Trading with AMA and price action- forward testing

As expected, Reliance fired on all cylinders today. Made more than 20000 in intraday trades in cash shares by starting with 100 shares and adding in multiples of 100. The Isl risk was about Rs.700. Thus i have made my 1240 CE absolutely free and more. The above message was given on 29th of march. Before that also i had told the same to PT ji when the news about sebi order came out.

As per my reading, Reliance is again ready to go up.(My reasoning is that there was a significant addition in OBV today and it closed much above PDC) This happened first time after making the recent high of 1320. SO now till we breach today's low on closing basis, it is a fit candidate for buying the dips.

The green line is the initial trade, the white lines are the adds and the red line is the exit.

I made 8000 this same way yesterday to part finance my 1240 ce.

I had read somewhere that idle people discuss other people, Good people discuss events (news etc.) but great people discuss ideas.

If you stick to trading the same instuments based on your rules, you end up with these kind of results quite often. I only stick to BN and Yes Bank and Now Reliance in Equty. And Crude and Nickel and Sometimes NG in commodity. There are dull days, but then there are great days too. So i take all good signals in all of these instruments when i am trading. An excellent day in Nickel or crude can at times give a profit of more than 50000 with adds.

One last parting thought for the day. I am not blowing my own trumpet by sharing the Reliance intraday trade, though it was very very satisfying for me. I just wanted to highlight the risk reward 700:21000(almost) just to underline the fact that even with small amount you can make good amount of money if you manage risk judiciously. More over i have ploughed back these profits back into the underlying to make it (maybe) free for life by rolling over my positions in Reliance till there is strength in it. So no urgency to sell as it is now free for me. This method i had discussed earlier also in this thread. So sticking to one instument in intraday to endeavour to make profits consistently. Then buying an in the money call (from the profits) and then to reap a lifetime of benefits. Sounds like a fairy tale. Well beleive me it is possible. Just beleive in yourself and your system. Good Night.

Have figured out a method to trade obv... Testing now, by the time vijkris back from vacation I will share it in detail...

DM

Thanks buddy. Eagerly waiting for the details.:thumb:

Using this thread again to store these posts.. Hope the thread owner doesn't mind.

Let me try that out in real trades and then I can talk more about it....If I explain the method now, within 1-2 hours our inhouse systems experts will have a "look " and declare that the system is no good...

ST

Vijaybhai, thread owner doesn't mind, that why he has shared his system and still guiding us. What he minds is baseless criticism without testing his system.


/QUOTE]

Yes true.. But the thread owner doesn't know that i am storing some of his posts here also..

He knows it. And he is a generous man.
:thumb:Happy Trading

ST Sir,

I am planning to start investment in Mutual Funds for very long term 15 to 20 years. Can you please suggest few good mutual funds or any suggestion would be greatly appreciated...

Ankur, I once asked same thing, had copied his response in my notes, pasting below:

"I have investments in the following
1) Large cap Diversified Equity schemes like Franklin India Frontline Equity Fund,Birla Sunlife Top 100 Fund,ICICI Value Discovery Fund,Birla Sunlife Long Term Advantage Fund,Franklin India Bluechip Fund,Motilal Oswal Focussed 25 Fund,ICICI Prudential Focussed Bluechip Equity Fund,Franklin India Prima Plus Fund ...
2) ELSS Funds like Reliance Taxsaver,Axis Long Term Equity Fund and Motilal Oswal Focussed Long Term Fund.
3) Midcap and Multicap Funds such as Franklin India Prima Fund,HDFC Midcap Fund,Motilal Oswal Focussed Midcap 30 Fund, Motilal Oswal Focussed Multicap 35 Fund
4) Debt Funds : HDFC High Interest Fund and Birla Sunlife Dynamic Bond Fund
Also have few sector funds in banking and Pharma....but in this dip I will be looking to buy the <b>diversified large cap equity funds ie from item no 1 above...
Smart_trade"

Vivek

thanks Vivek :thumb:
So idea is to make investments in 3-5 different types of funds....
And if I do investment directly to mutual fund then can I do that on any date in month as per my choice or any fixed date...?

You can do it on any day, especially whenever the markets are significantly down. You should enroll online without an agent (i.e. direct plans), so that you can buy/add on at will on days of fall, before 3pm, to get the units at nav of that day.

Vivek

In Daily charts, whenever OBV goes below 36 EMA or touches it and goes up, you get a very good point to initiate/ add and putting a trailing SL./QUOTE]

The reason I moved out, the buyers are increasing on NF and sellers are less. I don't like this kind of situation. My plan works well, when trend is up, no of sellers are more and price is still climbing up. If sellers are less, whose money I will take. The buyers ? Well that is like momentum trading. I am not in that game anymore.

