Trading Systems Using Technical Analysis

[SwingKing]

My strategy with stochastic is like:::::

1) decide trend with 3 & 6 month graph(trade only with positive & neutral trend, ignore negative trend)
2) wait %k value comes below 12%
3) buy when %k cross 12% value..
4) ignore if result or news comes negative
5) my stop loss will be support.


Thanx
Chirag Vyas

Chirag,

You are not trading based on stochastic. You are using Trend and Support levels to guide you in the right direction. Hence if you are getting good results, then continue to do so.

My comment was valid only when stochastic is used as a complete system. Hope this helps.

Tc

 

[SwingKing]

Thanks Raunak for a quick reply. I probably missed emphasizing enough that, I was picking the stocks which gave atleast 5 signals out of 7, in the last 5 days.

Will you please clarify that the test results considered that as well.

Regards
Sesha

Sesha,

Thanks for putting this thing through. I did not take these into consideration. Will see to it.

Tc

 

[chiragvyas.50]

Chirag,

You are not trading based on stochastic. You are using Trend and Support levels to guide you in the right direction. Hence if you are getting good results, then continue to do so.

My comment was valid only when stochastic is used as a complete system. Hope this helps.

Tc

Yes........m quite happy with the result i m getting.....
One more thing i like 2 ask u is... Are these steps enough or should i look some more parameters.......???.. it would be great moment, if you make my system little bit more perfect.

approximate 8 out of 10(monthly basis)... i got sucess....

Thanx
Chirag Vyas

 

[Apurv7164]

First of all thank you so much Raunakji for this thread, this was indeed required for new traders as well as for experienced also. New traders will get help in building own system or discipline and experience traders will get to revisit system coz no system works all the time....

Here is what I take into consideration -

1> What type of daily chart is? Trending or consolidating? - I use ADX to get the answer of this.
2> What does higher time frame suggest? (I must admit and appreciate that I learnt this from Raunakji only on other thread) - I use same ADX to know this.

Now if I find daily and weekly both trending, I use 20 daily EMA for entry and keep stop loss at the latest pivot low with the exception of complex corrections. If I find correction is complexe, I wait for pivot to be formed and chart to reverse journey (provided -DI is not getting dominance during complex correction). My recent entry on this is Federal Bank.... you can see chart and explaination on other thread.

Else if I find stock/market is non trending (consolidating) -
I trade using RSI (9). I get into train if price making pivot reversal at support and RSI turning above 30 or 40.

I also trade breakout from consolidation - but usually i wait for retracement and get into it using trending market theory rather than getting aboard right after break out. However, I at times, get into it right after breakout for scalping.

My opinion - I dont believe in using RSI/Stoch/Mom/RoC all together. I prefer only one of these coz to me all are saying same story so I use RSI.

On similar note I dont believe in using MACD and ADX both together coz to me both saying same story so I prefer using ADX.

Need Help:
I have always struggled in understanding price momentum at support/resistence and breakout. Can someone help me here?

 

[SwingKing]

Ksesha,

We discounted the fact that you wanted to use 5 factors out of 7 in picking out the signals. On doing so, the results generated were profitable, but that does not reflect the usage of your system. Soon I will be putting out a post where I will tell you guys how I judge a system. For the time being, here are my comments.

The system takes into account many rules. You basically want to enter when majority of (lagging) indicators are pointing towards one thing. Though this may work in trending markets, this is certainly not going to work in non trending markets. Draw downs were as big as 37% which in my opinion is unsustainable for a retail trader. The strategy had a winning percentage of less than 42% which would indicate that in case of a 37% drawdown, it is going to take too many trades to just retrace back your losses.

Solution: If you like stochastic and MACD, then let me give you something basic to start with. With your experience you can build upon this. The trick to use stochastic and MACD together is to let the stochastic cross and then if MACD also crosses, then enter the trade. That is, MACD helps to filter out bad stochastic trades. It acts as a confirmation indicator. This approach will do very well on trending markets and non trending markets on larger time frames.

Hope this helps.

Tc

 

[SwingKing]

Yes........m quite happy with the result i m getting.....
One more thing i like 2 ask u is... Are these steps enough or should i look some more parameters.......???.. it would be great moment, if you make my system little bit more perfect.

approximate 8 out of 10(monthly basis)... i got sucess....

Thanx
Chirag Vyas

Chirag,

Since you incorporate Stochastic in your trading, the solution I have mentioned to Ksesha will help you too. Just posting it again here. Will put up some charts for better understanding.

If you like stochastic and MACD, then let me give you something basic to start with. With your experience you can build upon this. The trick to use stochastic and MACD together is to let the stochastic cross and then if MACD also crosses, then enter the trade. That is, MACD helps to filter out bad stochastic trades. It acts as a confirmation indicator. This approach will do very well on trending markets and non trending markets on larger time frames.

 

[Satyen]

Thanks Raunik For the thread will definitely help us for new IDEAS ,

Hi Apruv you were saying about Larry corronors or Jeff Coopers Hit and run like set ups
Why not take one and make it a momentum system for nifty ??

 

[SwingKing]

How MACD can be helpful in Stochastic signal selection. Can be used in any system.

Look at the chart below. Look at where I have written 1,2 and 3. The places where stochastic cross 1 and 2 occur, the MACD was sloping down, hence these crosses were not profitable. On the contrary, Sell stochastic crosses were profitable due to MACD being down.

Moving forward, look at where 3 is marked. There are 2 crosses there which should have been taken because MACD began to point up. When MACD is up and stochastic crosses for sell position, it is most likely that stock will undergo consolidation.

MACD acts as confirmation to Stochastic signals. Incorporating this in any system which uses stochastic can improve the profitability to a great extent.

 

[SwingKing]

Thanks Raunik For the thread will definitely help us for new IDEAS ,

Hi Apruv you were saying about Larry corronors or Jeff Coopers Hit and run like set ups
Why not take one and make it a momentum system for nifty ??

Thanks satyen. Hope to see some wonderful posts by you.

Tc

 

[SwingKing]

Need Help:
I have always struggled in understanding price momentum at support/resistence and breakout. Can someone help me here?

Thanks for your kind words Apurv. Now, coming back to your query.

I will try and put up what I explain here with a chart. But read slowly to grasp the concept. According to me, a bull phase (be it on any time frame) occurs in these stages.

1. Higher high higher low (Run)
2. Lower high lower low (Consolidate)
3. Higher High higher low (Run)

To catch this phenomenon, you need to move to lower time frame. Preferably 60 Minute. Daily time frame somehow does not depict this that often. The thing you need to watch out for is phase 1 first (where no recent swing low is broken). Moving forward you need to watch out for Phase 2 (where lower highs and lower lows are formed) which give a feeling of trend being over. Lastly, then you need to watch for phase 3 where the break out occurs from phase 2 and stock continues to run forward. Stage 2 typically occurs with a falling wedge, flag kind of formation. But dont run behind the exact pattern. Resemblance is more than enough.

Support level from where rally started in phase 1 becomes your main support, any support in phase 2 has no relevance at all (untill stage 3 is formed). Once stage 3 begins to form, take SL as base of stage 2 and go long. This will seem confusing at first, but just try and get down to 60 min frame and visualize this. If you cant, then I'll post an example for you.

Tc