Nifty Pivot-based Mechanical Trading System coupled with 2 and 3 Day Swing Calls

[Sunil]

The signal is triggered if any 2 out of the 3 defined conditions (A, B, C) are true.

Can be represented as

(A AND B) OR (A AND C) OR (B AND C)

But in the conditions above B will always be true, when C is true ...

Thus removing that redundancy, the simplifed equation will be

(A AND B) OR C

the importance of 3day swing was highlighted by the very first trade for this thread (check out strategy as at closing of 18-Dec)....
- excel gave sell call
- 2 Day Swing gave neutral call (as closing was exactly at stop)
- 3 Day swing was still long

so, instead of switching to short, i chose to remain neutral (this decision eventually saved me from a whipsaw trade)

my experience is that a combination of these 3 methods result in less frequent whipsaws
cant have any system without them... ;-)

also, my original game plan is actually this (subject to extent of opposite direction closing):

The position is reversed if :
2 of the above 3 systems give a reversal call
or
all 12 indicators of the pivot based system give a reversal call



We can even shift to neutral/nil position if there's no clear consensus

 

[Sunil]

POSITION AS AT END OF 22-DEC-08

1. Pivot Based mechanical system (Excel file):
Position: Long at FUT 3076 / SPOT 3061 since 18Dec
(The excel system MAY give SELL call if FUT closes below 3040 on Tuesday 23-Dec; obviously we will have to confirm with actual High & Low of that day too)

2. 2 Day Swing
Position: Long @ SPOT 2788 since 4-Dec
SAR = CLOSE BELOW SPOT 3028 (which is the lowest low of the last two trading sessions)

3. 3 Day Swing
Position = Long @ SPOT 2928 since 10-Dec
SAR = CLOSE BELOW SPOT 2923 (which is the lowest low of the last three trading sessions)


OVERALL POSITION
LONG CALL from FUT 3076 / SPOT 3061 since 18-Dec is maintained and carried forward.
This multi-layered system/indicator will reverse to SHORT if SPOT closes below 3028 on 23-Dec

 

[Sunil]

Today's downmove has left double tops in both SPOT (3110) and FUT (3117) looking at intraday chart since Friday

The above bearish pattern gets more vicious on a good breakdown of 3040-35 level - the trough band for the double tops.

With two more days for expiry/settlement, it may boil down to 3000 & 3100. and overall 2950 & 3150.
Let's see...

 

[Sunil]

Hello Sunil

Were you replying to my post or just like that ...


Any way all I have pointed out is that

Once you are having a 3 Days Range Breakout it also means that you are having a 2 Days Range Breakout

So there is redundancy in the rules that you have put out ...

Not commenting at all if they work or not or which amoungst the three works better, thats another issue all to-get-her...

well, more than signal, i am interested in knowing the levels which respond to 2 Day & 3Day Swings...

it may so happen that, for example, 2Day changes to down but 3day is still up - here I would like to see at what level does 3 day turn down (so as to add more to position, etc)

I agree with you that 3Day swing will give a reversal call later than the first two methods - but it has a different purpose in the overall setup (which I have experienced)...
just like we have 30min & 60min bars in the overall 60min flow method - something of that sort...

BTW, was there a pun in "to-get-her" or "together"

 

[Sunil]

POSITION AS AT END OF 22-DEC-08

1. Pivot Based mechanical system (Excel file):
Earlier Position of "Long at FUT 3076 / SPOT 3061 since 18Dec"
reversed Short today at close FUT 2973 / SPOT 2969

2. 2 Day Swing
Earlier Position of "Long @ SPOT 2788 since 4-Dec"
reversed to Short today @ SPOT 2969
SAR = CLOSE ABOVE SPOT 3110 (which is the highest high of the last two trading sessions)

3. 3 Day Swing
Position = Long @ SPOT 2928 since 10-Dec
New SAR = CLOSE BELOW SPOT 2957 (which is the lowest low of the last three trading sessions)


OVERALL POSITION
As expected, the overall system indicated to reverse long and go SHORT today.

 

[Sunil]

The above bearish pattern gets more vicious on a good breakdown of 3040-35 level - the trough band for the double tops.

With two more days for expiry/settlement, it may boil down to 3000 & 3100. and overall 2950 & 3150.
Let's see...

