SH's MArket Correction Prediction Strategy

Karanm

Active Member
Dear Friends,

What I am about to share below is a swing strategy by which a trader can estimate the approximate time by which the market would start correcting against the current trend. This comes in very handy on deciding when to start booking profits and also one can start building a opposite position to the trend in the anticipation of the upcoming correction. PLEASE NOTE THIS A SWING STRATEGY AND TIMEFRAME APPLIED TO IS 'DAILY'.

This is not based on any complex calculations (like Gann/Fibo/EW) but based on a common sense approach and a belief that history 'repeats' itself. (Thats the underlying assumption of TA anyways).

I use this strategy on Nifty futures, once can derive a strategy from it for any particular stock they trade in through some trial and error.

This Strategy is highly inspired by the concept of 'Market Reversion to mean'.

Reversion to Mean rules for NIFTY

- Nifty futures price has to revert to 3 EMA within a maximum of 3 days before it goes anywhere else.

- Nifty futures price has to revert to 15 EMA within a maximum of 6 weeks before it goes anywhere else..

- NIfty Futures price has to revert to 34 EMA within a maximum of 16-18 weeks (4 months) before it goes anywhere else.

- NIfty Futures price has to revert to 100 EMA within a maximum of 28 weeks before it goes anywhere else. (7 months)


How to apply the above rules in Trading

- Look out for any daily candle where the candle body is not touching 3 EMA. Thats a signal for booking any profits and wait for 3 EMA reversion for entering again. If candle body doesnt touch 3 EMA for 2 days, one can open an opposite position and aim for 3 EMA as target price. This is something I extensively use in my 315 Strategy as well.

- Look out for a trend on daily charts where 15 EMA has not been retested for 4 -5 weeks in continuation. This is a signal that markets should correct now (target 15 EMA). One can start booking profits in 4-5th week and can actually open an opposite position in 5th-6th week aiming for 15 EMA.

- Similarly, look out for a trend where 34 EMA has not been tested even once in the last 14-15 weeks. Book any profits in 14th-15th week and one can open an opposite position in 17th week aiming for 34 EMA.

- Similarly, if you see 100 EMA not being tested in last 6 months, start building a positions aiming for 100 EMA retest in next month or so.

This I have found is a very strong tool to predict corrections (price correction or time correction). In my tests the success ratio is above 90% however I am ready to be corrected by anyone who finds otherwise. :)

PLEASE NOTE THAT THESE TIMEFRAMES ARE FOR NIFTY FUTURES ONLY.

Happy backtesting !!


Cheers
SH
Sir, Kindly inform me about your Simple Statergies which you have written earlier and you feel can be effectively and profitabily applied to stock market in any type of conditions.
Regards
Karanm
 
Sir, Kindly inform me about your Simple Statergies which you have written earlier and you feel can be effectively and profitabily applied to stock market in any type of conditions.
Regards
Karanm
Dear Karan - 315 strategy is being discussed under a different thread in the same forum.

Please go through the same and trade accordingly.

Cheers
SH
 

Karanm

Active Member
Sir, first of all I would like to thank you for all you are doing for people like me who can learn simple yet effective ways to trade and stay away from people who are exploting innocent people.
Sir, I would request you for 2 informations :

1. What is 315 Statergy, how to trade with 315 statergy, how to enter & exit trade, what success ratio & Risk / Reward Ratio we can expect from this statergy of your's and from where I can get details of this statergy.

2. Last time when 3 EMA was tested by NF daily candle = 30th Dec 2009
Date Open High Low Close 3 EMA
29/12/2009 5191.05 5224.80 5175.00 5194.15 5161.29
30/12/2009 5185.00 5198.70 5155.00 5168.55 5164.92
31/12/2009 5193.10 5229.00 5191.20 5202.30 5183.61
04/01/2010 5225.00 5247.00 5210.00 5239.80 5211.70
05/01/2010 5280.00 5295.00 5263.05 5281.20 5246.45

Sir, can you please explain where to enter the trade and at which point to exit the trade and which side trade was to be taken(Long or Short)

Sir, I hope you will reply in datail at the earliest possible and oblige.

Regards
Karanm
Sir, I am waiting for your reply.

