magic of moving averages (learn how magically moving averages … · nifty -----simple moving avg...
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Magic of Moving Averages
(learn how magically moving averages can helps trader and investors)
10th October, 2018
• Moving Average - MA
• A moving average (MA) is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations. It is a trend-following, or lagging, indicator because it is based on past prices.
• The two basic and commonly used moving averages are the simple moving average (SMA), which is the simple average of a security over a defined number of time periods, and the exponential moving average (EMA), which gives greater weight to more recent prices. The most common applications of moving averages are to identify the trend direction, and to determine support and resistance levels.
Source – INVESTOPEDIA.COM
Simple Moving AveragesHow to start to trade with moving averages?
“Consistency” is more important than “Average Period” that we use for ploting M.A.
Most commonly used moving averages
Design Specific Strategy : (Since from the beginning)
Strategy 1 : Crossover of simple moving averages
Strategy 2 : Trend following - Select 50 days SMA for positional traders.
Strategy 3: Median level between UPWARD TREND and DOWNWARD TREND.
Source - Own observations and findings
Filtering noise from random fluctuations
18:F M A M J J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com 9975
10050
10125
10200
10275
10350
10425
10500
10575
10650
10725
10800
10875
10950
11025
11100
11175
11250
11325
11400
11475
11550
11625
11700
Cr
75.00
150
225
10301.05
155.99
Price Avg(S,10)
Vol
NSE NIFTY [N59901]10301.05, -0.45%
Dly
1
11171.55
5
10417.80
43
10866.45
44
10524.00
46
10701.20
47
10701.20
NIFTY --------
SIMPLE MOVING AVG
Source – Spider Software Pvt LTD
Trend following or lagging
Source - Spider Software Pvt LTD
16:ON D 17:J F M A M J J A S O N D 18:J F M A M J J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com18000
18500
19000
19500
20000
20500
21000
21500
22000
22500
23000
23500
24000
24500
25000
25500
26000
26500
27000
27500
28000
Cr
100
200
300
24527.65
155.99
Price Avg(S,50)
Vol
BANKNIFTY [N59906]24527.65, -0.37%
Dly
3
4
28377.90
6
Most commonly used moving averages
Source - Own observations and findings
5 days SMA - To identify short term trend of the market.
20 days SMA – to identify medium term period.
50 days SMA – to identify supports in falling markets and resistance in rising
markets.
200 days SMA – Favourite SMA of Fund Managers.
Fibonacci numbers – 5, 8, 13, 21, 34 and so on. From Fibonacci followers.
Strategy 1 : Crossover of simple moving averagesAfter crossing upward - first drop and rise.After crossing down ward – first rise and drop.Follow the ratio of 1:4.Current example of 5 and 20 days SMA
Source - Spider Software Pvt LTD
18:J J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com 295
300
305
310
315
320
325
330
335
340
345
350
355
360
365
370
375
380
385
390
395
400
405
410
415
420
425
Cr
2.00
4.00
371.40
0.76
Price Avg2(S,5,S,20)
Vol
JSWSTEEL [N11723] 371.40, -1.29%
Dly
after crossover first drop and recovery
D 0
Crossover - LT
Source - Spider Software Pvt LTD
18:J J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com 1208
1215
1223
1230
1238
1245
1253
1260
1268
1275
1283
1290
1298
1305
1313
1320
1328
1335
1343
1350
1358
1365
1373
1380
1388
Lk
50.00
100
1245.65
12.39
Price Avg2(S,5,S,20)
Vol
LT [N11483] 1245.65, 2.01%
Dly
1287.01
03/09/18 Mon
Op 1375.00Hi 1390.00Lo 1360.10Cl 1363.00Av 1357.25Av 1310.05
Qt 23.48
Crossover – SUN PHARMA
Source - Spider Software Pvt LTD
18:J J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com534
540
546
552
558
564
570
576
582
588
594
600
606
612
618
624
630
636
642
648
654
660
666
672
678
Lk
75.00
150
225
605.70
15.69
Price Avg2(S,5,S,20)
Vol
SUNPHARMA [N3351] 605.70, -0.66%
Dly
Buy
Buy
SELL
D 0
0.00
10/10/18 Wed
Op 610.00Hi 619.50Lo 605.60Cl 605.70Av 603.34Av 629.39
Qt 15.69
Crossover – TCS – SAVED FROM SELLING
Source - Spider Software Pvt LTD
18:J F M A M J J A
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com1350
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
Cr
2.50
5.00
7.50
2089.40
0.08
Price Avg2(S,5,S,20)
Vol
TCS [N11536] 2089.40, -0.11%
Dly
FAILED TO GIVE SELL CALL
D 0 D 29B 1:1
D 0
0.00
03/08/18 Fri
Op 1956.50Hi 1982.05Lo 1956.50Cl 1979.45Av 1957.83Av 1967.19
Qt 0.15
Crossover – Maruti -
Source - Spider Software Pvt LTD
18:J 11 18 25 J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com
6800
7000
7200
7400
7600
7800
8000
8200
8400
8600
8800
9000
9200
9400
9600
9800
Lk
5.00
10.00
15.00
6966.25
6.46
Price Avg2(S,5,S,20)
Vol
MARUTI [N10999] 6966.25, 3.98%
Dly
13
9350.00Confusion
CLEAR SELL CALL
0.00
10/10/18 Wed
Op 6748.00Hi 7025.00Lo 6723.25Cl 6966.25Av 6931.72Av 7768.45
Qt 6.46
Strategy 2 : Trend is Friend : take long trades (above Average Level) Also a stop loss for Trend following method.
