Wednesday, June 24, 2009

Important follow through on trading strategy… Please read….

A couple of days back I had written about a strategy regarding trading on 3 and 15 EMA crossovers on 5 min charts. This was posted on my blog  and you can reach it by clicking (Click Me) and on Stockezy that can be reached by (Click Me). I am sorry but what happened was that the electricity was coming and going every five minutes so when I finally had the presentation in some shape I got disgusted and published it.

Like I had written in the beginning of the strategy – everything has a plus and a negative – so this too has some negatives draped along with it: – I will present the few that I have noticed and will be grateful if – anyone who notices something more should add on.

  • The fact remains that the 15 EMA on five minutes candle starts showing around 1115 or so. So that would imply that there will not be any trade till then. Okay here is a work around. Firstly everyone says that first 30 min are for the amateurs – yes it does swing but I too personally feel that it is not worth entering for the first 30 min in the market as there is too much of Topsy Truvy as many a times irrelevant things make the markets sway. Also it is not so that if you do not plot a 15 EMA you will not be able to know the trend – so I compensate with starting with a 8 EMA period and place trades accordingly and then every 10 min change the EMA line by two so that finally I come to the 15 EMA period.
  • Sometimes the whiplashes are too much and strong. Okay this is an important part. Two things that you must do.
    • Firstly, in such a situation do not enter trades – eventually such tiding die down in a few hours time.
    • Secondly, start by keeping the stop loss further out.
    • Thirdly, as you would expect a violent breakout in one direction – keep an increased distance between the stop loss and the trigger price. Like in Nifty on a normal day 2 point is good enough for you to trade a direction. On other days 3 points serve the purpose and on extremely violent days – like the coming budget day a 5 or even a 10 point should be there since the direction can change with a force not seen usually. Saw what happened on the election result day?

Finally I would end it be saying – there are days when things just do not work out – sit aside and take a break. In any case on a normal day with this strategy you get generally only two good trades and one odd whiplash. but winning is generally two to three time the loosing.

Please do comment.



r m said...


Thanks for the update!

The 15EMA problem for the beginning of trade is not there if you are using icharts or yahoo charts because they pick up the average from the previous day prices. However there is almost universal consensus on not trading in the first 15 minutes except for the ultra-fast scalpers.

S S Cheema said...

Cheers all the way!!