Monday, November 29, 2010

BSAR Trading System - Exit Rules

  1. Once I have bought futures, how long would I hold them, before I sell them?
    • You would hold onto your open positions (open positions mean positions that have not been closed by a corresponding opposite transaction) until (1) you get an exit signal from BSAR OR (2) the Futures Contract Expires.
  2. What are the Exit Rules or Exit Signals
    1. Calculate BSAR after markets have closed
    2. If today's closing price is lower than today's BSAR then;
    3. We inquire about the Quotes of the underlying asset after 10 am tomorrow
    4. IF tomorrow at 10 am, the underlying asset (spot prices) is still quoting below BSAR for today then we close our positions immediately
  3. Is there an astrological significance of 10 am?
    • NO. The first one hour and last one hour of trading are characterized by higher volatility, as a rule of thumb. And because our BSAR Trading System is not based on volatility, so we avoid these two time periods in our trading. Which means we could take positions between 10:00 am to 2:30 pm (preferably between 10:05 to 12:30)

Sunday, November 28, 2010

BSAR Trading System - Entry Rules

  1. How to trade for the very first time using BSAR?

    The entry rules for the very FIRST TRADE are as follows: (first trade would always be a long trade)


    1. The Underlying Asset must have been closing below it's BSAR level for at least 3 consecutive trading sessions
    2. Today, for the very first time in last four trading sessions, it should close above BSAR level
    3. Tomorrow even after 10 am, it should be quoting above today's BSAR level
    4. So tomorrow, after 10 am we would place a 'market buy order' to buy Futures Contract of our preferred underlying asset
  2. What are the entry rules for subsequent long trades?

    The entry rules for subsequent Long Trades (Long Trade means first you buy something then sell it) are as follows

    1. The Underlying Asset must have closed above it's BSAR level for today
    2. Tomorrow , even after 10 am, the asset must continue to quote above today's BSAR level.
    3. Place a 'market buy order' for Futures Contract after 10 am

Thursday, November 25, 2010

BSAR Trading System - Simple Implementation

  1. This is the Simple Implementation for most of the people willing to earn extra money using BSAR Trading System
  2. It is good for everyone - Employed, Unemployed, Self- Employed, Shopkeepers, Merchants, Retired, House Wives, Students, Handicapped or Disabled, Farmers, Craftsmen,etc.,
  3. Although one could profit from the BSAR Trading System with a capital as small as Rs 10,000, however for regular Income, one needs to start with Rs 25,000, or start with Rs 10,000 and wait till your capital and profits total Rs. 25,000 for getting a regular income from the system.
  4. There is no need to sit in front of a computer or a terminal or at broker's office
  5. No need for an online trading account - which usually tricks investors into over-trading
  6. There is absolutely no need to purchase any software, data feed etc., you could use a pen (cost=Rs 10) and a pocket diary (cost=Rs 10) and phone your broker for days high, low and close prices (average time = 1 minute everyday, 5 days a week and 22 days a month, a total expenditure of Rs 14 per month). On the other hand some newspapers also publish this data
  7. No need to watch the Support and Resistance Levels, or any Pivot Points, or any other Exponential Moving Averages or Simple Moving Averages (One could do very well even without 50 SMA).
  8. No need to anticipate or fear reversals, volatility, premiums and discounts on derivatives

Wednesday, November 24, 2010

BSAR Trading System - Requirements

  1. What do we need to Profit from BSAR Trading System?
    • A Pen and a Notebook/Old Diary
    • A PAN Card & Election ID Card
    • A Bank Account
    • A Demat and Derivatives Account with any Stock Broker
    • A Basic Mobile Phone with Incoming Call Facility
    • Capital Requirements
      • Minimum: Rs 10,000
      • Recommended: Rs 1,50,000

Wednesday, November 17, 2010

BSAR Trading System - 50 Periods Simple Moving Average

  1. What is the significance of 50 SMA?
    • 50 SMA is the average of the closing prices of last 50 periods. It is used to filter the signals generated by BSAR value. This is the implementation of the style of Bert Dohmen of Dohmen Capital Group. So if,

      UP TREND

      Closing Price is greater than BSAR AND BSAR is greater than 50 SMA.

      DOWN TREND

      Closing Price is less than BSAR AND BSAR is less than 50 SMA

      SIDEWAYS

      When above two conditions are not satisfied.
  2. Advanced Technique:
    • If Delivered Quantity is different than Traded Quantity,then:
    • Instead of Using 50 SMA we could use 50 Periods Adjusted Volume Weighted Moving Average(AVWMA)
    • Adjusted Volume = Traded Quantity * Percent Delivered Quantity to Traded Quantity /100
    • Adjusted Volume Weighted Price = Multiply Low of the Period (day/week) by the Adjusted Volume
    • Calculate 50 periods Moving average of the Adjusted Volume Weighted Price
    • Use it instead of the 50 SMA in the above technique

Tuesday, November 16, 2010

BSAR Trading System - Slow Stochastic Oscillator

  1. What is a Stochastic Oscillator?
    • It is a graphical depiction of a Mathematical formula, which compares a security's closing price relative to it's price range over a given (predetermined) time period.
  2. What is the difference between Fast and Slow Stochastic Oscillator
    • Stochastic Oscillator is termed as %K and it's 3 period moving average is termed as %D. It's the %D's divergences that it's inventor Dr George Lane emphasized upon. So in order to reduce noise and focus on %D, another 3 period average of %D is taken and it is termed as %D Slow. Now if you take a moving average of a moving average of the same period, it is nothing but Triangular Moving Average. And Triangular Moving averages assign maximum weight to the middle of the data series, thereby developing smoothly as we watch them, so that acting upon the signals is relatively easy.
  3. What are the Optimum values for %K, %D, %D Slow?
    • 7,4,4
  4. What are the various ways in which Stochastic Oscillator could be interpreted?
    • Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level.
    • Buy When the %K line rises above the %D line and sell when %K line falls below the %D line.
    • Look for divergences
  5. What is Jake Bernstein's Stochastic Pop?
    • Use the Slow Stochastic (14,5,5)
    • When Slow Stochasticgoes above 75% level then BUY
    • Exit when %K and %D cross
    • When Slow Stochastic goes below the 25% level, then SELL
    • Exit when %K and %D cross
  6. How is Slow Stochastic (7,4,4) implemented in BSAR Trading System?
    • Buy when the asset or a security closes above BSAR and Slow Stochastic (7,4,4) %D rises above 20 after falling below it.
    • Buy More when the asset or a security closes above High EMA and Slow Stochastic (7,4,4) %D is above 75% level. (Full Implementation later)

