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An EOD strategy to gain from futures trading using only 3EMA & 5EMA

An EOD strategy to gain from futures trading using only 3EMA & 5EMA. 3x5 MACO System. Review of the original system has been designed and shared by Vishwanathan Sundaresan ( Vish ) And discussion of modifications done by Shiva Galrani. 3x5 MACO System Overview.

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An EOD strategy to gain from futures trading using only 3EMA & 5EMA

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  1. An EOD strategy to gain from futures trading using only 3EMA & 5EMA 3x5 MACO System Review of the original system has been designed and shared by VishwanathanSundaresan (Vish) And discussion of modifications done by Shiva Galrani

  2. 3x5 MACO System Overview • Works great on Nifty Futures (NF) or BankNifty Futures (BNF) • Time frame – Daily • Use NseAdj close price (Future – Not Spot) • 3EMA – 3 day EMA of the Adjusted EOD close • 5EMA – 5 day EMA of the Adjusted EOD close • Buy when 3EMA crosses above 5EMA • Sell when 3EMA crosses below 3EMA • On last day of Future series expiry, cover existing position and carry forward the position to next month series.

  3. 3x5 Entries on Chart

  4. Entry & Exits – What to do & When C/f Longs in Bank Nifty Future - Reversal Point – 11,250 Markets at 9:30 am Markets at 3:15 pm 9:30 to 3:00 pm Open below 11250, 9:30 below 11,250 Avoid watching markets “regularly” Never Modify your Stop Loss order. You may only enter a Stoploss for your Intraday order as per your risk appetite (I don’t enter it) Above all try not to worry on what markets are doing. Enter Market order to cover Longs & Go short Enter Market Order to Cover Shorts & Go Long Market order or SLO hit in day and BNF is Above 11250 Open above 11250, 9:30 below 11,250 Market order or SLO hit in day and BNF is Below 11250 Intraday Shorts C/f to next day Open below 11250, 9:30 above 11,250 Enter Stop Loss Order @11250 to Cover Longs & Go Short SLO not hit and BNF is still Above 11250 SLO expires. Longs C/f to next day Open above 11250, 9:30 above 11,250

  5. Entry & Exits – What to do & When C/f Shorts in Bank Nifty Future - Reversal Point – 11,250 Markets at 9:30 am 9:30 to 3:00 pm Markets at 3:15 pm Open above 11250, 9:30 above 11,250 Avoid watching markets “regularly” Never Modify your Stop Loss order. You may only enter a Stoploss for your Intraday order as per your risk appetite (I don’t enter it) Above all try not to worry on what markets are doing. Enter Market order to cover Shorts & Go Long Enter Market Order to Cover Longs & Go Short Market order or SLO hit in day and BNF is Below 11250 Open below 11250, 9:30 above 11,250 Market order or SLO hit in day and BNF is Above 11250 Intraday Longs C/f to next day Open above 11250, 9:30 below 11,250 Enter Stop Loss Order @11250 to Cover Shorts & Go Long SLO not hit and BNF is still Below 11250 SLO expires. Shorts C/f to next day Open below 11250, 9:30 below 11,250

  6. 3x5 Modifications - Synopsis • Risk Management – Trade in one lot of NF / BNF for every 50K of capital invested. So if investing 2 lakhs, maximum lots I trade is 4. (This needs to be adapted as per your risk appetite. For conservative traders suggested level is to trade 1 lot per lakh) • Initial lots – Minimum quantity of lots that is always in trade (My personal preference is to keep this at 50% of maximum lots). • Addition to existing lots – To be done after 3 days of trend & only on 3ema touch. (Reasons follow in upcoming slides) • 3ema touch rule for booking profits– Exiting at beginning of day to re-enter at lower prices (in case of longs) • 50% of capital is actually invested as margin requirement. Instead of keeping the other half idle, Invest at least 60% of the same using 3x5 long only on cash stocks. Select Nifty 50 stocks give superior results (DLF, SBIN, ICICIBANK for example) • 20% of annual gains are set aside for donations, 30% invested on personal needs and 50% ploughed back in the system

  7. Adding to a current position Add to a current position only if ALL the following criteria is satisfied. • The trend is at least 3 days old. So if the intial trade was signalled on day 1, we add only from day 4 • Add on pullback to 3ema only. • Order entry follows same rule as initial trade day. • Enter order at 9:30 to buy additional lots at 3ema touch • By day end if the signal has whipped back, cover the added lots also along with the initial lots. Subsequent addition follows the same rule as above. Only replace first rule that the last addition was done at least 2 days ago. So if Initial trade was on day 1, 1st add was on day 4, 2nd add to be done only on day 6 How much to add : My personal rule is Initial lots are 50% of maximum allowed lots and maximum 2 additions of 25% each

  8. 3EMA Touch rule to book profits Enter this trade only if ALL the following are True (assuming you are holding long positions) • Gap up or jump in initial 15 mins till 9:30 • Your initial position was traded at least 3 days ago • Your current position is in profit (as of yesterday close) • Difference between NF / BNF and their 3ema is at least 50 / 125 Action to do if ALL above are satisfied • Sell at the most half your position at 9:30 • Enter Buy order at 3ema of yesterday’s close price. This is the price at which traded price = 3ema • If Buy back order is executed you have made 50 / 125 points on NF / BNF • If the order is not executed (markets have gone up without touching 3ema, you wait for them to do so and enter as per addition rule. • In the meantime you still have half your position to keep the cash coming in.

  9. Backtest results analysis (Jun-05 to Oct-12)

  10. Backtest results analysis on tradesMore profits in longs than in shorts

  11. Backtest results analysis (Jun-05 to Oct-12)

  12. Backtest results analysis (Jun-05 to Oct-12)

  13. Moment to reflect Double your money every year (based on backtest results) • With Minimal knowledge of technical analysis • Investing about 15-30 minutes twice a day • No Software. Only spreadsheet is required. • Important requirement is discipline and Risk management. • Most important task is to take all trades as signaled by the system as the next trade could be a big trend

  14. Disclaimer Backtest results are not indicative of future returns and please do your own due diligence before investing. I have to present all the possible scenarios in the system and its backtest. But markets do tend to surprise and test you in new ways always. So please please do some due diligence and paper trade this system before committing real money on this system

  15. Any Questions

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