Regards
Karanm
 
Sir, I am waiting for your reply.

Regards
Karanm
Karan,

I have already answered your first query on 315.

I do not understand your second query, last time 3 EMA was touched in March and not in Dec 09.

To understand 315 better, please post your questions in original thread and not here. You will see many members able to answer your questions there.

Cheers
SH
 

Karanm

Active Member
Karan,

I have already answered your first query on 315.

I do not understand your second query, last time 3 EMA was touched in March and not in Dec 09.

To understand 315 better, please post your questions in original thread and not here. You will see many members able to answer your questions there.

Cheers
SH
Sir, sorry for replying late as my net was not working.

Look out for a trend on daily charts where 15 EMA has not been retested for 4 -5 weeks in continuation. This is a signal that markets should correct now (target 15 EMA). One can start booking profits in 4-5th week and can actually open an opposite position in 5th-6th week aiming for 15 EMA.

Sir, as mentioned above by you when We Open an opposite position trade in the 5th - 6th week, our Target will be 15EMA, what will be our Stoploss. We are clear about our Target (15EMA) when we open an opposite position trade but what about the Stoploss.

Sir, Kindly clear this confusion - EMA changes every day, So when we open an opposite position trade on a particular day in the 5th or 6th week, our Target will be 15EMA of that day, so how we will Exit this trade. I would request you to provide me the details of last Trade taken of Nifty or any other stock of your choice with this statergy so that it is clear how & when to Open an opposite position trade, what will be the Target of 15EMA and how this target will be maintained as EMA changes every day, what was the Stoploss of this Trade.

Sir, my cofusion is how 15EMA of a particular day can be Target of a Trade which will achieve this Target after few days as the EMA value changes every day

Sir, I would be highly obliged for you valuable guidance.

Regards
Karanm
 
Sir, sorry for replying late as my net was not working.

Look out for a trend on daily charts where 15 EMA has not been retested for 4 -5 weeks in continuation. This is a signal that markets should correct now (target 15 EMA). One can start booking profits in 4-5th week and can actually open an opposite position in 5th-6th week aiming for 15 EMA.

Sir, as mentioned above by you when We Open an opposite position trade in the 5th - 6th week, our Target will be 15EMA, what will be our Stoploss. We are clear about our Target (15EMA) when we open an opposite position trade but what about the Stoploss.

Sir, Kindly clear this confusion - EMA changes every day, So when we open an opposite position trade on a particular day in the 5th or 6th week, our Target will be 15EMA of that day, so how we will Exit this trade. I would request you to provide me the details of last Trade taken of Nifty or any other stock of your choice with this statergy so that it is clear how & when to Open an opposite position trade, what will be the Target of 15EMA and how this target will be maintained as EMA changes every day, what was the Stoploss of this Trade.

Sir, my cofusion is how 15EMA of a particular day can be Target of a Trade which will achieve this Target after few days as the EMA value changes every day

Sir, I would be highly obliged for you valuable guidance.

Regards
Karanm
Good question, I understand them now.

1. Where will be the stoploss - There is no stoploss defined as a level. For eg if you short in the 6th week expecting markets to fall ...however they keep rising throughout the week you can do two 3 things:
a) Exit and book loss if your capital is small and you are weak hearted.
b) Hold is your capital is small but you heart is strong to stick to your conviction.
c) Add more shorts at higher levels and book profits when the correction comes.

2. How to decide target when EMA keeps changing : Target is where the 15 EMA is on the day when you shorted in above example or 15 EMA whichever is closer. For eg if you short at 5000 with 15 EMA on that day at 4600, your target is 4600. If markets move up to 5200 and 15 EMA moves up to 4650, you target becomes 4650 (if you add more shorts at 5200). If markets falls, you exit whenever 15 EMA is touched on 4650 comes, whichever is earlier.


Cheers
SH
 

Karanm

Active Member
Good question, I understand them now.

1. Where will be the stoploss - There is no stoploss defined as a level. For eg if you short in the 6th week expecting markets to fall ...however they keep rising throughout the week you can do two 3 things:
a) Exit and book loss if your capital is small and you are weak hearted.
b) Hold is your capital is small but you heart is strong to stick to your conviction.
c) Add more shorts at higher levels and book profits when the correction comes.

