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3 DMA Trading Strategy |
solanki
White Belt
Joined: 12 Feb 2007
Posts: 155
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Post: #16  Posted: Mon Aug 29, 2011 9:19 pm Post subject: |
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| solanki wrote: | | solanki wrote: | | TLS2010 wrote: | Dear Administrator,
Apologies for the same, I was unaware about this rule. Will take care in future.
Thanks!
-Lawrence Sequeira |
sir ji na,asteji
ne idea about attched charts |
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Last edited by solanki on Tue Aug 30, 2011 2:36 pm; edited 1 time in total |
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jaggy6522
White Belt
Joined: 16 Oct 2009
Posts: 7
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| Post: #17 Posted: Mon Aug 29, 2011 9:59 pm Post subject: Re: 3 DMA Trading Strategy |
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| TLS2010 wrote: | Hi,
In my search for the most optimum MA crossover to catch the swing high and swing low, I found the best one suited was the 3 DMA. (3 Days Moving Avg.)
Let me explain it in brief:
This strategy is based on monitoring the weekly charts (any instrument) by using the following indicators:
a) SMA, Open, 3 Days
b) EMA, Close, 3 Days
We all know that when Closing prices are higher than Opening prices it is considered bullish. Use the above parameters to see the crossover on wkly charts.
The Strategy:
a) Long entry: When EMA (Close, 3) line crosses above SMA (Open, 3) line on the wkly charts then we look for the same setup on Daily charts and wait for 1-2-3 pattern to form on daily charts. Most of us know the famous 1-2-3 trading strategy. so we use it to go long on the break of # 2 for target of distance equal to #3 & # 2. Liquidate 50% of the position when 1st target is reached and use the trailing stop loss as the SMA line for the rest 50% position.
b) Short Entry: When EMA (Close, 3) line crosses below SMA (Open, 3) line on the wkly charts then we look for the same setup on Daily charts and wait for 1-2-3 pattern to form on daily charts. We go short on the break of # 2 for target of distance equal to #3 & # 2. Liquidate 50% of the position when 1st target is reached and use the trailing stop loss as the EMA line for the rest 50% position.
Caution: This strategy works best when the direction of both the lines i.e SMA & EMA on Daily charts match with their direction on wkly charts.
Aggressive traders can ignore wkly charts and trade only the daily chart SMA/EMA lines crossover with 1-2-3 pattern. The only restriction is that you should wait for both the lines angles to point in one direction only. This is required so that we avoid getting trapped in sideways mkt.
I have observed this to be a very consistent strategy in identifying swing high and swing lows. Combine this strategy with your knowledge of candlestick at support/resistance levels and you have a high probability setup. Hence you can be part of the rally ahead of the crowd.
Wish you all a very profitable trading with this strategy.
-Lawrence. Sequeira |
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vinst
Black Belt
Joined: 09 Jan 2007
Posts: 3303
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| Post: #18 Posted: Mon Aug 29, 2011 11:06 pm Post subject: |
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| since we are actually trading 1-2-3 system with guidance from the ma's, why not dispense with ma's. we can trade just 1-2-3's. by the time 1-2-3 is triggered, ma's would have indicated the same anyway. |
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TLS2010
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Joined: 30 Nov 2010
Posts: 37
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| Post: #19 Posted: Tue Aug 30, 2011 6:24 am Post subject: |
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| vinst wrote: | | since we are actually trading 1-2-3 system with guidance from the ma's, why not dispense with ma's. we can trade just 1-2-3's. by the time 1-2-3 is triggered, ma's would have indicated the same anyway. |
Very good point, Vinst. First of all I appreciate your ability to read between the lines. Let me see if I can justify.
I fully agree with you in your point about ignoring ma's and just sticking to 1-2-3.......BUT.....the probability of 1-2-3 system becoming more successful is higher and the rally (i mean the profits) that you are able to catch is the highest when you wait for the wkly / daily ma's crossover happening at the prior s/r level. in fact you can "let your profits run" till the next daily or wkly crossover - whichever is earlier. Try it!
Actually I started this topic with a wrong name.... it should have been named the "3 Bar MA Trading Strategy" - as it works in all timeframes and it is more with regards to bulls v/s bears battle being concluded finally at the end of 3rd bar with the closing price. Number 3 is an important number as it is also one of Fibo numbers.
Secondly, your reply has forced me to reveal the point that you can trade this system just with the ma crossover and do away with 1-2-3 system altogether. YES it is true. Just the ma crossover.
