“Chennai Meet”

Knowledge sharing for VFM Members

Topic: “Trading Success” by murthyonline.

www.vfmdirect.com/forums/postbyuser.cgi?userid=murthyonline

Minutes of Meeting Documented by Tamilarasan K

Venue : Hotel Fortel, Egmore, Chennai

Date : 10-Jan-2016

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Share Markets – It’s the barometer of a country’s economy!

Trading can be either based on MATHS or MATHS THEORY.

MATHS: The concepts like Moving Averages, MACD, Bollinger Bands etc are
basic Maths and they never fail,. 2 + 2 is 4 and always will be. Such is the
calculation behind these concepts / indicators.

MATHS THEORY: On the other hand, we have theories derived based on Maths
like Elliott Wave Theory, GANN numbers, Wolfe Theory, Camarilla, Fibonacci
etc. Unlike direct Maths, which never fails these theories may fail some time. And
hence it is always preferable to follow the most successful system.

However, besides any indicators/tools, commonsense is basic requirement in

entering a trade and exiting or holding. Get rid of Greed, Fear & Anxiety. These 3
are never going to being you any money. Get rid of these factors completely to
become a professional trader.

TRADING STYLE:
Before deciding to Trade, decide which style suits you based on your
Capital/Time/Expectation etc.

▪ INTRADAY - Low Capital/Daily Returns

▪ POSITIONAL - Comparatively High Capital/Weekly to
Monthly Returns
▪ LONG TERM INVESTMENT - Huge Capital, Long term waiting

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While doing Intraday, get out of the Trade within 30 mins to 1 hour. Use a 5 Min
chart for Intraday which is advisable. The 5 min chart shows the immediate move
happening in the script/indices.

While doing Positional, use DAILY chart for a 1 week holding, WEEKLY chart
for a 1 month holding. If you plan to invest for 2+ years, MONTHLY chart comes
handy.

While having overnight positions, you can place an AMO (After Market Order)
Stop Loss order, so that any crisis/news may limit your losses. However, if the
Market opens beyond your AMO SL, there is no use but compared to having no
protection, have a habit of placing AMO SL order which is advisable.

CHART PATTERNS:
In addition to the Indicators, we have lot of patterns that can be identified in a
chart. The below mentioned chart patterns are preferably to be analyzed on either a
Daily chart of bigger Time Frame.

▪ Double Top - Bearish

▪ Double Bottom - Bullish
▪ Cup & Handle - Bearish & Bullish on pattern position.
▪ Inverted Cup & Handle - Bullish & Bearish on pattern position.
▪ Head & Shoulders - Bullish &Bearish on pattern position
▪ Inverted Head & Shoulders- Bullish & Bearish on pattern position.
▪ Butterfly
▪ Frog
▪ Bat etc etc

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These kind of patterns will be visible as you watch the chart and analyze closely
often and the expertise comes out of experience. These patterns if spotted, (on a
Daily or higher TF) gives ample opportunity for profits.

TIP: While trading Futures (Stocks/Indices), always prefer SPOT chart over
Futures chart as the premium game in the Futures market may mislead our
analysis.

Likewise, while trading Options, it is preferable to have an Options Chart (of the
Strike Price you want to trade), which gives an edge for your Options Trading. If
chart for options is not available, do based on SPOT but only for first 2 weeks.
Then the premium erosion comes into play and hence be cautious trading options,
better to avoid it. Futures does not have the erosion factor much.

TYPES OF CHARTS:
CHARTS

CandleChart Line Chart OHLC Chart (Bar Chart)

CandleCharts are preferred by most traders for a visual appealing of Bull/Bear

moves & OHLC indications for a given time period.
TIP: If Open=Low -> Go LONG with LOW-5 as SL
If Open=High -> Go SHORT with HIGH+5 as SL
TIP: Never BUY at Day’s High & SELL at Day’s Low, unless you are very sure
about the direction of the market.

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While analyzing Candles, always use the NEXT candle for a confirmation of the
previous candle. Suppose you see a HAMMER, the next candle should break the
high of the hammer to confirm an upward move.

Few Candles to be studied: HARAMI, HARAMI CROSS, HAMMER,

INVERTED HAMMER, HANGING MAN, SHOOTING STAR etc.etc…

VANTAGE POINT: (Only for NIFTY Spot)

These are some random numbers (100 divided into 4 parts) where Nifty often halts
and takes a break before moving. These numbers are based on constant watching
and has no logic behind it. But the same behavior has happened time and time
again. These can be used for Trailing Stop Losses. These numbers are to be noted
in Nifty SPOT & not Futures!
…..XX05, XX37, XX54, XX80, XX05…..and so on.