Monday, November 15, 2010

BSAR Trading System - The EMA of Highs

  1. How is EMA of Highs calculated
    • Exponential Moving Average (EMA) of Highs are calculated in a similar manner as EMA of Lows.
  2. Is EMA of Highs used in a similar fashion as EMA of Lows, perhaps to initiate Short trades?
    • NO. Exhaustive studies conducted by Researchers have found that Going Short hasn't been fruitful using any kind of system, unless the trader uses ad-hoc judgment which is contrary to the basic premise of developing and using a system.
  3. So what is the significance of EMA of Highs
    • We use it for setting breakout point, a deeper understanding would develop as we move along

Sunday, November 14, 2010

BSAR Trading System - The EMA of Lows

  1. How is BSAR value calculated?
    • Biased Stop And Reverse is a value derived by calculating the Exponential Moving Average (EMA) of Lows of the period.
    • First take up the Simple Average of the Lows of the period, e.g., if you want to calculate the Exponential Moving Average of Lows for 9 periods, first calculate the Simple Average of the first 9 periods Low
    • Then Calculate the Smoothing Percentage by the following formula:
      α = 2 / (N + 1);
      Since N in our case is 9;
      => N = 9;
      => N + 1 = 9 + 1 = 10;
      => α = 2 / (10);
      => α = 0.2;
    • Then to calculate the EMA of Lows, the formula is:;

      EMA (today) = EMA (Yesterday) + α * {Low (today)- EMA (Yesterday)}

      Where EMA (yesterday) is the yesterday's value of Exponential Moving Average, but the very first day we had calculated the Simple Average of Lows, hence just for the second day, the EMA (yesterday) would be Simple Average of Lows calculated Yesterday;

      So,
      1st Value of BSAR is Simple Average of Lows for the Period;

      2nd Value is the EMA of the Lows for the Period;
      where the EMA(Yesterday) = Simple Average of Lows calculated Yesterday or 1st Value ;

      3rd Value of BSAR is the EMA of Lows for the Period;
      where the EMA(Yesterday) = EMA of Lows calculated on 2nd Day.
  2. What is the α in above equation
    • α is the Greek alphabet "Alpha".
    • It is the smoothing factor in EMA formula which defines the weight that is assigned to the current value
    • It's value range is between 0 and 1
    • For Example a 18% weight-age for the current value means α = (18/100) = 0.18 and a 47% weightage for the current value means α = (47/100) = 0.47
    • For calculating α for time periods the formula is:
      α = 2 / (N + 1)
    • For Example, for calculating 5 day EMA the α would be 2 / (5 + 1) = 2/6 = 0.33 which is equivalent to 33% weight-age to the Current Value. Similarly, for calculating 21 days EMA, the α would be 2 / (21 + 1) = 2 / (22) = 0.09 Which is equivalent to 9% Weightage to the current value

    • The EMA formula could be expressed in two ways:
      EMA (today) = EMA (Yesterday) + α * {Raw Value for Today - EMA (Yesterday)}
      EMA (today) = (α * Raw Value for today) + {(1 - α) * EMA (Yesterday)}
      both would give the same value.

  3. What is the Optimum Value for α?
    • α for different assets would be different, and it should be chosen on the basis of the mean price volatility of the asset
    • For most of the assets a 20% to 25% weightage or α = 0.20 to α = 0.25 would work; but personally I prefer α = 0.236 or 23.6% which is {Phi * ( 1 - Phi)}
    • To put it even more simply, EMA of 7, 8 or 9 period Lows should work fine.

Thursday, November 11, 2010

BSAR - The Conceptual Framework - Moving Averages

  1. What is meant by Moving Average?
    • A Moving Average is an indicator that shows the average value of an assets price over a period of time
    • When calculating a moving average, a mathematical analysis of the asset's average value over a predetermined time period is made.
    • As the asset's price changes, it's average price moves up or down
    • For example, a picture of a stock's moving average along with its price is below (SBI's 50-day moving average):
  2. What are some different types of moving averages?
    • Simple Moving Average
      • A simple, or arithmetic, moving average is calculated by adding the closing price of the security for a number of time periods, say 20 days, and then dividing this total by the number of time periods, like 20 in our case.
      • The result is the average price of the security over a time period
      • Simple Moving Averages give equal weightage to each price element
    • Exponential Moving Average
      • An Exponential (or exponentially weighted) moving average is calculated by applying a percentage of today's closing price to yesterday's Moving Average Value
      • Exponential Moving Averages place more weight on recent prices
      • Because most investors feel more comfortable working with time periods rather than with percentages, the Exponential Percentage can be converted into an approximate number of periods.
      • For example a 10% Moving Average corresponds with 9 periods Exponential Moving Average { Exponential Percentage = 2 / ( Time Periods + 1) }
    • Triangular Moving Average
      • Unlike Simple Moving Average, which gives equal weight to each price element and Exponential Moving Average which gives more weight to the recent price elements, Triangular Moving Averages give more weight on the middle portion of the price or data series.
      • They are actually Double Smoothed Simple Moving Averages
      • They are chiefly used in Oscillator Signal Lines, e.g., Slow Stochastics (5,3,3) uses 3 period Simple Moving Average of the 3 period Simple Moving Average of the 5 period Stochastic.
    • Weighted Moving Average
      • A Weighted Moving Average is designed to put more weight on recent data and less weight on past data
      • A Weighted Moving Average is calculated by multiplying each of the previous day's data by a weight.
      • The weight is based on the number of days (periods) in the Moving Average
      • For Example to calculate a 5 day Weighted Moving Average, the first day's close is multiplied by one and the second day's close is multiplied by two and so on, so that the 5th day's close is multiplied by 5
    • Variable Moving Average
      • A Variable Moving Average is an Exponential Moving Average that automatically adjusts the smoothing percentage based on the volatility of the data series.
      • Rise in Volatility increases the sensitivity of the smoothing constant
      • Sensitivity is increased by giving more weight to the current data
      • Variable Moving Averages perform better than both Simple Moving Averages and Exponential Moving Averages, in rangebound as well as trending markets

