SMO_SAR SYSTEM
SMOs NIFTY TRADING SYSTEM
inspired by Shri. Illango's JNSAR , GANN's Sq of 9s & Murphy 5-9EMA System
STEP I Data Acquisition Prev 5 DAYS
High, Low & Close
STEP II Data Processing:
1 Calculate 5DHEma
2 Calculate 5DLEma
3 Calculate 5DCEma
STEP III Mathematical Modelling:
1 Find the Parabolic Regression Eq. of Best fit for the 5DCEma pts
2 Update the Equation with the Last 5EMA pt every day
3 Thus @ any pt in time , we have a Curve with y=a*X^2 + b*X + C
4 Calculate the SLOPE of the Curve (dy/dx)
5 Calculate the Rate of Change of Slope 2nd Degree Differential (d^2y/dX^2)
STEP III Trade Entry / Trigger :
1 Start from any OUTLIER PT (price close above DHEMA or Below DLEMA)
2 Suppose we Start from Pt A @ 5100 on 07th Dec'11
3 Price Closed Below DLEma on 9th Dec'11 & 5-9 DEMA -ve Murphy Cross Over was seen. TRIGGERED A SELL !
4 Say we SELL @ Day Close i.e 4857
STEP IV Trade Analysis:
1 As per Illango ji's System, we carry SHORT positions as long as price closes below DHEma. So we track the price every day @ close
2 @ Next day , we carry SHORTS if ALL THE BELOW CONDITIONS are satisfied :
i Price closes BELOW DHEma
ii @ Next Day, near closing say @ 3:00pm, RECALCULATE the CURVE by ADDING that Days EXPECTED CLOSE & Remove OLDEST Price Data(5Day OLD)
iii Calculate SLOPE OF CURVE dy/dxi.e 1Dy
Calculate RATE OF CHANGE OF SLOPE i.e & 2nd DEGREE DIFFERENTIAL( d^2y/dx^2) i.e 2Dy
iv If 1Dy MAINTAIN its SIGN i.e is -ve, check 2Dy if +ve or =0, CARRY SHORTS
If 1Dy MAINTAIN its SIGN i.e is -ve, check 2Dy if -ve, WARNING IMPENDING REVERSAL
V If 1Dy CHANGES its SIGN i.e is becomes +ve, irrespective of 2Dy , COVER SHORTS (Book Profits)
This pt B , appears on 21st Dec'11 .. Close price is 4693
RESULT: NET GAIN IN TRADE : 164 pts
SAME SYSTEM CAN BE REPLICATED FOR A BULL CASE!!!
The attached image is for a BEAR CASE .
Pls note, we can FORTIFY THIS ALGO EVEN FURTHER with PSAR & EW & FIBBO & TLs !!!
DRAWBACKS OF THIS MODEL : (i) One IMEMDIATE DRAW BACK is the MODEL works with MODERATE VOLATILITY ONLY. It wont work on 10% UPPER or LOWER CKT DAYS!!
(ii) Scratchin my head for any other lacuna :-P
All Maths enthu guys , pls read this ALGO & pt out flaws if any or IMPROVEMENTS.
I will shortly model this in EXCEL or try and write a Quick Code for Auto Trade trigger Simulation (as & wen time permits, hope this weekend)
INSHAH ALLAH , WE SHALL HAVE EXCITING TRADING DAYS AHEAD !!
cheers
SMO
i really liked this post, will try to analyse this after market hours.
ReplyDeleteAll the best
regards
vikram
Looks very interesting. I am not a maths person at all, so it would be great if you could give a write-up, an explanation for logic of the steps taken and actually what ARE the steps, for an audience of laymen like me.
ReplyDeleteI hope I am not asking for too much. :)
Shriram good concept
ReplyDeleteThe maths part is too heavy.
Could u simplify it a bit.
Thx.
Thank u Vikram, Fire & SBSB:
ReplyDeleteI will make a Flow chart on the weekend & upload it.
And GD is right, too much maths is not really reqd. We can restrict our selves to FIRST DEGREE DIFFERENTIAL i.e dy/dx) to determine EXIT PTS!
Also Pls note @ the core, the SYSTEM is based on ILLANGO's ji Hi-Lo EMA concept.
I have only tweaked the Entry trigger & Exit pts :-)
Cheers
SMO
I'd like to see an excel sheet with _all_ this math for a month of nifty entry/exit points. We'd find out with paper trading alone if it is viable or not.
ReplyDeletePersonally, I've realised ema trading has to be combined with a low-failure pattern - ew or wolfe/gartley - for profit in times of correction.
Hi Yoda,
ReplyDeletePls see my Latest Algo called SMo_SAR ver.1.0
Its the same as J10.SAR, but I have found a way to FILETR OUT CORRECTIVE WAVES & ONLY WORK ON TRENDS !
rgds
Dear ShriRamji
ReplyDeleteI have read your post but somewhat
I am confused with the calculations.
will you elaborate it further?
If you have prepared the excel sheet
of the above pls post me also.
regards!
Shradha Saburi
Macho69.mahendra@gmail.com