OK chart this time.
I will talk you through the chart.
Please see first red up arrow .. a buy on 16th March, before the days close you can see 3 EMA clearly above 15 EMA you take your first lot long position before market closes on 16th March ie around 2770 (please note how we need to wait till the last moment of EOD candle close to ensure we have a confirmed crossover on EOD charts).
Wow - we have a secular bull swing going from that day which takes markets to 3500 levels.
Please see second red up arrow on 28th April. Markets corrects on this day and EOD candle touches (or gets very close to) 15 EMA. This is the point we 'Add' one more lot long just before th day closes at around 3350 levels. Now the fact is that our average price has become 3060 for 2 lots so even if next day we again have a down day and 3 EMA crosses and closes below 15 EMA we will still be able to get out at a level above 3060 and hence book profits. See how even after our 'Add' we have not increased our risk overall.
Wow - but markets go up next day and both our positions are in profits.
NOW, please see 4th May candle... Nifty gapped up by 5% and closed at 3658.This is our Exit candle since 3 EMA is not touching the body candle at all.
So we basically book both lots before market closes on 4th May at around 3650. So we have made 590 points profit per lot or total 1180 points profit.
We now want to renter again with 2 lots whenever EOD candle touches 3 EMA again. If you see on 6th May that happens and we again go long 2 lots before market close at around 3630.
Now, please see the third up arrow. Markets keep correcting and EOD candle again touches 15 EMA on 11th May. This is where we 'add' our 3rd lot at around 3550. NOw we hold 3 lots NF long with avg price 3600. We have already booked 1180 points so that is still acting as a buffer we have in case markets go down next day and our SAR is hit. We will still have overall profits.
But as luck had it .. our SAR is not hit since markets are rangebound waiting for election results.
Now please see 19th May Candle .. opened way beyond 3 EMA so clearly a profit booking zone right at the open. It was a volatile day, opened at 4600 and kept crashing to 4200 ...assume we exited at 4300. We made 700 points profit per lot on 3 lots or total 2100 points profit. Add that to 1190 points profit and we have made 3390 points profit.
As you can see, we reenter again after a couple of days as marked on charts.... Finally on 18th June we exit all longs and enter shorts (again 1 lot as start).
We add shorts at 25th June... we have a small whipsaw on a day before budget but after budget we get another sell signal and now we are short.
I will cover one more important aspect about 'Protecting Capital' in my next post. Please post any questions here in the meantime.
Cheers
SH:thumb:
