Modified Heikin Ashi Fibonacci Trading System The Avinash
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The Modified Heikin Ashi – Fibonacci Trading System by Avinash Khilnani
Copyright @ 2013 Avinash Avinash Khilnani
Table of Contents Table Chapter 1: Introduction This Book Book is Not Not About What this this book IS about Chapter 2: The Business of Trading Trading The Must Must Haves of Your Business Plan The Don’ts Don’ts of Your Business Plan Chapterr 3: Charting: the Art of Tactical Chapte Tactical Observation The Basic Basic Chart The Standard Standard Heikin Ashi Ashi Chart The Modified Modified Heikin Ashi Chart Observing Observ ing the Candles Chapter 4: The Fibonacci T Fibonacci Triggers riggers The Appearance Appearance of a Bullish Bullish Candle The End End of a Bearish Trend The Bullish Bullish Candle The End End of a Bullish T Bullish Trend rend The Appearance Appearance of the Bearish Candle Candle The Long Long and Short Targets Chapter 5: the Spreadsheet Spreadsheet Tomorr T omorrow’s ow’s Data Today Tomorr T omorrow’s ow’s End of Trends Trends Today Tomo T omorrow’s rrow’s Triggers Today Re-arranging Re-arr anging Triggers and End of Trends Trends The Projected Projected Targets Distinguishing Disting uishing the Triggers Triggers and Targets Trimm T rimming ing the Spreadsheet Spreadsheet Chapter 6: Trading the Dow Jones The First First Trading Trading Insight to Go Long The Second Trading Trading Insight to Short Thanks, Mr. Mr. Fibonacci! Fibonacci! Going Long and Short Again A Good Long and a Great Short Way to7: Go! Chapter the FTSE 100 and the NIFTY 50
The FTSE 100 The S&P CNX NIFTY 50 A Cursory Glance at the Results Chapter 8: Conclusion
Although the whole of this life were w ere said to be nothing but a dream and the physical world nothing but a phantasm, I should call this dream dream or phantasm real enough, if using reason well, we were never deceived by it. – LEIBNIZ.
Chap Ch apte ter r 1: I ntro ntrodu du ctio ction n We, the humans, can never make up our minds as we keep changing them at our slightest whims. When it’s cold, we want hot and when it’s hot, we want cold. While some want to get rid of a possession, others want to acquire it. When somebody sells, somebody else buys and somehow they agree to a consensus that arises from expectations born of a complex mix of human emotions comprised mainly of varying degrees of greed and fear in a chaotic place called a market, which incidentally makes up the dream world for this book. Human expectations and their actions, combined with the numerous irrelevant criteria for their decision making processes and the sheer variety of participants in the market, are not quantifiable or predictable and the very inherent nature of this arrogant species guarantees the unpredictability and the thrill of the market place. In the light of this insight into human nature influencing market gyrations, let us be clear as to what:
This Th is B oo ook k iis s N ot Ab Abou ou t This book is certainly not about predicting market market or stock or currency or commodity price movements. It is also not about predicting the beginning or ending of trends or trying to quantify the duration of a trend. It is not about timing the markets, nor about setting any targets to be achieved. It is not about how to go about making a fortune in the market place or even about how not to take t ake losses. It is not about economic fundamental analysis or financial number crunching, and definitely not about hedging or complex strategies involving derivative products. It is definitely not about intra-day trading or about intricate arbitrages hunting. It is not about the concept that what has worked in the past will work in the future (it may or may not), and so not about complex technical analysis or its clamorous, often confusing, jargon. But above all, it is absolutely not about discouraging you from jumping into the wonderful, exciting world of trading indices, stocks, currencies and their derivatives. So, really:
What thi this s b boo ook k IS a abo bou ut This book is about encouraging you to take take up trading indices or stocks derivatives as a business by offering you a preparation plan. It is about trying to be on the right side of the market by submitting to whatever the market dictates, objectifying the market as an entity in itself, and giving it the respect it deserves in spite of its adorable eccentricities. eccentr icities. (The boss is always right, right, right? right? ) It is about riding a market trend as long as it lasts, whether whet her northwards northw ards or southwards. southwards. It is also about getting out quickly if the market changes its mind and getting in again whenever the market feels it must run in whatever direction it chooses to. Above all, this book is about letting the profits on winning trades run and cutting losses short on losing trades so as to maximize profits and minimize losses. And to do exactly that, this book is also a manual to help you create your own spreadsheet and charts, assuming you have a working knowledge of a spreadsheet. If not, acquire a little skill in this area. Spreadsheets are easy and fun to work with, so don’t be intimidated by them. Besides, you can always interact with the author at his website at http://niftytracker.com if if you need assistance. http://niftytracker.com So, let’s get on with creating your very own trading system that allows for the laws of averages av erages and probabilities in an unpredictable world to work in your favor by keeping you in step with the irrational movements of our markets.
A reasonable probability is the only certainty. -E.H. Howe (Sinner Sermons)
Chapte Cha pter r 2: 2: The B u siness siness of Trad Trading ing I hate to be a bearer of bad b ad news, but there is no perfect trading system that will give desired results all the time. If you did ask a mathematician and insisted upon up on a mathematical system to predict a price movement phenomenon about to happen in a stock or index, the mathematician or statistician, if unluckily, knew the laws of these phenomena, he could only make the prediction by inextricable calculations and would have to give up trying to answer in words. But unlike a mathematician or statistical analyst, I have the good fortune of not knowing these laws so I will answer with a workable system immediately. immediately. And what is surprising is that, my answer will be probably more more right than wrong. Can one actually conduct a business on what is more probably right than wrong? Should one be in the business of trading at all? Consider what the business of trading should be about and your place in it. A business serves only to make you profits and trading as a business should be doing just that. The business of trading should also be about freedom from your routine job, deadlines and above all your boss (well, not exactly because the market is your boss now). Trading T rading stock, or its derivatives as futures and options, is about making money, and not about being right or picking the brightest star of them t hem all. But this business, like any other, does require a strong commitment from you. It needs discipline, patience, enthusiasm, perseverance and above all preparation. Sound preparation for a business is just about having a working plan with a clearly defined goal in mind, which in your case is taking profits in your trading account. A good working plan should eliminate all emotional involvement on
your part and remove every psychological block in your psyche. Generally, the major psychological and emotional blocks in most traders are greed, fear and pride. Greed is what makes you lose a reasonable profit when you remember a past trade which could have turned into a huge pile of money but b ut you booked a profit very early in that trade. Fear is what keeps you from taking a new position because you remember the last one which turned sour.. Pride is getting attached to a stock because you feel sour like you have discovered a winning star that could go a long way (or fall headlong, if you were shorting it).
The Mu st Hav Haves es of Y You ou r B u sin siness ess P lan
The best way to keep your emotions out of your trading actions is to have a clearly defined plan of action every morning before the markets open for trading. So, let’s see what a great working plan as your trading system should entail and how this book is going to help you create just that. 1. You must have a chart for the index or stock you are planning to trade in and Chapter 3 of this book is going going to do just that. that. You would be creating a clearly defined candlestick chart that shows the trend of the stock at just a cursory cur sory glance. This would be your very own modified Heikin Ashi chart. 2. You should have a trigger value to enter a trade and exit profitably from that trade, with the necessary evil of a stop-loss figure in place. Chapter 4 and 5 explain exactly how to calculate your entry and exit points, while w hile fixing a stop-loss value using the Fibonacci numbers and the magical Golden Ratio. Chapter 6 discusses the actual results of trading the modified Heikin Ashi Fibonacci Fibonacci system for the DJIA (US 30), the FTSE 100 and the S&P CNX NIFTY 50. The continued modified charts and Fibonacci Fibonacci triggers for these indices are also updated regularly at the author’s website at http://niftytracker.com so book is ‘ live’ in in http://niftytracker.com so that the book that sense and interactive. These two components of your trading system alone would ensure that: 1. You are always ready with your working figures right before the markets open for trading. 2. You are always on the lookout for fresh trends or trend reversals in the stocks you are monitoring and you hardly miss any.
3. You have overcome your psychological psychologic al blocks of greed, fear and pride because you now have a mechanical trading system in place with pre-defined p re-defined figures for entry into a positional trade, a profit target and a stop-loss figure to exit if the trade turns sour.
The Th e D on on’’ ts of You r B u si sine ness ss P la lan n
While these are the essential components of your working plan, there are quite a few distractions you should be avoiding. 1. Do not overtrade. Monitor only the most liquid stocks stocks or indices whose derivatives are traded actively. actively. I like to keep track of just 21 stocks including 5 indices. 2. Do not overanalyze. overanalyz e. T There here are a maz maze e of technical charts and technical indicators out there. Even adding a couple or two to your trading system would make you either lose out on a fresh opportunity or miss your target or even mess up with your stop-loss. Let me point out a few here that kept me out of making money on many opportunities and made me take a loss on quite a lot of trades. The stochastic oscillator and its close cousin the William’s % R. This indicator would make me hesitate, because it either happened to be an oversold or overbought territory every time I was ready to jump onto a trade with wit h a great looking candle. And when the indicator looked good, the candle wasn’t attractive enough, or else the trend was just before or after completion. The ADX and directional indicators + DR and –DR. – DR. Like other lagging indicators, these appeared good only after I had missed the trend, or kept me from taking a profit. At times, it kept me from exiting at a stop-loss, in the hope that as ADX and its associates seemed right, perhaps the price would correct. As the loss increased, I found to my dismay that the ADX and DRs changed negatively rather too late. Volume and its derived d erived indicators and oscillators like the On Balance Volume, Volume, the Money Flow Index, smart money (low volumes) entering and exiting a
stock, the Accumulation-Distribution index and a host of others, usually were in conflict with the Stochastic or the ADX. Momentum indicators like the Rate of Change and Relative Rela tive Strength Index. Funnily enough, I found (and perhaps you do, too) that volumes and momentum were generally always good at a breakout break out from a consolidation. But a good-looking candle does indicate a breakout, so looking at the volume (smart or not) was quite redundant anyway. Trading T rading stocks or derivatives needs a calm mind but analyzing too many technical indicators will only serve to distract your focus, making you either fearful of taking a trade, or getting out too early or even worse, not taking a profit when you should have. 3. Do not be the perfectionist. There is no perfect trade. There are only average trades and average profits. profits. No one can be right all the time. But if you do take all the available trades in your trading system and stick to your plan, you will, on an average, make more profitable trades than losing trades. And that will make all the difference as gradually the law of averages will work in your favor and will keep you in the money, trading away happily. So, with the do’s and don’ts over and done away with, let’s get down to some serious work with charting your way to possible profits in the next chapter.