Sunday, November 7, 2010

BSAR - The Conceptual Framework - Trading Systems

  1. So what is BSAR, and how could it help a trader?
    • BSAR, (Biased Stop and Reverse) is a simple Mathematical Trading System designed to help traders make better profits, consistently.
    • It could be used by anyone - beginners, experts etc., (individuals could use it for free)
    • It could be used to trade anything, that is traded for money
  2. What is a trading system, and why does anyone ever need it?
    • A trading system is simply a group of specific rules, or parameters, that determine entry and exit points for a given asset.
    • These rules are defined logically, using Mathematical Equations
    • These rules are tested on historical data and the results are statistically validated for consistency and effectiveness
    • So trading systems take archaic emotions out of trading
    • They help a trader stay calm and composed, as he sees order in the chaos
    • Trading Systems save time and money as trading decisions are automated.
  3. What are the disadvantages of trading systems?
    • Masochism is defined as, "gratification gained from pain, deprivation, degradation, etc., inflicted or imposed on oneself, either as a result of one's own actions or the actions of others, esp. the tendency to seek this form of gratification." Masochism which is a manifestation of mortido, is present in all human beings, but the degree of need varies. Losing in gambling is a masochistic behavior, and most losers unconsciously enjoy it. Trading Systems take these kinds of masochistic pleasures out of trading, as trading ceases to be gambling anymore.
    • Trading Systems, in general, are complex and difficult to develop
    • Most trading systems defined in the textbooks and manuals ignore the transaction costs like brokerage taxation and opportunity costs
    • The development of a trading system is usually a time consuming and a daunting task, and entails lot of expenditure in terms of payment to trading systems developers, programmers, software and data subscription fees etc
  4. What are different types of trading systems, and what type is BSAR?
    • Trading Systems could be broadly classified into three categories
      • Advisory Trading Systems - Where a financial adviser or a stock broker or someone who could be responsible for executing the trades for large Financial Institutions advises Buy/Sell of particular assets.
      • Technical Trading Systems - The systems based on Mathematical or Statistical tools, and they could be further subdivided into following categories:
        • TREND FOLLOWING SYSTEMS:
        • Moving average based trading systems
        • Trigonometric/Geometric/Quadratic Equations based trading systems
        • Breakout Systems
        • Indicators Based Trading Systems
        • COUNTER-TREND TRADING SYSTEMS
        • Volatility Based Systems
        • Market Breadth Based Systems
        • Oscillators Based Trading Systems
        • Price Overlays Based Systems, including Bands
      • Fundamental Trading Systems - These systems chiefly rely on Financial reports and Ratios, Economic Data, Industry Statistics etc to find the intrinsic value of the asset and the projected value of the asset in the long term which is derived from the topline/bottomline growth statistics and future demand outlook
    • So BSAR is Moving Average Based Trend Following Technical Trading System
  5. What is the differnce between an indicator and oscillator?
    • Simply stated (in terms of technical analysis), an indicator is a mathematical formula that is applied to the price or volume of a security with the intention of predicting future trend. Common examples of technical indicators are the MACD, OBV etc.,
    • Oscillator is a mathematical formula that is constrained between minimum and maximum values. Oscillators are designed to help you identify overbought or oversold conditions. When the oscillator approches the upper (maximum) value, the security is said to be overbought, and conversely, when the oscillator approaches the lower (minimum) value, the secuirty is said to be oversold. Common examples of Oscillators are RSI, Stochastics & W%R
  6. Which trading systems are better the trend-following or the counter-trend?
    • Both trading systems have their advantages and disadvantages. However the trend following systems are best suited for aiding the decision for holding onto the open positions, while the counter-trend systems are best suited for market timing. A Complete Trading System which makes use of counter trading system for Entry/Exit signals and trend following system for holding the open positions would be very robust.
  7. Now the Problem with BSAR that it doesn't give us precise and clear Entry Exit signals, is due to the fact that it is a trend following system, and it needs to be used in conjuction with some Counter-Trend System.

Saturday, November 6, 2010

BSAR - The Problems

  1. The Biased Stop and Reverse (BSAR) and The Parabolic Stop and Reverse (PSAR) have one problem common amongst them
  2. They do not tell us when to enter the trade (and when not)
  3. This is the chief reason, why so many know about it but are unable to profit from it
  4. The Problems are not insurmountable - but it requires deeper analysis of the situations where buy and sell signals are generated; some pertinent questions that have been asked time and again are:
    • the volatility factor - could volatility help us determine the entry and exit points?
    • the signal confirmation - is there a way we could confirm our buy and sell signals and still avoid collinearity?
    • The problem of correct time frame - what time period is optimum to calculate BSAR or PSAR ?
    • The problem of position sizing and targets - how many contracts should be traded at different stages of the holding period?
    • The Determination of Minimum Capital Requirements - Is there an optimum amount of Capital?
    • The problem of plenty - What underlying asset should be selected to trade, for trading both the asset itself and it's derivatives?
    • The problem of hedging the open positions- how could the trading capital be protected from sudden large unfavorable moves?
    • How much could I lose if market goes against me - what could be the Maximum Adverse Excursion? And what could be the Maximum Favorable Excursion? How much should be provided for drawdown
    • The Problem of Consistency - could one make a living out of trading BSAR, or could I receive a regular income in all types of market conditions, trading with BSAR system?

Friday, November 5, 2010

Muhurat Trading

  1. Nifty is likely to gap up to above 6300 odd levels.
  2. The high could be around 6369.30.
  3. The low could be around 6312.70
  4. Short Nifty above 6360 for a minimum target of 6335, intraday
  5. FIIs have bought for Rs 5475.45 Crore in Cash Segment yesterday alone.
  6. We might have an upper circuit this month
  7. Wish you all a Happy and Prosperous Diwali

Monday, November 1, 2010

New System

The new system, that I had discussed some time back on my forum, is out for Implementation Testing. It's being tested in Real Time. You could follow the links given on the right, and leave your suggestions, which I might even try to incorporate, if feasible.

Monday, October 25, 2010

Jeetu Sehgal

I was deeply saddened to hear about the death of Shri Jeetu Sehgal ji. Since I didn't know him personally, I would like to know of his charity/charitable work, where I could donate some money.

Sunday, October 24, 2010

Let it Shine

Some Modifiactions would be introduced in various calculations in the coming days, keeping in view the changes being made by NSE.

Monday, July 19, 2010

Important Anouncement

From 23 July 2010 onwards, we would be dropping Individual Shares from our BSAR list, and would not be tracking them anymore, primarily because we trade in Nifty only, and besides we need about 1000 pixels worth of vertical space to add Options Data and Analysis on this blog. So if you need a file for BSAR for any individual share/stock, please feel free to inform me and I would do the needful. Friends here are the BSAR Files. Remember it's just for personal use.

  1. http://www.4shared.com/document/0yxI5-qP/NIFTY___BANKNIFTY___BSAR.xls
  2. RIL__INFY__ICI__LT__ITC__HDFCB.xls
  3. http://www.4shared.com/document/EILF-vTA/SBIN__TCS__TATASTEEL__BHARTIAR.html
  4. http://www.4shared.com/document/eVpFGmnd/TATAMOTORS__HEROHONDA__SUZLON_.html

Tuesday, March 23, 2010

Embrace BSAR




BSAR (patent applied for) is Biased Stop and Reverse, long above this point and short below it, on closing basis. BSAR helps you plan for the next trading session. These levels are Points of Determination and not merely Stop Losses.