VANTAGE POINT: (Only for NIFTY Options)

These are same kind of numbers that can be used for Option Pricing. Same logic
(or no logic) as discussed above, but it works.
…..20, 32, 54, 72, 97, 108, 120, 132, 154…..and so on..

AVERAGE DAILY MOVEMENT:

A Normal Nifty Day sees 126 points movement.
A Normal BankNifty Day sees 256 points movement.

These numbers comes in handy to set targets or trailing stop losses. Suppose Nifty
on a day had 100 points movement by noon, it is likely that it will move another 26
points before the closing hours @ 3.30 pm.
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INDIVIDUAL STOCK BEHAVIOUR:
As discussed above, there is an individual STOCK behavior for every script. Over
constant watching and experience, we can get a hang of an individual scripts
behavior which will be very useful for Intraday Trading.

Example: TATASTEELL moves 4 points up and comes down 3 to 3.5 points, and
moves up to next resistance. Similarly if it falls more than 4 points from day’s high
it can fall when it retraces 3 or 3.5 points after the dip below 4 points to fall to next
support level.

TIP: An easy way to analyze stock behavior is to load HIGH, LOW, CLOSE
values on a Camarilla Calculator and the range L3 – H3 becomes its stock
behavior. For better accuracy, an average of 15 days can be taken.

THE TRADING SYSTEM (Murthi Sir’s Highly Successful & Proven System)

The trading system discussed has the 5 indicators. Getting confirmed Buy/Sell
signals from more than 3+ indicators has more chances of success. The more the
indicators are in favor, the more chances of success. However, atleast 3 indicators
signaling a Buy/Sell is a good trade. While applying these indicators, default
settings can be used.

▪ Exponential Moving Averages (20 / 50 / 200)

▪ Moving Average Convergence Divergence (MACD)
▪ Bollinger Bands
▪ Stochastic
▪ Parabolic SAR (Stop & Reverse)

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EMA:
Setup the 20, 50 & 200 day EMA’s in your chart. The 20 Day EMA crossing over
50 Day EMA is a good sign of a reversal. But the 20 day EMA crossing over the
200 day EMA is almost a great chance of massive profits.

The order of the EMA’s signal if the script is bullish or bearish.

BULLISH (Ascending) BEARISH (Descending)

20 ---------- on top 200 ---------- on top
50 ----------middle 50 ---------- middle
200 --------- at bottom 20 --------- at bottom.

Unless the 200 & 20 EMA’s crosses over, it cannot be seen as a reversal, although
some correction may happen in the opposite direction. If overall trend is
BEARISH, then SELL ON RISE. Middle Bollinger Band or 20 EMA can be a best
place to go short while implementing the SELL on RISE strategy.

Golden Cross – The 20 day EMA crossing over the 200 day EMA upwards. It is a
sure sign of a rally.
Death Cross – The 20 day EMA crossing over the 200 day EMA downwards. It is
a sure sign of a correction/bearish trend.
TIP: The Golden Cross & Death Cross are to be seen only on a Daily Chart. A
Golden Cross on a 5 min chart cannot be a positional buy nor the Death Cross a
positional sell.
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Bollinger Bands:
Bollinger Band consists of 3 bands, the upper band (UBB), the middle band
(MBB) and the lower band (LBB). Always use Bollinger with Moving Averages.
When Bollinger is in TUBE format, never enter a trade. When the tube form exists,
it is almost sure that the price from the LBB will certainly go atleast to the MBB
(& UBB in many cases) and vice versa.

MACD:
MACD has a histogram and one or two signal lines. Above 0 point, if the signal
enters the histogram OR cross over of signals it is a BUY signal and below 0
line, if the signal get out of the histogram it is an exit signal. The converse is true
for a SELL signal.
TIP: Exit a trade, when the signal reaches at 80 – 90% of the MACD histogram.

Stochastic: (Fast Stoch 5,3,3)

Stochastic is used to identify bearish (20 & below) & bullish (80 & above) zone. If
below 20, the script continues to be bearish and if both the lines of the Stochastic
crosses over and returns above 20 at an approximately 45 degree upwards, it is a
sure BUY signal. Likewise, the script is in bullish mode until it is over 80 and any
crossover and return pointing 45 degree below 80 downwards is a sure SELL
signal. The crossover & the direction change to be analyzed.