The essence of the Tao is that the observer can evolve the observed through the act of tactical observation. –R.L. Wing, (A New Translation of the Tao Te Ching).
Chap Ch apte ter r 3: Char Charti ting ng:: the the Art Art of Tactical O bservation Candlestick charts have been in use for a long time now, and with the recent introduction of the Heikin Ashi way w ay of charting, observing the underlying trend in a stock price movement has become b ecome even easier. Heikin Ashi, a Japanese term, mingles the use of ‘ balance’ or ‘ average’ average’ to ‘ foot’ or or ‘ bar’. Combine Combine these these fo four ur words words in any any way you like to arrive at your own interpretation of what wh at Heikin Ashi should mean for you. Simply observing a Heikin Ashi candlestick chart, that you can now be creating yourself in your excel workbook would give you a fairly good idea of the strength or weakness of a trend. Further Further modifying this chart by introducing averages suggested in this chapter, will give an even better visual technique to gain greater confidence in your trades. Now, let’s get started with creating the visuals.
The B asi asic c Cha Chart rt Your first step when making your chart is to collect the data Your for the index or stock prices you want to trade in for a certain date range. You You can get the data from from the offi cial websites of the stock exchange where your stock is traded, and can even find the data at any financial website like finance.yahoo.com or google.com/finance. You may have to sort the acquired data in an ascending order of date. dat e. For a working example, I have selected historical prices for the Dow Jones Industrial from the date range of 21-Mar-2012 to 21-Dec-2012. Paste Pa ste the data you have just acquired into your excel worksheet, with the first column heading showing as the date, and next four columns as the Open, Op en, High, Low and Close. You Y ou have used up columns A to E here so far now now.. Here is how your spreadsheet looks with the data pasted p asted from column A to E.
A Date
B Open
C High
D Low
E Close
13,1 13 ,170 70.7 .79 9
13,1 13,190 90.0 .02 2
13,1 13,112 12.9 .93 3
13,1 13,124 24.6 .62 2
13,1 13 ,124 24.4 .40 0
13,1 13,124 24.4 .47 7
13,0 13,017 17.4 .42 2
13,0 13,046 46.1 .14 4
13,0 13 ,045 45.9 .99 9
13,0 13,099 99.9 .91 1
13,0 13,002 02.7 .77 7
13,0 13,080 80.7 .73 3
13,0 13 ,082 82.6 .62 2
13,2 13,243 43.8 .86 6
13,0 13,082 82.3 .39 9
13,2 13,241 41.6 .63 3
13,2 13 ,242 42.0 .09 9
13,2 13,264 64.9 .98 8
13,1 13,194 94.3 .33 3
13,1 13,197 97.7 .73 3
13,195 13,1 95.3 .39 9 13,1 13 ,125 25.9 .99 9
13,2 13,212 12.6 .64 4 13,1 13,151 51.5 .57 7
13,0 13,069 69.2 .26 6 13,0 13,032 32.6 .67 7
13,1 13,126 26.2 .21 1 13,1 13,145 45.8 .82 2
21Mar 22Mar
23Mar 26 Mar
27 Mar 28 Mar
29 -
Mar 30Mar
13,1 13 ,147 47.9 .94 4
13,2 13,224 24.4 .49 9
13,1 13,147 47.7 .78 8
13,2 13,212 12.0 .04 4
13,2 13 ,211 11.3 .36 6
13,2 13,297 97.1 .11 1
13,1 13,153 53.6 .69 9
13,2 13,264 64.4 .49 9
13,2 13 ,258 58.9 .96 6
13,2 13,265 65.3 .36 6
13,1 13,131 31.2 .21 1
13,1 13,199 99.5 .55 5
13,1 13 ,198 98.1 .19 9
13,1 13,198 98.1 .19 9
13,0 13,020 20.8 .86 6
13,0 13,074 74.7 .75 5
13,0 13 ,067 67.1 .18 8
13,0 13,088 88.1 .11 1
13,0 13,012 12.4 .46 6
13,0 13,060 60.1 .14 4
13,057 13,0 57.5 .57 7 12,9 12 ,929 29.4 .44 4
13,0 13,057 57.7 .72 2 12,9 12,929 29.5 .59 9
12,9 12,903 03.7 .78 8 12,7 12,710 10.5 .56 6
12,9 12,929 29.5 .59 9 12,7 12,715 15.9 .93 3
2Apr 3Apr 4Apr 5Apr 9Apr 10Apr
11Apr 12,7 12 ,716 16.9 .92 2
12,8 12,844 44.8 .82 2
12,7 12,716 16.9 .92 2
12,8 12,805 05.3 .39 9
12,8 12 ,806 06.4 .45 5
12,9 12,986 86.9 .96 6
12,8 12,806 06.3 .30 0
12,9 12,986 86.5 .58 8
12,9 12 ,986 86.2 .20 0
12,9 12,986 86.3 .35 5
12,8 12,845 45.2 .28 8
12,8 12,849 49.5 .59 9
12,8 12 ,850 50.8 .88 8
12,9 12,986 86.7 .77 7
12,8 12,850 50.8 .80 0
12,9 12,921 21.4 .41 1
12Apr 13Apr 16 Apr
Select the area of this data that you want to chart, and use the “insert-chart-stock-open-high-low-close” option to see a graphical chart for your date range as a simple candlestick chart. You You may adjust the axes, the gridlines and the grid interval to get a better view of the chart. I have selected the area from cells A2 to E78 to show the chart here:
Well, that’s a good looking chart, but there are still a lot of candles that distract you from forming a general idea of the underlying trend. You You may now convert th the e original data to display the Heikin Ashi chart in the next section.
The Standard Heikin Ashi Chart Leaving the column F blank, as a separating mark, assign columns from G through K to “Date”, “hOpen “hOpen”, ”, “hHigh”, “hLow” and “hClose” in the first row. row. Cell G2 is again the date, so you might equate this column G to column A by typing “=a2” in cell G2. The Heikin Ashi open is simply the average of the previous day’s open and close. Since you are starting from day-1, let the hOpen for day-1 be the same as actual open. This is done by writing the formula “=b2” in cell H2. The Heikin Ashi high is the maximum value of today’s hOpen, actual high of the day, day , and today’s hClose. This is accomplished by typing in the formula “=max(h2,c2,k2) in cell I2. Similarly, the Heikin Ashi low is the minimum of today’s hOpen, actual low of the day and today’s hClose. This can be calculated by typing the formula “=min(h2,d2,k2)” in cell J2. Finally, the hClose is obtained by typing in the formula “= (b2+ (b 2+ c2+ c2+ d2+ d2+ 2*e 2*e2) 2)/5” /5” in cel celll K2 K2.. Here, the Heikin Ashi close is taken as the average of the actual high, low and close of the day, and since we want to place more emphasis on the actual close, we have weighted the actual close twice and then taken the average of the five values (the open, the high, the low and two closes). This is the we firsthave modification of since the standard Heikin Ashi technique introduced this imparts greater
importance to the closing price. Now, the hOpen in the Heiken Ashi chart is the middle value of the previous day’s modified close (hClose) and the previous hOpen. Thus, in cell H3, you are typing in the formula : “=(h2+ k2)/2”. formula The next two cells can be just pulled down from their previous cells, and will show as the new high and new low for today’s date. The hClose for today, in cell k3 would have the modified formula “=(h “= (h3+ 3+ c3+ c3+ d3+ d3+ 2* 2*e3 e3)/ )/5” 5”.. Note that here we are deviating for the second time from the standard Heikin Ashi calculation of hClose, by not only placing greater emphasis on the recent close, but also substituting hOpen instead of the actual open. The next step simply involves dragging down the formulae from row 3 to the latest date for which you have the most recent data. You Y ou may now select the chart area for the modified Heikin Ashi values and chart them as a stock candlestick chart. The spreadsheet for the columns F through K should now look like this: F
G
H
I
J
K
hOpen
hHigh
hLow
hClose
13171
13190
13113
13145
Date 21Mar 22Mar
13158
13158
13017
13078
23Mar
13118
13118
13003
13076
26Mar 27Mar 28Mar
13097
13244
13082
13181
13139
13265
13139
13199
13169
13213
13069
13141
29M ar 30Mar
13155
13155
13033
13126
13141
13224
13141
13187
2-Apr
13164
13297
13154
13229
3-Apr
13196
13265
13131
13198
4-Apr
13197
13198
13021
13113
5-Apr
13155
13155
13012
13075
9-Apr
13115
13115
12904
12987
10-Apr
13051
13051
12711
12825
11-Apr
12938
12938
12717
12822
12-Apr
12880
12987
12806
12929
13-Apr
12905
12986
12845
12887
16-Apr
12896
12987
12851
12915
This is how your standard Heikin Ashi chart should look like: like:
Comparing this chart to the previous raw chart, you can see that much of the noise hindering you from spotting trends clearly is done away with. There are however, still many candles with spikes spikes at both ends that do present an awkward view. view. A further modification by introducing a simple 5-day moving average of the hOpen in place of the hHigh and the 5-day moving average of the hClose in place of the hLow should eliminate many of these spikes.
