SH's 315 Strategy - how to use if effectively

[bandlab2]

Try and write some trades on this..i mean entries and exits and reasons...u will see it is not all dat simple....MM and TP is very imp...and im eaiting eagerly for SH to detail us on the same....

ankit, the way i see it , this will be a great tool for positional traders. so far i checked only EOD charts and it shows great results on most instruments in last 1 yr. my observation is for 6 months we will be in stagnat mode means no profit no loss and for 6 months we will have trending market. we make money in 6 months for 1 year. you need lot of patience in those 6 months where market is range bound and you need to control your fear during the 6 months of trending market. just sit back and enjoy, you may have one trade per month , thats all

for example you have 2 lakh rs. take dlf lot size as 800 and entry price is 145. u need 40000 rs per lot and additional 20000 (50%) as M2M adjustments. you buy 3 lots and add 2 more lots at 250 and exit all 5 lots at 350 and short 3 lots at 350, now dlf is at 280. your total profit would be 7.3 lakhs on investment of 2 lakhs in one year !!!! what else you want ?

i am also waiting for clear rules on this by thread initiator, dont know why he is taking so long ?

 

[ag_fx]

ankit, the way i see it , this will be a great tool for positional traders. so far i checked only EOD charts and it shows great results on most instruments in last 1 yr. my observation is for 6 months we will be in stagnat mode means no profit no loss and for 6 months we will have trending market. we make money in 6 months for 1 year. you need lot of patience in those 6 months where market is range bound and you need to control your fear during the 6 months of trending market. just sit back and enjoy, you may have one trade per month , thats all

for example you have 2 lakh rs. take dlf lot size as 800 and entry price is 145. u need 40000 rs per lot and additional 20000 (50%) as M2M adjustments. you buy 3 lots and add 2 more lots at 250 and exit all 5 lots at 350 and short 3 lots at 350, now dlf is at 280. your total profit would be 7.3 lakhs on investment of 2 lakhs in one year !!!! what else you want ?

i am also waiting for clear rules on this by thread initiator, dont know why he is taking so long ?

Oh no..you got me wrong...What I meant was that just looking at the crossovers wont help. When we go and design any trading system, we need clear cut rules of entries, exits, SL and TPs. Once they are in place, then we can backtest this system for exact results.
I am very bullish on this method though :thumb:

So in no way I am condemning it or anything. Just waiting for all the rules to be explained so that it becomes tradeable.

Happy Trading

 

[ag_fx]

for example you have 2 lakh rs. take dlf lot size as 800 and entry price is 145. u need 40000 rs per lot and additional 20000 (50%) as M2M adjustments. you buy 3 lots and add 2 more lots at 250 and exit all 5 lots at 350 and short 3 lots at 350, now dlf is at 280. your total profit would be 7.3 lakhs on investment of 2 lakhs in one year !!!! what else you want ?

You see friend, here is what I wanted to point out. with 3 lots of DLF and 2 lakhs capital, u will be risking Rs 2400 per Rs 1 movement in the DLF Fut. That means even if you loose 1 rs on the trade, u actually lost 1% of ur capital. I am sure with this method , the SL will not be so close.

Lets say our initial SL is Rs 10 away. Then, with your MM, we will risk 24000 on 3 lots or more than 12% of our trading capital on one trade. 3-4 such trades in continuation and you wil be out of tradeable capital(to trade 3 lots again).

I am sure SH wil be having a clear cut MM rules and I hope we can learn from him.

Best

Happy Tradijg

 

[bandlab2]

ok, this is 1 hr intraday chart on nifty future in jan 22 - mar 03 2009 where its range bound. difference between hi, lo is around 300 points. lets see the trades. total points earned is 500 and consider 10% slippage (higher side) , even then we earned 450 points in 30 trading days. total trades = 11.

in trending market it gives greater returns

 

[bandlab2]

Oh no..you got me wrong...What I meant was that just looking at the crossovers wont help. When we go and design any trading system, we need clear cut rules of entries, exits, SL and TPs. Once they are in place, then we can backtest this system for exact results.
I am very bullish on this method though :thumb:

So in no way I am condemning it or anything. Just waiting for all the rules to be explained so that it becomes tradeable.

Happy Trading

yes we need trading rules for any method. risk, money management etc. but with visual scan of the charts looks promising. but to translate this into a tradeble idea we need some rules.

my observation : on EOD charts there are less whips (as expected) and the money lost in whips is not much. but it frustrates u a lot. on intraday charts, whips and gap ups will cause some worry. but in EOD charts we dont worry too much on gaps

 

[bandlab2]

You see friend, here is what I wanted to point out. with 3 lots of DLF and 2 lakhs capital, u will be risking Rs 2400 per Rs 1 movement in the DLF Fut. That means even if you loose 1 rs on the trade, u actually lost 1% of ur capital. I am sure with this method , the SL will not be so close.

Lets say our initial SL is Rs 10 away. Then, with your MM, we will risk 24000 on 3 lots or more than 12% of our trading capital on one trade. 3-4 such trades in continuation and you wil be out of tradeable capital(to trade 3 lots again).

I am sure SH wil be having a clear cut MM rules and I hope we can learn from him.

Best

Happy Tradijg

in this method, i dont put any SL. If you put SL then we are not in the trade. this is a always in the trade. but for position sizing we need to calculate some risk. for 2 lakhs capital and 3 lots at 145 rs, we still have 80000 rs in the account, this will cover upto 33 rs loss. wether 33 rs is close or far away depends on back test results and ones own risk appetite

i agree we may start on lighter note and keep adding more lots on winning trades

i am surpised SH hasnt come up with the rules yet.