My last post (for today) on this thread. Dedicated to all the Moro..., errr sorry, I mean the contra on NF who burnt their finger today.



What this Setup is called fellas?

1. STI, VWAP crossover on 3 mins TF
   
   
   
2. Trend is up
   
   
   
3. Sellers consistently more than Buyers till final session...
   

it yielded 50 odd points today at close, on NF. SL was on VWAP. I did not stay all the time (yes, am a moron as well) - 2 trades, got a total 37, size was gooood.



Well this is the setup (And you can spot the Contra as well).



https://www.youtube.com/watch?v=KnNviPbieHM







Have nice evening folks.



P.S- Objective of this post was not to humiliate or insult anyone. It is just to reiterate that Contra is a difficult task, albeit profitable at times. But unless you are precise on Contra entry, you will get blown to bits and keep on donating your money.



Just step back and think this twice - will u try to go with something which offers you more reaction time (like take a look, decide, confirm and enter) or something which just happens in snap of fingers and forces you take preemptive entry so that you don't miss it?



There is a Movie, 'The Big Short' - people who got motivated by that are the one who contributed to higher no of blown out accounts, taking contra, statistically.

@ ST sir ,

Sir as you are already a very profitable trader .. pl. tell me .. what specifically are you NOW working on in your trading. What improvement are you undertaking to make it more success ?

Sir if you are not comfortable answering .. pl. ignore my question .


Thanks

ps : (asking for self improvement)

These days more into swing and position trading.I spend time in identifying the growth stocks ,sectors and investment ideas.Day trading I do only on strong trending days....stay out on sideways days.I trade in options ( mostly selling options)

There was a time few years back when I was building my capital and I was 100 % in Daytrading.The reasons for this shift are many .My recent accident and the shoulder injury made it difficult for me to sit in front of the terminal the whole day and monitor the markets closely. Second reason is my capital has increased and it is not possible to deploy it in day trading...even if I make 30-40 % per annum on the large capital I make much more money than Daytrading...plus now I don't have necessity to do any hectic trading....plus the age is catching up as well....

I also have a mutual funds and stocks investment and small real estate portfolio which I monitor .I guess every trader has to generate multiple streams of revenue / income as he grows in his capital and experience and not depend on just one income stream and one type of trading.

Hope the above answers your question...

Smart_trade

Simple money management wins over time :-

The difference between a successful trader and a losing trader has a lot less to do with the successful trader’s ability to pick winners than you might think. All traders are going to experience losers and lots of them. It’s a fact of the business.

A winner, however, embraces the understanding that a large element of any one trade is randomness — in effect, any given trade is, on some level, a gamble. Losing trades are inevitable, and the winner takes that inevitability into account. Many longtime successful managers have done it with a winning percentage just above 50% and even the best traders are right only about 60% of the time.

It isn’t necessary to achieve that success rate to profit in the long-term, though. It isn’t even necessary to be 50% right (see "Win some, lose some," below). The depicted scenario assumes a 40% win rate — in other words, eight winning trades out of 20. The key to making a 40% win rate profitable is to structure your trades so that your winners profit at least twice as much as your losers lose — and that your initial stake can withstand the inevitable string of losses.

Look no further than recent headlines to illustrate this. Numerous ill-informed analysts have made the point that former MF Global head Jon Corzine could end up being correct on his positions in foreign bonds. No, no, no. When you take a leveraged position, you are not simply speculating on the direction of the market, you also are making a market timing decision and a position on volatility. You limit how far the market can go against you before you must bail.

Consider the assumptions in our table. Our hypothetical winning trades yield a profit of $2,000, and the losing trades lose half of that amount. Of particular significance is that even though 60% of the trades are losers, after 20 trades the overall balance is a positive $4,000. However, at one point the overall balance was $4,000 below water.

Indeed, the order of the winners and losers has a major impact on how your account grows. In "Splitting our losses" (below), we depict the same 40% win rate, but the sequence varies with two large blocks of losers separated by a string of six winners. The ultimate final profit is the same. However, in this case we got there after suffering just a $3,000 drawdown.

Why losers lose

The issue here should be obvious. You can’t predict the order of trades and must be prepared for the worst. Say you start with $8,000 and that you need at least $2,000 (the initial margin requirement) to make each trade. If you have eight losers in a row, you are broke. In fact, six losers in a row and you are shut down, taking into account fees. You can’t last through the full 20 trades. Rather than making $4,000, you are shut down with massive losses when your account dips below $2,000.

The worst case scenario is that you could lose 12 straight trades and then hit eight straight winners. In other words, to make the $4,000, you would need more than $14,000 (the losses plus the initial margin) to even begin trading. The likelihood of such a string of losses is remote, but it could happen.