This would complete our special modification for the Heikin Ashi chart, and the modified values would be used to calculate buying or selling triggers and stop-loss figures for our trading purposes.
The Modified Heikin Ashi Chart To T o calculate the modified HA chart, leave the column L blank and perhaps fill it up with a suitable color to act as a separator column. Column M holds the dates, so you might equate this column to column A by typing “=a2” in cell M2, and dragging down the cell formula to the latest date in the data range. Column N holds the mhOpen, which we are keeping the same as the hOpen, so type in the formula “=b2” in cell N2, and further the formula formula “=(n2+ q2)/2” in cell N3. Drag down this cell formula to the last data in your range. Now, the hHigh is replaced by the 5-day simple moving average of hOpen, by typing in the formula “=average(n2:n6)” in cell O6. The first five cells in this column are left blank. Drag down this cell formula from O6 down to the last data in your date range. Similarly, to calculate the modified mhLow in column P, calculate the simple average of the last five hClose by placing the formula “=average (q2:q6)” in cell P6, leaving the first five cells above blank. Drag the cell formula from P6 down to the last value in your date range. Finally, the mhClose is the same as in the standard Heikin Ashi chart, chart, so ty type pe in tthe he formula formula “=(n2+ “=(n2+ c2+ d2+ 2*e2) 2*e2)/5” /5” in in cell Q2, and dragging down the cell formula to the latest cell in your date range.
Now you have the final working Heikin Ashi values to create the modified Heikin Ashi chart and the modified values to calculate the triggers for profitably trading an index or stock. This is how your spreadsheet looks from column L to Q: L
M Date 21Mar 22Mar 23Mar 26Mar 27Mar
N mhOpen
O mhHigh
13171
13145
13158
13078
13118
13076
13097
13181
13139
13137
13136
13199
13169
13136
13135
13141
13155
13136
13145
13126
13141
13140
13167
13187
2-Apr
13164
13154
13176
13229
3-Apr
13196
13165
13176
13198
4-Apr
13197
13171
13171
13113
5-Apr
13155
13171
13161
13075
9-Apr 10Apr 11Apr 12Apr 13Apr 16Apr
13115
13166
13121
12987
13051
13143
13040
12825
12938
13091
12964
12822
12880
13028
12928
12929
12905
12978
12890
12887
28Mar 29Mar 30Mar
P mhLow
Q mhClose
12896 12934 12876 12915 If you select the area from cell M6 to Q78, and chart this as a stock chart in your Excel worksheet, you should see the
modified chart as below:
As you can see, almost all the distracting noise and the spiking candles have vanished. We have now a most pleasing chart to look at and with just a cursory glance you can see that presently (10-July-2012) in the chart recorded, the DJI is in a downtrend.
O bserving bserving the Candles Candles Tactically observing, we see either black or white candles. Tactically Let us categorize categoriz e the candles further. further. The bu llish w hite candle candle has a white body with a tail and seems to rise upward as the tail below the white body gives the visual of a kite pushing upward into the sky. The tail is almost always the 5-day moving average of mhOpen (5mhOpen) which is actually our mhHigh. Though we have placed this value in the ‘ mhHigh’ column, it not actually a high but for our purposes does serve to give the impression of a motion to the visual. The mhLow which is the 5-day moving average of mhClose (5mhClose) is rarely seen on the charts except in a candle which shows both a tail and a peak which we shall call a Doji, and does appear in indecisive or stagnant price patterns. Again, this is not a low but falls somewhere between the mhOpen and mhOpen. We are primarily concerned only with the color of the t he candle which is decided by the mhOpen and mhClose. If the mhClose is greater than the mhOpen, we have a white candle while the black candle appears if the mhClose value is less than the mhOpen. The bearish black candle gives the exact opposite perfect visual image of a kite diving downward to the earth, with its tail following the dive. The tail again, is invariably the 5mhOpen. Besides these prominently observable candles, frequently seen is the reversal candle, which has no tail to it, and could be either black or white. The white reversal candle signifies a reversal in trend from bearish to bullish, while the black reversal candle denotes a reversal from bullish to bearish trend. Notice that during an uptrend there may appear a rising candle but with a black body and a tail below it. This anomalou anoma lou s rising candle candle may signify a weakness in the
upward move which may prompt you to book profits, or even indicate indicate that that a reversal reversal in trend trend may be in in offi ng. Contrariwise, an anoma anomalou lou s falling candle candle (white body with a tail above it) during d uring a downtrend may be a signal for you to book profits after a significant fall in prices if you had shorted the stock or index. Soon enough, after viewing such a candle, you may either see a reversal in trend, or with more new bearish candles, a continuation of the downtrend. Observing the chart above, you can see your entry and exit points for your shorts and longs quite clearly. clearly. There are some trends which may bring in huge profits, while others may not last long enough, but if you worked with your candle plan, you may well have made a small profit or a small loss even with indecisive market movements. Here, one might well ask, how long may a trend last? Well, the best answer is: as long as it can! Stay with the trend as long as it lasts and move out to ride the next trend whether upwards or upwards again or downwards or downwards again. The best trading plan is one that lets your profits run to the maximum and cuts your losses to a minimum, and with your modified Heikin Ashi charts you have just the t he right visual tool to plan your trading to do exactly that. You Y ou may be seeing a number of reversal candles that do not turn into significant the candlebegin does anot appear significant enough intrends, size toor confidently trend. Should there be a threshold to the size of a candle, a sort of a trigger mark, which justifies going long or short with confidence in the start of a trend? I love to be the bearer bearer of good news! news! There There certainly certainly is a threshold, a trigger ratio, and it is known as the Golden Ratio, the magical ratio, derived from the Fibonacci Fibonacci series. The next chapter is devoted entirely to the magical Fibonacci number and ratios that you shall be using along with the modified Heikin Ashi chart that you have just created and the mhOpen values that you just calculated.
One cannot escape the feeling that these mathematical formulae have an independent existence and an intelligence of their own, that they are wiser than we are, wiser even than their discoverers, that we get more out of them than was originally put into them.
– HEINRICH HERTZ HERTZ.
Chapter Chapt er 4: 4 : The Fibonac Fibonacci ci Trigger Triggers s The Fibonacci Fibonacci series begins with 0 and 1. Adding the previous two numbers yields the next number. So, 0+ 1=1, gives 1 as the next next digit in the sequence, sequence, 0, 1, 1. Adding 1+ 1 gives 2 and the series pr progresses ogresses to 0,1,1,2. Keep on adding the last two digits to provide the next digit, and so the series progresses to: 0,1,1,2,3,5,8,1 0,1,1,2, 3,5,8,13,21,34,5 3,21,34,55,89,144 5,89,144… … .. You Y ou have already been using the F Fibonacci ibonacci numbers 5 in the 5-day simple moving average of mhOpen and mhClose and are also going to use the same number of days day s in projecting targets. As the series progresses, dividing two consequent digits yields the ratio approaching 0.618, often often called the ‘ Golden Ratio’ or the “Divine Proportion”, Proportion”, a term that th at was recently popularized by Dan Brown, in his book the “Da Vince Code”. The ratio is actually an irrational number obtained by halving the difference of the square root of five and one. Market price movements are irrational, and the magical ratio, for irrational reasons, seems to work as a very important tool in price retracements, resistances and supports projections. W e are values going to this ratio a lot to ustargets, in calculating trigger foruse entering a trade, forassist setting trend reversal points and stop-loss figures.
The Appe Appeara arance nce of of a B u llish llish Candl Candle e As you ponder over a modified Heikin Ashi you have just created, crea ted, you might might noti notice ce some candles candles of suffi cient siz size e and strength that lead on to a reasonable trend where you might have taken a profitable trade. What makes for a right sized candle that has a reasonable probability to begin a fresh trend and what should be the trigger price that could show such a candle on your chart? Let us consider the bullish candle and the three t hree most important attributes it must have in order to qualify a trend beginning candle. Firstly, it must appear after the end of a bearish trend. Secondly, it must be either a white bullish candle or at least a white reversal candle. Thirdly, and most importantly, it must be of suffi cient siz size e so as to break break above above at least least the previous two candles on the modified Heikin Ashi chart. You Y ou already know tomorr tomorrow’s ow’s mhOpen, which is fixed as it is based on the today’s mhOpen and mhClose. The 5-day moving average of mhOpen (let’s call this moving average the 5mhOpen from now on) is also fixed for tomorrow because mhOpen.it is anyway calculated from the already fixed Tomorrow’s T omorrow’s mhClose mhClose will, of course, change as the markets trade during the t he day. day. And this last figure is what will w ill decide how the candle will look like tomorrow tomorrow.. The 5mhClose does not take part in our calculations but may sometimes appear in indecisive market movements, which we shall assume to be a continuation of the existing bearish trend. Now, for a candle to be bullish it must have white body, therefore tomorrow’s tomorrow’s mhClose must be above tomorrow’s mhOpen in order for the candle to have a white body. body.
Additionally, the mhClose must also be higher than the maximum value of the past two Heikin Ashi candles from your modified HA data, which can be ensured by checking to see that it is also at least equal eq ual to or above the 5mhOpen 5 mhOpen of tomorrow. A good thing about the HA H A chart is that tomorrow’s mhOpen and the 5mhOpen are already fixed by today’s close, so you have a working plan for tomorrow’s triggers and stop loss figures that relies mostly on values that have been predetermined. But before the bullish candle can appear in its true glory, we must have an end to the bearish trend.