Since I make that stmt, I need to reveal the entry/exit points too right?
So here it is.....
Prequisite:
1. Forget the 1-2-3 system just keep your eye on the ma crossover and the high & low of the bar on which this crossover happens.... thats it!
2. You need to decide which timeframe you want to trade. Yes, you guessed it right, it works right from 1 min bar to any time frame. only restriction is that the time frame should have OHLC values (Open, High, Low, Close).
Let me explain:
We know the setup already but I would like to mention it again here:
Goto your chart and setup MA crossover as follows:
EMA 3 period on Closing values .... lets call it 3 EMA (Close)
SMA 3 period on Opening values.... lets call it 3 SMA (Open)
Thats it. you are set!
Now the trading rules:
1. Entry Long: When you see the 3 EMA (Close) crossover above the 3 SMA (Open) then you go long above the High of that bar on which that crossover happened. Stop loss will be the Low of that bar or ATR(14) which ever is lower. Keep trailing your stop loss at every new bars low.
2. Entry Short: When you see the 3 EMA (Close) crossover below the 3 SMA (Open) then you go short below the low of that bar on which that crossover happened. Stop loss will be the High of that bar or ATR(14) whichever is higher. Keep trailing your stop loss at every new bars high.
Be disciplined and you will be surprised at the results. ofcourse in a sidways mkt there are whipshaws too. but if you see that you are getting stopped out too often then you switch to a lower timeframe and trade the same strategy. Thats it.
I hope to get some critical testing results from you Vinst.
Happy Trading!
-Lawrence Sequeira |
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jaggy6522
White Belt
Joined: 16 Oct 2009
Posts: 7
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| Post: #20 Posted: Tue Aug 30, 2011 7:29 am Post subject: |
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| TLS2010 wrote: | | vinst wrote: | | since we are actually trading 1-2-3 system with guidance from the ma's, why not dispense with ma's. we can trade just 1-2-3's. by the time 1-2-3 is triggered, ma's would have indicated the same anyway. |
Very good point, Vinst. First of all I appreciate your ability to read between the lines. Let me see if I can justify.
I fully agree with you in your point about ignoring ma's and just sticking to 1-2-3.......BUT.....the probability of 1-2-3 system becoming more successful is higher and the rally (i mean the profits) that you are able to catch is the highest when you wait for the wkly / daily ma's crossover happening at the prior s/r level. in fact you can "let your profits run" till the next daily or wkly crossover - whichever is earlier. Try it!
Actually I started this topic with a wrong name.... it should have been named the "3 Bar MA Trading Strategy" - as it works in all timeframes and it is more with regards to bulls v/s bears battle being concluded finally at the end of 3rd bar with the closing price. Number 3 is an important number as it is also one of Fibo numbers.
Secondly, your reply has forced me to reveal the point that you can trade this system just with the ma crossover and do away with 1-2-3 system altogether. YES it is true. Just the ma crossover.
Since I make that stmt, I need to reveal the entry/exit points too right?
So here it is.....
Prequisite:
1. Forget the 1-2-3 system just keep your eye on the ma crossover and the high & low of the bar on which this crossover happens.... thats it!
2. You need to decide which timeframe you want to trade. Yes, you guessed it right, it works right from 1 min bar to any time frame. only restriction is that the time frame should have OHLC values (Open, High, Low, Close).
Let me explain:
We know the setup already but I would like to mention it again here:
Goto your chart and setup MA crossover as follows:
EMA 3 period on Closing values .... lets call it 3 EMA (Close)
SMA 3 period on Opening values.... lets call it 3 SMA (Open)
Thats it. you are set!
Now the trading rules:
1. Entry Long: When you see the 3 EMA (Close) crossover above the 3 SMA (Open) then you go long above the High of that bar on which that crossover happened. Stop loss will be the Low of that bar or ATR(14) which ever is lower. Keep trailing your stop loss at every new bars low.
2. Entry Short: When you see the 3 EMA (Close) crossover below the 3 SMA (Open) then you go short below the low of that bar on which that crossover happened. Stop loss will be the High of that bar or ATR(14) whichever is higher. Keep trailing your stop loss at every new bars high.
Be disciplined and you will be surprised at the results. ofcourse in a sidways mkt there are whipshaws too. but if you see that you are getting stopped out too often then you switch to a lower timeframe and trade the same strategy. Thats it.
I hope to get some critical testing results from you Vinst.
Happy Trading!
