SH's trading the 'greater fool' zone

[vikrit]

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How to trade 'greater fool's zone once we have built an effective envelope?

If we are in longs (for example based on 315 strategy), if we see the daily candle touching the upper band of the envelope (or going beyond it due to gap up) we can:

1. Hedge longs by buying some puts and wait for 15 EMA touch OR
2. Book longs completely and buy some calls in case the hysteria continues. We enter longs in futures again at 15 EMA touch
3. If the price we way outside the envelope, we exit long positions in futures/calls and open contrarion trades (open shorts or buy puts) and carry them as naked positions until 15 EMA is touched.

Visa versa for short positions.

I am attaching Nifty EOD charts, the effective envelope uses a 6% envelope against 17 SMA as it ensures only 5% candles are outside the envelope. We need atleast 250-300 candles to look back upon so I have chosed last 1 year chart.

I have also marked the 'greater fool's zone' where the trades as explained above could have been entered. (assume original positions based on 315)

Cheers
SH

is there any rules for reentry? for ex- in this chart if go long at fourth arrow, then when or on what basis again short?

 

[lvgandhi]

Have created this afl for Amibroker Users...... Try this out

_SECTION_BEGIN( "MA Envelope" );
Type = ParamList( "Avg. Type", "SMA,EMA" );
P = ParamField( "Price field", -1 );
Periods = Param( "Avg. Periods", 20, 2, 300, 1, 10 );
F = Param( "Filter %", 5, 0.05, 100, 1 );

if ( Type == "SMA" )
    A = MA( P, Periods );

if ( Type == "EMA" )
    A = EMA( P, Periods );

EnvUp = A + A * F / 100;

EnvDn = A - A * F / 100;

Plot( A, _DEFAULT_NAME(),  IIf( Ref( A, 0 ) > Ref( A, -1 ), ParamColor( "ColorUp", colorWhite ), ParamColor( "ColorDown", colorOrange ) ), ParamStyle( "Style", styleThick ) );

Plot( EnvUp, "EnvUp", ParamColor( "EnvUp Color", colorRed ), styleThick + styleNoLabel );

Plot( EnvDn, "EnvDn", ParamColor( "EnvDn Color", colorGreen ), styleThick + styleNoLabel );

PlotOHLC( EnvUp, EnvDn, EnvUp, EnvDn, "", ParamColor( "Envelope Color", colorDarkOliveGreen ), styleCloud | 4096 );
_SECTION_END();

There is an inbuilt indicator called percent bands in Amibroker which is based on SMA. However if we can code an afl to see How much % candles are inside bands/envelope it will be nice.

 

[NTrader42]

Thanks.
Whether any afl can be made to optimize period and % for any scrip so that 95 % candles are inside envelope?

There is an inbuilt indicator called percent bands in Amibroker which is based on SMA. However if we can code an afl to see How much % candles are inside bands/envelope it will be nice.

Technically it should be possible to do that,

Setup a loop and count candles where high is less than upper band and low is greater than lower band, this will give us the candle inside the envelope. then optimizing the above inside a nested loop to get MA value and % . . . don't know if its worth the effort for 2/3 counters that we trade

Maybe some one trading many more counters (10s or 100s) need to do all that

Thanks

 

[VJAY]

Have created this afl for Amibroker Users...... Try this out

_SECTION_BEGIN( "MA Envelope" );
Type = ParamList( "Avg. Type", "SMA,EMA" );
P = ParamField( "Price field", -1 );
Periods = Param( "Avg. Periods", 20, 2, 300, 1, 10 );
F = Param( "Filter %", 5, 0.05, 100, 1 );

if ( Type == "SMA" )
    A = MA( P, Periods );

if ( Type == "EMA" )
    A = EMA( P, Periods );

EnvUp = A + A * F / 100;

EnvDn = A - A * F / 100;

Plot( A, _DEFAULT_NAME(),  IIf( Ref( A, 0 ) > Ref( A, -1 ), ParamColor( "ColorUp", colorWhite ), ParamColor( "ColorDown", colorOrange ) ), ParamStyle( "Style", styleThick ) );

Plot( EnvUp, "EnvUp", ParamColor( "EnvUp Color", colorRed ), styleThick + styleNoLabel );

Plot( EnvDn, "EnvDn", ParamColor( "EnvDn Color", colorGreen ), styleThick + styleNoLabel );

PlotOHLC( EnvUp, EnvDn, EnvUp, EnvDn, "", ParamColor( "Envelope Color", colorDarkOliveGreen ), styleCloud | 4096 );
_SECTION_END();

Thanks aditya.....you are always ready for any afl's....
realy you are valuable member of this forum....:clapping:

 

[VJAY]

Dear SH,
Thanks for sharing one more arsenal for 315 .....I think 315 traders are now very alert in all scenerios ........first new exit strategy ....now another one FOOL to fools with our existing holdings....

 

[NTrader42]

Dear SH,
Thanks for sharing one more arsenal for 315 .....I think 315 traders are now very alert in all scenerios ........first new exit strategy ....now another one FOOL to fools with our existing holdings....

. . . :lol: . . .

 

[prem_k_s]

how to create envlope in metastock

prem kumar

 

[santoshdts]

Hi..
Good Strategy in making..

Can this MA Envelope be Modified to be used in Intra TFs.

Regards

 

[Tradewithhunter]

Yes can be used on intraday timeframes too..just stick to the two rules of creating the envelop and then which scrip or what timeframe kind of questions become irrelevant. (I have already posted 30 mins TF charts)

I will give you an idea - look at biggest weekly gainers and losers of any website or stock scanner....some of them would be trading outside the envelop as they are the biggest gainer or loser.

Try doing in cash i.e buy stocks which have fallen below the lower band and book profits on pullbacks... do in cash and keep averaging till the time candles stay outside envelope (look at kingfisher example)

Cheers
SH

 

[hawaisanjay]

Excellent....manyyyyyyyyy..thanksssss....sh..
One doubt..if price candle goes outside envelope..then comes back but does not touch 15EMA..how do we handle such trade?