The E nd of a B eari earish sh T Tren rend d For the bearish trend to over, we must have mhClose for tomorrow to be at least equal to tomorrow’s mhOpen. Thus, we should have mhClose(tomorrow) = mhOpen(tomorrow). mhClose(tomorrow) Now that we have tomorrow’s mhClose, we can easily calculate the actual value of the price that would ensure the above equation to be true from the formula we have been using for the mhClose. Remember Rem ember that the mhClose is calculated as: mhClose = (mhO (m hOpe pen+ n+ High+ High+ Lo Low+ w+ 2*Cl 2*Clos ose) e)/5 /5 where close is the actual close of the day. For the bearish trend to be over, the Close of the day has to be such an High that it brings the value of mhClose to confront the mhOpen equally. So, calling this High that ends the bearish trend as Ebr, we have: hav e: mhOp mhOpen= en=(mh (mhOpe Open+ n+ Ebr+ Ebr+ Lo Low+ w+ 2*Ebr)/ 2*Ebr)/5 5 (We (W e have replaced mhClose by mhOpen in the formula for mhClose, and renamed the High that equalized mhClose to mhOpen as Ebr). We can therefore deduce that: Ebr = (4*mhOpen (4*mhOpen – Low)/3 Low)/3 Here, mhOpen is the modified Heikin Ashi Open for tomorrow, tomorrow. and Low is a presumed value of the low for This Ebr gives the value of the high for tomorrow which, if hit, would signal the end of a bearish trend, since the value equals mhClose to the mhOpen resulting in a reversal candle or an anomalous bearish candle. Since, the Ebr indicates the end of a bearish trend, it also naturally acts as a stop-loss value for your short position in the index or stock being traded.
The Th e B u ll llis ish h C Can andl dle e But how much higher should the actual close be than this Ebr for tomorrow be for a bullish candle to appear and not just a reversal candle or an anomalous candle? Shouldn’t there be a certain trigger value that prompts you to go long on seeing such a bullish candle? There sure is. Please welcome the Golden Ratio! The trigger is provided by the Golden Ratio and in our case the bullish candle trigger for tomorrow must be 0.618 % more than the Ebr to be a buying trigger. trigger. Let’s call this higher value as the buying trigger : Btrg. Thus, Btrg = 1.00618*Ebr. 1.00618*Ebr. This value of Btrg predicts the shape of the candle tomorrow tomorrow to be a bullish candle. The mhClose with this Btrg would then be suffi ciently higher than the value of mhOpen in order to be an attractive candle for going long into the stock or index. Great! You now have a stop-loss figure of Ebr for your existing sell positions, and a bullish trigger Btrg for going long or buying the stock (or index) for tomorrow! You Y ou may also want to make s sure ure that this buying trigger is greater than the 5mhOpen for tomorrow. tomorrow. Invariably, it usually is, but in the rarest of do rare cases whenless thethan markets are highly volatile, when you see t he Btrg the the 5mhOpen, refrain from going long in the index or stock that you are tracking, or defer your buying decision to the next day. Once you have gone long into the index or stock, you would like to calculate the stop-loss value for tomorrow in the case that this bullish trend t rend is compromised.
The E nd of a B u lli llish sh Tren rend d To calculate the end of a bullish trend, we must have the To mhClose for tomorrow moving down to meet the mhOpen for tomorrow, so we are interested in knowing the value of the low for tomorrow that would equalize these two values. Again, we should have: mhClose (tomorrow) = mhOpen (tomorrow) Let’s call this low value the end of bullish trend t rend as Ebl, which can be calculated by the formula: Ebl = (4*mhOpen (4*mhOpen – High)/3 High)/3 (You (Y ou may easily deduce how this came about in quite the similar way we deduced the Ebr). This figure of Ebl then gives you the value of the low tomorrow, which if hit would signal the end of the bullish trend, and therefore also act as a natural stop-loss value for your buy position in the index or stock.
The App Appearan earance ce of the B earish Candle Further on, the bearish trigger that should prompt you to short the index or stock, can now be calculated as 0.618 % less than the Ebl to give you the sell trigger which we shall name Strg. Thus, Strg = 0.99382*Ebl It’s time to sit back and take t ake a breather now that you have the bullish and bearish stop loss values plus the t he bullish and bearish triggers.
The L ong and Short Targets Targets All right, let us be done with the final step of fixing the bullish and bearish targets now now.. For a rough estimate of the bullish target, simply find the lowest price of the past five days and increase its value by 6.18 percent to get the bullish target value. For a rough estimate of the bearish target, find the highest value of the past five days d ays and decrease its value by 6.18 percent to get the bearish target value. You Y ou may want to vary the past five days to eight days highest or lowest value, but for most cases either number of days work. Besides, the target values are only support or resistance values that may be over shot or not touched at all but they do serve as a tool to decide if you want to go long or short. If you find that the target is too near your trigger price, you may want to stay out of taking the trade. This does happen when the price movements are erratic to volatile, and perhaps your trading system wants to keep you out of such movements. I find that fixing targets does help in such times, while otherwise it is usually better to stay with the trend until the Ebr or Ebl prompts me to move out of the bearish or bullish trend, and get ready to buy or sell into the reversing trend or go back again to the inherent trend. Staying with the trend is always preferable as the stop-loss value can go much above the target value of 6.18 percent which is merely a resistance level and if violated, more highs can be expected. Conversely, in case of a bearish trend, t rend, the support level of 6.18 percent if violated can result is lower lows. So, keep in mind the resistance and support values as achievable targets but not strictly sacrosanct. Now that you have the key figures and your trading system dictating your trading style, let’s get down to the actual
Excel worksheet construction in the next chapter chapter..
The essential fact is that all the pictures, which science now draws of nature and which alone seem capable of according with observational facts, are – Sir James Jeans mathematical pictures.
Chap Ch apte ter r 5 : the the Sprea Spreadsh dsheet eet Once you have the modified Heikin Ashi values and you know the formulae for calculating the stop loss values of Ebr and Ebl, the corresponding buying and selling triggers Btrg and Strg along with the bullish and bearish targets, it is easy enough to create the spreadsheet in Excel. Let’s walk through the construction of the sheet here.
Tomorrow omorrow’’ s D ata Toda Today y Assume that you have the past five days data and have the worksheet ready with modified Heikin Ashi values from row 2 to row 6 for the dates ranging from 21st March to 27th March of 2012. For our demonstration purposes, 27th March has just closed and you have the actual closing data for 27th March filled in row 6. For tomorrow, tomorrow, that is, 28th March, we will presume a range of price movement that has a high of 0.618 percent higher than the close of 27th March and a low which is 0.618 percent lower than the close of 27 th March. For simply hypothetical calculation purposes, we will also assume that tomorrow’s open is the same as today’s close, and that tomorrow’s close will be just 0.1618 percent higher than today’s close. Notice that here again we are involving the Golden Ratio and the next Fibonacci Fibonacci ratio of 0.1618 0.161 8 in our calculations. To T o get the hypothetical values, choose the columns from S to W, leaving column R blank filled with a suitable color to mark this as the separator column. Label column S through W as ‘ Date’, Date’, ‘ hpO hpOpen pen’, ’, ‘ hpH hpHigh igh’, ’, ‘ hpLow’ hpLow’ a and nd ‘ hpC hpClos lose’. e’. Column S holds the dates, so equate this to column A by typing formula “=a7”this in cell S7. previous In cell T7,day’s type close in theas formulathe “=e6” to equate to the the hpOpen. To To get the hypothetical high, type in the formula “=1.00618*e6” in cell U7, and the hypothetical low is obtained by typing in the formula “=0.99382*e6” in cell V7. The hypothetical close, hpClose, is given by putting in the formula “=1.001618*e6” in cell W7. Copy the hypothetical values for 28-March from cells T7 to W7 in the cells B7 to t o E7 as probable data for 28-March using the ‘ paste values’ tool available in your Excel tool bar bar.. Next section involves the calculations for the Ebr and Ebl.
Tomorrow omorrow’’ s E nd of Trends Trends Toda Today y Leave column X blank as a separator column, colored appropriately to distinguish it from the calculating columns. Columns Y and Z will be used to t o calculate the end of bearish and bullish trends so label these two as Ebr and Ebl respectively. To T o get the Ebr for 28th March, type in the formula “=(4*N7D7)/3” in cell Y7. This is also almost your your stop-loss value for a short position if you do have one in the th e index or stock that you are monitoring. To T o get the Ebl for 28th March, type in the formula “=(4*N7C7)/3” in cell Z7. This is the also your stop-loss value for a long position if you do have one in the index or stock that you are tracking. So, now you have a reasonably accurate handle on your short or long positions, since the stop-loss value depends mostly on the mhOpen for tomorrow (28th March, in this case) by a factor of 4, and much less on the low or high for tomorrow by a factor just 1 compared to 4 for the mhOpen. The mhOpen is fixed already already by the mhClose and mhOpen of today (27-March, in this case) and is not going to change at all tomorrow, that is on 28th March. If the actual high and low remain low in the 0.618 and the -0.618 percent values tomorrow, the+Ebr andpercent Ebl values will be severely restricted to the range you have already obtained above.
