Quantitative Analysis & Statistical Research

USD v INR

2011-11-13T16:06:00.004+05:30

In all recorded history there has not been one economist who has had to worry about where the next meal would come from. -- Peter Drucker The so called or self proclaimed Economists should better hang themselves. They have always professed and supported the Efficient Market theory with a zeal which is peculiar to them. Now if the Efficient Market theory is true then Nifty shouldn't fall and Dollar shouldn't appreciate at all. But "Fine Gentlemen" are adding to their Shorts in Nifty Futures and and adding positions in Cash Segments - doing a short hedge. In Currency Markets "The Gentlemen" are indifferent to the Dollar closing above 50 on weekly basis. So dollar is destined to go to 51 and Nifty sub 5100 ( 51? does anybody play satta over here?). But Why? Simply because of this talk about 8% GDP growth and all that rubbish. Since the rate of inflation on YoY basis is in double digits, any growth less than that is a farce - nothing less and nothing more. India is in an Economic turmoil. Moreover one should not expect India growing at more than 6% in the fiscal year 2011 -2012. No I didn't read Business Standard today!!!
UPDATE as on 3:40 PM 15 Nov 2011

Market Breadth

2011-11-07T14:36:00.004+05:30

With extremely high reading of STIX and McClellan Oscillator of 71 and 178 respectively, Nifty seems to be way overbought indicating some Makar Sakranti(Harvesting Festival of India) in the November. I am in complete agreement with Smart Money, when they are booking profits at every 75 points gain on either side, and that now they are betting a little downside as opposed to the Dude Money. I see a good harvest of "dudes" now that CoC is 11%. Oh yes I remember the Old John Lennon (RIP) song "Imagine". I am thinking of creating a Housemix of the same and adding the following lines: "Imagine No Trading Losses...It isn't hard to do..." And House Mix reminds me of sweet girl on Lazard video......

Institutional Activity

2011-10-24T06:07:00.001+05:30

The FIIs have sold for about 1005 crore in cash markets in last 4 trading sessions and shorted a paltry 77 crores worth of futures in Index Futures. But the main activity has been the Index Options segment where they have made purchases worth 5300 Crores, indicating a certain movement in either direction. It seems Nifty is likely to test 5180 - 5200 range in coming sessions - thus giving an average returns of 50% to FIIs in a matter of just a week! (Smart Money - eh?)

The Lakshman Rekha

2011-10-21T13:33:00.001+05:30

The S&P CNX Nifty Index is as flat as it could get, with ADX now at only 14, VHF hovering around 20 for months, and Nifty unable to close above 5200 odd levels. No matter what chart one may follow the Nifty is actually hovering around its averages. The Short Term indicators indicating some weakness.

Is it a bug?

2011-10-17T06:26:00.005+05:30

The Formula for Cost of Carry is derived in the following manner: F = S * exp (r*t) - D. So, r = ln((F+D)/S)/t Where F - Futrues price S - spot price r - cost of carry t - time to expiry D - dividends to be paid during the life of the futures contract. But while on most days nseindia.com uses this formula to calculate CoC on some days it uses some other formula. I have written to them - since to say the least it's wierd or am I missing something? Or is it a bug in their site? Besides they choose Number of days in arbitrary manner, i.e., on Friday, 14th Oct 2011 it says The Expiry of the Current month falls on 25th of Oct, the No of days till expiry should be 11 as on Friday, 14th Oct 2011 but it takes 8 days for calculation
Hence it should be (using above formula):5.94%
Whereas it is hown as : 8.17%
Why?
P.S.: The mean CoC for the Oct Series has been 3.12% with a Standard Deviation of 2.81% which gives us a -1 to +1 σ range of 0.32% to 5.93% ... (Hic)

P&F Charts for Nifty

2011-08-14T09:33:00.003+05:30

Elliott Waves in EOD Charts

2011-03-22T08:30:00.003+05:30

BSAR Trading System - Exit Rules

2010-11-29T10:46:00.008+05:30

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.

What are the Exit Rules or Exit Signals

Calculate BSAR after markets have closed
If today's closing price is lower than today's BSAR then;
We inquire about the Quotes of the underlying asset around 10 am tomorrow
IF tomorrow at 10 am, the underlying asset (spot prices) is still quoting below BSAR for today then we close our positions immediately

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

BSAR Trading System - Entry Rules

2010-11-28T09:09:00.018+05:30

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)

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

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

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

BSAR Trading System - Simple Implementation

2010-11-25T10:00:00.011+05:30

This is the Simple Implementation for most of the people willing to earn extra money using BSAR Trading System
It is good for everyone - Employed, Unemployed, Self- Employed, Shopkeepers, Merchants, Retired, House Wives, Students, Handicapped or Disabled, Farmers, Craftsmen,etc.,
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.
There is no need to sit in front of a computer or a terminal or at broker's office
No need for an online trading account - which usually tricks investors into over-trading
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
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).
No need to anticipate or fear reversals, volatility, premiums and discounts on derivatives

BSAR Trading System - Requirements

2010-11-24T10:22:00.004+05:30

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

BSAR Trading System - 50 Periods Simple Moving Average

2010-11-17T10:18:00.009+05:30

What is the significance of 50 SMA?

UP TREND

DOWN TREND

SIDEWAYS

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

BSAR Trading System - Slow Stochastic Oscillator

2010-11-16T11:00:00.002+05:30

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.

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.

What are the Optimum values for %K, %D, %D Slow?

7,4,4

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

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

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)

BSAR Trading System - The EMA of Highs

2010-11-15T17:56:00.003+05:30

How is EMA of Highs calculated

Exponential Moving Average (EMA) of Highs are calculated in a similar manner as EMA of Lows.

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.

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

BSAR Trading System - The EMA of Lows

2010-11-14T06:11:00.013+05:30

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.

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.

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.

BSAR - The Conceptual Framework - Moving Averages

2010-11-11T10:40:00.022+05:30

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):

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

BSAR - The Conceptual Framework - Trading Systems

2010-11-07T13:06:00.019+05:30

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

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.

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

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

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

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.

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.

BSAR - The Problems

2010-11-06T09:29:00.020+05:30

The Biased Stop and Reverse (BSAR) and The Parabolic Stop and Reverse (PSAR) have one problem common amongst them
They do not tell us when to enter the trade (and when not)
This is the chief reason, why so many know about it but are unable to profit from it
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?