Wednesday, March 17, 2010

Midweek Review

  1. So Nifty finally crossed 5175 in style
  2. Technically Nifty is in Overbought Zone - that is confirmed by several parameters
  3. But that doesn't warrant a reversal, only a swing, a correction
  4. This rise has been engineered by dear FIIs buying out of shame
  5. Unless they start selling, Nifty isn't going down
  6. I had warned not to short unless there was a failure swing, those who followed me must have been happy
  7. Now there's another cause to rejoice - BSAR system has been completed - see the link on the right below the table
  8. I have tried to develop an FII proof system which would work in all market conditions
  9. Nifty's next target is around 5380, provided it clears 5310 odd levels
  10. But 5380 seems unlikely this week
  11. Those who are short from above 5000 levels - should wait - if they can
  12. There is no failure swing yet in Nifty
  13. Bank Nifty: Looks Ill!

Friday, March 12, 2010

weekly oulook

  1. Nify shied away from 78.6% retrace at 5175 of the previous swing.
  2. The Weekly Overbought level is now at 5221 and Oversold Level is at 4817
  3. The Phantom Price Line is at 5019
  4. The Biased Stop And Reverse is at 4931
  5. The VHF(29) is at 0.17 now against a median of 0.41 and std dev of 0.12
  6. The ADX(14) is at 16.4 against a median of 29.5 and std dev of 9
  7. The W%R(29) is at 22.4
  8. The RSI(14) is at 58
  9. The OBV(daily) is back in Trend. So it confirms the statement in Monthly Outlook, "Buy on Dips". Even FIIs have taken that statement seriously. Let's see where do they offload.
  10. The overall picture suggests limited upside, Nifty might try to take 5175 in a gap, but is likely to face selling Pressure above 5217. On the other hand, as long as Daily Nifty Closing is above 4929, all through the next week, the trend is likely to remain bullish.

Saturday, March 6, 2010

weekly outlook


  1. So this is what it is!
  2. So what the heck it is?
  3. Squeeze (I don'' meanno offen' nobody)
  4. Wear your reading glasses, see the RSI, vis-a-vis Bollinger Bands
  5. The Nifty made a high of 5310.85 on Jan 6, 2010; and a low of 4675.40 on Feb 8, 2010. A range of 635.45 points
  6. Major retrace pivots come around:: 38.2% => 4918; 61.8% => 5068; 78.6% => 5175; 111% => 5380;
  7. The Weekly Overbought Level corresponds to 5172, which corresponds with 78.6% retrace of 5175, and a critical point which if crossed would take Nifty to 5380
  8. Those traders who are planning to short Nifty should keep their Stop Loss around 5180
  9. The BSAR is at 4851, it gives Nifty enough width to fool novice bulls and bears at one go
  10. The VHF (29) Weeks is continuing at 21, reflecting the fact that there is a reversal at hand, which might prevail for many weeks
  11. The ADX is falling, now at 17
  12. The W%R for 29 weeks has come at -23; likey to create a negative divergence
  13. The RSI continues in downtrend now at 57
  14. The MFI is at 65 now; knocking at the door of 70
  15. The Index Options PCR is at 1.38, signifying the point of inflection for put writing
  16. India VIX is at ridiculously low level 


  17. Gold Will Outperform Paper Currencies Like The Euro And The US Dollar

    “Gold's quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar. I’m not saying that the dollar will go straight away down because other currencies like the euro are even worse at the present time. But eventually if you print money, the purchasing power will lose value."  Sometimes I wonder, who's following whom!!!

Thursday, March 4, 2010

Failure swing

  1. Why did Nifty rise so madly?
  2. Honestly I didn't expect that Nifty would home deliver me an overbought level (Check the table on the right)
  3. But I am watching about 50 different kinds of level 1 and level 2 indicators, and a level 2 screen, the reason was simply the shorters stop losses, that were hit. Please don't short without reading this post at least three times. Don't shoot in the dark. If nifty crosses 5479, we would see 6600 in a flash. Advise your friends, relatives or whoever would care to listen, the trick that you learn from this post.....
  4. Although Nifty would rise was beyond any doubt, but that it would get overbought and give us a lollipop trade so soon wasn't expected. People who have been following my teaching must be smiling all the way to bank and preparing to buy something expensive, and would find the next trade another blessing, but if you are new here, or do not know what all I have been teaching then read my advice even more carefully..........
  5. Allah, The Most Merciful, and The Most Beneficent is kind to all of us.
  6. Now keep an eye on the Weekly Overbought levels, and Failure Swing in daily charts, UNLESS A FAILURE SWING OCCURS IN EITHER 14 DAYS RSI OR SLOW STOCHASTIC WITH 5,3,3, SETTINGS, DON'T SHORT...NO FAILURE SWING NO SHORTING, NIFTY WOULD CORRECT BY AT LEAST 150 POINTS.........WEEKLY BSAR LEVEL IS VERY DEEP.............NIFTY COULD EASILY TEST IT......AND THAT'S WHERE NOVICE TRADER COULD FALTER...........................
  7. A failure swing could occur in price charts as well as indicators
  8. But here I am talking about failure swing in indicators
  9. A failure swing in an indicator like Stochastic or RSI is a confirmatory signal of a reversal
  10. So what is a failure swing?
  11. Follow these links:

    http://www.investopedia.com/articles/technical/03/042203.asp

    http://www.incrediblecharts.com/indicators/indicator_basics.php

    http://thepatternsite.com/failswing.html

  12. Would gladly accept any 200 points sure shot swing, thanks Nifty & FIIs!!!

Wednesday, March 3, 2010

comments are being disabled


  1. It seems that DIIs have felt some shame on themselves, in last three trading sessions, they have sold stuff worth 2023 Cr while FIIs have bought stuff worth 3135 Cr. My criticism had some profound effect on them!

Monday, March 1, 2010

monthly outlook for march

  1. The Overbought level is 5470, the Oversold Level is 4328
  2. The Phantom Price Line is at 4899, BSAR is at 4644, TRIX is at 4104
  3. The Important Pivots would be, 4328 4450 4546 4681 4764 4899 5034 5117 5185 5252 5348 5470
  4. The Nifty is buy on dips, keep SL @ 4644 Spot
  5. The PCR for Nifty Options for January: µ=1, s.d.=0.87 k=1 band =1.09 to 0.91; closed on 1.17; we had expected some rampant Put writing in last month, now is the time for Call writing and Put unwinding.
  6. Reverse Bullish Divergence in Short Term Momentum Oscillators, first down then up, but as long as 5479 is not crossed, ultimate target remains at 1300.

