this is an excel file for those newcomers/persons who have no idea how to read charts and use technicals...
something like a mechanical trading system by Vinod Nadoda ji.
I had made this when I was a newcomer myself, and the ONLY trading-tool & friend i knew was CLASSICAL PIVOTS (floor-trading pivots)...
I happen to like it maybe because it involved simple mathematics, and it was my fav subject since 15 years of my life (half of my life)...
something like a mechanical trading system by Vinod Nadoda ji.
I had made this when I was a newcomer myself, and the ONLY trading-tool & friend i knew was CLASSICAL PIVOTS (floor-trading pivots)...
I happen to like it maybe because it involved simple mathematics, and it was my fav subject since 15 years of my life (half of my life)...
Most of you know about my small fascination for Pivotal levels using the Classical formula (floor-trading pivots) for intraday NIFTY trading. These simple mathematical formulae’s resulting levels really astonish me with the frequency with which they coincide with actual key chartical support and resistance levels, and the “respect” these levels get at time of actual intraday trading. (I have discussed the whats, hows & whens about them in our library thread).
Few months back, I was inspired to use this PIVOT level (ie the average of High, Low & Settlement Close of Nifty) to help me out in positional trades and/or to give a sense of direction of Nifty’s movement. I scanned the “world wide web” for articles relating to Pivot calculations, but mostly found them dealing with forex transactions.
I came across 2-3 methods where Pivot level was compared with its 3 day average and with last 3 or 5 days’ average of Closing prices, and thus giving the result of the direction bias. I also incorporated some of my formulae and in the end, I had 6 different formulae dealing with Pivot & Closing level and giving a BUY or SELL call. Obviously, there would be some days when some of these formulae will have contrasting result with the other formulae.
Hence I decided to do what is done in such cases – right from school-level kiddish games to national/international level elections – GOING WITH THE MAJORITY. If atleast 4 out of 6 formulae say “BUY”, I would go with that long call. If 3 say BUY and other 3 say SELL, I would remain neutral.
I decided to incorporate BOTH SPOT & FUTURE levels and thus, by applying 6 formule to both scrips, I get 12 results (6 corresponding to SPOT levels and 6 corresponding to FUT levels).
(all this may seem crap to some of you, but I just wanted to put forward my views & reasonings)
Ok, now moving on to the main part….
I made this Excel file, wherein I made 3 worksheets – one for SPOT, one for FUT and one which has the resulting summary of both.
I have attached this excel file, which I can study & use for trading accordingly…
HOW TO USE IT (also mentioned in respective worksheets of the file):
1. One will have to enter Spot’s and Future’s Open, High, Low & Close values along with the respective date in the respective row, at the end of the trading day, in the respective worksheet of the Excel file.
a. “Date” is just for identifying the trading session
b. “Open” value is actually not required anywhere in Call generation; it is just for statistical & study purpose.
c. “Open”, “High” & “Low” values are readily available on the trading screen / market watch window, or at NSE’s website
d. “Close” value - I prefer Settlement closing price, and not the “Last Traded Price”. Spot’s settlement price comes up on screen within 5 minutes of closing, and Future’s settlement closing price comes on NSE’s website by 4pm.
2. After entering these values in SPOT & FUTURE worksheet, go to SUMMARY worksheet and check out the last 2 columns (columns S & T ie Call generated & its price) against that respective trading day.
PLEASE NOTE THAT ONE WILL HAVE TO TAKE A NEW TRADING POSITION AS & WHEN A NEW TRADING CALL IS GENERATED…
Now, you would ask, how can one take a position after end of day, and before start of new trading day…
Well, there’s no problem at all in case of OPEN value…
High & Low values by 3:25pm remain the same even after 3:30pm (closing time) UNLESS WE HAVE THAT RARE SHARP VERTICAL MOVE GOING ON TILL THE VERY LAST MINUTE….
Now, regarding close – well, I hope this is common knowledge that “settlement price” is actually a weighted average price of the trading price between 3:00pm and 3:30pm. By 3:25pm, those who have good screen time experience will have a rough idea about the possible closing settlement price in the next 5 minutes. So, one can enter this value in the Close column. Future’s closing value can be derived from such tentative Spot’s settlement price estimate by adjusting the prevailing premium/discount to spot price.
All this may seem complicated – don’t worry – we are just looking for the likely settlement price at 3:25pm to enter in the excel file, so that we get the call generated using the formulae. If the latest day’s call generated is same as that of the previous day, then we simply hold on to our previous trading position. But, if a different call is generated than the previous day’s call, then we have to SAR the previous trading position accordingly.
For example, in the attached excel file with data entered till Friday 12-Dec-08, call is of LONG position since closing of 4-Dec-08’s closing of Fut 2796.
Now, on next trading day, Monday 15-Dec-08, at 3:25pm, we simply enter the Open, High & Low values till that time. For close value, as aforesaid, a rough estimate/judgement price will have to be entered. If the resulting call for 15-Dec is still LONG, then we do nothing and continue our position.
But, if resulting call is of SELL, then we wait for 2 more minutes to confirm our estimated closing price, and if still it’s coming as SELL, then we close our LONG position and switch to SELL position before market ends at 3:30pm.
At 4pm, enter the exact levels as derived from market-watch window or NSE’s website, and confirm the call generated. 99% of times there would be no trouble in all this.
So, in short, at around 3:25pm, just before closing, one will have to enter these O, H, L, C figures of both Spot & Fut, and simply check out the SUMMARY worksheet to verify whether the old positional call continues or there is a change, and act accordingly before 3:30pm.
Now, for some personal views:
1. Floor-trading PIVOT level is far different from Saint Sir’s PIVOT. The former is derived using a calculator, while the latter is derived from the charts. There should be no confusion in this regard.
2. There’s no chartical knowledge required for this method. A simple entry of levels in respective cells, and going with call generated.
3. The call generated will be with respect to the Settlement closing price of Nifty Future (since we can trade only in Future and not Spot value).
4. Unlike Vinod Nadoda ji’s mechanical trading system, where one can know before hand, the exact entry & exit price (on intraday basis), in this system, we can only know the entry price at NEARLY the end of the day. Stop-loss level is NOT known at all. One will have to wait for near-completion of the next trading session to confirm the continuation or reversal of trading position. Hence, one cannot even attempt to do position-sizing with this method, and will have to stick with fixed lot of Futures or In-the-money or At-the-money Options.
5. Like in case of any mechanical trading system, this system will also not reveal part-profit booking levels. That will have to be decided by one’s greed & fear factor.
6. The previous result of this system is in front of you – it has faced whipsaws quite sometimes and July 08 was particularly bad with a drawdown of nearly 800 points at a stretch due to whipsaws.
It seems that this system is full of flaws – no prior knowledge of stops, no position sizing, chances of frequent whipsaws, etc.
But, as aforesaid, the purpose of this mechanical system is just to indicate directional bias. One may chose to trade on it, or may use it for second confirmation. Also, one may exit (partly or fully) his position as whatever suitable price target.
Please refer Post # 54 for reason behind modification of the excel file.
It will now also include 2Day & 3Day Swing Signals.
Plus, each worksheet of the Excel file has been LOCKED to prevent any accidental edition/deletion of cell formula.
But, no password has been assigned to its unlocking - any advanced user may unlock the sheet one-by-one by clicking on the Menu Bar:
TOOLS -> PROTECTION -> UNPROTECT SHEET
(For locking, follow the same procedure & choose "Protect sheet")
Also, the file will be updated with latest Nifty Data on every Sunday, and the link of such updated file will appear in Post # 3 of this thread.
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