The double top's trough-break & Outside Day Bar of Monday had the expected & desired effect today, as soon as yesterday's low of Spot 3028 / FUT 3025 got broken at today's gap down.
Textbook target of 3040-(3110-3040) = 3040-70 = 2970 was surpassed comfortably, and today's low was near the 2950 expected support level.

Personal view on Nifty levels

The short term uptrend, since the low of 2500, is in form of Higher-Low Higher-High (HL HH) pattern, as visible in 30min/60min charts.
After making a new higher high on Friday, SPOT 2923 becomes the key previous HL and a close below SPOT 2923 breaks/stops/reverses the uptrend.
SPOT 2923 is also the 5 Day Swing Low & thus, last week's low.
A close below SPOT 2923 would also mean a re-failure of 50Day Simple Moving Average.

The corresponding FUT level is around 2930, which was the near-low of both Thursday & Friday.


On upside, SPOT 3145-3160 is the key resistance band. A break above confirms the intermediate uptrend.

Tomorrow is the test of this bull's back, previous higher-low, pivot low, 50DSMA... (so many titles for this level) SPOT 2925-20.
Bears need to break this for a date with SPOT 2850.
Bulls need to hold this for a retest of 3000

upside seems capped at around 50more points from Yesterday's high (my personal view)
Expiry on wednesday 24-Dec-08...
and my study on expiry week pattern suggests that next week is going to be a correction week, to make Jan series more attractive
again, strictly as per subjective view

i would put it like this:
I dont see nifty expiry above 3200...
and hence that strategy of selling OTM Dec calls and earn the premium (taking inspiration from Satyajit Da's preference of earning "free" premium)

Expiry weeks are great for being "negative" about a particular level (with respect to its closing on settlement day), and selling suitable OTM puts & calls.... (but it is very risky - one has to be very sure of the strike price chosen)

 

[Sunil]

POSITION AS AT END OF 24-DEC-08

1. Pivot Based mechanical system (Excel file):
Sell Call on close of 23-Dec @ FUT 2973 / SPOT 2969 maintains & continues.

2. 2 Day Swing
Current Position: SHORT @ SPOT 2969 since 23-Dec
SAR = CLOSE ABOVE SPOT 3017 (which is the highest high of the last two trading sessions)

3. 3 Day Swing
Earlier Position of "Long @ SPOT 2928 since 10-Dec"
reversed to Short today @ SPOT 2917
SAR = CLOSE ABOVE SPOT 3110 (which is the highest high of the last three trading sessions)


OVERALL POSITION
SHORT position since 23-Dec close of SPOT 2969 being maintained.
Position will reverse to long / buy if SPOT closes above 3017 on Friday 26-Dec

 

[Sunil]

Personal View:

Break & sub-close of SPOT 2923 confirmed the signal of short term downtrend.
The break of 2923 warrants a test of 2850 support level, before the pivotal low of 2815 as in daily charts. Thus, this 2820-50 is an important upcoming support band. I will look to book 1/2 or 1/4 of short position in this band.

Surprisingly, the 50DSMA is EXACTLY at the CLOSE value of SPOT ie 2917, while 20DSMA is at SPOT 2863.

This downtrend move from 3110, in apparently Lower-High Lower-Low pattern, has its Stop-And-Reverse (SAR) level at SPOT 3002, which is the previous Lower-High, near 2 Day Swing high & also a key Pivot high as per 60min chart.

 

[bandlab2]

sunil,

one suggestion. can you modify th excel to include 2D, 3D so that we can see all signals in one excel and its easy to take a call. otherwise, we need to maintain anothe excel or 'remember' the positions which is dangerous. since data entry is done here, it should be easy to include 2D, 3D in same excel

i will do paper trade fom this series

thanks for this excellent method

 

[lvgandhi]

sunil,

one suggestion. can you modify th excel to include 2D, 3D so that we can see all signals in one excel and its easy to take a call. otherwise, we need to maintain anothe excel or 'remember' the positions which is dangerous. since data entry is done here, it should be easy to include 2D, 3D in same excel

i will do paper trade fom this series

thanks for this excellent method

I have made the same in spot sheet.
Sunil,
you may like to see and correct if required.
Link is given below.
http://tinyurl.com/8relj7