SH's 315 Strategy - how to use if effectively

[Tradewithhunter]

Define the term ema?

EMA is an acronym for Exponential Moving Average. Please read this link to understand what EMA stands for:

http://www.investopedia.com/terms/e/ema.asp

Cheers
Stockhunter

 

[jeetu888]

dear shsun pharma has uptrend 3 >15 and price is >15ema ,when can i buy [enter] trade,should i wait for 15ema to touch or any price between 3ema n 15 ema,pls guide ur strategy on this.

 

[Tradewithhunter]

Dear Jeetu - you can buy immediately once the 315 crossover is confirmed, if that point is too far from 15 EMA .. you can buy 50% at that price and rest 50% when price touches 15 EMA.

However looking at Sunpharma charts, they are not 'clean' charts and the stock seems to whipsaw a lot .. i dont think 315 should be applied to Sunpharma .. there are so many such stocks .. IFCI, WWIL, JP Associate and Reliance are all by recent longs ....

Cheers
SH

 

[kkr555]

Which prices do we need to use to check if a 3/15 cross over has occurred or not ? Do we use the SPOT prices or the FUTURES prices ?

For e.g., NIFTY FUTURES can sometimes trade at +/-1% premium/discount to NIFTY INDEX. Therefore, the moving averages for the NIFTY FUTURES may be entirely different from the SPOT.

OK - so here we go.

The first step is to understand what is 315 .. its advatages and disadvantages.

The second step is to understand some rules I have derived to use it effectively. Rules are related to effective entries, effective SL management, effective profit bookings, effective re-entries and in the end effective money management or effective safeguarding the capital.

In this post I would focus on step 1 i.e what is 315 etc.

315 Strategy for swing trading

315 is a simple swing technique which tries to identify a trend very early. In this strategy we use only EMAs name EMA 3 & EMA 15 (hence the name 315).

People ask me why EMA 3 and EMA 15 .... for me last 3 days define the immediate average price ... to find the slightly longer term trend i use the factor of 5. This is becuase 5 has an interesting relevance to markets.... we have approx 5 hours of trading everyday, 5 trading days in a week, almost 5 trading weeks in a month .... So I simply multiple 3 by 5 to get my 15 EMA which defines my medium term average price.

Now in simple terms, if our immediate average price is higher than the medium term average price that means we are entering in a bull swing ... and visa versa. Hence the strategy entries are:

1 Enter Long when 3 EMA goes above 15 EMA
2 Enter Short when 3 EMA goes below 15 EMA

Advantages of following 315 strategy

1. A simple technique using just 2 EMAs, no other oscilattors or indicators required. NO advanced charting softwares required.

2. System is based on following the ULTIMATE indicator available i.e price action.

3. Keeps a trader in the trend, lets the full swing to complete. Never gets a trader against the trend.

4. Since we are just following price action, we dont need to worry about divergences etc.

Disadvantages of 315 Strategy

1. Works brilliantly in a trending market but can whipsaw in extremely ranging markets. However this can be overcome by certain rules and money management to be explained later in this thread.



So this is what the strategy is folks, do some chart reading and see how it works on EOD charts. Do post any questions you have here.

I will come back to talk about Step 2 again.

Keep an eye on Nifty charts, 315 is going to generate a signal soon... dont miss.

Cheers
SH:thumb:

 

[columbus]

Which prices do we need to use to check to determine if a 3/15 cross over has occurred or not ? Do we use the SPOT prices or the FUTURES prices ?

For e.g., NIFTY FUTURES can sometimes trade at +/-1% premium/discount to NIFTY INDEX. Therefore, the moving averages for the NIFTY FUTURES may be entirely different from the SPOT.

One should consider FUTURE data only for 3/15
Crossover.The discount/Premium over spot is
severe especially at the time of Exipiry of futures.

 

[Hari]

Hi Columbus!

Can you clarify as to why we should be using the futures data when the prices are derived from the spot.

Rgds,
Hari

 

[kkr555]

I guess what Columbus is trying to say is that when one uses Futures to trade, then it is better to use the Futures data to determine the cross-over. As stated by Columbus, for Futures, there is always the additional risk of a premium or a discount to SPOT prices which can alter the trade set up quite substantially.

Ofcourse, if you trade in CASH segment, then one just needs to follow the CASH prices.

I hope Mr TradeWithHunter clarifies this issue. Logically speaking, one would expect to use Futures 3/15 crossover to determine trade set up in Futures and SPOT 3/15 crossover to determine trade setup in CASH segment.

Hi Columbus!

Can you clarify as to why we should be using the futures data when the prices are derived from the spot.

Rgds,
Hari

 

[Tradewithhunter]

I agree - use the prices of the instrument which you want to trade... use futures for Nifty.

Cheers
Stockhunter

 

[columbus]

Hi Columbus!

Can you clarify as to why we should be using the futures data when the prices are derived from the spot.

Rgds,
Hari

When Nifty is falling the discount is as much as 15 points sometimes,
similarly When Nifty is rising the premium is as much as 20 points often.
Today the premium was 12 points.
Nifty Fut.=5039
Nifty = 5027.

 

[sramrutia]

When Nifty is falling the discount is as much as 15 points sometimes,
similarly When Nifty is rising the premium is as much as 20 points often.
Today the premium was 12 points.
Nifty Fut.=5039
Nifty = 5027.

it is not always true. it gives false signal many times.requres support of another indicators.
s.r.patel