Muhurat Trading

2010-11-05T10:56:00.004+05:30

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

New System

2010-11-01T01:21:00.002+05:30

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.

Jeetu Sehgal

2010-10-25T12:10:00.003+05:30

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.

Let it Shine

2010-10-24T11:20:00.011+05:30

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

GOLD TOUCHES 1320

2010-10-02T06:04:00.010+05:30

Chasing GOLD from $739 USD/Oz

Pegasus is a symbol of knowledge, glory, and inspiration.

Important Anouncement

2010-07-19T12:23:00.009+05:30

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.

Embrace BSAR

2010-03-23T11:38:00.111+05:30

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.

NIFTY EOD

2010-03-20T00:46:00.028+05:30

Midweek Review

2010-03-17T21:51:00.002+05:30

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

weekly oulook

2010-03-12T19:25:00.005+05:30

Nify shied away from 78.6% retrace at 5175 of the previous swing.
The Weekly Overbought level is now at 5221 and Oversold Level is at 4817
The Phantom Price Line is at 5019
The Biased Stop And Reverse is at 4931
The VHF(29) is at 0.17 now against a median of 0.41 and std dev of 0.12
The ADX(14) is at 16.4 against a median of 29.5 and std dev of 9
The W%R(29) is at 22.4
The RSI(14) is at 58
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.
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.

weekly outlook

2010-03-06T13:39:00.009+05:30

So this is what it is!
So what the heck it is?
Squeeze (I don'' meanno offen' nobody)
Wear your reading glasses, see the RSI, vis-a-vis Bollinger Bands
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
Major retrace pivots come around:: 38.2% => 4918; 61.8% => 5068; 78.6% => 5175; 111% => 5380;
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
Those traders who are planning to short Nifty should keep their Stop Loss around 5180
The BSAR is at 4851, it gives Nifty enough width to fool novice bulls and bears at one go
The VHF (29) Weeks is continuing at 21, reflecting the fact that there is a reversal at hand, which might prevail for many weeks
The ADX is falling, now at 17
The W%R for 29 weeks has come at -23; likey to create a negative divergence
The RSI continues in downtrend now at 57
The MFI is at 65 now; knocking at the door of 70
The Index Options PCR is at 1.38, signifying the point of inflection for put writing
India VIX is at ridiculously low level
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!!!
body rock maria mp3 | lyrics

Failure swing

2010-03-04T00:37:00.007+05:30

Why did Nifty rise so madly?
Honestly I didn't expect that Nifty would home deliver me an overbought level (Check the table on the right)
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.....
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..........
Allah, The Most Merciful, and The Most Beneficent is kind to all of us.
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...........................
A failure swing could occur in price charts as well as indicators
But here I am talking about failure swing in indicators
A failure swing in an indicator like Stochastic or RSI is a confirmatory signal of a reversal
So what is a failure swing?
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
Would gladly accept any 200 points sure shot swing, thanks Nifty & FIIs!!!

comments are being disabled

2010-03-03T19:18:00.015+05:30

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!

monthly outlook for march

2010-03-01T13:05:00.005+05:30

The Overbought level is 5470, the Oversold Level is 4328
The Phantom Price Line is at 4899, BSAR is at 4644, TRIX is at 4104
The Important Pivots would be, 4328 4450 4546 4681 4764 4899 5034 5117 5185 5252 5348 5470
The Nifty is buy on dips, keep SL @ 4644 Spot
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.
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.

weekly outlook

2010-02-27T12:48:00.009+05:30

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)
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?)
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.)
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.
The VHF (29) is at 21, signifying that a change in trend is at hand
The ADX (14) is 18, signifying a lack of an undercurrent
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.
Volume Indicators: Double Bottom in MFI (14)
Options Data suggest height of indecision among big players
The breadth indicators suggest that Nifty has made a feeble effort to recover from the Oversold state.
To sum up: Go long, Go Fishing for 6 months, come back and be rich

Comments:

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.
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
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
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.
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. "
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
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
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?

point of no return

2010-02-24T23:45:00.006+05:30

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.

fun

2010-02-22T20:28:00.009+05:30

Buy Nifty at 4850 Spot, SL 4825 Spot, Target 4876, 4889, 4909 Spot
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

2010-02-22T12:58:00.002+05:30

Vvvvv ji asked, "If one follows BSAR, what should be the target in that direction?"
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"
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
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.
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
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.
I hope I have been able to clarify this. Further Questions are welcome

weekly outlook

2010-02-20T13:11:00.010+05:30

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)
The Nifty would be overbought above 5101, and Oversold below 4666
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
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
This target is very unlikely to happen in a week
If I were a gambler, I would be buying Nifty at all levels
Volume indicators suggest a range bound market with positive bias
Trend Indicators suggest, absence of any underlying current
Breadth Indicators suggest that if Nifty were to fall say, about 300 or so, points then it could bottom out.
Momentum Indicators suggest positive reverse (hidden) divergences.
The 14 period TRIX Weekly, is at 5022, Nifty might give it a shot.
The Index Options PCR suggest some interest in Put Writing.

for the kind attention of rahul rathi - ob os revisited

2010-02-17T09:24:00.004+05:30

Q:How do you trade in the market?
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;
Q:How is one different from the other?
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;
Q:How would I calculate such points, and what kind of charts do I require?
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;
Q:Which OB OS Levels do you use?
A:Weekly;
Q:How do I Calculate Stop Loss?
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.
Q:What is your success rate?
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).
Q:Is there something else that you use apart from the OB OS Levels in your trading?
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;
Q: Anything else apart from that?
A:Divergences in two dozen indicators,half a dozen price overlays, Elliott wave theory with my own modifications, All kinds of charts etc.,
Q:Are you lying again?
A:God damn that bird keeper

weekly outlook

2010-02-14T12:43:00.003+05:30

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
Swing traders are best advised to keep 4804 as Stop and Reverse point for their trades for the forthcoming week
The Oversold level is at 4680, it seems unlikely that we would get to see this level in the following week
Some important Pivots could be, 4728,4765, 4818, 4850,4903,4956,4988,5041
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
The RSI 14 and W%R 29 hover around their median values
MFI at 58 probably points to the fact that DIIs and retail has been active on the long side in the market
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
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!

weekly outlook

2010-02-05T18:30:00.004+05:30

Nifty continued it's downtrend for the second consecutive week
No fresh longs should be initiated unless the weekly close happens above the BSAR point(Weekly), which now stands at 4868
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
The Weekly VHF is at 0.22 almost 2 sd away from the median, signifying that a reversal is at hand
The weekly ADX stands at 19, almost one sd away from it's median value, signifying that Nifty is lacking in strong trending oscillations
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
Some Important Pivots could be, 4920,4883,4861,4790,4766,4742,4719,4695,4671,4647,4620,4576,4554,4517
Gold has touched 1050, now the target is 1320.