Saturday, February 27, 2010

weekly outlook

  1. Looking back, last week played out according to my expectations.(so what's new, huh, you must be gazing at that tic tac toe and predicting future)
  2. Although people are talking about a breakout, change of trend, etc., I tell you it's all rubbish, (you always belittle other people's haaaard work, where is your chart?)
  3. I don't have a chart, but figures downloaded courtesy bseindia.com and their associated partners, which reveal what DII said to FII in January and February, "Jehanpanah, tussi great ho..tohfa kabool karo", FIIs were selling and DIIs were buying, essentially to let FIIs exit at good price! And now FIIs are not buying, so how would the Indian bourses move north?(You always make things look scandalous.)
  4. Coming back to the next week, the Phantom Price Line is at 4880. The high is at 4990 and low (BSAR)is at 4809. If Nifty breaks out and closes beyond, either high or low, then it could be said that a break out has occurred.
  5. The VHF (29) is at 21, signifying that a change in trend is at hand
  6. The ADX (14) is 18, signifying a lack of an undercurrent
  7. There is a remarkable Reverse Bullish Divergence in W%R (29), and RSI (14); good news for people who invest in non leveraged products. Expect zero to hero within next one year.
  8. Volume Indicators: Double Bottom in MFI (14)
  9. Options Data suggest height of indecision among big players
  10. The breadth indicators suggest that Nifty has made a feeble effort to recover from the Oversold state.
  11. To sum up: Go long, Go Fishing for 6 months, come back and be rich
Comments:
  1. Sir, Do u see market to cross 5485 and turn bullish this time? The other day, u told below 5485 market is bearish. Please clear the doubts. n.b. : i have no intention to hurt u in referring to above facts.
  2. Javed Sir, Do you mean market will again go down before making a new high? Please comment as I am new learner, finding it difficult to understand tech language. Thanks Sachin
  3. Javed bhai I am becoming your chamcha and feeling proud about it too. Wishing you and your family a very happy holy and accept my best regards. Sandy
  4. Vvvvv ji, why don't you admit that you are short? Read Sachin ji's remark and drink some Rose Sharbat, if a newcomer could understand it why can't you? Sachin ji, you got me, 100%. Sandy ji, no need to become my Chamcha, feel free over here and express your doubts and concerns whatever they are.
  5. Mr vvvvv writes, "sir, Confusion came from the phrase "Go long, Go Fishing for 6 months". It mismatched with foregoing paragraphs in your article. If some body is unable to understand a conclusion which is contrary to the whole article, can he not request for clarity? Why do u reply in that way when i ask in such humble way? Again, request, sir, do not take it otherwise, please. "
  6. And on one other blog he wrote..." vvvvv said... Sir, I am an avid follower of yor blog. But sir, I face one problem as is below: Suppose one fresh white candle has been formed above red line and stochastics crossed as desired but RSI @ overbought zone. What to do here? Buy? If yes, what will the stop loss be? Sometimes, I take position (say buy) as per chart and book profit/loss as per RSI. But market keeps tanking. How to avoid this? Moreover, as I live at Bandel,WEST BENGAL, I wish to get your course TRADING physically instead of ONLINE. My cell no. is 9432001628. EMAIL ID : konchati@yahoo.co.in Awaiting reply Thanking you in advance." http://www.stockmaniacs.net/2009/06/you-can-earn-your-living-using-this.html
  7. And the last and the best....(On Sudershan Sukhani's Blog),"vvvvv said... sir, Being a layman, I am scared. What should my target in NIFTY be - 9465 or 550? Expecting a simple one word(number) answer. Please, come to our rescue. June 7, 2009 7:03 AM " http://www.sudarshanonline.com/2009/06/cup-and-handle-in-nifty-examined-again.html
  8. That's why I always maintain, Stock Market is full of Hypocrites, they are laymen on one blog and use Connor's RSI with Stochastic Pops on the other, and write indignantly on another. Please I humbly request vvvvv ji, with folded hands, go elsewhere, and please don't feel as if you have been kicked out. Could I not request that, Konchati?

Wednesday, February 24, 2010

point of no return





Thanks Dinesh ji, Dharmesh ji, Rajiv ji, Sureela ji, and all the others. I came to the forum in search of more knowledge. But more than knowledge I discovered politics, which was meaningless. I am not an internet personality, nor do I intend to become one. At a certain point of time this blog has also clocked 1000 hits per day, if I would want it I could get it. But again my objective is to share what could be useful to somebody else. Because I am indebted to all those strangers who have shared rare and original materials over the internet, whom I don't know, and may be could never even say thanks to. So I wish to continue that same tradition. As Jesus of Nazarene is reported to have said, "Freely you have received, freely give,'" in Matthew 10:8. I would continue giving freely, I promise, as I continue to receive freely! So Let my Spirit Flow freely, from now onwards.

Monday, February 22, 2010

fun

  1. Buy Nifty at 4850 Spot, SL 4825 Spot, Target 4876, 4889, 4909 Spot
  2. Done three times, +78 points. Range bound, did somebody say? Profits-abound I say. It's how you trade non-trading zones! No More Trades on this call.

questions

  1. Vvvvv ji asked, "If one follows BSAR, what should be the target in that direction?"
  2. Shekhar ji asked, "Will you plz clarify the Stop-loss if we follow BSAR then where should we put the Stop-loss according to BSAR while entering a Fresh Trade"
  3. Any Stop and Reverse Technique, is a trend following method, meaning you are in trade as long as your trailing Stop Loss is not hit, once hit you take positions in Opposite direction
  4. For example, if your BSAR Daily is at 4817, you remain Long as long as you are above 4817, and once Nifty Closes below 4817, you come back next day, and close your Long position and initiate your Short position.
  5. 85% of the times you get the same prices the next day, where your Biased Stop and Reverse Point was, so no need to panic
  6. For targets you could keep 3% or 7% of the entering value as your target from the BSAR point. For example, suppose you entered the trade Long at 5000, your target is 5150 (3% of 5000 is 150, add to 5000 = 5150). This is for trading options. In options, the SL is always the 50% of the total amount invested. I strongly discourage beginners to take exposure in Options. If you are trading futures you could go for 7% target, in our example it would be 5350 (7% of 5000 is 350, add it to 5000, the point of trade, we get 5350). The SL for trading futures is always 10% of your entire capital. For example if you have a capital of 10,00,000. And further suppose that you buy 10 contracts of Nifty. So 10% of 10 Lacs is 1 lac, so the maximum, that you wanna lose is 200 points. because if you divide 1,00,000 by 50 X 10 => 1,00,000 / 500 = 200 points. Future traders never use more than 40% of their capitals in margins, and rest 60% is always idle! If you are trading Stocks, you could keep a target of 10% of the value of the stock, and write a covered call for a strike price which is 10% higher than your entry price of the stock, every month.
  7. I hope I have been able to clarify this. Further Questions are welcome