-Lawrence Sequeira |
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rk_a2003
Black Belt
Joined: 21 Jan 2010
Posts: 2734
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| Post: #21 Posted: Tue Aug 30, 2011 8:03 am Post subject: |
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"I hope to get some critical testing results from you Vinst."
Any testing result from your side Lawrence Sequeira ! |
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TLS2010
White Belt
Joined: 30 Nov 2010
Posts: 37
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| Post: #22 Posted: Tue Aug 30, 2011 9:04 am Post subject: |
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| rk_a2003 wrote: | "I hope to get some critical testing results from you Vinst."
Any testing result from your side Lawrence Sequeira ! |
I have tested it and it does work. In fact you can see it on icharts too. Go to chart (old) section and use it. Just follow the instructions given in the setup and you will see how these parameters show up. My testing results are positive. Hence I thought of sharing it. I have used many parameters in my R&D but this one seems to give the best results. It works !!! (for the disciplined trader).
I have just invited Vinst and those others who are experts on this forum to grill this strategy to the limit thats what I meant by "critical testing". I m open to your suggestions and can add any valid observations you may have to the "rule book" - but please bear in mind, the simpler the better. |
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vinst
Black Belt
Joined: 09 Jan 2007
Posts: 3303
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| Post: #23 Posted: Tue Aug 30, 2011 9:19 am Post subject: |
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| TLS2010 wrote: | | vinst wrote: | | since we are actually trading 1-2-3 system with guidance from the ma's, why not dispense with ma's. we can trade just 1-2-3's. by the time 1-2-3 is triggered, ma's would have indicated the same anyway. |
Very good point, Vinst. First of all I appreciate your ability to read between the lines. Let me see if I can justify.
I fully agree with you in your point about ignoring ma's and just sticking to 1-2-3.......BUT.....the probability of 1-2-3 system becoming more successful is higher and the rally (i mean the profits) that you are able to catch is the highest when you wait for the wkly / daily ma's crossover happening at the prior s/r level. in fact you can "let your profits run" till the next daily or wkly crossover - whichever is earlier. Try it!
Actually I started this topic with a wrong name.... it should have been named the "3 Bar MA Trading Strategy" - as it works in all timeframes and it is more with regards to bulls v/s bears battle being concluded finally at the end of 3rd bar with the closing price. Number 3 is an important number as it is also one of Fibo numbers.
Secondly, your reply has forced me to reveal the point that you can trade this system just with the ma crossover and do away with 1-2-3 system altogether. YES it is true. Just the ma crossover.
Since I make that stmt, I need to reveal the entry/exit points too right?
So here it is.....
Prequisite:
1. Forget the 1-2-3 system just keep your eye on the ma crossover and the high & low of the bar on which this crossover happens.... thats it!
2. You need to decide which timeframe you want to trade. Yes, you guessed it right, it works right from 1 min bar to any time frame. only restriction is that the time frame should have OHLC values (Open, High, Low, Close).
Let me explain:
We know the setup already but I would like to mention it again here:
Goto your chart and setup MA crossover as follows:
EMA 3 period on Closing values .... lets call it 3 EMA (Close)
SMA 3 period on Opening values.... lets call it 3 SMA (Open)
Thats it. you are set!
Now the trading rules:
1. Entry Long: When you see the 3 EMA (Close) crossover above the 3 SMA (Open) then you go long above the High of that bar on which that crossover happened. Stop loss will be the Low of that bar or ATR(14) which ever is lower. Keep trailing your stop loss at every new bars low.
2. Entry Short: When you see the 3 EMA (Close) crossover below the 3 SMA (Open) then you go short below the low of that bar on which that crossover happened. Stop loss will be the High of that bar or ATR(14) whichever is higher. Keep trailing your stop loss at every new bars high.
Be disciplined and you will be surprised at the results. ofcourse in a sidways mkt there are whipshaws too. but if you see that you are getting stopped out too often then you switch to a lower timeframe and trade the same strategy. Thats it.
I hope to get some critical testing results from you Vinst.
Happy Trading!
-Lawrence Sequeira |
Lawrence,
many thanks for a detailed answer. I had tried 7ema of open and close in the past but results were not too good (i mean no specific advantage over othe ma crossovers).
However, your proposal can also be tried, I'll try it and post results here. i guess instead of backtest we should live test this. backtest hides many things.
regards, |
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TLS2010
White Belt
Joined: 30 Nov 2010
Posts: 37
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| Post: #24 Posted: Tue Aug 30, 2011 10:18 am Post subject: |
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| vinst wrote: |
Lawrence,
many thanks for a detailed answer. I had tried 7ema of open and close in the past but results were not too good (i mean no specific advantage over othe ma crossovers).
