Trading Strategy using TA
15- Min Breakout Setup
Failed Double Top - Daily Pattern
Tools – Candlestick/Bar Chart (Daily), Colour Coded Volume, 21 and 50 SMA
Trade Setup – This is a very powerful EOD setup which I came across during my early days of trading. It is one of my favourite EOD trading strategies. To walk you through this setup, I am going to explain it to you in various steps.
1. Trend Determination - There has to be a 'trend' in place for an effective reversal to kick in. Hence, the first step of this setup is to identify s tocks which are trending. You can either do this through a trend line or you can use the method which I use. I usually plot 2 SMA (period 21 and period 50) and determine the trend of the stock by the slope of these averages. If 21 SMA and 50SMA do not touch for a while and both exhibit slope greate r than 25 degrees, then the stock is in a very strong up trend. These are the kind of stocks we want to choose for this particular strategy.
2. The Pull-Back Phase - After, a descent run up, the stock forms a new high (1st Top) with heavy volumes and retraces back to the 21 SMA or 50 SMA. U sually the stock does not touch the 50 SMA. The stock usually forms a candlestick reversal pattern and head's off to make a new high .
3. The Trap (Top) - As the name suggests, this is the phase where a New High is formed. This is a new high, which is formed on very light volume and convinces many traders as a genuine high (breakout). It is here when many traders enter long positions in anticipation of a p rice rise. What essentially happens is that the prices fall back below the first top (within 2 days) and continue to slide down to the previous swing high. This dents the confidence of those who went long on the new highs and usually panic selling kicks in. The gain is quick in the set -up and the risk reward ratio is amazing.
Example - Oriental Bank recently formed this pattern. The stock was in an uptrend from september as determined by the slope of averages . The volumes at first top were high whereas at the second top they were low. The stock price fell below the previous top within 2 working ses sions. Finally it fell back to the previous swing high.
Important Notes – Do NOT forget to look at the trend of the stock and the volumes. Finally, the prices must fall back within 2 days below the f irst top.
Stop Loss - Keep a strict stop loss of a close beyond the high of the 2nd top.
---Now look above. How about an ascending triangle ?? Look at the black lines.
The key here is the present leg of wave being formed. This will determine whether we r in a horizontal range or ascending tri angle. As of now just wait and watch. My gut feeling is that Yes Bank is trading a bit weak. If it takes out the current high on good volumes then the price would (and should) rise dramatically. But since it is little weak (not too much though) on daily charts, I'll wait n watch this script carefully.
One more thing ... your horizontal range isn't right .. thrs one bar (around 1) which is out of the range. Though some may sa y this is allowed, I'll still tell u this is not that valid. Rest time will tell .
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83.4 is the current swing low ... now it is trading above that level but also in symm triangle zone. One the price breaks dow n from the symm triangle, wait for 83.4 to be taken out. If on retracement the prices do not re-enter the sub 83.6 levels , then short it. MRPL is relatively under performing the NIFTY. So it
15- Min Breakout Setup
05 July 2015 12:41 PM
83.4 to be taken out. If on retracement the prices do not re-enter the sub 83.6 levels , then short it. MRPL is relatively under performing the NIFTY. So it should be a good trade.
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if previous swing low or high taken out by progressing complex correction .then it is end of complex correction?
Yes. You will have two factors on your side.
1. Triangle breakout (strong sign)
2. Prev Swing low taken out (again a strong sign) Add up volumes to check validity
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I had told you guys that I was trying a system which I had mentioned in My Stock Watch list thread. Well, since this is in te sting phase, I'll post my list here.
The beauty of this system (mixture of Trend Following Systems and Mean Reversion Systems) is that it gives returns within 1 -4 day of trades. It's a real time scan system and hence positions have to be taken between 15.15 - 15.30. I have got in house development done for the system's software. I'll be posting my results live here and will certainly release the system (with software) once it is successful. Results on backtesting the dat a were very good. But it is necessary to see if it works in real time. At times this system generates contradictory signals
. Eg: If it gives BUY for a security on 4th Jan and then short for the same on 6th Jan, then earlier position have to be clos ed and new positions should be added. At present am tracking only 40(high beta stocks). I hope it works. Here are results for January along with today's res ults. CMP indicates closing price of signal generation day. Stop Loss is based on EOD prices.
