Experiments in Technical Analysis

[rpc]

Hi karthik & SGM

yes karthik you have thoroughly confused me .
I feel what SGM has suggested is correct to some extent
I agree if we follow only the CO then the CO may at times be below SL(%age SL).However what we can do
is follow CO and SL(1%of trading equity) only.We may abandon the use of 5 % SL altogehter(I think
this is what AJAY also wanted).Now we should set SL at CO or 1% of trading equity whichever is higher.
This way we can have the best of both worlds.
In case :
1) CO is above 1 % SL we have the satisfaction of following the signals ie being disciplined trader.
(This may or may not be a profitable trade)
2) CO is below 1 % SL we get stopped out by losing 1 % of equity and again satisfaction that we are
following the Gurus who fiercly advocate strict use of SL.Also CO staying above SL will act as a
trailing SL.

The only problems in this system are
1) Frequent whipshaws(given by CO) may wipe out the trader completely, which would mean the system is bad and
needs improvement.
2) Whether 1 % SL of trading is too tight or too loose a SL ?This I think would depend on the risk
bearing capacity of the trader.An aggressive trader may keep a deeper SL of 1.5 % or 2% even.Whereas
a conservative trader may not want to lose more than .5 to .75 % of trading equity.
But then losing on stock market is part of game.

To determine the CO of EMA(C,13) and EMA(EMA(C,13),13) we can use the follo formula

(EMA13y*Sc13*Dc13+Sc13(EMA13y-EEMA13y)+EEMA13y)/(Sc13*Dc13)

where

EMA13y - Yesterday's EMA
EEMA13y - Yesterday's EMA of 13d EMA
Sc13 - Smoothing factor ie 2/(13+1)
Dc13 - Decay factor ie 1-Sc13

It can be used as follows.for eg taken a long position today.Determine CO for tomorrow.If the
CO > 1 % TE SL .Enter in computer terminal SL as CO.If CO < 1 % TE SL then Enter 1 % TE SL as SL in the
terminal.Of course the above system will be followed only in cases involving CO systems.
Seniors pls guide.

thanks

with best wishes
rpc

PS : Did you meet yesterday ? @ SGM pls inform about meetings preferably before 1.30 pm on
Saturdays if we are meeting on Saturday or Sunday as i do not come to office on Sat afternoons and Sundays.
This is just a request.

 

[rahulg77]

Hi Rahul

Yes, I have made some study of KST. Did not find it vey useful but does give some ideas about good moveS tough a little delayed.

I will make a detailed post later as I will be travelling soon. Making a short trip to India . I know there are many things requested by you are pending like combo of Indicators.

Unfortunately too many thing on hand and my work is also keeping me too busy. Please bear with me.

warm regards

Karthik

Hey karthik,

Thats nice. Any chances u will be delhi.

I quite understand as u all very aggressively following the test and that is a good exercise and taking out regular time is very difficult. So please take your time and repl at your own leisure.

Rgds

Rahul

 

[karthikmarar]

Hi karthik & SGM

yes karthik you have thoroughly confused me .
I feel what SGM has suggested is correct to some extent
I agree if we follow only the CO then the CO may at times be below SL(%age SL).However what we can dois follow CO and SL(1%of trading equity) only.We may abandon the use of 5 % SL altogehter(I think this is what AJAY also wanted).Now we should set SL at CO or 1% of trading equity whichever is higher.
This way we can have the best of both worlds.

In case :
1) CO is above 1 % SL we have the satisfaction of following the signals ie being disciplined trader.
(This may or may not be a profitable trade)
2) CO is below 1 % SL we get stopped out by losing 1 % of equity and again satisfaction that we are following the Gurus who fiercely advocate strict use of SL. Also CO staying above SL will act as a trailing SL.

Hi rpc,

First, It is heartwarming to see you come up with such technical studies and queries. You are taking great steps forwards. Do keep it up..

The problems with CO as the stop loss are
1.It is difficult to Estimate the adverse CO movement.
2. The stop loss moves with the trend, initially in the opposite direction and then turns up to converge if the trend is up. This does reflect the risk like Sanjay pointed out. But how far will it move down we cannot say as this depends on the stock movement.

CO can be better considered for Trailing stops but not for stop-loss. Let us be clear about the difference between a stop-loss and trailing stop. A stop loss preserves your capital whereas a trailing stop preserves your profits.

2) Whether 1 % SL of trading is too tight or too loose a SL ?This I think would depend on the risk bearing capacity of the trader. An aggressive trader may keep a deeper SL of 1.5 % or 2% even. Whereas a conservative trader may not want to lose more than .5 to .75 % of trading equity. But then losing on stock market is part of game.

Absolutely agree with you. For the sake of commonality we had considered 1% of equity as stop loss. Traders should fix their own SL based on the factors mentioned by you.