So where are we?

2010-02-04T19:54:00.006+05:30

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

copyright

2010-02-04T16:50:00.005+05:30

The Author of this blog holds the right to copy, publish, or disseminate the information being published here and is the sole discretion of the Author in all cases. Any other person/institution found copying in full or part any of the material or 'methods of analysis' would be booked under Section 55, 56, 57, 58 of Indian Copyright Act 1957, and would be subjected to Delhi Jurisdiction. Any person reading this blog in future would be construed to have information about this notice. The same would be displayed as the footer ofthis web page prominently

fibonacci analysis

2010-02-03T17:19:00.007+05:30

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

Chebyshev’s Inequality (Oh Those Russians)

2010-02-02T12:54:00.009+05:30

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
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)
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)
*****This Topic is Incomplete, would be reposted*****

Outlook for February 2010

2010-01-30T13:33:00.004+05:30

The Overbought level is 5478, the Oversold Level is 4297
The Phantom Price Line is at 4888, BSAR is at 4628
The Important Pivots would be, 5353,5306,5228,5182,5032,4982,4932,4882,4832,4782,4732,4582,4536,4458,4411
The Nifty is buy on dips, keep SL @ 4628
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
In last two three months we have seen historically quiet periods, but don't be mistaken
All weekly indicators are near their lower sigma

the central limit theorem

2010-01-30T12:53:00.007+05:30

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

watch this drama

2010-01-28T20:43:00.003+05:30

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

So where are we?

2010-01-27T19:55:00.005+05:30

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

the normal probability curve

2010-01-25T12:52:00.008+05:30

The 68-95-99.7% Rule

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

68%
of the observations fall within 1 standard deviation of the mean, that is, between µ-σ and µ+σ .
95%
of the observations fall within 2 standard deviations of the mean, that is, between µ-2σ and µ+2σ.
99.7%
of the observations fall within 3 standard deviations of the mean, that is, between µ-3σ and µ+3σ .

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

You said it

2010-01-17T07:43:00.008+05:30

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
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
Gentleman with a Non English name, I couldn't understand what you were asking for.
Nifty Trader ji, we have dark clouds all over, only waiting for lightning
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.
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?
Alnesh Bhai, relax, people who come here wouldn't be loosers, Inshallah
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
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.
MOK ji, one can make 10 points everyday. Because all three situations discussed above are present intraday!
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

flash of the sword

2010-01-10T10:10:00.002+05:30

get ready for a public algorithm.............

The Blatant Truth

2009-12-30T14:39:00.008+05:30

On an average there are 240 trading days in an year
If a day trader makes just 5 points, every trading day, he makes 1200 points an year
On an average it takes 600 points to double your money, if trading in futures
A trader who begins trading with 1,00,000 and assuming he has no drawdown since he doesn't carry any positions overnight, doubles his money in first 6 months, assuming he neither redeploys the earned profits nor withdraws them
So after 6 months he has a capital of 2,00,000!!!!!!
After doubling his capital he starts trading with 2,00,000, instead of initial 1,00,000
At the end of the year he has 4,00,000 (at the end of the 5th year he would have made 10 Crore, ignoring taxes, and the fact that much before 6 months he would have the ability to increase his position size:::so no need to worry for taxes!!!!)
This corresponds to a profit of 300% per year
Can't you make net 5 points per day or just net 25 points per week, consistently?
Think about it

weekly outlook

2009-12-26T10:36:00.002+05:30

Nifty would present us with some fabulous trading opportunities in coming weeks
These opportunities would be tapped by those who are humble, steadfast and daring
The Overbought level is 5312, and Oversold level is 4839.
The Phantom Price Line is at 5075, and BSAR is at 4941.
The half yearly, quarterly, and monthly values in the table on the right, would be updated on the New Years Day, Inshallah.
I am gearing up for Direct Market Access Trading, now available with NSE, trying to develop my own platform on *NIX framework, and for DOW, which should be available in next 5 years or so, which means that I have practically no free time left
I do not provide any trading advice/calls other than those appearing on this blog, which is practically my thought process and trading ideas.
Also I do not intend to start an advisory service/Asset Management Company, as I had thought earlier, simply because I don't have time and or inclination, and also because Almighty Allah has been very kind to me.

weekly outlook

2009-12-21T19:37:00.002+05:30

The Overbought Level is 5259, the Oversold Level is 4789
The Phantom Price Line is at 5024
The BSAR is at 4939, use it strictly to decide your trade direction
As long as weekly closing is above 4939, Nifty would be bullish
The next move would be in the opposite direction to the following BIG move
These market conditions aren't favorable for novice traders
As a rule of thumb, as long as Nifty is above 4800 it could slaughter bears, so be very careful if you go short
Cdr VPB ji, I would post an article on Squeeze Set up in the VFM Forum shortly
Thanks VK ji, welcome back

The objective of technical analysis

2009-12-19T13:16:00.001+05:30

Before writing this article I Googled the topic and found no answer from any established authority, or no one ever bothered to pause and ponder over it
So here is a serious attempt: The Objective of Technical Analysis is ,
1. To Understand and Identify the Overbought and Oversold price levels as derived from using all the historical data available;
2. To Identify reversal patterns that might occur in overbought or oversold regions, so as to profit from contra trend trades;
3. To maximize the gains from all sorts of trading activities, and minimise risk and losses arising from such activities;
4. To identify the price levels where chances of a profitable trade are less, and recognize 'price-patterns' in and at such levels if and when they occur to avoid such trades;
I hope I have been able to put things in right perspective

weekly outlook

2009-12-12T19:06:00.008+05:30

The greatest people in this world were those who cultivated their characters and their intellects
The weekly Overbought level is 5282
The weekly Oversold level is 4803
The Phantom Price line is at 5042
The important Pivots between the Oversold and Overbought levels are as follows:
4854, 4894, 4951, 4986, 5042, 5099, 5134, 5190, 5231,
Please tighten your seat belts for the Roller Coaster, and trade using BSAR which is at 4921,
EXIT ALL POSITIONAL LONGS, INVESTORS IT'S TIME TO BOOK PROFITS, WAIT FOR OVERSOLD LEVELS TO RE ENTER
Where is VK Bhai, hope all is well with him
The Title of the blog has been altered to reflect correctly the area of my study