Tomorro omorrow w ’ s Trigger Triggers s Today Today Next, to calculate the Buying trigger Btrg, leave column AA blank, filled with a color to mark it as a separator column and label column AB as Btrg. Type in the formula “=1.00618*Y7” in cell AB7 to get the buying trigger for tomorrow, i.e. 28-March. Further, label column AC as Strg for the selling trigger and type in the formula “=0.99382*Z7” to get the selling trigger for tomorrow tomorrow.. You Y ou may now drag the formulae from cell R7 thr through ough AD7 down to the last data. Here is how your spreadsheet looks now for columns R through AD:
R
S Date
T hpOpen
U hpHigh
V hpLow
W hpClose
X
28 Mar 13198 13279 13116 13219 29 Mar
13126 13207 13045 13147
13202
30Mar 13146 13227 13065 13167 2Apr
13212 13294 13130 13233
3Apr 4Apr
13264
AA
13155
13113
13167 13120
13218
Z Ebl
13196 13156
13138
13346 13183 13286
13200 13281 13118 13221
Y Ebr
13256 13197
1328
132
13173
AB Btrg
1321
132
1330
133
5Apr 13075 13156 12994 13096 9Apr
13060 13141 12979 13081
10Apr 11Apr
12930
13203
13009 12850 12951
12716 12795 12637 12737
13186 13134
13165
13178
13092
13012 12969
132
1328
1324
130
12805
12Apr 13Apr
12885 12726 12826
12987 13067 12906 13008
16 Apr
12850
12929 12770 12870
12905
12924 12877
12911
12844
12866
1298
130
1299
R e-arr e- arrang anging ing Trig Triggers gers and and E nd of Trends Let us see what you have now so far. far. Y You ou have Ebl the as buying trigger as Btrg in column AB and its stop-loss end of the bullish ttrend rend in column Z. Y You ou also have the selling trigger Strg St rg in column AC and its stoploss value Ebr as end of o f the bear bearish ish trend in column c olumn Y. Y. If you have indeed gone long in the index or stock under consideration, you will want to keep its stop-loss value handy, so in columns AE to AI, you need to re-arrange your buying trigger and its stop-loss value as well as your selling and its stop-loss value. For keeping keeping your tr triggers iggers and their stop-loss figures adjacent to each other, leave column AD blank filled with a color to mark this as a separator column. Label the next column AE as “Buy” and column AF as its “Stop-loss”. Copy the figure for Btrg in cell AE7 by typing t yping in the formula “=AB7” and then copy the figure Ebl in cell AF7 by “=Z7”. But wait; remember that the Ebl is actually the figure that equalized mhClose to mhOpen, and for a valid stop-loss figure, we need the mhClose a bit lower than the mhOpen. So let us also scale down this equalizing value by a factor of 0.1618 % , another Fibonacci Fibonacci ratio so as to make this a final threshold. Only then can the Ebl be termed a stop-loss for a bullish trend where we need to actually get out of the long position. So, instead of a simple “=Z7”, type the formula “=0.998382*Z7” in cell AF7. Leave the column AG blank and label column AH as “Sell”. Also label column AI as “Stop-loss”. Copy the Strg in cell AH7 by putting in the formula “=AC7”, and the Ebr by typing the formula “=Y7” in cell AI7. Again, let us increase the Ebr value for the bearish trend by a factor of 0.1618 to really call this a stop-loss, by typing in
formula “=1.001618*Y7” in cell AI7, instead of =”Y7”. Now, there you are, all set with the buying/selling triggers and their stop-loss values in one place.
The P rojected roj ected Targets Targets You still need to calculate the bullish and bearish targets. You Continue by leaving column AJ blank, appropriately colored to mark as a separator. Head column AK as ‘ LgTarget’ LgTarget’ to represent the bullish or long target, and head column AL as ‘ ShTarget’ ShTarget’ to represent the bearish or short target. Type T ype in the formula “=1.0618*min(C2:D6)” in cell AK7 to get the long target and put in the formula “=0.9382*max(C2:D6)” in cell AL7. Refer back to chapter 4 with the section on targets to be clear on calculating targets from the past 5 days’ highest and lowest values. You Y ou may now drag down the cells from S7 through AL7 down to the last data in your worksheet and be ready for tomorrow’s trading by pasting the hypothetical values for tomorrow in cells Bn through En from cells Tn through Wn, where n represent the number for the row for tomorrow’s date. This is how your worksheet should look like like now for columns AD through AM: AD
AE Buy
AF StLoss
13284 13277 13219 13249 13300 13338 13284 13267 13246 13092
AG
AH Sell
AI StLoss
13133 13135 13091 13098 13152 13176 13156 13113
13073 13075 13031 13038 13092 13116 13096 13053
13071 12948
13011 12889
AJ
AK LgTarget
AL ShTarget
13224 13217 13159 13189 13239 13278 13224 13207
13806 13806 13806 13838 13838 13838 13826 13817
12445 12445 12445 12445 12475 12475 12475 12475
13186 13033
13701 13496
12475 12446
AM
12984 13004 12991
12824 12857 12845
12765 12798 12786
12925 12945 12932
13496 13496 13496
12383 12279 12251
D istingu istingu ishing ishing the Triggers Triggers and Targets Notice that I have changed the format for text color in column AL for the bearish red, denoting targets, while text targets color fortothe long target the has short been kept the default black color. For the buy triggers too, you may want to edit the color to red where the high of the day is lower than the buy trigger, keeping the color black when the high of the day has been above the buy trigger trigger.. Likewise, the stop-loss figures should change to red where the low of the day has breached the stop-loss value and stay black if the low has not been compromised. This can be accomplished by replacing the formula formula in cell AE7 by : “=if(C7> 1.00618*Y7,1.00 1.00618*Y7,1.00618*Y7, 618*Y7,-1.00618 -1.00618*Y7)” *Y7)” and replacing the existing formula in cell AF7 for stop-loss value by : “=if(D7< “=if(D 7< 0.998382*Z7,-0. 0.998382*Z7,-0.998382*Z 998382*Z7,0.9983 7,0.998382*Z7)” 82*Z7)” Note that the factor of 0.1618 has been placed into the stop-loss value here. You Y ou may now change the number format for these two columns to show negative numbers as red (use the formatcells-number menu to do this). The advantage of formatting this way is that the numbers will show up automatically as red on days when the trend is not bullish, or the stop-loss value will turn tu rn automatically red as the stop-loss value is breached. You Y ou can simply update your data every half an hour to keep track of the index and check to see if the color for the stoploss has turned red to alert you to get out of the long position. Similarly, for the sell trigger and its stop-loss value, you need to replace the existing formula in the following manner.
In cell AH7, replace “=AC7” by: “=IF(D7< “=IF( D7< 0.99382*Z7,-0.993 0.99382*Z7,-0.99382*Z7,0 82*Z7,0.99382*Z .99382*Z7)” 7)” And cell AI7, replace the existing formula by by:: “=IF(C7> “=IF( C7> 1.001618*Y7,1.00 1.001618*Y7,1.001618*Y7 1618*Y7,-1.0016 ,-1.001618*Y7)” 18*Y7)” You Y ou must now change the format for these two columns (AH and AI) also to show negative numbers as red colored. At the risk of repetition, I must point out again that if you see a black color in the stop-loss value for the bearish trend, you need to be alert to possibility of an end to the bearish trend and get out of your short position. A red color sell trigger after a couple of black figures in the sell trigger will alert you to the beginning of a bearish trend. A black colored number here on the other hand, shows that the bullish trend is still on. Here is how your worksheet looks like now for columns AD through AM, again: AD
AE Buy
AF StLoss
13284 13277 13219 13249 13300 13338 13284 13267 13246 13092 12984 13004 12991
13133 13135 13091 13098 13152 13176 13156 13113 13071 12948 12824 12857 12845
AG
AH Sell
AI StLoss
13073 13075 13031 13038 13092 13116 13096 13053 13011 12889 12765 12798 12786
13224 13217 13159 13189 13239 13278 13224 13207 13186 13033 12925 12945 12932
AJ
AK LgTarget
AL ShTarget
13806 13806 13806 13838 13838 13838 13826 13817 13701 13496 13496 13496 13496
12445 12445 12445 12445 12475 12475 12475 12475 12475 12446 12383 12279 12251
AM
Trimming the Spreadsheet For explaining and demonstrating the construction of the spreadsheet, it had been necessary to include every small bit of calculation resulting in some redundant columns that have made the spreadsheet quite bulky. It is time now to slim down the spreadsheet by removing the unnecessary columns. Begin by completely deleting the columns from F to K which were used to calculate the standard Heikin Ashi values which you no longer need. Next, select columns G to L and use the cut and paste function to shift these columns to AH through AM. These columns hold the modified Heikin Ashi values which you need to chart and they also contain the very important mhOpen and 5mhOpen figures. Y You ou also do not need the columns V, W and X, since these tri triggers ggers have already been included in the Buy/ Sell columns. So delete these three columns altogether altogether.. Now, you need the buy/sell triggers, their stop-loss values and the targets closer to the actual data. These are a total of 9 columns from V through AD, so make space for these by inserting 3 more columns prior to column L. (you already have 6 blank columns after column F. F. By inserting 3 columns, the triggers, stop-loss and the targets columns have now assumed columns names Y to AG). Use the cut and paste function to remove columns Y to AG, and place them at blank columns from G to O. Y You ou now have blank columns Y to A AG G which may be deleted so as to move the modified Heikin Ashi columns closer to the Ebr and Ebl columns. The most visible part of your spreadsheet spreadsheet now shows the actual data and the triggers/stop-loss/targets adjacent to each other. other. This is the first few columns look look like from column column A through O: O: A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
Date 21Mar 22Mar 23Mar 26Mar 27Mar 28Mar
Open
High
Low
Close
Buy
StLoss
Sell
StLoss
LgTarget
ShTarget
13,171
13,190
13,113
13,125
13,124
13,124
13,017
13,046
13,046
13,100
13,003
13,081
13,083
13,244
13,082
13,242
13,242
13,265
13,194
13,198
13,195
13,213
13,069
13,126
13284
13133
13073
13224
13806
12445
13,126 13,148
13,152 13,224
13,033 13,148
13,146 13,212
13277 13219
13135 13091
13075 13031
13217 13159
13806 13806
12445 12445
29M ar 30-
Mar 2Apr 3Apr 4Apr 5Apr 9Apr 10Apr 11Apr 12Apr 13Apr 16Apr
13,211
13,297
13,154
13,264
13249
13098
13038
13189
13838
12445
13,259
13,265
13,131
13,200
13300
13152
13092
13239
13838
12475
13,198
13,198
13,021
13,075
13338
13176
13116
13278
13838
12475
13,067
13,088
13,012
13,060
13284
13156
13096
13224
13826
12475
13,058
13,058
12,904
12,930
13267
13113
13053
13207
13817
12475
12,929
12,930
12,711
12,716
13246
13071
13011
13186
13701
12475
12,717
12,845
12,717
12,805
13092
12948
12889
13033
13496
12446
12,806
12,987
12,806
12,987
12984
12824
12765
12925
13496
12383
12,986
12,986
12,845
12,850
13004
12857
12798
12945
13496
12279
12,851
12,987
12,851
12,921
12991
12845
12786
12932
13496
12251
Further, the columns P through AC should appear this way on your spreadsheet: P
Q
R
S
T
U
V
W
X
Y
Z
AA
AB
AC
Date
hpOpen
hpHigh
hpLow
hpClose
Ebr
Ebl
Date 21Mar 22Mar 23Mar 26Mar 27Mar 28Mar 29Mar 30Mar 2Apr 3Apr 4Apr 5Apr 9Apr 10Apr 11Apr 12Apr 13Apr 16Apr
mhOpen
mhHigh
mhLow
mhClose
13171
13145
13158
13078
13118