Saturday, February 20, 2010

weekly outlook

  1. In the name of Allah, the Beneficent, the Merciful. Say : I seek refuge in the Lord of the dawn, From the evil of that which He has created, And from the evil of intense darkness, when it comes, And from the evil of those who cast (evil suggestions) in firm resolutions, And from the evil of the envious when he envies." ( Holy Quran 113:1-5)
  2. The Nifty would be overbought above 5101, and Oversold below 4666
  3. The important pivots could be 4398.2 4449.5 4507.7 4532.5 4576.8 4607.7 4642.4 4666.7 4713.2 4749.7 4801.0 4832.7 4884.0 4935.2 4967.0 5018.2 5054.7 5101.2 5125.5 5160.3 5191.2 5235.5 5260.2 5318.4 5369.7
  4. The attached PNF chart for Nifty, exhibits a classic congestion formation and targets 2700 points in either direction,(6600 OR 2600) using the horizontal count for deriving Price Objective
  5. This target is very unlikely to happen in a week
  6. If I were a gambler, I would be buying Nifty at all levels
  7. Volume indicators suggest a range bound market with positive bias
  8. Trend Indicators suggest, absence of any underlying current
  9. Breadth Indicators suggest that if Nifty were to fall say, about 300 or so, points then it could bottom out.
  10. Momentum Indicators suggest positive reverse (hidden) divergences.
  11. The 14 period TRIX Weekly, is at 5022, Nifty might give it a shot.
  12. The Index Options PCR suggest some interest in Put Writing.

Wednesday, February 17, 2010

for the kind attention of rahul rathi - ob os revisited

  1. Q:How do you trade in the market?
  2. A:There are mainly two ways of trading, one is to follow the trend, another is to exploit the reaction, or retraces that come from time to time in a trending or rangebound market;
  3. Q:How is one different from the other?
  4. A:In following a trend, firstly, one has to identify a trend, then one has to keep a trailing Stop Loss, for safeguarding profits and for the fear of sudden reversal, and secondly, one has to calculate the targets which could be the points of Resistance or some levels.

    In reactionary trading, you try to determine the levels at and around which the market would be Overbought or Oversold, and a retrace would happen. These are very short term reversals, or corrections. They happen fast, and present with two opportunities, viz, opportunity to trade it contra trend, and opportunity to enter in the direction of the trend;
  5. Q:How would I calculate such points, and what kind of charts do I require?
  6. A:The calculation is complex, since it requires the entire database of quotes to know the precise levels, but I have been publishing the same here for quite some time now, and would continue to do so, as long as possible. And Graphical depiction of the quotes is not needed, hence no charts required;
  7. Q:Which OB OS Levels do you use?
  8. A:Weekly;
  9. Q:How do I Calculate Stop Loss?
  10. A:Very difficult Question...I have nearly forgotten that Stop Loss is something to be used! I thought it was something to discuss when you met strangers apart from the weather! Anyway Keep a 3% SL of the Nifty Value, like if you short at 5000 3% of 5000 would be, 150 points, so your SL should be 5150, if you go long at 4500 3% of 4500 would be 135 points, so your SL should be 4365, but this is only for your own amusement, I assure you, I had my last SL hit in August 2009, while trying to go after a trend, and with Allah's grace, it was also my last order till date to have gone in loss! HE IS INDEED THE MOST MERCIFUL AND THE MOST BENEFICENT.
  11. Q:What is your success rate?
  12. A:I started looking at this concept starting from 5th June 2009, since then, using this method, I have had, ummm let me invent, 2 SL hits, (I am lying, there weren't any) and the success rate is ummm, okay 95% looks good, ( I have developed this bad habit, following in the steps of that bird keeper, Success Rate is much higher, almost highest).
  13. Q:Is there something else that you use apart from the OB OS Levels in your trading?
  14. A:Yes, I like Point and Figure charts, they remind me of my childhood when I would play tic tac toe with my cousin sister;
  15. Q: Anything else apart from that?
  16. A:Divergences in two dozen indicators,half a dozen price overlays, Elliott wave theory with my own modifications, All kinds of charts etc.,
  17. Q:Are you lying again?
  18. A:God damn that bird keeper

Sunday, February 14, 2010

weekly outlook

  1. The 5 EMA Low is at 4804, and Nifty closed at 4826, on the last trading day of the week, so it's in uptrend
  2. Swing traders are best advised to keep 4804 as Stop and Reverse point for their trades for the forthcoming week
  3. The Oversold level is at 4680, it seems unlikely that we would get to see this level in the following week
  4. Some important Pivots could be, 4728,4765, 4818, 4850,4903,4956,4988,5041
  5. The VHF for 29 weeks continues at very low level of 0.23, suggesting range-bound conditions in the following week, or a pause in the trend in either direction. The ADX for 14 weeks at 19 also suggests that Nifty is uncomfortably quiet these days
  6. The RSI 14 and W%R 29 hover around their median values
  7. MFI at 58 probably points to the fact that DIIs and retail has been active on the long side in the market
  8. Looking at Volume Indicators it seems that Nifty is in a state of indecision, such times are not good for the novices to expose their capitals to seasoned speculators in the markets
  9. Looking at Index Options PCR, call writing is the order of the day, one possibility which most analyst overlook in such cases could be that it might look Nifty would cross certain levels but unlikely to do within the time-frame (might even do after-wards!) of a week or so, so that option writers could bite into the time decay!

Friday, February 5, 2010

weekly outlook

  1. Nifty continued it's downtrend for the second consecutive week
  2. No fresh longs should be initiated unless the weekly close happens above the BSAR point(Weekly), which now stands at 4868
  3. The Weekly Oversold Level is at 4714, any close below this on the first three days of the next week would see a nice bounce of 100 - 150 points, which could be traded
  4. The Weekly VHF is at 0.22 almost 2 sd away from the median, signifying that a reversal is at hand
  5. The weekly ADX stands at 19, almost one sd away from it's median value, signifying that Nifty is lacking in strong trending oscillations
  6. For some strange reason NSE is not publishing the Advance Decline Data for January, so we look at PCR, Put writing is not as feverish as it should be near market bottoms, so there is a possibility that nifty might test Monthly BSAR or Quarterly Mean which is at 4546
  7. Some Important Pivots could be, 4920,4883,4861,4790,4766,4742,4719,4695,4671,4647,4620,4576,4554,4517
  8. Gold has touched 1050, now the target is 1320.

Thursday, February 4, 2010

So where are we?

