iCharts Discussions

[RKM]

Hi Shiva,

Thanks for sharing your strategy....it seems to be quite effective if one has the discipline not to break the rules or try unnecessary tweaks. Even without looking at any backtest results, just plotting the EMAs on the charts itself gives quite a favourable picture....the EMAs rarely crossover even during consolidation phases (at least this is so on our Daily TF charts, but during the market hours I guess there may be times when there is a false crossover).

But can you please explain two things -

1. How do you get your EMA crossover reversal values?
a. Are you looking at EOD charts or the RT charts on daily TF? For example, my RT/daily BNF charts are showing positive crossover at about 9230 on 24th May 2012 while your backtest sheet shows a reversal value of 9207.99.

b. More important, for the same long trade that triggerred on the 24th May in BNF, your sheet shows different EMA reversal points everyday upto the 31st, although no crossover took place between the 24th May and 1st June, when we got a short trade.

Is there some formula to obtain the reversal values?

2. In case you are using only the EOD charts to check for crossovers, how do you confirm the same at 9.30 am and 3.15 pm?

Thanks,

RKM

[Vevensa]

Hi RKM,

Reversal value is the value at which both EMAs are equal. In this case, EMA 3 = EMA 5. If you know how EMA is calculated, you can get reversal value. If you want I can give the formula to calculate reversal value.

You don't need charts to trade this system, excel sheet is good enough. I am not trading this system but following this since the time it was introduced in another forum.

Thanks.

[galrani]

Hi RKM

You got it bang on.Discipline is the key.

Think of trading markets like driving on the F1 racing track. You will have clear stretches where you can accelerate and there will be times when you have blind turns (where you dont know if the road ahead turns left, right or U turn).

So obviously you will slow down in the blind spots and will hi the pedal on the clear roads.

Similarly in the markets also, you try to play at your minimum till you are sure to commit more, which you will do only when you are sure that a trend is unfolding.

Now to your queries,

I calculate the 3ema and 5ema based on the closing settlement prices of the day.

The EMA are dynamic so they keep changing during the day as the price changes. So what ema value you see EOD is definitely going to be different to what you seein RT.

The reversal point changes every day as the price changes for every day. Its logical to keep on increasing your reversal price as the clsonig price moves up. The formula for reversal price calculation is already fed into the Column J of my file.


I did not get your query no. 2. I have the reversal price as per my sheet and if that is hit, I exit my position and take opposite position simple.

Cheers
Shiva

[shahrachit]

Thanks Shiva for reply....

Sorry but I am a slow learner .....

Regards.
Rachit

[galrani]

No problems. I too took my time to learn this. I did paper trade for a month before starting with one lot and gradually going up

its your money on the line so you should do your diligence before any thing else

Cheers
Shiva

[RKM]

Hi Shiva,

Thanks for your prompt reply. Maybe I'm a bit dense, but I still have some doubts.

1. Your statement in bold italics (the first one, in bold type) says you calculate the EMA values based on the closing statement prices of the day. I suppose we should get that from any EOD data chart , like JCharts (EOD), or do we still need to calculate?

2. Regarding your remaining statements in bold type...I agree we need to move our stops as the price progresses in our direction, but I haven't yet understood why, in an EMA crossover strategy, we need to move our reversal points before any crossover takes place.

3. Finally, do take a look at my example in my earlier post (in bold type below). Your reversal value is 9207.99. although as per the charts the crossover took place at 9230 (approx cursor value) on 24.05.12. So even on the actual day of the crossover, there seems to be difference of values.

Looking forward to your reply.

Thanks.

RKM

[RKM]

Hi Vevensa,

Sorry, I missed seeing your response to my first post. Thanks for your reply. I do understand that the reversal value is the value is where both EMAs should be equal, but shouldn't that be where we find the crossover taking place on the EOD (or other) charts?

So, as you say, the reversal value calculation is done using a formula and an Excel sheet. Great!! And I've been looking at charts trying to see how infrequently the two EMAs cross each other. Thanks, the formula would be very welcome.

RKM

[Vevensa]

Hi Rkm,

If you have intraday update of EOD chart(Jcharts-premium has that), you can see the both EMAs touching when price reaches the reversal value.

Formula for calculating reversal value:

Reversal value = [E2(n2-n1+(n1*n2)-1)-E1(n1-n2+(n1*n2)-1)] / 2(n2-n1)
Where,
n1 & n2 are time periods for which EMA is calculated and n2>n1
E1 is EMA value corresponding to period n1
E2 is EMA value corresponding to period n2

Example: n1 = 3, n2 = 5, E1 = EMA 3, E2 = EMA 5

Thanks.

[RKM]

Hi Vevensa,

Thanks for the formula. JCharts (Premium) will no doubt show both EMAs touching intraday, but now lets see if that is at the value based on the previous day's EOD data.

Thanks.

RKM

[pipstocks]

Hello everyone,

Just look back to theory part of EMA. One has to study the mathematical formula calculating EMA. By using algebra and reversing the EMA formula one can find EXACT CROSSOVER VALUE.. Means at which price EMA crossover will happen.

[bugs3003]

[sonai_81]

Hello Shiva,

One question here,

When u trade using 35 EMA method, you look at cash price crossover or future price crossover.

Thanks,

[RKM]

Hi,

Is anyone facing any problem in Sheet No. 3 (Comparison) of the backtest results posted by Shiva? Except for 3 rows (Intraday Points Loss,System Gain/Loss and Net Points Gain/Loss), I am not able to read the info in any of the other rows. Instead, I am getting this : #NAME? in all the boxes in those rows. Even expanding the column size is not working.

I am using Office 2003. Can anyone tell me how to solve this problem?

Thanks.

RKM

[galrani]

Future price

[sonai_81]

Thank you Sir.

Yesterday I took position in INFY using 3,5 crossover and booked profit (september series)

Today I have taken long position in Reliance from 844 (fut price). Currently
it's trading at 848.Let's see what happen today..

Thank you sir for sharing your strategy..