Principles of Trading

2009-12-12T12:23:00.004+05:30

Determine the trend by drawing trendlines
In an uptrend the trendline is drawn beneath the price bars
In a downtrend the trendline is drawn above the price bars
The trendline should merely kiss at least three bars
Trendlines merely indicate the higher probability of market direction in the very short term
The Stop Loss should be placed a little below/above the trendline
This technique works best in trending markets, and is overall profitable
Modern Statisticians have replaced trend lines with moving average lines
The best Moving Average line is considered to be 7 EMA Closing
If traded consistently, could give handsome returns over a long period of time, say 1 year

Black Belt Trading

2009-12-10T14:09:00.000+05:30

Trend or Range Bound Market

The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or range bound phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

Paper Trading: Is it Useful?

2009-12-08T22:10:00.003+05:30

(Article by Richard L. Muehlberg)

On June 10, 2008, I opened a simulated futures account. My starting total was $50,000. Twenty-three trading days later, on July 11, my total reached $158,404. If you would like a JPEG copy of my July 11 statement, I will email it to you.

I opened the account because these words kept coming into my mind: "If you are a bad trader, why aren’t you a good trader? If you are a good trader, why aren’t you a better trader? If you are a better trader, why stop there?"

For years, I had been toying with the idea of opening a simulated ("paper trading") account. On the one hand, I felt that opening a paper trading account was something I should do. On the other hand, I was not convinced. Because I was actively trading, I did not see the point in opening a paper account while my real accounts were keeping me busy enough. But, those words "If you are..." kept coming back to me.

Then, on June 10, I made the move. I accepted that it was okay to have a paper account and real accounts at the same time. The idea of training is familiar to me. I keep a trading diary as a training tool. I study the diary to help me trade. I reasoned that trading money in a paper account would be another training tool. I would be able to compare what I was doing in my real accounts against my paper account.

I knew that the "fear factor" would be different with a paper trading account; you do things with simulated money that you might not do with real money; you might trade the way you are supposed to without letting emotions / fear overrule you. What I did not expect but soon realized was how seriously I would take my new paper account. The simulated money took on its own reality.

Now, when I read an article saying paper trading is a waste of time I wonder if the person who wrote the article has any direct experience with paper trading.

If you are new to trading and want to explore how trading feels, I recommend opening a paper trading account. Do a web search using the keywords "simulated trading account + paper trading account + stocks + futures" or some combination of those keywords. Create a short list of the websites that appeal to you. Some paper accounts are free. Some cost a small fee.

One alternative is to open a single account. Another alternative is to open two (or more) accounts through separate sites. Use one account to test one trading approach and the second account to test another.

Even if you are an active trader, I still recommend a paper trading account. Trade the account alongside your real accounts. You may be surprised by how mentally reinforcing the experience can be. Sometimes, you need to learn things by having someone else teach you. Sometimes, you need to learn things by having yourself teach you. Using a paper account, where the pressures are different from what they are with your real accounts, may help you show yourself just how much better you can become as a trader.

So how did I triple my paper trading account?

I followed the same trading approach I follow with my real accounts. (I am a day trader as a rule. My approach is to follow a consistent group of futures and ETFs and attempt to day trade no more than one or two of those futures or ETFs at a time.) I traded when I saw a low risk / high reward situation. Each day, when I made what I felt was enough money for one day, I stopped trading for that day. I did not let myself become overconfident.

At the end of each day, I looked over the trades in my simulated account and remembered why and how I made each one, just as I do with trades in my real accounts.

Paper trading is helping me in a lot of ways, but most especially with my discipline. If my answer seems too easy, then open a paper trading account and see first-hand what is possible.

Gold, 11-Day Chart, eSignal

Look at this linear regression intraday 11-day chart for August 2008 gold futures. The price bars are 180 minutes. See the action on July 10 and July 11? Would you have had the nerve to ride those two days on the long side using your real accounts? Would a paper account have helped? What if you had used both accounts? Do the math. Imagine just a $30,000 paper account on the long side of the July 10 / 11 move.

Look at your own charts tonight. Review the trades you wish you had made. Ask yourself if you might have made those trades if you had had a paper account. If the answer is yes, then open your own paper account. Next time you see a trade you want to make but don’t want to risk with your real accounts, use your paper account. Get some part of you in the game. Build yourself up in steps.

If you are experiencing a winning streak in your real accounts, then shift most of your trading to your paper account; let it absorb some of the "emotional high" that comes with winning. The "high" of winning can lead to overconfidence and recklessness. Your paper account can help protect you.

If you are experiencing a losing streak in your real accounts, then restrict yourself to your paper account. Once again, your paper account can help protect you. Get your rhythm back. When you are "back in the zone", start trading small in your real accounts; then, gradually increase the size of your real positions.

A trader is an athlete; you never lose the need to train, no matter how good you get. Trading is a competition. You are competing against other traders. You win money from them. When you lose, they win money from you. An athlete who does not train gets outclassed.

What do you think happens to traders who don't train? A trading diary can help you train. A paper account can help you train. Become that better trader.

*Reprinted (and modified) with permission from Richard L. Muehlberg (richardmue@yahoo.com, a contributor to Futures magazine and an active day trader of his own account using linear regression channels and intermarket analysis. His daily trading diary entries are available on www.DayTradingWithLinesInTheSky.com. Also, see his January 25, 2008 eSignal Weekly Trading Education article, "Is the Advice to Keep a Trading Diary Good or Bad", and his February 15, 2008 article, "What Is the Goal of Trading?"

weekly outlook

2009-12-05T11:58:00.010+05:30

Nifty would be Ovebought above 5252, and Oversold below 4757
The 5 EMA Weekly is at 5005
The 14 Period TRIX is at 4924
Nifty has to close above 5172 to regain it's uptrend
And it has to close below 4676 to start a downtrend
The 29 Weeks SMA is at 4689, and Upper Bollinger Band is at 5271
The corresponding W%R reading is -4.84, suggesting uptrend (29 weeks = 7 months roughly).
The 7 Weeks W%R is in the region of -11.35
Warning:The Nifty could do a quick 4000 followed by 5200
Tip:Sell When Overbought keep the target as the 5 EMA and buy when Oversold target again 5 EMA or use BSAR for exit
Thanks Alnesh, for reminding me, Rajan ji, Mohid ji, Vaish ji, Jayant ji, Amit ji, Sunil ji and everyone else for your constructive comments