13076
13097
13181
13139
13137
13136
13199
13169
13136
13135
13141
13155
13136
13145
13126
13141
13140
13167
13187
13164
13154
13176
13229
13196
13165
13176
13198
13197
13171
13171
13113
13155
13171
13161
13075
13115
13166
13121
12987
13051
13143
13040
12825
12938
13091
12964
12822
12880
13028
12928
12929
12905
12978
12890
12887
12896
12934
12876
12915
28Mar 29Mar 30Mar 2Apr 3Apr 4Apr 5Apr 9Apr 10Apr 11Apr 12Apr 13Apr 16Apr
13198
13279
13116
13219
13202
13155
13126
13207
13045
13147
13196
13156
13146
13227
13065
13167
13138
13113
13212
13294
13130
13233
13167
13120
13264
13346
13183
13286
13218
13173
13200
13281
13118
13221
13256
13197
13075
13156
12994
13096
13203
13178
13060
13141
12979
13081
13186
13134
12930
13009
12850
12951
13165
13092
12716
12795
12637
12737
13012
12969
12805
12885
12726
12826
12905
12844
12987
13067
12906
13008
12924
12877
12850
12929
12770
12870
12911
12866
As new actual data comes in tomorrow morning’s trading, you will have actual high, low and close values. You You can then type in the actual values as the day’s trading progresses and create or square off your positions if the triggers and stop-loss are hit which prompt you to trade accordingly. At the close of the day, you would have all the actual data for the day and the hypothetical figures for tomorrow. Y You ou may also eliminate the need for thos those e columns calculating the hypot hypothetical hetical figures by typing in their formulae for tomorrow’s data in cells B, C, D and E. Let us presume that today’s date is 21 st Dec 2012 in cell A193, and you already have the actual values after today’s close in cells B193 to E193. The date in cell A194 reads reads 24th Dec 2012. For tomorrow’s hypothetical values, simply type in the formula “=e193” in cell B194 to presume that tomorrow’s open would be the same as today’s close. The next cell C194 holds the assumed high for the day, so put in the formula “=1.00618*b194” in this cell. The cell D194 has the low of the days which should have “=0.99382*b194” here and finally in cell E194 type in the formula “=1.001618*B194”. Y You ou may now drag these formulae fo forr the whole row 194 down tto o any row to represent the hypothetical data figures, the triggers, targets and the modified Heikin Ashi calculation for a couple of decades dates ahead ( or as long as your worksheet permits). It does not really matter to what future date you reach, because as tomorrow’s ( 24th Dec 2012) actual data comes in, you will be updating the hypothetical values in row 194 by typing in the real values, effectively wiping out the formulae in cells A194 through to E194 but keeping actual data. As you type in the actual data for 24th Dec, you would have the next day’s hypothetical values updated accordingly since you are not disturbing the formulae there. Thisyou eliminates theand need forto pasting hypothetical figures from columns Q to T and saves the labor time do that. The critical calculations for triggers, triggers, targets, end of tr trends ends and the mh values will update themselves which you won’t be editing at all. It is only the date, the actual open, high, low and close columns that are to be altered every day and during the day as the trading progresses. Do remember to only type in the actual data on the day of trading. Color the cells for the current date differently or perhaps highlight these cells for today’s date by using the bold function on your worksheet so that you do not inadvertently erase the formulae for the next date. Once today’s trading has closed for the day, you may unhighlight this day but highlight the next day’s row which you would updating next as fresh data comes in.
Now, delete the columns P through U, which you no longer need. Y You ou are now ready with your triggers and stop-loss values fo forr the next day with a very pretty lean looking spreadsheet with just 24 columns including the separator columns. A trading system is now in place for you where you only have a mechanical role to play the markets as the system dictates, a system that has been reasonably and rationally worked out, based on irrational market movements and an irrational mathematical ratio derived from a simple mathematical sequence comprised of numbers that depend on each previous number. The system is inherently derived from a visual chart, rather easy to llook ook at, that immediately reveals the existing ongoing trend as a tactical observation. In the next chapter, the charts and the triggers together are discussed as a trading system, taking up the case of the DJI first, the FTSE 100 and the S&P CNX Nifty of the NSE, India. Y You ou may create more charts and triggers for your favorite stocks, curr currency ency or commodity price movements, and back test your trades for the past many months or years to gain the needed confidence in this trading style.
Here and elsewhere we shall not obtain the best insight into things until we actually see them growing from the beginning… . – ARISTOTLE (Politics )
Chap Ch apte ter r 6 : Tradi rading ng the the D ow Jones Jones (for demonstration purposes, we are concerned here with the spot values, not the futures prices which may have been at a discount or premium to the spot). To T o get an insight into your trading style, keep your chart and the triggers well in view, and begin contemplating from the start of a new trend by noticing the first bullish candle that appears on 30th March. This candle has indeed appeared after after a couple of weak bearish candles signifying perhaps the end of a bearish phase prior to 30th March. The spreadsheet also shows our trigger rows from from cell G7 to K8 as all red, and the first bullish signs appear on the 9 th row for the date of 30th March. For a clear understanding of the trigger calculation based on the HA candles, let us assume that 29th March trading has just closed for the day, and we have our hypothetical range of projected data calculated in cells B9 to E9 for tomorrow, i.e. 30th March. If you have these projected values in the actual data row in cells B9 to E9, you will have the triggers and stop-loss calculations for 30th March in cells G9 to K9. The values would show up for the ‘ Buy , Stop-loss , Sell , Stop-loss’ would show as: 13247
13090
13031
13187
You can see that for tomorrow, bearish tr You trend end may end if the Dow goes above 13187, and the buy trigger to go long is 13247 which is still red colored since our range for the high is not above this threshold level. But now you know that if this trigger price is taken by the Dow, you should be ready to go long, and in case you have a short position, you should square off the position on seeing the Dow violating v iolating the 13187 level.
Well, that is some useful information to have even before the market opens tomorrow t omorrow morning. As the Dow opens on 30th March, you would replace the hypothetical figures by actual data streaming in your trading account screen, and immediately notice that with the actual low and high coming in, the stop-loss value for the bearish trend changes to 13159, while the buy trigger adjusts itself to the more plausible value of 13219. And soon enough, the Dow does cross over 13219, prompting you to go long, while noticing that now the stoploss value for the bullish position is 13093, instead of the 13090 you had before the markets opened. You Y ou did buy the Dow futures around 13219, and the day closed with the Dow at 13212 with the stop-loss for the long position standing 13091. Of course, now allat the critical figures in row 9 are colored black so you can see in a flash that t hat the trend is now clearly bullish, a scenario that is also easily discernible on the modified Heikin Ashi chart where you see a strong white bullish candle. Let us recollect what we have understood so far. far.
The Firs Firstt Trad Trading ing I nsight nsight to to G o L ong Although this bullish candle of 30 th March looks good on the charts, did it really have the strength to justify a reasonable probability of a sustainable uptrend? This very important question may be answered by two figures: 1. the End of of Bearish trend figure figure Ebr at 13,138 in cell P9 and 2. the End of Bullish trend figure Ebl at 13,113 in cell Q9. Since the trading price had indeed crossed 13,138, we were cautioned not to sell the index anymore, and also since the price has also moved above the stop-loss figure for buying (Ebl), we do have a stop-loss figure if we were to go long in the index. To T o put it simply, we are now allowed to buy, and at the same time not permitted to sell. Now, as the trading progresses, the DJI may just touch the Ebr and then go below the Ebl effectively nullifying our long position. We needed to draw a line where we could go long without fear of the candle transforming once again into the dark bearish candle again. Here is where the Golden Ratio helped us. To set our buying trigger, we made sure that the trigger is at To least 0.618 percent above the Ebr. To calculate this trigger, we multiplied Ebr by 1.00618 to give 13,219 as the trigger price for buying the DJI. Did you notice that the buying trigger on putting in the actual data in the early hours of 30th March changed to 13,219 from the 13,247 we had when we pasted the hypothetical data after the close of 29 th March? This change occurred because because the low in the hypothetical figures was assumed to be 13065, but the actual low on 30 th March was just 13,148 which was also the opening value for
the index. Since the buying trigger is dependent on the mhOpen by a factor of 4 and on the low by a factor of 1, the trigger was lowered to 13,219 as the actual low was higher than the hypothetical low. low. This higher actual low meant that the downward pressure on on the index had eased, and so we should naturally have more confidence in an upward move. And indeed, our formula did move our buying trigger to a better place at 13,219 instead of 13,247. Having bought the DJI and taken a long position, we now wait for either the target to be hit, or if the trend does not last long enough to hit the target, we get out of the long position by squaring off the position near the end of the bullish trend. The endbody of a trend beor indicated by either candle. a black bearish of thewould candle, a flat anomalous In either case, for such a candle to appear, the mhClose must be either equal to or less than the mhOpen for the day day.. So, for a fizz led out tr trend, end, we should should have: have: mhClo mhClose se < or = mhOpen. By the reverse formula, the value of the low (Ebl) that makes the above equation true is given by: Low(Ebl)= (4*mhOpen (4*mhO pen – High)/3 In our case of 30th Mar, this was calculated at 13,113, as the end of bullish trend or the stop-loss value for a long position. Again, the DJI may just touch this value, and resume its uptrend, so we should keep the stop-loss threshold just below this low, reducing the low by 0.1618 percent of itself. To T o find this threshold, we simply multiplied the low by 0.998382, giving the figure of 13,091 as our stop-loss value for the long position. Thus, having bought long at 13,219, we are either looking for a target of 13,806 or to get out of our position at 13,091, believing the trend to t o be over. over.
