Nifty and Bank Nifty future trading - Time tested strategy

Indrajit, Thanks for posting some pointers towards your winning trading strategy. Not many people do it.
It seems interesting at first glance but seems to lack a SL level which in my scheme of things is first priority while entering a trade. Again must add each traer has his/her/ own style.
Trying to add the SL in this method and for that :
"Can you suggest some way to do a 'back testing' on your strategy?"
Charts onyour Blog seems to be of Nifty Intraday 5 minutes chart. If acceptable to you ,please post how to post the required EMAs of different Time frames : 3,13,34,70 and 1070 minutes on a 5 minutes chart. I am already using 3-13-39 EMA in a few stocks but the EMA if plotted on 5 minutes chart and is for 3 , 13, and 39 periods and not minutes. Do help in this regards.
Regards.
R K Karnani
ps.: Would it be required to have a 1 minute or tick chart to draw the odd time frame EMA's like 3,13,34 minutes (not periods) etc.??? If so , it shall be of no use to me as I have lowest time frame of 5 minutes in my charts.

Agreed RH, apart from sharing my strategy, I also like to publisice my blog. But I feel there is no harm, coz I am not selling anything there. It is completely free. Its not a Pay for Tips sort of site. If my creation can be of some help to fellow experienced as well as novice traders, I will feel really proud.

Asides to Karnani, I was thinking to add some more EMAs in the charts. But it looks too clumsy then. I took 3,13,34 as these are fibonacci numbers. Regarding back testing, no system is proved to be full proof. But I got more than 80% success ratio by following the methods religiously. This method is ideal for Enter and Hold condition. You can ride your trade as long as the trend continues. I use 5 minutes chart as I felt 5 min or 10 min is ideal time frame for day trading. If u need any other set of EMA do mail me at xxxxxxxxxxxxx with ur requirements. I will not mind creating a personalised html file for u.

Yesterday's trade details are updated in my site.Anybody can have a look.

Graphical representations of yesterday's trades are also attached below for your ready reference.




Regards,

Indrajit

Now, lets discuss the trades taken on 9th Jan, 2009. No intraday trades taken for this day. EMA crossover happened once but long not taken due to Stoch value unfavourable.

We closed our remaining 50% short position today at Nifty future value of 2880 after MACD in 5 day's chart reached positive zone. We took the short on 7th Jan at 3085, booked 50% at 2935 on the same day, booked remaining 50% at 2880 today. That means a profit of Rs. 17750 for trading of 2 lots only in 2 days.


Your comments are welcome.

Regards,

Indrajit

Live SCO calculator added.

Seems I could not make myself clear. You say that you are using 5 minutes TF chart, then how do we draw a 3,13,34 minutes EMA on it??? It is fine that you are not selling any product on your blog but then we also are not in a positin to have a look at older charts as per your trading scheme to ascertain how it fared in the past. I do understand there is no holy grail and so there is no fool proof system and if there was one, no one would be discussing it. Its all about risk reward ratios.

Is it by any chance EMA of 3,13, and 34 period and not minutes as mentioned. Please excuse my ignorence if it is a silly question.

Karnani, u are absolutely right. Very valid question. Technically 3, 13 and 34 should be periods. Actually yahoo chart for 1 day has time stamp of 5 mins. So it is actually a 5 mins TF chart. If we try to add ema3, ema13 and ema34 on it the yahoo chart shows them as 3 min / 13 min and 34 min ema. This is yahoo basic chart. It actually shows you 3 min, 13 min and 34 min emas, not periods.

If you use yahoo interactive chart it shows emas in period. But I prefer to use the basic chart which shows us the emas in minutes as it is less confusing. For ur understanding I am attaching yesterday's interactive chart with emas in period. Just see how many false signals it has generated yesterday.



I am not a technical guru . That's why I use the basic chart as my ultimate motto is to generate profits from my system. If any other members can add some more light to it I will be glad.

Regards,

Indrajit

thanks indrajit for info
myself also using same pattern from longway
by using http://www.paliorocks.com/html/Trade.html

this strategy is quit good for intraday minting !

Hi Indrajit,

I didnt trade using EMA so far, but just for academics, can you tell me: after 13 min EMA crosses down 34 min EMA, do you frequently see 3 min EMA crossing up 13 min EMA or vice versa?

Kiran

Sanju, Paliorocks is a nice site. Thanks for sending the link. But apart from intraday, EMAs can be good for positional nifty. As per my system, I enter by 1 day chart and hold my position watching the 5 days chart. Sometimes, after nifty making a big intraday move keep quite for 2/3 trading sessions and remains rangebound and choppy. Most traders give up the gains they have made during the choppy market. Thats why I use 5 days chart as exit as it helps me in holding my position instead of entering and exiting every now and then.

Asides to Kiran, 3 EMA can frequently cross 13 if the trend is not so strong, but 13 seldom crosses 34 in whipsaws. Better to enter a position when all the following things happen:

1. EMA channel crossover happens
2. RSI crossing above or below 50
3. Stoch crossing above or below 50 in the same direction of nifty and RSI
4. 5 days chart RSI and Stoch also moves in the same direction crossing mid-point.

In this way most of the time we can avoid the choppy market. The same system can be used in trading Bank Nifty which is nowadays more volatile than Nifty.

Regards,

Indrajit

Adheer, you can take a look at http://www.babypips.com/school/leading_vs_lagging_indicators.html for a comparison of leading vs lagging indicators.

Or, for another good comparison you can consult page 32 of "Technical Analysis From A-To-Z" by the renowned technical analyst and founder of Metastock Steven B. Achelis. The book is available at http://atozbook.com/AtoZbook/.

Regarding, the system, I have tried quite a lot of systems including Metastock RT etc before sticking to the current system for more than a year now. I am a conservative and not so bold type of trader. I am quite happy with it and success ratio is more than 80%. I request you to follow the system for some time and hope you will also like it.

Regards

Indrajit

Hi Indrajit sir,

May be I was not clear with my question earlier, I meant to ask, when the EMA13 crosses above EMA34, did you ever see EMA3 being below EMA13? I was little puzzled to see why one would use a 3 EMA crossover based system, like yours, for intraday. I think 2 will be sufficient. However, I did this simple afl to find out myself in Nifty Futures for last one year:
And it did happen 22 times out of 2153 times and all these 22 times, it did not help in avoiding a wrong trade. If you use AmiBroker, please run it yourself and let me know if I got it wrongly.

While doing this I also wrote another afl to backtest your system, settings file attached.
Amibroker shows me a loss of 59.63% in 2008, including 0.04% tranx charges.

I am just a beginner in trading, just 2.5 months since I took my 1st trade, so I could be wrong with my Amibroker and my afl skills. Please guide.

Kiran