Nifty at a glance

2009-12-03T18:43:00.006+05:30

Welcome Friends,
You must have noticed that I have included a table of all the important pivots on the bar on the right hand side. It'd be updated regularly. Remember to Short in the Overbought region and go long in the Oversold region. I have also included Biased Stop and Reverse (BSAR), my own implementation of Stop and Reverse, to be implemented on closing basis(like at 3:25 pm). Only for those who have an IQ reading of greater than 100. Rest can search for Sunil Saranjame. He is the leader of those who could only KISS (Keep it Simple Stupid, the Great Motto of Simpletons)and do no more. All the Best

من كونت مولى، فى علين مولى

2009-12-02T14:12:00.006+05:30

Gold touches 1216
I had expressed the same views here
I am sure no forum reader would remember what I said in last December
مہر مرے ٹوہ ہم مرے ورنہ مرے ہماری بلا سچے گر کا بلکہ مرے نہ مرا جائے मैहर मरे तो हम मरे वर्ना मरे हमारी बला सच्चे गुर का बालका मरे न मारा जाये Hazrat Ameer Khusro Rehmatullah Alaihi

a letter from a critic

2009-12-01T12:19:00.007+05:30

Akhtar bhai, I hope yu would recall that a couple or so months back, u were sure nifty will not breach 4793 ( in vfm when I questioned khosboo's call of short selling around 4570-4600). Don't take it otherwise, but my own sense is nifty will comfortably breach this level of yours and even breach the previous top of 6357 in the next six months appx. After that my expectations of a slow and steady fall to 3650-3920 and miay be even 3150. As regards 21000 in the next 7 yrs on breach of 5480 appx levels, I see it a very very remote posibility as even 10-15% compounded growth in nifty EPS can't take it beyond 17000-18000 levels. Thx n regds Sunil

My Answer

Dear Sunil ji, Greetings! Why would I not recall what I had said on that thread, advising people to use SL for that short call? I guess you should try some brain enhancing tonic for that. Son, I have seen many people here who had a sense and later lost it, leaving their family in utter distress, so my friendly advise is: don't have a sense that is bound to leave you pennyless. Only time would tell whether I am right or wrong, but what if I am right and you are wrong? I make money. What if you are right and I am wrong? I make even more money! How? Read this blog, I write it in simple English. With Warm Regards, Javed P.S. I enjoy foolish comments more than the intelligent ones. I can't help it. BTW I guess that stupid forum owner is also lifting off my ideas and posting as his own, these days. To Mohan: Greetings! Boy I am straight, so that I don't enjoy the "touch". If you have a question, post it here, in comments section.

Outlook for December 2009

2009-11-30T19:02:00.004+05:30

The Overbought Level is 5354
The Oversold Level is 4117
The Monthly Phantom Price Line is at 4736
Favorable Conditions for a swing are building up
The Monthly Biased Stop & Reverse Point is at 4450
The 14 Monthly TRIX is at 4071
A mild to moderate correction would easily take Nifty into the region of 4071 - 4450

weekly outlook

2009-11-28T12:07:00.005+05:30

The Biased Stop & Reverse for Investors is at 4814.50
The Overbought Level is at 5201
The Oversold Level is at 4704
The Phantom Price Line is at 4952.90
The 14 weeks TRIX is at 4908.05
Nifty has to close(weekly) above 5156 for the uptrend or below 4660 for downtrend
The important Pivots between Oversold and Overbought levels are:
4704, 4757, 4799, 4858, 4894, 4953, 5011, 5047, 5106, 5148, 5201
Nifty might fall below 4000, before continuing it's uptrend, in coming months
So, Get Ready to Get Rich, there won't be a second call

A letter from a friend...

2009-11-26T23:47:00.001+05:30

Asalam Valekum Bhaloo Bhai :) today i have completed 3 months of testing with real money for 322/1364 as we discussed last time , i was trading with 2 mini nifty 1 lot I use to cover on 100 pts and another on crossover stop loss for both of them was crossover so the results are for the first one : it's -10 pts ( where i was covering @ 100 pts ) and for the second one it's : +285 pts :) i was purely following the crossovers no ADX, PSAR , and RSI , kuch nahi 100% mechanical trading in October i also got 3-4 whipsaws in a row where i was down by -350 pts but then that mega move came in Nov first week and i got +275 in one single trade at one point this trade was giving me +500 pts but i dint touched it as i wanted to test and follow this system without using my brains and emotions i have written records or each trade that i took and i have gained much more confidence now form the above data i think doing only crossover to crossover will be best , it's a trend following system so we need to let it run freely to gain maximum profit from this so now i am starting with one big nifty and doing only crossover to crossover aapka 6 mahine meh double is proved as this have given 50% return in 3 months :) also ur saying BE CONSISTENT is proved sirji after seeing the results i am getting the urge to start with 100 nifty ...aap kya bolteh hai i am entering next level with this system, ur advice and guidance based on above data will be very helpful

weekly outlook

2009-11-22T15:56:00.005+05:30

The Weekly Overbought level is 5200.50
The Weekly Oversold level is 4716.30
The 5 EMA Weekly is at 4958.40, Triple Smoothed Exponential Moving Average is at 4895, 29 Weeks SMA is 4594
The major Pivots for the week are: 4768, 4808, 4866, 4901, 5015, 5050, 5108, 5148
Nifty is struggling to regain it's uptrend
This week Nifty has to close above 5138 to regain it's uptrend
Nifty could move violently in either direction in coming 3 - 4 weeks
Gold has touched $1150, now just $50 away from the target given at $739 on my previous blog International Economic Review,(Where are my baiters?)

Revival of the old blog

2009-11-21T12:23:00.002+05:30

I have decided to revive my old blog, http://nifty-trend-analysis.blogspot.com/ and use it for posting charts, which I used to post on the forum.