Having set your buying trigger at 13,219 and the stop-loss at 13,091 at the start of the trading day, you can see that the Dow moved from 13,147 to above 13,219 where you bought the futures and then patiently waited for either the target or the stop-loss value, which did not happen that day. day. So far, so good. At the end of the trading close on 30th March, you repeat the steps as above by first having the hypothetical values for tomorrow, which is 2nd April, in data cells B10 to E10. Looking at the trigger row you would find that the trigger cells in row 10 (cells G10 to K10) are all black colored, giving you confidence in having gone long today. today. The stop-loss for the long position is shown at 13099, so you know when to square off your long position tomorrow. tomorrow. This is the figurethe thatend would yield an anomalous flat candle signaling of the bullish t rend. trend. On the actual trading day data, your Excel work sheet shows the Stop-loss at 13,098 which again did not appear that day, keeping your long position intact. Note that you must keep updating your data every 30 minutes or so as the value of stop-loss depends on the High of the day. You may notice that as the High of the t he day rises more, the stop-loss values drops a little more, keeping you into the game as new Highs are made, which does make sense, since if a higher high is not made the trend cannot be considered bullish. At the close of 2nd April, as you paste the hypothetical figures for 3rd April in cells B11 to E11, you notice that the stop-loss figure stands at 13125 for 3 rd April. But as the morning actual data pours in, you find that a higher high is not made, and so the stop-loss which depends on the value of the high achieved so far, is raised from the projected 13125 to 13152. This does seem fair enough, because in a bullish trend we do expect a new high to be b e made on subsequent days and not seeing such a phenomenon should undermine our
confidence in the trend. So it is quite logical that we should be willing to get out of the faltering trend early on. The 3rd April, however seems to be indecisive and soon enough, you find that the stop-loss value of 13152 is hit, prompting you to get out of the long trade as the candle body is flattened with mhClose getting below the mhOpen, signaling the end of the bullish trend. t rend. Fine, you may now get out of the trade, taking a loss of 67 points.
The Second Trading Trading I nsight to Short Is it time then to short the Dow Jones? To T o short the Dow, you must have the selling trigger below the Ebl (which is actually the end of bullish trend or the stop buying figure) and the Ebr (which (w hich is the stop-loss for selling). The sell trigger (as the equal and opposite of the buy trigger) should be below 0.618 percent of the Ebl, which is calculated by multiplying Ebl by a factor of 0.99382. In cell J11, this comes to 13,092. So, on 3-April, having squared off your long position, you are now waiting for the sell trigger of 13,092 to short the index. This figure was never reached on that day and you stayed out of the At the endindex. of this day, as you put in the hypothetical values for 4th April, you note down the sell trigger at 13088 for tomorrow. The next morning, as you put in the actual trading data in the morning, you see the sell trigger at 13116 not at 13088. The selling trigger was raised slightly by your formula because it is dependent on the High for the day which was not high enough as the range of hypothetical data you had placed yesterday. yesterday. Not having a higher high indicated that perhaps the downward pressure on the Dow was pretty heavy and the formula took the liberty to prompting you to sell earlier. (Did not somebody say that mathematical formulae acquire an intelligence intelligence of thei theirr own? ) In the meanwhile, also noticing that the sell trigger is quite below the stop-loss value of 13278 for selling, you did go ahead and sell the Dow near 13116. Since the stop-loss value for the short position was not reached on this day, you can carry the short position to the next trading day.
Carrying on in this manner, you found that the fifth of April indicated the stop-loss for shorts at 13,224, which of course, you kept updating as every ever y half an hour passed by. by. Since you never saw this stop-loss being compromised on this day too, you were good with your shorts in the Dow. Dow. Over the next few days, while on the lookout for the target of 12, 475 to be taken, you sit up becoming alert on 12 th April to note that the Dow approached the stop-loss around 12,925. As this does indeed happen, you mechanically square off the short position around this figure, taking a profit of 191 points. Since these figures are based on the mhClose and mhOpen for the day, you also notice the shape of the HS candle on that day as an anomalous white candle, signifying the end of a bearish trend. Fortunately, the trend lasted longer than 3 days, giving you a substantial profit even though the projected target was not hit.
Thanks, Than ks, Mr Mr.. Fibo Fibonacci nacci!! Now, you can either be looking forward to the resumption of a bullish trend or another bearish trend. The trigger trigg er for going long seems to 12,984 on this day but since the day is nearly over and the approximate figure for buying tomorrow is around 13004, you decide to postpone p ostpone going long into the index to tomorrow morning. In any case, the index has just recovered from a bearish trend, and with the stop-loss value of a long position compromised early in the morning, you are not too confident of the resumption of a bullish trend yet. Indeed, the next day of 13-April never saw the buying trigger of 13,004, or the selling trigger of 12,798. th
Again, 16selling April,trigger the buying trigger of 12,991 was never hit, noron the that was at 12,876. You Y ou may now thank Mr Mr.. Fibonacci Fibonacci for raking in profits so far as well as keeping you out of trading the Dow on the 13 th through 16th April.
G oing oing L ong and and Short Short Agai Again n The 17th April sees you going long on the DJI at the buying trigger of 12,980, for a target of 13,496 and a exit point below 12,810. You Y ou hold to the long position on the 18th with the exit point of 12,903 not compromised. The 19th of April, however gets you out of the long position at 12,957 with a loss of 23 points, and although the sell trigger is reached below 12,898 is hit, you do not short the index since the selling stop-loss of 13,061 was compromised for the day. You do want to see all the 4 triggers in the trigger row as red colored. (Or, in the case of a taking a long position, you want to see all the 4for triggers t o be to black colored). Waiting the next day to short the index would be more prudent. On 20th April, neither buying nor selling trigger was activated, so you move on to 23rd April with no positions in the DJI. You Y ou do take the short position on 23rd April just below the selling trigger of 12,919 with a target of 12,320 and a selling stop loss of 13,081. The 24th April, only the next day, prompts you to book another loss as the selling exit point of 13,014 is hit. The loss in this trade comes to about 95 points. Since the buying trigger is not hit on 24th April, you would wait for the next day to go long on the index again.
A Good Long and a Great Short Next day, you buy the index at 13,061 as the trigger is activated for a target of 13,639 and an exit figure at 12,922 that would render the uptrend void. For the next few days, the trend does continue until the 3rd of May, when you exit the long position at 13,185 as the buying stop-loss is breached. This trade has given you a profit of 124 points. You Y ou do not wish to short the Dow on this day since the selling trigger is not breached. On 4th May, you may short the index below 13,147 for a target of 12,514 as all the four parameters (triggers) are indicating a sell. th
This time downtrend continues till the May with selling exitthe never compromised during this24 time, and thethe bearish target hit on 17 th May. You could square off the short position at the target, or wait to see when the trading system gets you out of the trade by its selling exit point. The system prompts you to exit the trend on 24th at a value of just above 12,544. This is surprisingly very near the original target but higher than the lowest point of the downtrend which appeared on 23rd May as 12,312. It is entirely up to your judgment or intuition whether to exit at the target or to exit when your trading system tells you to do so. This trade made you a profit of 603 points even if you ignored the target.
Way Wa y to to G o! Continuing in this manner, you can back test the DJI on your trading system to calculate how much of a profit or loss you could have made. I have summarized the results for you here. During the period from 30th March through 20th Dec of nine months, you took 40 trades out of which 19 were losing trades and 21 were winning trades. The maximum loss on a losing trade was 121 points, while the maximum profit on a winning trade was w as 603. The total loss from 19 losing trades turned out to be 1448 points which is an average of 76 points per losing trade. The total profit from 21 winning trades turned out to be 3421net which is from an average of 163 perwas winning The profit these 40 trades 1973 trade. points. I may point out here that targets were hit in only 2 of the 38 trades, but if you had squared off your positions at the targets, you would have taken a slightly higher net profit of 2066 points during this time period. There were also days when the index index opened beyond your exit points, but I have reasonably adjusted the points for those days, which were the 28 th June and 16th August. While actually executing your trades in real life, you may not be able to get in or get out of the trades at the exact triggers, so let us add an error margin of 5 percent to these results. Adjusting for this error margin, you may reduce the total profits for the winning trades by 5 percent to 3250, and raise the total loss for the losing trades t rades by 5 percent to 1520. This is actually reducing the total profit by more than 12 percent. We may now safely conclude that out of given number of trades, half of the trades may lose at an average of 80 points per trade while the other half of the trade may gain
at an average rate of 155 points, even after accounting for an error of 5 percent and gap up or gap down opening days. This empirical analysis, therefore therefore suggests that over a reasonable length of time, one may execute all available trades with a reasonable probability of making money if one mechanically obeys a simple trend following system. I have given you the guidelines for creating just that trend spotting system by slightly modifying the usual Heikin Ashi candlestick charts and incorporating the Golden Ratio into it to define candle strengths. You Y ou may further modify the system to suit you or use the existing one by changing a couple of parameters here or there, but remember to back test the system on a few more indices, stock prices or currencies. A good thingrun about a trend following is that it lets your profits to the maximum and system cuts your losses to the minimum. Statistically, it then keeps you in profit as long as you keep trading to its dictates, keeping your emotions of fear and greed aside. So, go ahead and follow your preferred preferred system and allow the law of averages work in your favor by taking every trade the system offers you.