The FIIs are selling relentlessly, while DII buying is declining. The Nifty is Oversold in weekly charts, there are indications of a possible reversal in longer term charts, but short term reversal signals are absent. A lot of volatility, as noted earlier could be expected, FII, DII data appears courtesy bseindia.com

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Wednesday, February 3, 2010

fibonacci analysis

  1. Nifty made a high of 5310 on 6th Jan 2010, and subsequently made a low of 4766 on 29th of Jan 2010.
  2. The difference comes out to be 544 points
  3. => 61.8% of 544=336
  4. Add 336 to 4766 = 5102
  5. As long as Nifty is below 5102, it could be a correction of the 5310 -> 4766 move
  6. The ideal corrective target is 4973 (38.2% of 544 added to 4766)
  7. If it closes above 5102 the target could be 5457 (127.2% of 544 added to 4766)
  8. If it closes below 4766 the target could be 4618 (127.2% of 544 subtracted from 5310)
  9. 4894 is a major support now (23.6%), below which nifty would be bearish

Tuesday, February 2, 2010

Chebyshev’s Inequality (Oh Those Russians)

  1. Introduction

    Chebyshev's inequality

    In probability theory, a theorem that characterizes the dispersion of data away from its mean (average). The general theorem is attributed to the 19th-century Russian mathematician Pafnuty Chebyshev, though credit for it should be shared with the French mathematician Irénée-Jules Bienaymé, whose (less general) 1853 proof predated Chebyshev’s by 14 years. An observation is rarely more than a few standard deviations away from the mean. Chebyshev's inequality entails the following bounds for all distributions for which the standard deviation is defined. At least 50% of the values are within √2 standard deviations from the mean. At least 75% of the values are within 2 standard deviations from the mean. At least 89% of the values are within 3 standard deviations from the mean. At least 94% of the values are within 4 standard deviations from the mean. At least 96% of the values are within 5 standard deviations from the mean. At least 97% of the values are within 6 standard deviations from the mean. And in general: At least (1 − 1/k²) × 100% of the values are within k standard deviations from the mean

  2. Proof

    Chebyshev's Inequalities Chebyshev's inequality and its descendants allow you to place an upper bound on the probability that some random variable is >= a set value, given only the mean and variance of that variable. No other information about that variable's distribution is required. Some of the descendants exist to make use of information about higher moments, though.

    This web page was sparked off by a web page from Henry Bottomley, at http://www.btinternet.com/~se16/hgb/cheb.htm. He gives proofs for the standard two-tailed inequality and for a one-tailed variant, and shows examples where the inequality is exactly satisified. Herman Rubin responded in usenet, linking this to the 'problem of moments'. This result is also Question 9 in Problems 7.11 of 'Probability and Random Processes', by Grimmett and Stirzaker, published by Oxford Science Publications, ISBN 0 19 853665 8 - page 327 of my copy, which is the 1993 reprinting. The main contribution of this page is to give a slightly different proof for the one-tailed case, which I find easier to follow than Henry's.

    The main use for Chebyshev's inequality is in proving theorems, such as laws of large numbers. The existence of cases where it is exact shows that it is as strong as it can be, given its total lack of assumptions on the distribution of the variable involved. Despite this, you can usually get very much stronger bounds by assuming, for instance, that the variable in question is normally distributed - so most people do. It would be nice to use Chebyshev's inequalities as a defence against variables in real life where outliers are expected, but in such cases the variance of the variable in question may not be known - and judging the error of estimates of variance will probably involve you in distributional assumptions anyway.

    The standard two-tailed inequality

    We are given a variable X with known mean and variance. For convenience, add a constant to ensure that the mean of X is zero. P(|X| >= t) = E([X² >= t²]), where [condition] has the value 1 if condition holds and 0 otherwise. E([X^2 >= t^2]) <= E(X²/t²) = Var(X)/t² (since we made sure E(X) = 0). So P(|X| >= t) <= Var(X)/t². If you remove the constant added you find that P(|X - E(X)| >= t) <= Var(X)/t². This equality can be exact for rather degenerate distributions where X can takes two possible values.

    A proof of a one-tailed inequality

    This proof will use the well-known equality Var(X) = E(Var(X|A)) + Var(E(X|A)). One proof of this is:

    Var(X)=E(X2) - E(X)2
    =E(E(X2|A)) - E(E(X|A))2
    =E(Var(X|A) + E(X|A)2) - E(E(X|A))2
    =E(Var(X|A)) + E(E(X|A)2) - E(E(X|A))2
    =E(Var(X|A)) + Var(E(X|A))

    We first of all subtract a constant as necessary to ensure that E(X) = 0. Now, let p, q, and r be the probabilities that X is > t, = t, and < 0 =" pE(X|X"> t) + qt + rE(X|X < s =" 1"> t, 0 if X = t, and -1 if X <>2) = E(Var(X|S)) + Var(E(X|S)) And we ignore the term E(Var(X|S)) - which will be zero when our inequality is exact. So we are concerned only with Var(E(X|S)). It's easy to see that E(X|S >= 0) >= t. We can get an idea of E(X|S = -1) from the equality E(X) = 0. Note also that E(E(X|S)) = 0.

    Var(X)>=pt2 + qt2 + r[(-pt - qt)/r]2
    Var(X)>=(1-r)t2 + t2((1-r)/r)2r
    >=t2(1-r) + t2(1-r)2/r
    >=t2(1-r)(r+1-r)/r
    >=t2s/(1-s)

  3. Where s is the prob of X >= t. So Var(X) - sVar(X) >= t2s. or Var(X) >= s(t2 + Var(X)), from which we work out that (adding in our constant again)..

    Prob(X - E(X) >= t) <= Var(X)/(t2 + Var(X))

    Proof in answer book

    The proof in the answer book is neater, and doesn't need as much inspiration as you might think. Here we assume E(X)=0. Now give yourself an extra degree of freedom by noticing that P(X >= t) = P(X + c > = t + c). Since t + c >= 0, P(X >= t) <= E((X + c)2/(t + c)2) = (Var(X) + c2)/(t + c)2.

    If you minimise the rhs over c, you will find that it occurs at c = Var(x)/t. I need only pluck this figure from the air and work out that P(X >= t) <= (Var(X) + Var(X)2/t2)/(t+Var(x)/t)2 = Var(X)(t + Var(X)/t)/(t(t+Var(X)/t)2) = Var(X)/(t2 + Var(x)).

    Proof in Feller

    Another proof of this appears in Volume II of "An introduction to Probability Theory and its Applications", by Feller, section V.7, example (a). This is similar to the proof in the answer book (but no doubt precedes it, at least if you judge by the date of the respective copyrights.

