Day Trading & Forex Forum

dipaarti

Hello Friends!!

I am new to forum and since I want to share what I have, what I like & how I trade with all the legendary & fellow members.

I am into technical trading since last 1 year and learnt almost everything reading books and surfing forums containing technical analysis and systems by experts. What I liked most is the Moving averages. I lost a quite before learning TA. I decided to back test some the strategies on different parameters and different time-frames. Invested almost 3 months in finding out best system that will fit my style.

Finally, I found out better system to trade S&P CNX Nifty Futures( Indian National Stock Exchange Index Futures). Since everyone knows that trading in Nifty is easy but getting profit out of it is really difficult. Following is my method of trading which I follow since last 3 months and which is working well for me. I have tested this on some frontline stocks with good volatility, and there too it worked excellent. But I prefer to trade in only one instrument i.e. NIFTY FUTURES.

Basic Setup – 15 Minute Intraday Chart with minimum 30 days data backfill.
Indicators – 5 Days Exponential Moving Average (DEMA) & 21 DEMA. Optional Swing Setting with 0.10% setting for easy reference of Tops & Bottoms.

Strategy – Will go long when 5DEMA crosses 21 DEMA from below and will exit long as well as go short when 5DEMA crosses 21 DEMA from above. Simple System, that’s it! Please note that you will always carrying Long or Short positions once you entered in to the trade. If first trade is Go Long, Buy 1 Lot of Nifty and when there is reversal sell 1 lot which you are long and sell one more lot as a Short sale.

Stop Loss – There is in built stop loss in the system. You need to c/fd your positions till next crossover happens. Hence you will be with the market and with the on-going trend, just before it reverses. Also note that since markets are always volatile, you will get whipsawed very easily. Do not worry, system is back tested and you will surprise to see that maximum loss was just 83 points and consecutive loss (in 6 trades) was 231 points.

Profits – Well before following this practically, I did mock trading for 1 month and found excellent response from my strategy. However, practically doing overnight positional trades very initially difficult and I was getting carried always by analysts on TV channels. But as I decided stick to the charts and that paid me off. After 2-3 initial loss trades I got big profit and my account size started getting bigger.


It would be advisable to follow basic money management rules. Like I did, I started with initial capital of Rs 1, 00,000 and traded 150 Nifty at a time. No less and No more. Money management is crucial part of any strategy.

Also one thing is very important that do not close your positions on anticipation. It kills your profits as I have experienced that market moves against general predication. Do not predict market; be with it, wherever it goes.


Following is a summary of My Trades.

NO. OF TRADING SESSIONS 90
TOTAL TRADES 66
AVERAGE TRADE PER SESSION (R/OFF) 1
WINNING TRADES 26
LOSING TARDES 40
GROSS GAIN 3,012.33
GROSS LOSS 1,679.38
AVG GAIN PER TRADE 115.86
AVG LOSS PER TRADE 41.98
NET PROFIT 1,332.95
HIGHEST PROFIT IN A SINGLE TRADE 590.26
HIGHEST LOSS IN A SINGLE TRADE 82.83
CONSECUTIVE PROFIT TRADES 3
CONSECUTIVE PROFIT 693.27
CONSECUTIVE LOSS TRADES 6
CONSECUTIVE LOSS 231.47

I am also attaching my Trade summary in separate excel file. It will clear all doubts. Also note that there is some slippage cost, when there is a massive movement in Futures premium and discount overnight.

Brokerage Cost is taken as 0.05% + 0.02% statutory cost and same is calculated double i.e. 0.14% as normally trades are covered on the next day and resulting in to both side brokerage.

Since I am a new to technical trading my stategy may contain some weak points. I request all of the veteran members to go thru and advice me something I can improve for the benefit of all.

Thanks & Regards,
Dipesh
dipaarti@gmail.com

Attached Files

NIFTY.xls (23.0 KB, 90 views)

tomorton

Well done Dipesh. Simple and effective: not original, but that doesn't matter - a MA cross-over system is trend-following and therefore potentially inherently profitable - BUT most traders cannot make them work because of the frequent whipsaws.

What you have achieved is demonstrated by the low losses per losing trade. Although you have only a 39% success rate on your trades, you keep losses so low on the bad ones that your average gain is nearly 3x your average loss.

And no sine of MACD, Bollinger Bands, RSI, VWAP, or anything more complicated than moving averages.