[12 jan'2010]This is the final list as of 15.15 - 15.20 Banks and sugar stocks are looking weak.
For Short - BAJAJHIND, BANKINDIA,RENUKA,CENTURYTEX,IBREALEST, ICICIBANK,TATASTEEL For Long - Wipro
Testing phase is on. Please don't trade.
Signals are based on closing prices. So, since we r seeing these at 15.20, It might be that (in very rare case) we might get one false signal.
---Since this is a T + 1 to T + 4 system (Maximum holding till 4 sessions), I am uploading performance of signals generated on 4 th and 5th of this month. Four day cycle for these are over. On 6th and 7th there were no signals. And the next signal was on 8th, 11th and 12th (today). Wi ll be uploading result when 4 day cycle ends for them.
---Signals for Today. I had posted these at 15.20. Just doing them again in proper format. Keep SL 5310 for NIFTY. Rest SL at 2. 5%
CMP is the market price on the SIGNAL day ... ...
i had a query. the nifty short call was initiated at 5210 with a sl of 5340. so shoul we expect a fall of at least 200 points nifty considering the sl to be 130 points?
Watcher right above the image I had mentioned SL of Nifty as 5300 ... coz thts the next major level ... I think u missed this line ... refer back to the original post.. also today was T + 1 of the signal ... the signal takes maximum T + 3 to validate ... if not it has to be ignored ... still testing to let us see if we can modify a few things here .
These are the signals generated in 2009 for Nifty. As you may see, this strategy is effective (30% net return deducting broke rage at 0.03% each side + extra costs) for Day 1 trade. So, what I do is, if the Buy Nifty is generated today at 15.15, I buy the nifty and hold only for '1' day. If it gives me profit, then fine else I close my position at end of the day. In no circumstance do I take a loss of beyond 2.5%. I manually square off the deal. Th is is just a BTST or STCT strategy.
You can see the list and get an average target.
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As per your 2-3 week swing trading set up, I have screened two scripts. Please let me know if my selection of stocks are correct as per you r strategy.
1) INDHOTEL---uptrending stock with a pullback, hammer candle pattern formed on 13/01 2) SAIL---uptrending stock with a pullback, I hope its bullish engulfing candle pattern on 13/01
Sail has not given a Engulfing pattern .. it is more of a piercing one ... and in Indhotel I would have wanted the hammer to be a little more ideal (long shadow) ... for Indian Hot the patterns have formed at 38.2 retracement level ... it would have been good had it formed at 50 % retracement ... for Sail though it has formed at 50% retracement ... which is good
Sail especially is looking good on the broader note ... Displaying more strength than Indian Hotel ... stop loss of 215 and 2 32 looks good ...
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Do you mean fibonacci retracement level should be 50% and above for strong buy signal.
Am I right in understanding your message. Please clarify me.
Finally regarding the entry price, target price and stop loss methods explained and followed by you in simple english will be really helpful...
Yes it should be at 50 or between 38.2 and 50 ... for Sail it is exactly at 50 ...
Entry - if you are planning to take up 100 positions ... then first do a probe test ... this means .. first buy only 20% of your posi tion once the stock crosses previous day's high ... If you then continue to see the stock showing strength over the past 2 -3 days, then increase your position. This way, even if the stock goes against you, you will have less loss as you have invested only 20% of your position at first...
Target - I dont believe in target's ... so it's upto you when you want to exit .. or you can use your strategy Stop loss - previous swing high ... or you can take 61.8% fib level
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Honestly I don't believe in back testing results ... there r so many dynamic things in the market (plus the human element) th at back test results do not incorporate ... hence am testing it live .. lets see ...
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Classical Gap Setup - Intraday Trades
Tools – Candlestick/Bar Chart (Hourly Time Frame), Comparative Relative Strength (Base Index: Nifty)
Brief Introduction – Now, Let‘s take time over understanding this. Markets are based on demand and supply. Gap down, as shown in one of the images below indicates that today the market opened lower. Hence, the bidding today started much lower than yesterday‘s lows. This means t raders are expecting the market to go down and hence are not even bidding near the levels of yesterday. This is classical sign of bearishness. Same go es for upward gap.
