SH's swing trading system - a simple way to play the markets

:thumb::thumb:WAITING:thumb::thumb:

Waitinggggggggggggg!!!!!!!!

witing...g

Give him some room, guys. Let him put it across when he is good and ready. I'd rather the mods deleted the posts saying "thank you and when are you posting the strategy" and locked this thread and gave the key to TWH to open it at his leisure

ok then ... here we go then....

This strategy is highly inspired by Dow theory and Elder's greaters fools zone. The Dow theory defines a a trend as a sequence of higher highs and higher lows (bullish trend) and lower highs and lower lows (bearish trend). Elder's greater fool zone has already been covered by me in one of the previous threads. It explains how markets tend to revert to mean (ie correct back to a particular EMA) after it reaches a point far away from the EMA. Basically when markets are trending, they tend to trend till they hit extremes, then correct back to value zone ..and then start the trend again.

Our jobs as swing traders are to:

1. Identify the trend as well as trend reversals early.
2. Identify when the markets have trended to extreme zones
3. Wait for enough pullbacks before we enter the trend again.

We will cover all the above 3 gradually as we evolve this thread.

First things first, what all do we need on charts as indicators. We need to plot:

1. 15 EMA on 30 mins nifty futures charts
2. SMA envelope (17 SMA, 1.5 % deviation)

Now coming back to the 3 things we need to do as swing trader using 15 EMA and envelope as stated above:

- How to identify trend and trend reversal

As stated above, a trend is a sequence of higher highs and higher lows (or lower highs and lower lows). For the sake of this strategy, in a bull market, a lower high will be defined as a correction to 15 EMA after making a new high. If the correction does not reach 15 EMA, we will not consider any low made during that correction as lower high... our lower high will stay at the point where 15 EMA was last touched. A higher high is obviously a high made above previous high.

Similarly, in a bear market, any correction going upto 15 EMA and then falling to new lows would mean a lower high made..any other rallies that cease before 15 EMA is touched will not be considered at lower high.

If we see markets making highs, then pullbacks to 15 EMA, then making new highs, then again correcting to 15 EMA and then making new highs again .. we are in bull run. Each successive 15 EMA retest makes a higher low, We will call the higher low as 'bull SAR'

Similarly highs made around 15 EMA in bear trend will be called 'Bear SAR'

Trend reversal is whenever a bull SAR or bear SAR is taken out, we reverse to opposite position.

I will post some charts to explain bull SAR and Bear SAR in detail before talking about entries, SL and targets for this strategy.

Till that time, digest above

Cheers
SH

Nifty futures charts for last 20 days (15 EMA and 30 mins)

all red dots are proper corrections to 15 EMA after making a new high (sometimes markets correct to go below 15 EMA, thats ok). As you can see, each red dot has made a higher low so each red dot makes a bull SAR.

A breach of bull SAR (i.e markets dropping even by 1 point below bull SAR) triggers trend reversal and shorts are triggered.

Currently the bull SAR is at 5232 (lowest point between previous high and current high) . Today nifty touched 5398 before falling to 15 EMA and making 5333 low.

If nifty was to make a new high above 5398 tomorrow, it would mean todays 5333 would become a new bull SAR.

If Nifty keeps falling and goes below 5232, it will mark the trend reversal and shorts will be triggered.

Please understand the above charts.

Tomorrow I will post about when to enter, book profits and pyramiding etc.

Cheers
SH

such a SELFLESS teacher ! hatts off to you buddy.Thanks for sharing.Will be looking forward to your further posts :thumb::thumb:

dear tradewithhunter.
The basic quality of you is,when ever you come with a system(it is 100 % mechanical trading system)i appreciate you for such a perfect knowledge !!!!!

thanks.....

Hats off to you SH...another masterpiece...