3 Day SMA Trading

augubhai

Well-Known Member
#1
Reposting what I had posted in the "Trading Diary" section. Do you have suggestions on how to trade the charts shown below?

Friends,

i have been forced by circumstances to limit the time that I can spend on watching charts. Usually, i am able to place trades between 10-10:30 AM. Other than that, I am able to day trade commodities late night. But on some days, I am not able to get to the charts at all.

So...
I have been trading a bit differently during the past 4 months - I guess its called Swing Trading. I have been using just one Simple Moving Average, and have been profitable. Now, before I share what I have been doing (no rocket science), I need at atleast some of you to look at the charts below, and tell me how you would have traded these charts.

The charts are just daily charts with 3 SMA.

Below is Nifty. I have not shown the recent run-up, since that is an "easy" trade.



 

Laksh

Active Member
#3
One very simple way to trade this chart is to buy on close above 3SMA and stop and reverse on close below 3SMA and again stop and reverse on close above 3SMA and continue the process. In trending markets that may lead to very good profit; but is likely to take away much of it in ranging markets. I have traded 5SMA in this way with very good profit but lost a substantial portion of it during ranging markets.

Laksh
 

NTrader42

Well-Known Member
#4
One very simple way to trade this chart is to buy on close above 3SMA and stop and reverse on close below 3SMA and again stop and reverse on close above 3SMA and continue the process. In trending markets that may lead to very good profit; but is likely to take away much of it in ranging markets. I have traded 5SMA in this way with very good profit but lost a substantial portion of it during ranging markets.

Laksh
Add to the position on every lower close, that way you have bigger winners to offset the loses from whips.

Thanks
NT

PS: Wrote it hastily, what i meant is add to the short position on every lower close, similarly add to longs on higher close on daily charts.
 
Last edited:

Laksh

Active Member
#5
Add to the position on every lower close, that way you have bigger winners to offset the loses from whips.

Thanks
NT

PS: Wrote it hastily, what i meant is add to the short position on every lower close, similarly add to longs on higher close on daily charts.
I hv 2 doubts regarding ur advice. No doubt it will increase profit during trending periods; but it will also increase losses during whipsawing period. Moreover, with each additional lot it will increase the requirement of margin. For people who are trading with small or limited capital this advice will be difficult to follow. My 5sma trades were ultimately profitable in spite of losses during ranging period; but it is very testing on patience durin this losing period. So would u kindly elaborate in some details.

Laksh
 

augubhai

Well-Known Member
#6
One very simple way to trade this chart is to buy on close above 3SMA and stop and reverse on close below 3SMA and again stop and reverse on close above 3SMA and continue the process. In trending markets that may lead to very good profit; but is likely to take away much of it in ranging markets. I have traded 5SMA in this way with very good profit but lost a substantial portion of it during ranging markets.

Laksh
Hi Laksh,

Agree completely with you that the method that you suggested will result in big drawdowns in ranging markets. I guess most us would have at some point traded the same way, using one or the other moving average.

After all, when someone first learns about moving averages, it seems to be obvious method.

The way I am trading is using a similar simple/naive logic, not complicated at all...

Before I started trading the 3 Day SMA in November, I did some due diligence by analyzing Nifty data over the years. I am not able to find the file now. So let me download the Nifty EOD data from the NSE site, and redo my analysis, and then share it with you - hopefully by tomorrow.
 

Laksh

Active Member
#7
Hi Laksh,

Agree completely with you that the method that you suggested will result in big drawdowns in ranging markets. I guess most us would have at some point traded the same way, using one or the other moving average.

After all, when someone first learns about moving averages, it seems to be obvious method.

The way I am trading is using a similar simple/naive logic, not complicated at all...

Before I started trading the 3 Day SMA in November, I did some due diligence by analyzing Nifty data over the years. I am not able to find the file now. So let me download the Nifty EOD data from the NSE site, and redo my analysis, and then share it with you - hopefully by tomorrow.
I would be eagerly awaiting your method.

Laksh
 

NTrader42

Well-Known Member
#8
I hv 2 doubts regarding ur advice. No doubt it will increase profit during trending periods; but it will also increase losses during whipsawing period. Moreover, with each additional lot it will increase the requirement of margin. For people who are trading with small or limited capital this advice will be difficult to follow. My 5sma trades were ultimately profitable in spite of losses during ranging period; but it is very testing on patience durin this losing period. So would u kindly elaborate in some details.

Laksh
Most of the (not all) whipsaws that occur will be with only initial quantity maybe some with 1 off add.

But all the trending moves that take place will accumulate with full quantity, scaling in to winning trades will increase overall performance for a trend following system.

We can also have scaling-out rules, but lets wait for the OP to tell us his way of doing things, i suspect (from his previous posts) it is going to be far too simpler way of doing things, than all this scale-in scale-out business :)

Cheers
 

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