iCharts Discussions

[Rahulsharmaat]

I dont see much use of 3 EMA in this

If you have any finding, please back test and share with us.

Thanks

[channasri]

Hi Rahul,

As you have come out with the 30 SMA method, I respect your opinion. I have used 3 EMA with a few back tested methods and used them for trading with success. Hence, I suggested the use of 3 EMA. Henceforth, I will evaluate the real time utility of 3 EMA with the method posted by you.

My experience with 3 EMA in using methods based on 70 EMA or 34 EMA or 55 SMA in 5 min. and 15 min. T/F has helped me to overcome whipsaws on several occasions. It also reduced the number of trades.

By and large, I would like to mention that your method is good. Please continue the good work. I have read your postings on gold trading on alternative months. That is also good. Please post it again as I missed to make note of it.

Best regards,
channasri

[Rahulsharmaat]

No doubt your system will be good..

i request you to back test and post your findings here

and point out few whipsaw-- which got avoided dude to this--

as what all i saw-- few times-- it call was active in this 3 EMA system --where as 30 sms was not triggered

so u are the best person to back test and post

do it atleast for 6 months

[Rahulsharmaat]

i have traded this 3--30--3--34 ema-- long time

and end of the year-- its a ladoo gopal -- so stopped


================================================

i trade 34 EMA still--- but no cross overs-- just some filters n trade

net gains almost plus 275--300 points

[channasri]

In my previous trades with 3 EMA crossover on 34 EMA/70 EMA/55 SMA, I have used Bollinger band direction as well as SSTO (14,3) crossovers (from below 20 to above 20 for LONGS and from above 80 to below 80 for SHORTS). I would use crossover of 3 EMA over either 34 EMA or 70 EMA or 55 SMA whichever coincides with SSTO (14,3) crossover as mentioned above. Results were good. I have not recorded the trades. I am just posting the method here so that I do my part of honest interactions with you.

Anybody can back test the trade set up I had used and mentioned here. They will be happy to see the outcome. My experience was that for Nifty, 15 min. T/F is more suitable than 5 min. T/F for 3/34 set up. Carrying positions was more risky in 5 min. T/F than 15 min. T/F espesially in 3/34 set up.

For Bank Nifty, gains were good in both 5 min. and 15 min. T/Fs. I have also used my little knowledge of candlestick patterns such as morning star or evening star, hanging man, bullish harami/bearish harami, inverse hammer to understand reversal possibilities and booked profits (these were independent of crossovers but restricted to profit booking and not for new trades).

For Nifty trading, I would be happy with anything more than 20 points profit. For BN, I would be happy with anything more than 40-50 points.

Hope that this posting of mine clearly puts my risk appetite and trading methodology. However, all things said and done I am always willing to learn more effective trade set ups to follow the market trends as and when they emerge. Because, I always believe that however smart I trade, smarter players always exist.

[Rahulsharmaat]

Why dont you post back tested results along with entry--exit-- rules

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I am not TA, and many traders here may not have heard of SSTO.. all those candle patters,

what i tried to give here was a very very simple procedure, simple entry.. stop loss and targets

[channasri]

Your point of giving a very very simple trading method is well taken Rahul. I have written my entry and exit rules below.

Requirements: 15 min. time frame candle stick charts, SSTO (14,3), 3 EMA, Bollinger bands (20,2), 30 SMA High and 30 SMA Low.

1) LONG TRADE to be initiated when SSTO (14,3) gives +ve Xover from below 20 to above 20, Bol. band (20,2) turns up and 3 EMA +vely crosses over 30 SMA Low. PROFIT or LOSS BOOKING when 3 EMA -vely crosses over either 30 SMA High or 20 EMA (comes by default with Bol. bands (20,2) - this info is for those who are new to Bol. bands) whichever happens earlier.

2) SHORT TRADE to be initiated when SSTO (14,3) gives -ve Xover from above 80 to below 80, Bol. band (20,2) turns down and 3 EMA -vely crosses over 30 SMA High. PROFIT or LOSSBOOKING when 3EMA +vely crosses over either 30 SMA Low or 20 EMA whichever happens first.

When I back tested for the past 14 trading sessions, I did not find a single trading opportunity as per the above rules suggested by me.

Then, I simplified the rules to the following TSL based method:

Requirements: 15min. T/F, 3EMA, 30 SMA High, 30 SMA Low

LONGS when 3 EMA gives +ve Xover on 30 SMA Low. TSL shall be -ve Xover of 3 EMA over 30 SMA Low.

SHORTS when 3 EMA gives -ve Xover on 30 SMA High. TSL shall be +ve Xover of 3 EMA over 30 SMA High.

When a LONG trade is in progress, SHORT trade should not be initiated.
Similarly, when a SHORT trade is in progress, LONG trade should not be initiated.

Here are the back testing results over previous 14 trading sessions.

1) LONGS: No. of trades: 04, Net result: Gain of 119 Points
All trades ended in profit (6, 32, 43, 3

2) SHORTS: No. of trades: 05, Net result: Gain of 1 Point
One trade gave +42 points while the rest were losses (8, 10, 14, 9)

All the above observations are based on Nifty spot charts only. I am sorry to say that my schedules and activities do not permit me to spend more time than this for back testing.

My conclusion is this: The net gain of 120 points for 14 trading sessions in a narrow trading range December series (range - just 140 points - between 5825 to 5965) is quite good with the simplified rules.

I have posted my observations without being egoistic. Kindly let me know your back testing results for past 14 trading sessions with the original method posted by you.

Best regards,
channasri

P.S.: Even I am not a TA. This discussion is purely for educational purposes only.

[Vevensa]

Hello Channasri,

Just one correction.

The moving average that comes by default with Bollinger Bands is SMA.

Thanks.

[Rahulsharmaat]

Nifty long made on friday closing at 5954--- now stop loss and short below 5922

[maooliservice]

Dear Rahul,

Will u pls explain end of the entry[3.15PM] rules in detail

Thanks & Regards
Mohan

[Rahulsharmaat]

If trade not triggered after using filter-- wait till closing--

1} before closing one has to see that-- previous candle closed above High -- or below low-- If closed above high-- and last candle closes above 30 sma low-- go long--

if any candle closed below low-- and last candle closes between band--- go short

[channasri]

Hello Vevensa,

In icharts basic charts, I always get 20 EMA by default for Bollinger bands (20,2). My mistake is not mentioning it in the reply.

As I know, SMA is traditionally used in BB. However, EMA can also be used. I have copied Rule 12 and Rule 13 of the 22 rules for using BB below.

12. Traditional Bollinger Bands are based upon a simple moving average. This is because a simple average is used in the standard deviation calculation and we wish to be logically consistent.

13. Exponential Bollinger Bands eliminate sudden changes in the width of the bands caused by large price changes exiting the back of the calculation window. Exponential averages must be used for BOTH the middle band and in the calculation of standard deviation.

Just to share with you in case you don't know, anybody can receive the set of 22 rules from Bollinger's official website - bollingerbands.com

Wish you happy new year.

Best regards,
channasri

[Rahulsharmaat]

Nifty long at 5954-- now at 5997---

gain 42 points

[Rahulsharmaat]

Nifty made 6002.5

Now Tsl at 5979

[jyothil]

Nifty high 6010 TSL 5994