 

[ag_fx]

ok, this is 1 hr intraday chart on nifty future in jan 22 - mar 03 2009 where its range bound. difference between hi, lo is around 300 points. lets see the trades. total points earned is 500 and consider 10% slippage (higher side) , even then we earned 450 points in 30 trading days. total trades = 11.

in trending market it gives greater returns

I have my doubts over ut sheet buddy...here is why. i will explain giving the example of first 2 trades.

Your trade

27th jan 09, Buy 2701 and exit 30 jan 2770.

My explaination
You took the entry price as the opening price of 27th jan, which is next to impossible to get always. Also, you took the long above 955-1000 candle at the close of which EMA 3 was under EMA 15.
The EMAs crossed over at close of 11AM candle and valid entry was 2724.

Also, you took the exit on 30th jan at low of 955-1000 candle. ideally, u shud wait for the candle to close and den exit.The valid exit was 2772.

Thus, instead of +69, this trade generated only +48


Your 2nd trade

Short on 30 jan @ 2770 and cover 30 jan 2780

My explaination
Again as listed above, the entry price shud be 2772.
I dont know how you took 2780 as the exit level. the ema crossover occurred at 1200PM close. The level was 2817.

So instead of -10, this trade generated -45


So u see, in just 2 trades, instead of ur estimate of +59, this method of urs generated +3 points.

EMA crossovers are lot more difficult to trade than what they seem. Once again I wud request you to let SM post his complete strategy first. Dont get carried away by the simple EYEBALLING effect.


Happy Trading

 

[Tradewithhunter]

Hi Bandlab/Ankit - Sorry for the delay in responding to all your posts and putting my rules here. I just wanted to leave the strategy here for people to digest the 'concept' first before i put forward my money management and other system details.

Its great to see you guys have done some chart reading. Bandlab, great that you have tested it on some intraday time frames as well.

Coming back to my rules... I will talk about Entries, position sizing, pyramiding and Exits (yes, its not always in a trade method) !!

BUT FIRST OF ALL, PLS APPLY 315 TO EOD ... believe me i have thought (and tried) applying 315 to intraday but success ratio is too low. 315 is for traders to trade less and make more money.

Coming to rules....

Entries

Entries are simple, you wait for a candle to close above 15 EMA, next candle to open and see if 3 EMA is above 15 EMA or not. If the answer is 'Yes' you go long. For shorts you need an exact opposite setup.

Position Sizing

Since in this system SL cannot be defined as a 'level' your initial position sizing has to be small. Depending on the trading capital, you dont want to put more than 25% capital which you want to put in this trade in as the first trade i.e assume if you can trade a total of 4 lots max, you will start with 1 lot. Rest 3 lots we will add later as our position moves into profit.

Pyramiding

Pyramiding or 'adds' are obviosly done once our position has 'swung' into profits. The rule is we add when the markets correct after a swing, price comes and touched 15 EMA again (but 3 EMA hasnt crossed over). This means that we add very close to our SAR hence keeps the risk small and also ensures that even if SAR is triggered we still end up in net profits (since our initial position is in profits hopefully now).

Exits

Yes, we do exit at certain points even when our SAR is not hit. These exit points are obviously when our position is suddenly in deep profits becuase of an extreme rally or crash in our favour. The exit points are where you find our 'current' EOD candle is not touching 3 EMA at all. On this candle, we book profits and wait for markets to correct back and touch 3 EMA again. As soon as 3 EMA is touched we jump back into our initiaal position. So in a way we stay with our position, we just exit it once and get back in after a small correction.

I would let you guys analyse, examine and apply these rules to some of the trades which you have identified. I am also posting an NF chart below showing entries, Pyramids or 'adds', Exit and jump back in and finally SAR.

Please do post any questions you have here.

In the end, I would try and touch the most important piece which is 'how to protect capital from whipsaws' .. but thats later.....

NF Chart in next post below.

Cheers
SH:thumb:

 

[bandlab2]

I have my doubts over ut sheet buddy...here is why. i will explain giving the example of first 2 trades.

Your trade

27th jan 09, Buy 2701 and exit 30 jan 2770.

My explaination
You took the entry price as the opening price of 27th jan, which is next to impossible to get always. Also, you took the long above 955-1000 candle at the close of which EMA 3 was under EMA 15.
The EMAs crossed over at close of 11AM candle and valid entry was 2724.

Also, you took the exit on 30th jan at low of 955-1000 candle. ideally, u shud wait for the candle to close and den exit.The valid exit was 2772.

Thus, instead of +69, this trade generated only +48


Your 2nd trade

Short on 30 jan @ 2770 and cover 30 jan 2780

My explaination
Again as listed above, the entry price shud be 2772.
I dont know how you took 2780 as the exit level. the ema crossover occurred at 1200PM close. The level was 2817.

So instead of -10, this trade generated -45


So u see, in just 2 trades, instead of ur estimate of +59, this method of urs generated +3 points.

EMA crossovers are lot more difficult to trade than what they seem. Once again I wud request you to let SM post his complete strategy first. Dont get carried away by the simple EYEBALLING effect.


Happy Trading

on IEOD charts ema c/o looks confusing as we are seeing in this pride system also. on EOD charts we get more clarity and the whips are relatively less

still waiting for SH to post his rules

 

[ag_fx]

Coming back to my rules... I will talk about Entries, position sizing, pyramiding and Exits (yes, its not always in a trade method) !!

Thanks for the post SH. I already have a few questions. i wud though wai for your charts before firing them.

Happy Trading