Its also interesting that you have charts showing 15min periods but daily MAs. for most intra-day traders using your charts, a 5MA and 21MA would mean 5x15minMA and 21x15minMA. Do you really mean daily MAs?

dipaarti

Thanks tomoton for reviewing the system. I trust moving average and MA crossovers are traded for years. I tried too much using 3DEMA & 13DEMA, 5DEMA and 13DEMA in my back-testing. However best results I got in 5DEMA and 21DEMA. Also would like to clarify that EMA's I am using is not daily EMAs. Those are calcuted by using last 5 candles and last 21 candles on 15 minute chart. And simple Exponential formula as we move on. First candle will get removed and new one got added in to the formula and so on ..

Practically I think it is not possible to plot daily moving average on intraday chart. Atleast in India I never come across such complex trading tool.

Once again thanks for the reply. Is any thing you feel like adding in to the system to get more benefit out of it ?

- Thanks & Regards,
Dipesh.

tomorton

Hello Dipesh. A nice simple system. We all see complex systems sometimes, so complicated that I am sure they would confuse their own designer. A simple trend-following system relies on the fact that a trend tends to continue. Adding many more indicators and parameters might hide this simple fact and add confusion without improving efficiency much.

Thank you for clarifying that you use EMAs based on the 15min chart periods, not days, I thought that would be the answer.

I am surprised that you hold a position until the next crossover. I accept that every crossover should cause an entry (because you can not tell in advance which will be a very important winner) but have you experimented with an earlier stop-loss?

I am not sure of your starting capital, whether you meant 100,000 or 1,000,000 but after 3 months you have NET PROFIT 1,332.95. Is this enough to justify continuing?

tomorton

On stop-losses - I have been looking at daily charts to identify price/14EMA crossovers, with entry on the close of the day after the crossover day (unless MA has been re-crossed), using the opposite extreme of the range of the crossover day as the stop. I am also filtering out weak signals by giving a score to the pattern the two bars make.
That is -
Crossover day: High above Open = +1:High above mid-point of day' range = +1
Second day: High above Open = +1: High above mid-point of day' range = +1: High above Crossover Day Open = +1: High above Crossover Day High = +1: High above Crossover Day High = +1: Low above Crossover Day Low = +1
Possible score 8pts. Signals scoring 5 or less should be ignored. Stop would be Low of Crossover Day. Profit target first Close in positive territory below the 14EMA. Reverse all this for Shorts. 14EMA works OK for me on the FTSE100 index but is not a magic number for all indices and all trading styles. Backtesting looks good, I start trading this system next week.

dipaarti

Hi Tomorton.

I have tried to get out early (Manual Stop Loss) anticipating a fall or rise (when i was long or short) before actual system crossover, but surprisingly, Markets just reverses from the point where you "anticipate". So decided to stick on the rule of crossover. Also in my latest 3 trades I saw that If system give crossover in last 1 hr of trading, all the three time i saw a gap up or gap down opening in my favor, Surprising !!. Slowly slowly i am getting confidence on the system.

About My starting capital It was Rs. 1,00,000 (Not 1 Mln). Rs. 1,00,000 is approx. USD $2000. Today my a/c stands at Rs 2,35,000 Approx. i.e. Approx USD $ 4700.

Currently I am working on Intraday 5 Minute Chart using CCI (Commodity Channel Index), if you have any research papers,etc on CCI, do forward me. Also if you know CCI better, please share.

Thanks in Advance.

-Dipesh

tomorton

Hi Dipesh - I think you are right on stop-losses - once you have found the right place to locate your stop, keeping a definite stop position allows you to properly test the system and so allows you to forecast returns: finding the right place first is the hard part. Better to anticipate profits than anticipate stops.
I know nothing about CCIs, sorry.

Charlton

There is so much material on CCI if you google "commodity channel index" or "trading using cci" . Here are just a couple of links for starters

Timing Trades With The Commodity Channel Index



CCI - Trading the CCI by Steve Fitzsimmons aka Fitzy40

As an oscillator it indicates whether the instrument in question is in the overbought or oversold stage of a cycle, normally rated using the 80 and 20 levels. It is best used in conjunction with other signals, as shown in the article, and often people look at whether it shows divergence with price or use CCI cross-overs.

An MA of the indicator was used as one of the principal tools within the Technical Trader forum on this site for timing and direction (go to Join Groups)

Along with MACD and price it is the most common chart setup (the 3 of them being displayed together) that you will find on most trading sites.


Like all of these things read up about it, listen to webinars, but then apply it to your own charts to determine whether the tool is of any use to you, the circumstances in which you may/should no use it and how to understand fully how it is derived, works and what it is telling you.

Charlton

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