2. How to decide target when EMA keeps changing : Target is where the 15 EMA is on the day when you shorted in above example or 15 EMA whichever is closer. For eg if you short at 5000 with 15 EMA on that day at 4600, your target is 4600. If markets move up to 5200 and 15 EMA moves up to 4650, you target becomes 4650 (if you add more shorts at 5200). If markets falls, you exit whenever 15 EMA is touched on 4650 comes, whichever is earlier.


Cheers
SH
Sir, No words to say Thanks, all I can say - May God Bless you.

Sir, one last help :
Really the Success Ratio of this Statergy is 90%+
I will be Trading with 15EMA Statergy, can you suggest few good Stocks for 15EMA Statergy and can I Trade Nifty Futures with 15EMA Statergy.
Regards
Karanm
 

Karanm

Active Member
Yes, thats the whole point. We learn Maths and Science separately but their true magic is revealed when they are applied together....!

These are basic rules which I keep at the back of my mind always when I am trading based on 315 or 534 or EHL5 or contrarion etc. Their combination gives amazing results and leaves others wondering 'How the hell did he time it so beautifully? ' ! :lol:

I will give you another example.


I was trading based on 315 and was long since 24th August 09 in Nifty futures. As on 1st October 09 my Nifty futures were in 400+ points profits (it was a huge 315 trending move).

However at that point I saw that Nifty futures had not retested 15 EMA since September 4th (that was almost 4 weeks on 1st October). As per the 15 EMA reversion rule I hedged my longs with buying puts ... Nifty corrected and touched 15 EMA on October 6th which saved me a good 100 odd NF points in puts.

The big correction that i caught later was due to 100 EMA rule. By October 20th I had realised that Nifty futures had not corrected to 100 EMA since last 6 months (last 100 EMA touch was on 1st April 09). Hence I started adding puts in my portfolio to hedge my longs again.

NF generated a sell on Oct 24th at 5008 (based on 315). I immediately closed all my longs and immediately shorted double quantity in NF knowing that 100 EMA retest was almost inevitable now. I also held onto my puts that were bought earlier by me as a hedge for NF longs.

100 EMA at that point was at 4650... I kept 4600 as my target for shorts .. 100 EMA finally got retested on Nov 3rd (thats exactly 7 months and 2 days from 1st April). From 5008 to 4600 .. I was able to catch a 400 point massive correction ! THAT RESULTED IN HUGE PROFITS WHICH I BOOKED in shorts.
Also, that left a lot of my followers wondering ' Hell how did he predict it so nicely' :clapping:

The secret is out in the open now :)

Cheers
SH
Sir, where I can find details of your EHL5 or contrarion Statergies.

Regards
Karanm
 

Karanm

Active Member
Just to give an example to make it more clear.

Last time when 3 EMA was tested by NF daily candle = 30th Dec 2009
Hence next 3 EMA touch has to happen before end of day 5th January 2010 (3 trading days from 30th Dec)

Last time when 15 EMA was touched by NF daily candle = 23rd Dec 2009
Hence next 15 EMA touch has to happen before 1st week of Feb 2010 (6 weeks from 23rd Dec)

Last time when 34 EMA was touched by NF daily candle = 23rd Dec 2009
Hence next 34 EMA touch has to happen before 23rd April 2010 (4 months from 23rd Dec)

Last time when 100 EMA was touched by NF daily candle = 4th Nov 2009
Hence next 100 EMA touch has to happen before 4th June 2010 (7 months from 4th Nov)

Cheers
SH
Sir, In 2009 on 15EMA Statergy,there was only One Trade taken in Nifty Futures.
On 13/3/2009 15EMA was Retested and we took the Opposite Position Trade on 22/4/2009 (after 5 Weeks) and Sold Nifty Futures@3370 with 15EMA of 22/4/2009, which was at 3252 as Target.
15EMA was again Retested on 16/6/2009 when the Nifty Futures was 4530 & 15EMA was 4466.
In a year we got only one trade and it gave us a loss of more than 1100 Points.
Sir, is my calculation wrong?

Regards
Karanm
 

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