positions small to start with and will increase them if the buy signal whipsaws... NF will generate a buy if future closes above 5470 (just an estimate will have to check the charts at 3.25PM) Cheers SH
Till Page 231