Midweek Outlook

2009-11-19T00:37:00.004+05:30

Stop Loss for Longs is at 4994, for Thursday, and 5010 for Friday
Traders looking to go short could try if Nifty Spot goes below 4994, keeping 5080 as Stop Loss
There is just a possibility of a minor correction as Nifty isn't truly overbought
The supports are placed at 5020, 4999, 4957, 4902

weekly outlook

2009-11-15T12:53:00.006+05:30

The Weekly Overbought Level is 5160.90
The 5 EMA Weekly or Phantom Price Line is at 4911.40
The weekly Oversold Level is 4662.0
The 14 Weeks Triple Smoothed Exponential Moving Average is at 4882.35;
Nifty made a low of 4538.50 on 3rd Nov and a high of 5017.90 on 13th of Nov; thereby as long as it is above 4834.75 it is bullish and the VIX is likely to remain rangebound
Some Important Pivots to watch for this week are: 4822, 4854, 4874, 4936, 4957, 4978, 4999, 5020, 5041, 5062, 5124, 5144, 5176
Exit Longs initiated at 4786, and initiate fresh shorts around 5176.

Nifty 21000 in 7 years

2009-11-12T10:52:00.007+05:30

If Nifty breaches 5479 in coming weeks, then surely we are in the Primary Wave III, and the target would be 21000 within 7 years. Will elaborate later.

Back in 1989 when Sensex was at 750 I had predicted it would touch 2000, while sitting at my broker's office, everybody had a hearty laugh. But when Sensex finally did, those same people came to touch my feet; while at a social function in March 2002 I had predicted that we are going to have Sensex at 10000 ( Sensex was hovering around 3200), people had thought that I had finally lost my mind, and stopped inviting me to social events. When it finally did, I was invited by the senior-most titans of Export Promotion Council for Software and IT in order to time their respective IPOs and that's when I got the break to work at the wall street; meanwhile I am happy that at least SN Vaish ji had guts to use poor language against me; but be warned I would not let anybody touch my feet this time around

weekly outlook

2009-11-09T10:40:00.005+05:30

Below 4616.60 Nifty would be Oversold
Critical Supports in Oversold Region are placed at 4588, 4548, 4512, 4432
Major Pivots above Oversold Level would be 4670, 4712, 4771, 4808, 4867
Keep buying on dips, with proper hedging and money management
Do Keep Referring to Monthly Outlook, as often as you come here
Here is the link for Alan Farley and Dummies Book

Week in Charts

2009-11-08T11:32:00.003+05:30

Although these charts were meant for a certain forum, but it seems that forum is crumbling under the weight of some big personalities. So here are they:

Overbought Oversold and Mastering the Swing Part I

2009-11-07T12:42:00.009+05:30

Overbought:
- A stock or commodity market condition where there has been significant trading bidding up prices to higher levels, levels which seem overextended
- In technical analysis, it is a market in which the volume of buying that has occurred is greater than the fundamentals justify
- A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors
- A technical condition that occurs when prices are considered too high and susceptible to a decline. Overbought conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp advance from $15 to $30 in 2 weeks might lead a technician to believe that a security is overbought. Or, a security is sometimes considered overbought when the Stochastic Oscillator exceeds 80 and when the Relative Strength Index (RSI) exceeds 70. It is important to keep in mind that overbought is not necessarily the same as being bearish. It merely infers that the stock has risen too far too fast and might be due for a pullback.
- A term used to describe a market or a stock that has appreciated so rapidly and has generated such excessively bullish sentiment that a near-term decline is highly likely
- A physical asset or futures contract whose prices have been pushed up to a level that some believe is unrealistically high and cannot be sustained ie. when the speculative long interest has rapidly increased and the speculative short interest is sharply reduced
Oversold:
- A term used to describe a technical opinion of a market has declined too steeply and too fast in relation to underlying fundamental factors
- An analytical term for a stock that is underpriced
- a condition of the marked after an abrupt recession. In this situation a correction rise is possible
- A technical condition that occurs when prices are considered too low and ripe for a rally. Oversold conditions can be classified by analyzing the chart pattern or with indicators such as the Stochastic Oscillator and Relative Strength Index (RSI). A sharp decline from 30 to 15 in 2 weeks might lead a technician to believe that a security is oversold. Or, a security is sometimes considered oversold when the Stochastic Oscillator is less than 20 and when the Relative Strength Index (RSI) is less than 30. It is important to keep in mind that oversold is not necessarily the same as being bullish. It merely infers that the security has fallen too far too fast and may be due for a reaction rally.
- The reverse of overbought. A single security or a market which, it is believed, has declined to an unreasonable level
- A market which has fallen too far and too fast under excessive selling pressure and is expected to move back to a higher, more neutral level
- Used in the context of general equities. Technically too low in price, and hence a technical correction is expected. Antithesis of overbought
- A physical asset or futures contract whose prices have been pushed down to a level that some believe is unrealistically low and cannot be sustained ie. when the speculative long interest has been drastically diminished and the speculative short interest increases.
- An equity (or market) that has gone down to which its valuation seems to support buying of the stock.
Swing Trading:
- Opposite of daytrading. Swing Traders speculate longer term on prices of stocks, futures, etc.
- This term is typically used to imply a style where one takes a position for several days to a few weeks. A swing trade might be completed in less than a week, or if the stock consolidates it might take several weeks. While a swing trader will watch the market very closely, this style does not require the trader to be in front a computer screen while the market is open. A swing trader will typically aim for a 10-15% profit on all trades.
- Swing trading is commonly defined as a stock, index, or commodities trading practice whereby the instrument is bought or sold at or near the end of an up or down price swing caused by daily or weekly price volatility. A swing trade position is typically open longer than a day, but shorter than trend following trades or buy and hold investment strategies. Swing traders engage in prospecting changes in an instrument's price caused by oscillations between its price being bid up by optimism and alternatively being bid down by pessimism over a period of a few days, weeks, or months. Profits can be sought by engaging in either Long or Short trading
- Identifying whether a market is currently trending higher or lower, or trading sideways and when this will change is a challenge for many swing trading and long-term trend following trading strategies
- Swing traders do not need perfect timing - to buy at the bottom, and sell at the top of price oscillations. Small consistent earnings that involve strict money management rules can compound returns significantly.
- Most important is to understand that there is no foolproof mathematical model or algorithm that will always work so only use them as research tools not decision making engines.

