Nifty Pivot-based Mechanical Trading System coupled with 2 and 3 Day Swing Calls

Sunil

Well-Known Member
#1
this is an excel file for those newcomers/persons who have no idea how to read charts and use technicals...
something like a mechanical trading system by Vinod Nadoda ji.

I had made this when I was a newcomer myself, and the ONLY trading-tool & friend i knew was CLASSICAL PIVOTS (floor-trading pivots)...

I happen to like it maybe because it involved simple mathematics, and it was my fav subject since 15 years of my life (half of my life)...
Hello Friends & co-members,

Most of you know about my small fascination for Pivotal levels using the Classical formula (floor-trading pivots) for intraday NIFTY trading. These simple mathematical formulae’s resulting levels really astonish me with the frequency with which they coincide with actual key chartical support and resistance levels, and the “respect” these levels get at time of actual intraday trading. (I have discussed the whats, hows & whens about them in our library thread).

Few months back, I was inspired to use this PIVOT level (ie the average of High, Low & Settlement Close of Nifty) to help me out in positional trades and/or to give a sense of direction of Nifty’s movement. I scanned the “world wide web” for articles relating to Pivot calculations, but mostly found them dealing with forex transactions.

I came across 2-3 methods where Pivot level was compared with its 3 day average and with last 3 or 5 days’ average of Closing prices, and thus giving the result of the direction bias. I also incorporated some of my formulae and in the end, I had 6 different formulae dealing with Pivot & Closing level and giving a BUY or SELL call. Obviously, there would be some days when some of these formulae will have contrasting result with the other formulae.
Hence I decided to do what is done in such cases – right from school-level kiddish games to national/international level elections – GOING WITH THE MAJORITY. If atleast 4 out of 6 formulae say “BUY”, I would go with that long call. If 3 say BUY and other 3 say SELL, I would remain neutral.

I decided to incorporate BOTH SPOT & FUTURE levels and thus, by applying 6 formule to both scrips, I get 12 results (6 corresponding to SPOT levels and 6 corresponding to FUT levels).
(all this may seem crap to some of you, but I just wanted to put forward my views & reasonings)



Ok, now moving on to the main part….
I made this Excel file, wherein I made 3 worksheets – one for SPOT, one for FUT and one which has the resulting summary of both.

I have attached this excel file, which I can study & use for trading accordingly…



HOW TO USE IT (also mentioned in respective worksheets of the file):

1. One will have to enter Spot’s and Future’s Open, High, Low & Close values along with the respective date in the respective row, at the end of the trading day, in the respective worksheet of the Excel file.
a. “Date” is just for identifying the trading session
b. “Open” value is actually not required anywhere in Call generation; it is just for statistical & study purpose.
c. “Open”, “High” & “Low” values are readily available on the trading screen / market watch window, or at NSE’s website
d. “Close” value - I prefer Settlement closing price, and not the “Last Traded Price”. Spot’s settlement price comes up on screen within 5 minutes of closing, and Future’s settlement closing price comes on NSE’s website by 4pm.


2. After entering these values in SPOT & FUTURE worksheet, go to SUMMARY worksheet and check out the last 2 columns (columns S & T ie Call generated & its price) against that respective trading day.

PLEASE NOTE THAT ONE WILL HAVE TO TAKE A NEW TRADING POSITION AS & WHEN A NEW TRADING CALL IS GENERATED…
Now, you would ask, how can one take a position after end of day, and before start of new trading day…
Well, there’s no problem at all in case of OPEN value…
High & Low values by 3:25pm remain the same even after 3:30pm (closing time) UNLESS WE HAVE THAT RARE SHARP VERTICAL MOVE GOING ON TILL THE VERY LAST MINUTE….