To determine the CO of EMA(C,13) and EMA(EMA(C,13),13) we can use the follo formula

(EMA13y*Sc13*Dc13+Sc13(EMA13y-EEMA13y)+EEMA13y)/(Sc13*Dc13)

where

EMA13y - Yesterday's EMA
EEMA13y - Yesterday's EMA of 13d EMA
Sc13 - Smoothing factor ie 2/(13+1)
Dc13 - Decay factor ie 1-Sc13

I will try out this formula and give you my comments..

It can be used as follows.for eg taken a long position today.Determine CO for tomorrow.If the CO > 1 % TE SL .Enter in computer terminal SL as CO.If CO < 1 % TE SL then Enter 1 % TE SL as SL in the terminal.Of course the above system will be followed only in cases involving CO systems.
Seniors pls guide.

If you look at the movement of the CO this will be ineffective. Suppose the stock moves up for say 3 days after entry, the CO will be moving down and the EMA will move up. Suppose the stock starts falling after that the EMA will move down and the CO will turn and starts moving up. They start converging till the actual CO occurs. So the CO will up above the maximum value it had gone down

Also we did not meet yesterday.

Hope I have not confused you further

Warm regards

Karthik

 

[SGM]

To determine the CO of EMA(C,13) and EMA(EMA(C,13),13) we can use the follo formula

(EMA13y*Sc13*Dc13+Sc13(EMA13y-EEMA13y)+EEMA13y)/(Sc13*Dc13)

where

EMA13y - Yesterday's EMA
EEMA13y - Yesterday's EMA of 13d EMA
Sc13 - Smoothing factor ie 2/(13+1)
Dc13 - Decay factor ie 1-Sc13

It can be used as follows.for eg taken a long position today.Determine CO for tomorrow.If the
CO > 1 % TE SL .Enter in computer terminal SL as CO.If CO < 1 % TE SL then Enter 1 % TE SL as SL in the terminal.Of course the above system will be followed only in cases involving CO systems.

Hello RPC,

The above formula works with crossover for 2 EMA (e.g ema3 / ema5 or ema5/ema 20). Our equation has EMA of EMA so we will need to resolve that. The logic will be same.

We need to find the C (price) @ which

EMA(C,13) = EMA(EMA(C,13),13)

where we know yema13 & yeema13
i.e. ref(EMA(C,13),-1) and ref(EMA(EMA(C,13),13),-1)

@ SGM pls inform about meetings preferably before 1.30 pm on Saturdays if we are meeting on Saturday or Sunday as i do not come to office on Sat afternoons and Sundays.

Can we fix up a schedule to meet maybe once or twice in a week so no need for further miscommunications on that.

Everyone can suggest suitable days and time.


Regards
Sanjay

 

[murthymsr]

...................

Can we fix up a schedule to meet maybe once or twice in a week so no need for further miscommunications on that.

Everyone can suggest suitable days and time.

Regards
Sanjay

dear sanjay,
i am ready for the meeting ON ANY DAY at :

22:00 or 21:30 or 21:00 Hrs, in that order of preference.

the meeting may be brief with a tentatative duration of ONE hour.

meeting once a week may be sufficient.

thanks.
murthymsr

 

[SGM]

dear sanjay,
i am ready for the meeting ON ANY DAY at :

22:00 or 21:30 or 21:00 Hrs, in that order of preference.

the meeting may be brief with a tentatative duration of ONE hour.

meeting once a week may be sufficient.

thanks.
murthymsr

Hello All

So we can decide to meet for 1 hr, once every week @ 22:00 Hrs. Now plz post choice if any for DOW (Day of the Week)

Regards
Sanjay

 

[asnavale]

Hi Sanjay,

Weekly once for 1 hour starting at 10:00PM (IST) is ok for me. My choice for days is SATURDAY or SUNDAY. Both are equally convenient for me.

-Anant

 

[rpc]

Hi karthik
thanks for the encouragement.I can not thank you enough for introducing people like me to the wonders of TA.
In the hope of receiving perinnial guidance from you
with best wishes
rpc

 

[rpc]

hi SGM
pls try out the formula.I think the formula takes care of what you require.pls let me know if you find any problem.

I am also agreeable to either Saturday or Sunday @ 10 pm.Saturday is preferable.

thanks with best wishes
rpc

 

[rpc]

hi Sanjay

I sincerely apologise for the formula which I gave earlier.Yes it is wrong.The correct formula
is as follows.

(EMA13y*(Sc13*Dc13-1)+Sc13*(EMA13y-EEMA13y)+EEMA13y)/(Sc13*Dc13)

I had actually worked on EMA(C,5) and EMA(EMA(C,5),13) and mearly plugged in variables for your
requirement.In my hurry I did not check it.I have now checked the above formula.I am getting the
CO line crossing at the precise point of EMA COs.The 3 lines cross at same point.
Pls check and inform if it works.
sorry for the inconvenience caused by earlier formula.
with best wishes
rpc