views for thursday

2009-11-05T09:55:00.006+05:30

Nifty is in downtrend
The 5 EMA is at 4722
The Oversold level is at 4621
Pivots above Oversold Level are 4698.60, 4683.80, 4659.80, 4642.80
The important support below OS level is 4593.40
The SL [SAR] for Shorts is 4786 [again a coincidence]
I have received a lot of mail regarding the SAR, I have already written everything in the article, some people attach their own names to it like Tom's Swing; Dick's SAR, Harry's Levels, don't get fooled, the underlying theory remains the same. I have spent nearly 23 years in this arena, and don't have a small ego or mind, so I would call somebody else's theory as his and not mine. And don't forget, Late Mr Jesse Livermore committed suicide, after loosing everything in stock market and Late Mr W D Gann's chief source of income came from conducting seminars and courses on trading, his son worked as a banker in California, rest is all lie. But don't get discouraged, as long as Mathematics is around, we shall overcome! (And it doesn't mean that I am greater than those legendry figures)

views for wednesday

2009-11-04T04:51:00.007+05:30

HE's Most Merciful, indeed
Nifty would be oversold below 4630.90
The Supports below are at 4620, 4604.40, 4590.50
The Stop & Reverse Point is at 4853.65, (Stop Loss for Current Short Positions & entry point for Next Long Positions)
FIIs sold this time, and DIIs bought, while Nifty fell 190 points!

Views For Tuesday

2009-11-03T02:18:00.004+05:30

I begin this new chapter with The Name of God, Most Merciful, Most Beneficent
The Oversold level for the day is 4720
Supports below are placed at 4710.30, 4695.90, 4683, 4664.60, 4654.30
Stop & Reverse Point is at 4867 (Stop Loss for Current Short Positions & entry point for Next Long Positions)
The 5 EMA is at 4810.70, and 7 EMA is at 4849.50

Late Mr W.D. Gann's Stop And Reverse Concept

2009-11-02T10:12:00.005+05:30

Definition:

A stop and reverse (often known as SAR) is a type of stop loss order that exits the current trade, and either simultaneously or immediately afterwards, enters a new trade in the opposite direction. Stop and reverse orders combine elements of trade management and risk management, and are used in place of regular stop loss orders.

When Are Stop And Reverse Orders Used?

Stop and reverse orders are used when a trader wants to reverse their position (hence the name stop and reverse). For example, if a trader is in a long trade, and wants to exit the long trade and enter a short trade at the same price, they would use a stop and reverse order. The same task could be accomplished manually (i.e. placing an exit order, followed by an entry order), but stop and reverse orders are more efficient as they can combine the entry and exit into a single order.

How Do Stop And Reverse Orders Work?

Stop and reverse orders not a standard order type, and are not offered by many brokerages or any exchanges (that I am aware of). Therefore, stop and reverse orders are usually implemented by the trader's trading software (order entry software), and therefore their implmentation can vary significantly, but with the same end result (a new trade in the opposite direction). If a trader's trading software does not offer stop and reverse orders (many do not), the trader can create a stop and reverse order by doubling the number of contracts (or shares, or lots, etc.) in their stop loss orders. For example, if a trader is in a long trade with one contract, a stop loss order that is placed for two contracts will function exactly like a stop and reverse order. Note that stop and reverse orders are not related to the Parabolic SAR indicator, however, a trader that is trading using the Parabolic SAR indicator may use stop and reverse orders in their trading.

Also Known As: SAR

(courtesy: about.com) Mr Gann calculated SAR from the previous two trading days data. If Downtrend, he would use the Highest High of previous two trading days as SAR, if Uptrend he would use previous two trading days' Lowest Low as SAR. I would use it in conjunction with the multiple band analysis, and the Normal Probabality Theory, that I had been using hitherto. I hope this refinement brings you and me profits unimaginable...and this is what trading is all about...isn't it? P.S. I am currently considering designing an RTOS for doing Technical Analysis on the fly. Anyone worked on Scientific Linux? I am also looking at the codes of OpenBSD, MINIX and various other Linux Distros.

views for November 2009

2009-11-01T10:35:00.006+05:30

The monthly overbought level is at 5207.80
The Pivots below it are 5075, 4971, 4897, 4824, 4734
The Monthly 5 EMA is at 4587
November and December would present us with some good buying opportunities
There are no indications of an impending crash
Important Trade Pivots For Setting Targets are as following:

5148
5127
5110
5093
5069
5023
5000
4980
4968
4952
4936
4898
4865
4808
4715
4676
4605
4573
4514
4436

weekly outlook

2009-11-01T09:46:00.003+05:30

Nifty is seemingly in a swing mode
The Oversold Level is at 4655.90
The Supports below are at 4628.20, 4588.60, 4553.40
The Weekly 5 EMA is at 4903
The Pivots above Oversold Level are 4708.90, 4750.50, 4808.90, 4845
Pay attention to 4786 (Coincidentally it has 786 in it!!!), nifty would move wildly below it
FIIs and DIIs were net buyers on Friday, ending the month net flat!(bought=sold)
The Month opening was at 5087; shows that retail has sold short
The trend remains up as long as 4350 is not breached

Views For Wednesday

2009-10-28T10:12:00.004+05:30

Nifty is trending down, it could fall further down
Supports are placed at 4759.40, 4771.05, 4813.50
Resistances are placed at 4852.30, 4893.30
Intraday: If falls below 4759.40, Buy Nifty Futures below 4759.40 SL= 4732, target = 4813.
Investors looking for buying opportunity should wait for sub 4750 levels

Views For Tuesday

2009-10-27T05:14:00.003+05:30

Supports are placed at 4936; 4927; 4914;
Resistances are placed at 4997; 5016; 5034
Intraday: Buy Nifty Futures below 4936 spot, targets: 4953; 4966; 4985
If closing comes below 4913; it would signify birth of a downtrend

views for monday

2009-10-26T08:13:00.003+05:30

Today 4936.20 is the iron support
Resistances above are 4999, 5019.70, 5038.70, 5057.70
Nifty has created a range of 261 points between 4921 and 5182
So as long as it is below 5082.30 the volatility would tend to be high
In October so far, FIIs are buying and DIIs are selling

weekly outlook

2009-10-25T07:33:00.003+05:30

This week Overbought Level is 5239 and Oversold Level is 4759.
Pivots for Support & Resistance would be; 4907; 4942; 4999; 5055; 5147; 5187; 5239;
If 4942 is supported, we might see 5200.
The 5 ema, weekly is hovering at 5000 for the second consecutive week.
The Options data suggest range-bound market with positive bias
Momentum Oscillators Suggest a small bounce ahead.