Now, regarding close – well, I hope this is common knowledge that “settlement price” is actually a weighted average price of the trading price between 3:00pm and 3:30pm. By 3:25pm, those who have good screen time experience will have a rough idea about the possible closing settlement price in the next 5 minutes. So, one can enter this value in the Close column. Future’s closing value can be derived from such tentative Spot’s settlement price estimate by adjusting the prevailing premium/discount to spot price.
All this may seem complicated – don’t worry – we are just looking for the likely settlement price at 3:25pm to enter in the excel file, so that we get the call generated using the formulae. If the latest day’s call generated is same as that of the previous day, then we simply hold on to our previous trading position. But, if a different call is generated than the previous day’s call, then we have to SAR the previous trading position accordingly.

For example, in the attached excel file with data entered till Friday 12-Dec-08, call is of LONG position since closing of 4-Dec-08’s closing of Fut 2796.
Now, on next trading day, Monday 15-Dec-08, at 3:25pm, we simply enter the Open, High & Low values till that time. For close value, as aforesaid, a rough estimate/judgement price will have to be entered. If the resulting call for 15-Dec is still LONG, then we do nothing and continue our position.
But, if resulting call is of SELL, then we wait for 2 more minutes to confirm our estimated closing price, and if still it’s coming as SELL, then we close our LONG position and switch to SELL position before market ends at 3:30pm.
At 4pm, enter the exact levels as derived from market-watch window or NSE’s website, and confirm the call generated. 99% of times there would be no trouble in all this.


So, in short, at around 3:25pm, just before closing, one will have to enter these O, H, L, C figures of both Spot & Fut, and simply check out the SUMMARY worksheet to verify whether the old positional call continues or there is a change, and act accordingly before 3:30pm.



Now, for some personal views:

1. Floor-trading PIVOT level is far different from Saint Sir’s PIVOT. The former is derived using a calculator, while the latter is derived from the charts. There should be no confusion in this regard.
2. There’s no chartical knowledge required for this method. A simple entry of levels in respective cells, and going with call generated.
3. The call generated will be with respect to the Settlement closing price of Nifty Future (since we can trade only in Future and not Spot value).
4. Unlike Vinod Nadoda ji’s mechanical trading system, where one can know before hand, the exact entry & exit price (on intraday basis), in this system, we can only know the entry price at NEARLY the end of the day. Stop-loss level is NOT known at all. One will have to wait for near-completion of the next trading session to confirm the continuation or reversal of trading position. Hence, one cannot even attempt to do position-sizing with this method, and will have to stick with fixed lot of Futures or In-the-money or At-the-money Options.
5. Like in case of any mechanical trading system, this system will also not reveal part-profit booking levels. That will have to be decided by one’s greed & fear factor.
6. The previous result of this system is in front of you – it has faced whipsaws quite sometimes and July 08 was particularly bad with a drawdown of nearly 800 points at a stretch due to whipsaws.


It seems that this system is full of flaws – no prior knowledge of stops, no position sizing, chances of frequent whipsaws, etc.
But, as aforesaid, the purpose of this mechanical system is just to indicate directional bias. One may chose to trade on it, or may use it for second confirmation. Also, one may exit (partly or fully) his position as whatever suitable price target.




Please refer Post # 54 for reason behind modification of the excel file.
It will now also include 2Day & 3Day Swing Signals.

Plus, each worksheet of the Excel file has been LOCKED to prevent any accidental edition/deletion of cell formula.
But, no password has been assigned to its unlocking - any advanced user may unlock the sheet one-by-one by clicking on the Menu Bar:
TOOLS -> PROTECTION -> UNPROTECT SHEET

(For locking, follow the same procedure & choose "Protect sheet")

Also, the file will be updated with latest Nifty Data on every Sunday, and the link of such updated file will appear in Post # 3 of this thread.
 
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Sunil

Well-Known Member
#2
Trading Calls based on 2 Day & 3 Day Swings

To give support & more meaning to the above pivot-based mechanical trading system, I use 2Day & 3Day Swing calls.