That is the reason that most traders end up losers. They don’t allow for the possibility of a major string of losing trades. The truth is that while the worst-case scenario may be unlikely, something approaching it has a relatively high probability of occurrence. Over time, it is a virtual certainty that at some point all traders will suffer a long series of losing trades.

Keys to winning

However, it is not that hard to develop a trading strategy that has a win rate of 40%. It is also not that difficult to structure trades that produce a two-to-one profit/loss ratio. Given that, the only factors preventing a trader from succeeding over time are not starting with a large enough account size and succumbing to the temptation to over-trade.

In the initial example, the trader needed $4,000 more than the margin requirement to make the trades. In the second example, $3,000 more was needed. In the worst-case scenario — 12 straight losers and then eight straight winners — the trader would need $12,000 more than the initial margin.

To demonstrate, consider an approach designed to achieve the minimum desired performance metrics: 40% wins and a two-to-one win ratio. Our tests cover dollar index futures from Jan. 19 through June 3, 2011. The rules are simple. On Jan. 19, we buy or sell the close based on a coin flip. Heads we buy, and tails we sell; in our test, the coin toss was heads, so we buy.

Regarding the profit/loss ratio, if price moves in our direction by two standard deviations, we take profits and initiate an opposite trade. If the market moves against us by one standard deviation, we take a loss and initiate a trade in the opposite direction. Our strategy is designed to manage our profits and losses to achieve our goals. The initial coin flip simply gets us into the market in an objective manner.

The goal of this strategy is that if we win, we’ll make two standard deviations. If we lose, we’ll lose one standard deviation. (A standard deviation is a statistical measure of price movement, or volatility, and virtually all charting programs offer it.)

Understand that this approach is for demonstration purposes only. The buying and selling is being done in this manner to achieve close to a two-to-one profit/loss ratio. There is no reason to assume that the trades will work, as the only logic is a volatility measure designed to set profit and loss points at desired levels.

Test results

The results of this one demonstration reinforce the contention that the most important thing about a strategy is sizing the account to allow for a series of losers — that is, proper funding. It is much more important than the ability to pick winners (see "Random results," below).

The margin on the dollar index is about $2,000, and the first trade was a loss of $840 so we would have needed at least $2,840 to begin trading. In reality, we would begin with an even larger account for security’s sake, so let’s use $3,500 as our base number.

Of the trades that were made, five were winners and eight were losers. This is approximately a 38% win rate. The overall profit was $920, or $204 a month on average. The average loss was $572 and the average winner was $1,100, so we came close to achieving the goal of a two-to-one profit/loss ratio. Projecting those same results over 12 months would yield a profit of $2,448, or about a 70% annualized return on the initial account size.

We also tested the results of this approach based on starting with a tail on the initial coin toss. In other words, the first trade was a sell, the second trade was a buy and so forth. These results also are shown in "Random results."

The strategy performs much better starting with a sell instead of a buy. The profit was $5,200 rather than $920. There were a total of 17 trades, and nine were winners — just a little better than 50%. The average winner was $1,032, and the average loser was $511. The annualized return using $3,500 as a beginning balance is a strong (and unlikely!) 396%.

An interesting observation from "Random results" is that the last three trades in the examples were the same. In other words, our strategies converged. This is possible because interim volatility levels that trigger an opposite trade for a loser may not do so for a winner. This would allow the winner in the first hypothetical scenario to ride, while the other scenario would have switched directions. If the subsequent move is enough to hit the trigger for both, then each strategy will stop-and-reverse, and they’ll move in tandem. (It would be interesting to test this approach in other markets and time frames to see how long it would take the scenarios to converge given other circumstances.)

What matters

Trade structure and money management are critical for all traders. The futures markets move, and that movement presents a steady flow of opportunity, but the techniques used to capture that movement are secondary to proper trade structure and starting with enough funds to weather the drawdowns.

There is no system for entering and exiting a trade that will make you money in the long run if you fail to follow the rules of trade structure and money management. Eventually, the system will break down, and you will suffer a string of losses. Accept that and plan for it, and you will enter the ranks of winning traders. Ignore these facts, and you will remain with the majority of traders who lose.

Our goal is not to replace a signal generation program with a random model but to point out that proper risk management and position sizing is as important as signal generation.

Discussed here has been a broad framework for achieving success in the markets, but there remain holes in a proper discussion to formulate a workable strategy. Specifically, these include how to determine the worst-case scenario for determining how to allocate sufficient capital. We’ll examine this in a future article.

Joseph Stuber began his career in 1972 as a research analyst. He is an author and lifelong student of risk and risk management.



Source - http://www.futuresmag.com/2011/12/31/simple-money-management-wins-over-time?page=1