Factual science may collect statistics and make charts. But its predictions are, as has been well said, but past history reversed. - JOHN DEWEY DEWEY.
Chap Ch apte ter r 7 : the the FTS FTSE E 100 100 and and the the N I FTY 5 0 You now have the compact spreadsheet for calculating and You charting the modified Heikin Ashi chart. All you need to do is paste the data for any other index or stock or currency that you would like to trade. I have back tested the results obtained by the same spreadsheet for two actively traded indices – the FTSE 100 at London and the S&P CNX NIFTY 50 at Mumbai for the period from 21-March-2012 to 21-Dec-2012, a total t otal of nine months.
The FT FTSE SE 10 100 0 Here is a consolidated summary of the results for FTSE 100: Out of a total of 35 trades available as per the triggers taken, 17 turned out to be profit making while 18 trades t rades made a loss. The maximum profit made by a winning trade was 376 points while the maximum loss incurred by a losing trade was 54 points. The 18 losing trades made a total loss of 574 points, which after accounting for a 5 percent error margin comes to 603 points loss over a nine months period. The 17 winning trades made a total profit of 1521 points. With a 5 percent reduction to account for errors, this can be safely assumed at 1445 points over the same period. The average net profitloss then stands 842 points. at 33, while the The per tradeat was estimated average gain was put at 85 points per winning trade. On the whole, an average profit of 24 points per trade is apparent for all the 35 trades taken together, after accounting for an error margin and gap up opening days. The two gaps up openings on 7th June and 19th July are already accounted for in the results shown above. So, as evident in the DJI trading profit and loss results, you can surmise that about half of the total trades t rades are losing trades but the average profit figure from the winning trades is almost twice the average loss figure of losing trades.
The S& P CN X N I FTY 5 0 Next, the consolidated summarized results for the NIFTY 50 are presented here. For the same period under study from 21st March to 21st December, 41 trades were available and taken. t aken. Out of these 41 trades, 25 trades resulted in losses while 16 trades made gains. The maximum profit from from a winning trade was 239 points, while the maximum loss from a losing trade turned out to be 100 on a gap up opening day. However, even with so many losing trades, the total loss from such trades was recorded at 1030 points, which on adding a 5 percent error margin, came to 1082 points. The total the winning trades isstill calculated 1638 points andprofit afteron subtracting 5 percent stands atat1556 points. The average loss per losing trade is 43 points, while the average gain per winning trade is at 97 points, again highlighting the fact that average gain is almost always more than twice the average loss per trade. The average profit per trade comes to about 12, while the total profit over the 9 months under study stands at 475 points after accounting for gap up and gap g ap down opening days.
A Cu rsor rsory y G lanc lance e at the the R esu esu lts lts Finally, here is a tabular summary showing tthe he effective results of the trades executed based on the modified Heikin Ashi – Golden Ratio trading system presented so far.
DJIA FTSE NIFTY
T Trades rades
Winner/Loser Winner/Loser
Gain per winner
40 35 41
21 / 19 17 / 18 16 / 25
15 5 85 97
Loss per loser 80 33 43
Average gain per trade 43 24 12
Net Gain 1730 842 475
As you work with more data over longer time periods, statistical laws may asymptotically lead you closer to the outcome that half of the total trades will be losers but the gain from the other half winner trades will be almost double the loss from the losers. Isn’t statistics gratifying!
Common people are alarmed by stock market gyrations because they don’t know what causes them. The best kept secret of experts is nor do they. – Kaushik Basu, chief economist to the World Bank, on the ebb and flow of stock markets (as quoted in “The Times Times of India”, ‘ They Said It’ column, 4th Jan 2013).
Chap Ch apte ter r 8: 8 : Conc Conclu lu sion sion As you ponder over your spreadsheet, you realize that some trades can continue for a longer period than others, ranging from a couple of days or less to perhaps a week to over a month. The spreadsheet works to give you entry and exit points for a trade readily but is certainly cer tainly not a tool for investing long term in securities or market indices. Trading T rading derivatives (futures or options) of indices or of highly liquid stocks therefore, seems a good idea to profit from the hard work you have put in to create the spreadsheet. Select a number of stocks and indices that you can easily monitor and consider trading their derivatives. I would suggest no more than a total mix of 21 stocks and indices. w ith these Fibonacci numbers, or what?) (Am I obsessed with Do not bother that you y ou are using spot values of indices or stock prices in your calculations but are trading their derivatives which may have a discount or premium to the actual spot values, because futures prices will follow the spot prices anyway, though premiums or discounts may vary with time. Since you are not staying with your trades for too long, these variations can come in your 5 percent error margin already allowed for. There may be times when the markets are are volatile and your triggers or stop-losses are breached as momentary spikes. To T o avoid getting out too soon or getting in too early, you might consider entering or exiting when the past one hours’ average price of the index or stock has breached the trigger or stop-loss values. You You can check a 13 tick moving average of 5-minutes ticks on a 3-day or 5-day chart of your index or stock at finance.yahoo.com or investing.com. This 13MA would be about an hour’s average of the price and hence the criterion for getting in or out of trades based on your triggers.
Now, futures have a potential for unlimited loss in case the markets suddenly go horribly against your existing position, like at the time of the fiscal cliff resolution or any other major event, though there is also the potential potent ial for unlimited profits, too. To protect your position in such a scenario, you would buy a contrary position in options. For example, if you had a long position in futures, you should also have bought b ought put options in the same underlying, in case the markets crash tomorrow morning, or vice versa, if you have a short position in futures, you must have a buy position in call options too to protect you against unlimited loss in case the markets shoot up the next morning or the next moment. Such a combination ensures that you won’t take a huge loss but limits your potential for profits in a lasting trend by the fact that youAnd are in going to loseofallthe thetrade money paid sour, for buying the options. the event turning you will anyway incur a loss on futures that would be somewhat limited by the profits in the contrary options. Alternatively, you could also write options instead of buying buy ing them along with futures and build up covered calls or covered puts combinations. On the other hand, if you simply buy just the call options in a bullish trend, you have the potential for unlimited profit if the trend lasts long, and are also insured against unlimited loss because if the trade turns contrary to your position you can only lose the money you paid for buying the call option. In the case of a bearish trend, you would simply buy put options to profit from a lasting downtrend while limiting your maximum potential loss only to the cash you paid for the option. However, your trading system will prompt you to exit your position at some value if the trend does not last, so you will still recover some of the money you paid for the option, if not all, and sometimes, as you have empirically seen, the exit point can still result in a small profit too. As the system detects the end of a trend in a couple of days, the premium
on options would not change much anyway. Try not to buy options that are just a week away from expiry though, as the premiums on these can vary significantly as the date of expiry approaches quickly. Go for the next months’ contracts then. Choosing to trade futures coupled with options, or just the options is entirely up to your temperament and preference. But whatever you do, trade as the market dictates and as your spreadsheet prompts you to enter and exit while gauging the prevalent mood of the market mechanically. mechanically. There are a host of complex complex strategies out there involving hedging with various combinations of futures and options but none perfected yet to yield profits all the time. I have proposed a simple Contrary Position Rule F & O Futures utures strategy in the next book”,titled: “ The Simplified F Options Trading Strategy Strategy”, that you might consider sinceand this strategy further reduces those intermittent losses that invariably result from following the trend patterns of the MHAF trading system. In summation, stick to your plan of riding r iding a simple trend but don’t trust it just because it’s simple. Be ready to abandon a trend or to jump on to a new n ew trend as the market changes its mind and as that fickle mind is revealed in your spreadsheet. Feel free to interact with me through my website at http://niftytracker.com http://niftytracker.com and and remember to sign up for receiving updates to the book and an occasional newsletter there. There may yet be some oversights in text or formulae, even though I have gone through the book’s figures many times over. over. Do point these out when you find them by contacting me through my website. web site. Since your views are very important to authors and their page again again and scroll down to book, please visit the book page the ‘ Customer review’ area area to write about what you liked liked and choose your star rating for the book. Happy Trading! rading !
Other books by Avinash Khilnani:
The Simplified Futures Trading Strategy Futures and Options Trading A simple Contrary Positions Positions Rule strategy is outlined for playing Futures Futures and Options combinations, named the CPR F&O strategy. The reader is guided to create an optimum strategy that exploits the existing trend, implied volatility of options and the time decay inherent in options to t o one’s advantage. Right at the start of executing initial trades, the reader can estimate maximum profit potential, reversal and exit points using just plain arithmetic and follows those figures through for one calendar month.
The Fibonacci Trading Script Fibonacci Dictated Trading A stage play is set for playing index futures against index options, demonstrated as a real world example of the Dow E-mini futures and the DJX options. The reader is guided to write a trading script for the stage before the play actually begins as a simple Excel worksheet. Fibonacci ratios and numbers dictate the writing of the script and extensive use of the Black-Scholes option pricing model ensures that optimum exit point, reversal points, profit or loss, rolling up or rolling down figures are calculated well in advance of the actual play.
Geneticenough Hacking: DNA Can Be of Hacked! Are you literate in Your the codes of life, reading and writing DNA? And should you be hacking your own biology? This book explains why it is about time you hacked hacked your own DNA and shows how the recent developments in genetics and genomics enable you to understand your personal biology.. The benefits of bio biology bio-hacking -hacking yourself rrange ange from personalized medicine for your quantified self to looking into your ancient past to trace your personal ancestors to get to know yourself better, to evolve quicker than nature intended and to intentionally create genetically superior children by design. In a slightly futuristic scenario, the book ponders if you can live healthily (and happily) ever after by hacking your genome and connectome through re-booting your genome with your connectome again and again. --------------------------------
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