I can explain 2Day Swing call only with an illustration:
For example, if its a Long position as of now, then we reverse to Short position when Nifty Spot closes below the lowest low of the last two trading sessions.
If the current position is of a Short trade, then we shift position if Nifty Spot closes above the highest high of the last two trading sessions.

Similiarly, a 3Day swing call uses the highest high or lowest low of the last 3 trading sessions, as the case may be.

here, one knows when EXACTLY to reverse a position with a well-defined SAR level on closing basis

Post# 7 has a sample chart
here
 
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Sunil

Well-Known Member
#3
At end of every trading session, I will post the trading position as per :

1. The Pivot-based Mechanical Trading system
2. 2 Day Swing
3. 3 Day Swing


The position is reversed if :
2 of the above 3 systems give a reversal call
or
all 12 indicators of the pivot based system give a reversal call



Here, I'll be referring ONLY to SPOT values, to avoid break in flow on expiry/settlement days...
Also, I'll note only chartical highs & lows of SPOT and not the (sometimes) chartically invisible highs & lows made at open


We can even shift to neutral/nil position if there's no clear consensus




HERE'S THE LINK TO THE EXCEL FILE UPDATED AS ON 20-JUNE-2010
 
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Sunil

Well-Known Member
#4
Position at end of 17-Dec-08:

1. Pivot-based mechanical system
FUT Long at 2796 reversed to short today
Spot close = 2954

2. 2 Day Swing
(yesterday, the SAR level was on close below 2954, and Long was since 2788)
today SPOT closed exactly at 2954
Current Position: Neutral with small negative bias
SAR: Close below 2943

3. 3 Day Swing
(yesterday, the SAR level was on close below 2955)
Current Position: Long since 2928
SAR: Close below 2943

(Please note that Spot 2943 is the chartical lowest low of last 2 & 3 trading sessions)


Method 1 is short
Method 2 is unconvincingly short / neutral
Method 3 is Long...

WOW... what a confused beginning for this forum
LOL

So, overall position is neutral with earlier longs having being booked fully today...
Short bias creeps in
 
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coolboy007

Well-Known Member
#6
Sunil sir ,

Thanks a lot for such a wonderful work. Even i imagine how much brain you have for creating a separate excel sheet and explaining that 2D 3D swing signals so easily.:D I am breathless , just hope we get this a hit.

Tsunil sir , can this system work for specific stocks. I hope so if they are in F&o

Thanks
 
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Sunil

Well-Known Member
#7
my god!@!

renu
too much brains to study teh depth
no need to go into complexities & whys-n-hows of the 6 formulae in the excel file...
just stick to the summary file result, after simply entering
open, high, low & close values of SPot & FUT


for 2 Day & 3 Day swing trades,
even a freely available ya h00's website will do...

obviously, if short, highs are SAR level
and if long, lows are SAR level

 

Sunil

Well-Known Member
#8
Sunil sir ,

Thanks a lot for such a wonderful work. Even i imagine how much brain you have for creating a separate excel sheet and explaining that 2D 3D swing signals so easily.:D I am breathless , just hope we get this a hit.

Tsunil sir , can this system work for specific stocks. I hope so if they are in F&o

Thanks
Believe me, it is not as complicated as it seems...

Making a humble attempt in positional trading, which requires NO chartical / technical knowledge at all...
Meant to give an overall directional clue, which may be used as a supplement to one's existing positional trading method


it should work for any F&O scrip too
 

Sunil

Well-Known Member
#10
the 3:25pm "hiccup" thing mentioned in the 1st post, is only for those who want to trade as per the pivot-based mechanical system only....
they will have to take the trouble of estimating the settlement close by max 3:28pm and taking position accordingly...
10-15 points here-n-there does not make that much difference to the excel file system

even if one enters the current price around 3:25-3:27pm, end result is most likely to be the same, as with the EXACT settlement close price available officially after 3:35pm by max 3:40pm
 

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