    Connection with the Median

    The first proof above was based on a proof in Bartoszynski and Niewiadomska-Bugaj that the median is no more than one standard deviation away from the mean, so it is fitting that Henry Bottomley pointed out that you can derive that fact from this inequality. Without loss of generality suppose that the median is greater than the mean. The probablity of X being at least the median value is at least one half. If the median was more than one standard deviation away from the mean, that would contradict the one-tailed Chebyshev inequality.(notes from A.G.McDowell)

  4. *****This Topic is Incomplete, would be reposted*****

Saturday, January 30, 2010

Outlook for February 2010

  1. The Overbought level is 5478, the Oversold Level is 4297
  2. The Phantom Price Line is at 4888, BSAR is at 4628
  3. The Important Pivots would be, 5353,5306,5228,5182,5032,4982,4932,4882,4832,4782,4732,4582,4536,4458,4411
  4. The Nifty is buy on dips, keep SL @ 4628
  5. The PCR for Nifty Options for January: µ=1.12, s.d.=0.13 σ=1 band =1.25 to 0.99; closed on 0.92; we could expect some rampant Put writing now. Also Supports the short term Bullish view
  6. In last two three months we have seen historically quiet periods, but don't be mistaken
  7. All weekly indicators are near their lower sigma

the central limit theorem

In probability theory, the central limit theorem (CLT) states conditions under which the mean of a sufficiently large number of independent random variables, each with finite mean and variance, will be approximately normally distributed (Rice 1995). The central limit theorem also requires the random variables to be identically distributed, unless certain conditions are met. Since real-world quantities are often the balanced sum of many unobserved random events, this theorem provides a partial explanation for the prevalence of the normal probability distribution. The CLT also justifies the approximation of large-sample statistics to the normal distribution in controlled experiments.

In more general probability theory, a central limit theorem is any of a set of weak-convergence theories. They all express the fact that a sum of many independent random variables will tend to be distributed according to one of a small set of "attractor" (i.e. stable) distributions. For other generalizations for finite variance which do not require identical distribution, see Lindeberg's condition, Lyapunov's condition, Gnedenko and Kolmogorov states.

The central limit theorem states that given a distribution with a mean μ and variance σ², the sampling distribution of the mean approaches a normal distribution with a mean (μ) and a variance σ²/N as N, the sample size, increases. The amazing and counter-intuitive thing about the central limit theorem is that no matter what the shape of the original distribution, the sampling distribution of the mean approaches a normal distribution. Furthermore, for most distributions, a normal distribution is approached very quickly as N increases. Keep in mind that N is the sample size for each mean and not the number of samples. Remember in a sampling distribution the number of samples is assumed to be infinite. The sample size is the number of scores in each sample; it is the number of scores that goes into the computation of each mean.

Courtesy: Wikipedia.com, davidmlane.com

Thursday, January 28, 2010

watch this drama

  1. DIIs are buying, and did I say buying yet?
  2. PCR is @ 0.98 (median=1.07) 5 EMA is @ 0.97 (median=1.07), 10 EMA 0.99 (median=1.09);
  3. Tomorrow they might take a breather from Rampant Call Writing!
  4. Keep Biased Stop And Reverse in front of your eyes while taking any decisions
  5. Will answer your questions during the weekend

Wednesday, January 27, 2010

So where are we?



  1. Nifty, after making a 52 week high of 5310.85 on 6th Jan 2010 made a low of 4833.05 today
  2. Nifty is in downtrend in Short Term Daily and Weekly charts.
  3. Indicators are in oversold zone, so a relief rally on Thursday or Friday can't be ruled out
  4. Remain Short if you want to but -> Do not go long unless Nifty goes above the daily BSAR level
  5. Conservative Swing traders could wait for Nifty to get above Weekly BSAR Levels, to initiate longs
  6. Please do not mail me your questions, post them here as comments

Monday, January 25, 2010

the normal probability curve

    The 68-95-99.7% Rule

    All normal density curves satisfy the following property which is often referred to as the Empirical Rule.

  1. 68%

    of the observations fall within 1 standard deviation of the mean, that is, between µ-σ and µ+σ .

  2. 95%

    of the observations fall within 2 standard deviations of the mean, that is, between µ-2σ and µ+2σ.

  3. 99.7%

    of the observations fall within 3 standard deviations of the mean, that is, between µ-3σ and µ+3σ .

  4. Thus, for a normal distribution, almost all values lie within 3 standard deviations (or any measure of volatility) of the mean.

    My observation has been that each segment within any given Normal Gaussian Distribution, consists of at least one Normal Gaussian Distribution, and in turn is a member of a large Normal Gaussian Distribution. Fractals? Or Billions!

Read this if you are crazy

Sunday, January 17, 2010

You said it

  1. I am in receipt of your questions in the e-mail, and comments on different blogs. Please allow me to answer all of them at this one place
  2. First VK ji, thanks for your comment, Nifty is in uptrend but overdue for correction. It seems government is planning some strict fiscal measures or something that might not be good for capital markets sentiments
  3. Gentleman with a Non English name, I couldn't understand what you were asking for.
  4. Nifty Trader ji, we have dark clouds all over, only waiting for lightning
  5. Dharmesh ji, I have decided not to discuss technical analysis anymore, it doesn't benefit me in anyway, while people who crucify their Prophets, (profits) and later worship them, find a way to make me angry.
  6. Rishi ji, I don't chase volatility, but let volatility chase my trade. There are three kinds of people that are trading in this market, viz, Punters, Swing Traders, Investors. Punters are those who fancy that they could handle the volatility. Swing traders try to determine the trading ranges and try to profit the shorter term trends within the larger term trends. Investors bet on the growth of the underlying of their investments, and hence are bullish no matter what. I am neither of the three, but try to determine opportunities as to where I could maximize my gains. So I am basically Opportunistic trader. Remember, when I had first suggested that we should trade Bank Nifty, you had expressed the situation mathematically, like so, 1 bank nifty = 2 big nifty? Doesn't this equation hold anymore?
  7. Alnesh Bhai, relax, people who come here wouldn't be loosers, Inshallah
  8. Bala Bhai, I am sorry for that, keep an eye on the table. I have included median values for all indicators so that you could benchmark respective indicators readings agains their median values
  9. SH Jain Sahib, anything that trades for a price has three stages, making higher highs and higher lows, fluctuating between an established high and low and sometimes touching, and sometimes violating a bit the previous highs and lows, like being in a rectangle price formation, and lastly higher highs and lower lows OR lower highs and higher lows, like triangles in the price formations. Any given trading strategy would only suit either of three conditions!!! So you need three strategies, one for each market situation. Basically to use as a starting point, Moving Average Lines are good for the first market state, which is also called trending market, Camarilla is good for the second state, which is also referred to as rangebound, and RSI indicator is good for markets that exhibit the triangular price formation. Triangular price formations are generally a nightmare to most of the traders.
  10. MOK ji, one can make 10 points everyday. Because all three situations discussed above are present intraday!
  11. My heartfelt thanks to Sureela ji, Amirishali ji, Mohan ji, Genius Jaggu ji, Kris ji, JK ji, and Shiv Shankar ji, Raj ji, Rajamani ji