However, your proposal can also be tried, I'll try it and post results here. i guess instead of backtest we should live test this. backtest hides many things.
regards, |
Hi Vinst,
its 10:15 am....Just heads up on this 3 bar ma strategy in todays live mkts.
On Nifty 5 min chart, it gave a sell crossover at 4975 and buy crossover at 4959. So thats a 16 pts gain.
Now we are long at 4959 (SL at 4948) lets us see what happens.
Rgds,
Lawrence Sequeira |
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TLS2010
White Belt
Joined: 30 Nov 2010
Posts: 37
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| Post: #25 Posted: Tue Aug 30, 2011 10:20 am Post subject: |
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| Stop loss moved to 4961....we are at breakeven now. |
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TLS2010
White Belt
Joined: 30 Nov 2010
Posts: 37
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| Post: #26 Posted: Tue Aug 30, 2011 10:26 am Post subject: |
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| TLS2010 wrote: | | Stop loss moved to 4961....we are at breakeven now. |
Nifty trailing stop loss moved to 4966, we are 7 pts up now. but this bar has formed a gravestone doji. the move may halt for some time and then proceed upwards/downwards. |
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TLS2010
White Belt
Joined: 30 Nov 2010
Posts: 37
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| Post: #27 Posted: Tue Aug 30, 2011 10:34 am Post subject: |
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| TLS2010 wrote: | | TLS2010 wrote: | | Stop loss moved to 4961....we are at breakeven now. |
Nifty trailing stop loss moved to 4966, we are 7 pts up now. but this bar has formed a gravestone doji. the move may halt for some time and then proceed upwards/downwards. |
its 10:30 and we got stopped out at 4966. as mentioned gravestone doji did the job what its suppose to do.
now we will wait... see how the 3 ma is showing the trend slowing down so nicely. secondly we right in the middle of todays high / low. this is a dangerous point so we will now be patient and wait for more confirmation.... remember our strategy works best at s/r levels. so no hurry.
We are already in 19+7= 26 pts profit since morning on Nifty.
Both the trades were positive.
-Lawrence Sequeira |
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TLS2010
White Belt
Joined: 30 Nov 2010
Posts: 37
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| Post: #28 Posted: Tue Aug 30, 2011 11:12 am Post subject: |
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| TLS2010 wrote: | | TLS2010 wrote: | | TLS2010 wrote: | | Stop loss moved to 4961....we are at breakeven now. |
Nifty trailing stop loss moved to 4966, we are 7 pts up now. but this bar has formed a gravestone doji. the move may halt for some time and then proceed upwards/downwards. |
its 10:30 and we got stopped out at 4966. as mentioned gravestone doji did the job what its suppose to do.
now we will wait... see how the 3 ma is showing the trend slowing down so nicely. secondly we right in the middle of todays high / low. this is a dangerous point so we will now be patient and wait for more confirmation.... remember our strategy works best at s/r levels. so no hurry.
We are already in 19+7= 26 pts profit since morning on Nifty.
Both the trades were positive.
-Lawrence Sequeira |
If you are following the ma crossover you will see that it has shown sell signal at the resistance. Now here is where we will need some basic market tone knowleged. We all know that 61.8% & 38.2% fibo retracement are indicative of the strength of bulls & bears. I have seen the ma crossover and telling me to sell. but at the same time I see that it had crossed the 4978 area - which is 61.8% retrace from the high=4997 & low=4948. so I will think twice before shorting it and be a little cautious. As i m writing this i can see that there has formed a bullish kicker candle right at the 61.8% retracement area. this confirms that it is much safer to go long on Nifty than short the mkt today.
right now nifty is at 4980, 1-2-3 has also formed so i will again go long at 4981. ( SL 4965)
-Lawrence Sequeira |
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solanki
White Belt
Joined: 12 Feb 2007
Posts: 155
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| Post: #29 Posted: Tue Aug 30, 2011 11:31 am Post subject: |
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nifty cash intraday chart tm 5 mini
Last edited by solanki on Tue Aug 30, 2011 2:35 pm; edited 1 time in total |
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solanki
White Belt
Joined: 12 Feb 2007
Posts: 155
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| Post: #30 Posted: Tue Aug 30, 2011 11:48 am Post subject: |
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asian paint cash intraday 2 days chart 30 mini with buy point sell point
Last edited by solanki on Tue Aug 30, 2011 2:35 pm; edited 1 time in total |
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