Parabolic SAR:
This is a Stop & Reverse signal, which can be used effectively for putting Stops.
Also, it generates a Buy/Sell signal. If the Parabolic dot appears above the candle,
it is a SELL signal and if it appears below the candle, it is a BUY Signal. The same
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can be used as Stop Loss and the eventual dots can be used for trailing the stop
losses and lock in profits.
Out of these 5 indicators, if 3 or more indicators favors a trade, there is almost no
chance of failure. 9 out of 10 trades will turn to be successful ones.

TIP: While doing a positional trade, no need to wait for 3+ signals to turn in your
favour. Just based on Parabolic SAR & Stochastic in Daily T/F you can enter a
Positional Trade. That too, if you get a GOLDEN cross or DEATH Cross, no other
signals to be watched. Just be sensible on your exits only.
Happy Trading!

In addition to the above session by Murthy Sir, Rama Madam has shared her
strategy of using Camarilla Levels with MACD which gives excellent results too.

The System EXPLAINED in Murthy Sir’s own Words:

Now due to increase in lot size, the options trading and volatility can increase.
How to take advantage of it. For this you need a real time feed for futures and
options and a chart for MT4 (easily understandable) or Amibroker. Below I give
the intraday trade and next Sunday I can explain about the medium term trades (a
week to 2 weeks). As all of you know my one liners (for intra) in MACD thread
are without SL and also you know how it hits the targets.

Basics.

1. Never ever enter a trade unless you are 100% confident about. It is better to
have a no trade rather than a losing trade.

2. How to get confidence while trading? Have a keen eye on the technicals, to be
narrated here, understand it, do paper trading and have at least 5 days correct trades
continuously.

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3. Your emotions, the greed and fear, cannot bring you money in. So keep it
aside.

4. The market is always there, so never do any impulse trade. Just like, I have not
done anything today, so let me try my luck.

5. Follow the technical described word by word. Understand it fully, ask

questions, how many times you want, till you to understand it. This learning
process is the real worth for lifetime and not what the trades profit you get.

6. An intraday trader will try to keep his capital on the table for the shortest
possible time. Bullish market once you make 20 points in Nifty exit and wait for
the stochastic to fall and cross over below/near 20 and enter trade again and get out
again for 20 points if it is bullish.

If bearish (MACD below 0) short below 80 and exit near 20. Exactly opposite to
bullish behavior.

NOW READ AND UNDERSTAND CORRECTLY IN FULL:

There are some important numbers, and Nifty (always spot referred here) plays
around.
They are called the vantage points. xx05-37-54-80-xx05 again and continues for
each 100.

MACD and EMAs are basic mathematics averages.

Here I suggest some EMAs 20, 50 and 200. How they behave in each time
frame?

For intraday let us take 5 Min. and hourly charts. In all charts they will be same.

See if it is in ascending order or not.

Small at top to big in order 200 at bottom, 50 above it and 20 above it. This is
bullish,
Big at top to small in Order 200 above, below that 50 and below it 20. Bearish.

If the 50 is in between 200-20 it is neutral sideways movement. Same thing

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for 50 above and 200 below it and 20 below all. (means not in proper order).

MACD: There are 2 types of MACDs you can see in charts. One is what you see
in Yahoo Chart (which is easy to understand) with one signal line and the other one
in Chartink, Amibroker etc. with 2 signals. The standing line in MACD is called
histogram and the line passing through, or above or below it called the signal(s).

In 5 Min chart (in Yahoo 1D time frame) when the signal enters inside the
histogram
the market will go in that direction - for example above 0 it is bullish and below 0
it is
bearish. If you keenly watch you can say how far the nifty can go and which
vantage
points it can touch upward or downward.

Now the third indicator is STOCHASTIC.

When the stochastic is falling from below 80 downwards the market falls/corrects
and when it go above 20 towards 80 it will move up. Above 80 it will be very
bullish
and below 20 it is very bearish.

Now understand the above first, and based on the above three try to make a
decision
the market is trying to up or down or sideways.

What mentioned above is a universal system you can apply in all indices, all
scripts, options & futures, in commodities and in currency trading. One system for
all.

DISCLAIMER: THE ABOVE IS PURELY FOR EDUCATIONAL AND/ OR

ENTERTAINMENT PURPOSES. THIS IS NOT A SUGGESTION TO
ENTER A TRADE OR A SUGGESTION TO TRADE. UNDER NO
CIRCUMSTANCE IT SHOULD BE CONSTRUED AS A SYSTEM WHICH
WILL NEVER FAIL.

……….. END OF PART – ONE……..

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