views for thursday

2009-10-22T11:17:00.006+05:30

Positional: Buy Nifty below 5014, SL=4956 spot; for a target of 5032, 5045, 5064, 5076, 5094, 5113.

views for muhurat

2009-10-17T08:46:00.010+05:30

Positional: Short Nifty if spot goes above 5175 for targets of 5157, 5143, 5123, 5111, 5100

views for friday

2009-10-16T08:14:00.005+05:30

The daily Overbought level is 5152.65
Sell Nifty above 5152.65 Spot level for a target of 5120, 5100, 5087, positional call

weekly outlook

2009-10-10T17:22:00.004+05:30

The weekly Overbought level is 5172.50, which would be very strong resistance
The Pivots for Supports and Resistances below that are; 5120, 5079, 5022, 4987
The 5 EMA is around 4929
Nifty is likely to get strong support between 4859 - 4872
Nifty would remain range-bound with positive bias
Put Options for Nifty are going to get dearer/expensive
Common traders are likely to expect a reversal in the trend, while there is none
Wishing You All A Happy Prosperous and Wonderful Diwali

weekly outlook

2009-10-04T00:00:00.004+05:30

The weekly overbought level is 5171; this should act as strong resistance
The pivots below that would be 4980; 5017; 5075; 5117;
The 5 ema weekly is about 4922; this should act as good support
Investors going long should hedge through 4400 puts (Rs 10)
Good conditions for a swing are building up

views for october 2009

2009-10-01T23:11:00.004+05:30

The monthly overbought level is 5155
The breakout point is at 5616
Nifty would face good resistance above 5155
The µ is 4526; it can retrace upto this point
The maximum level that Nifty could attain before 31 Dec 2009 is 5681
In a time frame of 3 - 6 months, nifty is getting overbought
The important supports and resistances would be placed around: 4674.60, 4766.50, 4915.10, 5020.85, 5155.55, 5226.10, 5326.80, 5416.30, 5616.40

views for tuesday

2009-09-27T23:10:00.010+05:30

The Oversold level would be 4883.10
The 5 EMA is at 4966
The Trading SL for Shorts is 5036
The weekly Overbought level now is 5097
Investors: Keep buying on dips
Day Traders: If Nifty goes below 4925 before 10:30 am buy for a target of 4950
Swing traders: Short Nifty below 4880; Above 4880 don't short

views for thursday

2009-09-24T07:55:00.002+05:30

The Overbought level would be 5045
Resistances below that level are: 5027, 5013, 4994, 4982
The 5 ema is at 4962
Trading SL for longs is 4931.90
Investors SL is 4255; or 4300 puts of Oct Series
As long as 4520 is not breached, Nifty is in uptrend

Views For Tuesday

2009-09-21T23:49:00.003+05:30

The Overbought Level for Tuesday is 5013
The resistances above it are 5023, 5036, 5048
The supports below are 4995, 4980, 4960, 4948,
The 5 EMA is at 4927
The weekly Overbought Level is 5048
Nifty might not breach 5048 level this week
There is likelihood of a negative closing
Options data suggests that downside is limited
The 5 ema of VIX is 28.17, lowest in 2009, reflecting stability

Heiken-Ashi Chart For Nifty

2009-09-20T14:48:00.002+05:30

read this

2009-09-20T09:23:00.006+05:30

The October 4200 put was quoted at 13.40 last on Friday. Whether the Market crashes or bounces from here, the investor stands to gain in both situations; the true objective of Technical Analysis! (The article appears courtesy vfmdirect.com)

For Investors

2009-09-19T12:16:00.002+05:30

views for friday

2009-09-17T20:08:00.008+05:30

Enjoy, but don't throw caution to the wind
The Overbought Level would be 4992
The Resistances are placed at 5002, 5016, 5028
The Supports are placed at 4958, 4937, 4924
The Options Data Suggests that Downside is limited.
FIIs are net buyers for 11,282.16 Cr and DIIs for 24,468.81 since 1st September 2009.
A link to a StockChart, that shows ADX and PSAR has been included under Easy Trading Rules in pure-profits.blogspot.com for the trailing Stop Loss.
Thanks everybody for your wishes, and making this blog number one site in the world on the topic of Pure Quantitative Analysis (See here), I hope your wealth multiplies exponentially in the coming months

For Records Only

2009-09-17T09:52:00.010+05:30

http://www.vfmdirect.com/forums/show.cgi?topicid=1242726273 http://www.vfmdirect.com/forums/show.cgi?topicid=1242861855

views for wednesday

2009-09-15T20:03:00.005+05:30

The Overbought Level would be 4922
The Resistances are placed at 4932, 4947, 4960
The Supports are placed at 4887, 4865, 4852
The Options Data Suggest a bounce ahead
The Monthly Breakout Point is 5392, for September - A closing above 5392 in September would invalidate my forecast of an impending C wave (Major Correction)
If Nifty closes above 5392 in September, then we would have 12000 within one year. But a closing above 5392 in September 2009 is very unlikely
Half Yearly Overbought Level: 4958, Monthly Overbought Level: 4925, Weekly Overbought Level: 4955
A closing above 4941 would bring 5036 sure shot

Views For Tuesday

2009-09-14T23:41:00.002+05:30

Nifty continues to be in uptrend
There is a likelihood of a swing this week
If the swing doesn't happen this week, we would see a bounce from current levels
Main Pivots are 4877, 4769, 4734, 4698
Nifty would try to touch 4821 on the up and 4778 on the low.
Thanks VK Bhai, Sureela ji, and Sundaribala ji, I would answer your queries in a day or two.

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))

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)

Quantitative Analysis & Statistical Research

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BSAR Trading System - Exit Rules

BSAR Trading System - Entry Rules

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

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

BSAR Trading System - Simple Implementation

BSAR Trading System - Requirements

BSAR Trading System - 50 Periods Simple Moving Average

UP TREND

DOWN TREND

SIDEWAYS

BSAR Trading System - Slow Stochastic Oscillator

BSAR Trading System - The EMA of Highs

BSAR Trading System - The EMA of Lows

BSAR - The Conceptual Framework - Moving Averages

BSAR - The Conceptual Framework - Trading Systems

BSAR - The Problems

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New System

Jeetu Sehgal

Let it Shine

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Chasing GOLD from $739 USD/Oz

Important Anouncement

Embrace BSAR

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

Failure swing

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من كونت مولى، فى علين مولى

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