Concept of Relative Strength - First of all, do not confuse this with Relative Strength Index (RSI). RSI is completely different. Comparative Relative stren gth is when a stock is compared with a base entity (let‘s say an index; Nifty). By using Comparative Relative Strength we compare wh ether the stock is outperforming NIFTY or underperforming NIFTY. We will always want to buy stocks which are outperforming the index and will always want to s hort stocks which
underperform NIFTY.
Trade Setup - This is one of the few setups which gives consistent returns in intraday. We enter a BUY position when there is an upward gap on Hourly time frame and the gap is sustained for one hour with the Comparative Relative strength sloping/pointing up. We enter a SHORT posi tion when there is downward gap on Hourly time frame and the gap is sustained for one hour with Comparative Relative strength indicator sloping/pointing down.
Time and Validity - I trade this pattern only on Hourly charts. Out of 10, I must say 6 of the gap patterns are successful. If you get a gap up i n a stock that has reversed or formed a base, then the pattern seems to work more efficiently. If you apply the same structure on daily charts, results can be even better.
Stoploss and Target - I have explained the stop loss in the charts. Targets may vary depending on the range of the stock.
Examples - I have given 2 very recent examples. One for Buy setp and one for short setup. Please refer below.
Note - Intraday trades are for very experienced traders. Please master some setup and paper trade it before putting real money.
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Punjllyod is giving a lot of false signals ... it is common for a stock to do so if its not trending ... we r planning to inc orporate a trend identifier in the system so that better results can be given ..
prefer desktop based applications like Amibroker, Metastock , Tradestation ...
I can tell u how to add Comp Rel Strength indicator in them ...
---As promised the AFL is ready. AM posting the results of the strategy (3 -4 Swing trade setup) and I must say results are pretty good.
Since you know I don't believe in giving targets, hence I measure the performance of the strategy in days. Here, since it is swing trade, i have measured the performance in two durations; 5 days and 10 days. I must say the results are pretty satisfying. In 2009, this strategy has ge nerated 72 Buy signals and in 5 days from day of trade, the success rate has been 73%. When performance is measured in 10 days from trade, the success rate i s 86%. Results are based on stocks trading in the Futures and Options segment. As mentioned, this strategy works well in Strong Trending stocks. Will be posting the AFL …
2009 ---> 5 day hold --> Trades 72 ---> Success 73%
2009 ---> 10 day hold -> Trades 72 ---> Success 86
To be a Trader-20yrs Page 172
2009 ---> 10 day hold -> Trades 72 ---> Success 86
...Entered SAIL at 242.95 (2-3 Week swing strategy). Closed at 240.85. Lets wait and watch.
Why did u exit ??? din u do a probe test ... U had a valid reason to enter ...
But did u have a valid reason to exit ??? I had a look personally at Sail .. its not looking bad at all You had a swing trade for 2-3 weeks ... then y did u square off based on one day ...
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I guess slope of 22 SMA ---Lupin----is flat, instead of up. Please correct me if I am wrong.
Tata motors ---satisfies the rule----however, I see that this script has ended in red last couple of days, even though market ended green last couple of days.
Your views on this Raunak ?
Yes that was one of the reasons why Lupin is little weak compared to Tata motors ..
Tata motors meets requirements and though the stock has closed in red, I would still prefer it ... however since it is result s season, I'd definitely do probe test entry in both stocks... the day previous day's high is taken out, entry should be made in small quantities.
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for EOD Stochastic 8,3,3 or 6,3,3 with a bullish candlestick pattern does give good next day results ...
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RSI and Bollinger Band Setup
Tools – Candlestick on Hourly Time Frame and RSI (14)
Trade Setup – I just can't recollect where I read this setup. But, it is a very useful one of you apply it correctly. If you identify the s tocks on which this setup works, then it is going to be very profitable. Usually, you should pick weak stocks for this setup. Stocks which are under pe rforming the broader market or which are in intermediate down trend. Else you can get many false signals.
How to trade it - Look at the chart below. Bharti has been under performing the market for quite sometime now. If you look closely. The prices have crossed and closed above Bollinger band (upper) two times. On both occasions the RSI(14) was not above 70. Now, RSI is an indicator o f strength and despite the price closing above the band, the RSI remains below 70 (does not exhibit strength). Hence, we then look for some sort of bearish co nfirmation on candlesticks (Doji, Hanging Man, Bearish Engulfing). The moment you get this confirmation, short the stock with stop loss being the highest price (of the previous two candles). In case of Bharti, in the first case we got a Doji whereas on the second case it was a variation of bearish engulfing pattern.