Source - Spider Software Pvt LTD
16:ON D 17:J F M A M J J A S O N D 18:J F M A M J J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com18000
18500
19000
19500
20000
20500
21000
21500
22000
22500
23000
23500
24000
24500
25000
25500
26000
26500
27000
27500
28000
Cr
100
200
300
24527.65
155.99
Price Avg(S,50)
Vol
BANKNIFTY [N59906]24527.65, -0.37%
Dly
3
4
28377.90
6
Strategy 3: Median level between UPWARD TREND and DOWNWARD TREND. Most commonly used 20 days.
Source - Spider Software Pvt LTD
18:M J J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com10200
10260
10320
10380
10440
10500
10560
10620
10680
10740
10800
10860
10920
10980
11040
11100
11160
11220
11280
11340
11400
11460
11520
11580
11640
11700
11760
Cr
75.00
150
225
10443.90
49.86
Price Avg(S,20)
Vol
NSE NIFTY [N59901]10443.90, 1.39%
Dly
1
11171.55
5
10417.80
43
10866.45
44
10524.00
46
10701.20
47
10701.20
NIFTY --------
SIMPLE MOVING AVG
SELL
PAUSE AND SELL
0.00
10/10/18 Wed
Op 10331.85Hi 10445.20Lo 10318.25Cl 10443.90Av 10975.84
Qt 49.86
Reliance – Re entry
Source - Spider Software Pvt LTD
18:J 16 23 30 A 6 13 20 27 S 10 17 24 O 8
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com 1000
1020
1040
1060
1080
1100
1120
1140
1160
1180
1200
1220
1240
1260
1280
1300
1320
Lk
75.00
150
225
1104.10
48.47
Price Avg(S,20)
Vol
RELIANCE [N2885] 1104.10, 1.29%
Dly
16
24
1141.47
06/09/18 Thu
Op 1230.15Hi 1265.70Lo 1225.35Cl 1261.40Av 1242.60
Qt 111.95
BAJAJ FINA – FOR INVESTORS 200 DAYS SMA
Source - Spider Software Pvt LTD
12:FMA M J J A S O N D 13:J F M A M J J A S O N D 14:J F M A M J J A S O N D 15:J F M A M J J A S O N D 16:J F M A M J J A S O N D 17:J F M A M J J A S O N D 18:J F M A M J J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
Lk
50.00
100
150
2290.50
46.11
Price Avg(S,200)
Vol
BAJFINANCE [N317] 2290.50, 11.14%
Dly
6
2660.25
BUYING OPPORTUNITY
BUYING
D 0 R 3:19 D 0 D 0 D 0 D 0 D 0 S 10:2B 1:1
D 0 D 0
HDFC BANK – FOR INVESTORS 200 DAYS SMA
Source - Spider Software Pvt LTD
08:JO ND09:J MA MJ J A S O N D 10:J MA MJ J A S O N D 11:J MA MJ J A S O ND 12:J MA MJ J A S O N D 13:J MA MJ J A S O N D 14:J MA MJ J A S O ND15:J MA MJ J A S O N D 16:J MA MJ J A S O N D 17:J MA MJ J A S O N D 18:J MA MJ J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com 200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
Cr
5.00
10.00
1968.95
0.20
Price Avg(S,200)
Vol
HDFCBANK [N1333] 1968.95, 1.46%
Dly
S 10:2 D 0 D 0 D 0 D 0 D 0 D 0 D 0
Maruti – 20% below 200 days SMA
Source - Spider Software Pvt LTD
08:SND09:J A MJ J A S O ND10:J MA MJ J A S O N D 11:J MA MJ J A S O ND12:J MA MJ J A S O ND13:J MA MJ J A S O ND 14:J MA MJ J A S O ND15:J MA MJ J A S O ND16:J MA MJ J A S O ND 17:J MA MJ J A S O N D18:J MA MJ J A S O
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com 500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
7000
7500
8000
8500
9000
9500
Lk
50.00
100
6959.30
7.39
Price Avg(S,200)
Vol
MARUTI [N10999] 6959.30, 3.88%
Dly
11
9996.40
413
9350.00
20 % BELOW 200 DAYS SMA
Trait
D 0 D 0 D 0 D 0 D 0 D 0 D 0
0.00
10/10/18 Wed
Op 6748.00Hi 7025.00Lo 6723.25Cl 6959.30Av 8940.93
Qt 7.39
Data Points of Nifty @ 10198
Source - Spider Software Pvt LTD
INDIA VIX – 21.50 (SHOWS FEAR AND BOTTOMING FORMATION)
PCR – 0.85 OF SAME SERIES (OVERSOLD ACTIVITY).
DAILY RSI – IT WAS AT 21 (OVERSOLD BUT FIRM GRIP OF SELLERS)
INR – WAS AT 74.20
Crude was at 87.
Nifty Pull back is due up to 10550 or 10750 max.
Source - Spider Software Pvt LTD
18:A 13 20 27 S 10 17 24 O 8
Lnr IRIS
Source : www.SpiderSoftwareIndia.Com10200
10260
10320
10380
10440
10500
10560
10620
10680
10740
10800
10860
10920
10980
11040
11100
11160
11220
11280
11340
11400
11460
11520
11580
11640
11700
11760
Cr
75.00
150
225
10426.85
83.76
Price Avg(S,200)
Vol
NSE NIFTY [N59901]10426.85, 1.22%
Dly
1
11171.55
5
10417.80
43
10754.70
44
10540.65
46
PAUSE AND SELL
Technical Analysis: When to Buy/Sell Fundamental Analysis: Why to Buy/Sell
Question & Answer
Queries should be specific to stock that are in FNO segment.
22
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23
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