STOPLOSS - Stop loss is the highest price (high) of the previous two candles.
Usage - Can be used on 60 Minute time frame chart. You can use 15- Minute chart for entry.
---What Mr. Savant gives is not a blind proposition for investment. If you have the patience of going through his threads, you will indeed learn a lot. His returns are more than 100%. However the time duration is much longer.
What we do here are small trades and quick trades. These trades look attractive, but are only effective if you are an experienced trader. It is not to say that you won't make money here, but all am saying is that monitor these strategies for some time before committing even a paisa into them. Hence, what I'll advise you to do is that learn what suites you the best. But don't put in money straight away. If you loose during this, your appetite for learning will diminish exponentially. Follow Mr. Savant's stocks, invest in them and simultaneously learn from here. Once you learn and master something, then neither you will need Mr. Savant's thread nor this thread for making your own killing in the market.
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Following are the stocks for "Investment". Start accumulating small quantities on dips. The stop loss for the stocks will be low which just goes to show the growth these stocks can have over the period of time (usually 12-24 months).
1. Hold these stocks for Investment purpose only. These are not swing trades nor they are scalping trades. These are purely investment based trades based on numerous factors.
2. Maximum loss that we will take for a particular stock is 10 - 15%. Again, the stop loss is deep but these stocks can give amazing returns. For some stocks stop losses are more deep. However, this is only because these stocks are showing good long term momentum.
3. Buying criteria is based on a weekly technical system (neither a trending system nor a mean reversion system) and long term fundamental - economic system.
I'll be really grateful if someone could assist me with updating this list of stocks on weekly basis.
I'll be posting the list in this same post in sometime ... Will be updating the stocks as I find new investment opportunities ..
...---AvgRange = Sum( abs(O-C),15 )/15;
Doji = IIf(abs(O-C)<=0.1*(H-L),1,0);
HAMMER = IIf( (H-L > 1.5*AvgRange) AND (C > (H+L)/2) AND (O > C),1,0);
Cond1 = Cross(StochK(8,3), StochD(8,3,3)) AND StochK(8,3) <30;
Cond2 = RSI(3) < 30;
Cond3 = Close > MA(Close,150);
Buy = Cond1 AND Cond2 AND Cond3 AND (Doji OR HAMMER);
Sell = BuyPrice*1.05;
Filter = Buy;
AddColumn(Buy, "Buy", 1.2);
AddColumn(Close, "CMP", 1.2);
AddColumn(BuyPrice*0.97, "SL set at 3%", 1.2);
AddColumn(IIf(Buy,100*((Ref(Close,5)-Close)/Close),100*(Close-Ref(Close,5))/Close),"Profit% on Day 5",1.2,3,width = -2);
AddColumn(IIf(Buy,100*((Ref(Close,10)-Close)/Close),100*(Close-Ref(Close,10))/Close),"Profit% on Day 10",1.2,3,width = -2);
// Have included performance tracker in percentage terms (%) after period of 5 and 10 days // Stop loss is set at 3%. Please suit your own risk levels
//Stochastic setting are at 8,3,3 You can modify it to 6,3,3 as per original settings. However it does not make much of a difference. Since you have the AFL now, I'd advise you to follow it first without putting in the money. Keep a note of all the dummy trades and see what exit policy suites you better ... Backtest the afl and see what sort of gains it gives ... It is YOU who has to be comfortable with the system ...
Personally, I never take a loss of more than 5% on any stock ... and I do wait for end of day closing prices ... Stock may be down 7% on intraday but for me closing price matters.
Today nucleus was down 6 % but when it closed, it was not down so much ... hence i held on to the trade ...
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Watcher, we all work with probabilities .. sometimes we r right ... sometimes we r wrong ...Originally Posted by watcher
Slowly but steadily I am maturing to the fact that TA gives you more chances of winning, keeping your losses in check. Like all other methods it is not 100%
foolproof, but it is always better to go with structured probability rather than our whims.
Oh certainly .. Knowledge gives you an edge in everything ... I'll soon be starting a fundamental analysis thread where I'll teach how to analyse firms
Oh certainly .. Knowledge gives you an edge in everything ... I'll soon be starting a fundamental analysis thread where I'll teach how to analyse firms