TECHNICAL ANALYSIS BLOG
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FEBRUARY : PREPARATORY WORK AND A FREE CIRCULATORY COPY ONLY
NIFTY CNX ROUTE MAP AHEAD FROM 08.02.2016 Onward’s
NIFTY CNX ROUTE MAP AHEAD FROM 01.02.2016 Onward’s
NIFTY CNX ROUTE MAP AHEAD FROM 25.01.2016 Onward’s
NIFTY CNX ROUTE MAP AHEAD FROM 14.12.15 Onward’s
NIFTY CNX ROUTE MAP AHEAD FROM 23.11.2015 ONWARD’S
For all the previous charts please click on the Archives link / page shown above
Study material on how to trade the moving averages below :
The two moving averages
I use two moving averages: the 10 period Exponential moving average (EMA) and the 30 period exponential moving average (EMA). I like to use a slower one and a faster one. Why? Because when the faster one (10) crosses over the slower one (30), it will often signal a trend change. Let’s look at an example below:
The Green coloured line is the 10 Ema & The Black coloured line is the 30 Ema
You can see in the chart above how these lines can help you define trends. On the left side of the chart the 10 EMA is above the 30 EMA and the trend is up. The 10 EMA crosses down below the 30 EMA thereafter and the trend is down. Then, the 10 EMA crosses back up through the 30 EMA in September and the trend is up again – and it stays up for several months thereafter.
Here are the rules:
Focus on long positions only when the 10 EMA is above the 30 EMA. Focus on short positions only when the 10 EMA is below the 30 EMA. It doesn’t get any simpler than that and it will ALWAYS keep you on the right side of the trend!
Note that moving averages only work well when a stock is trending – not when they are in a trading range. When a stock (or the market itself) becomes “sloppy” then you can ignore moving averages – they won’t work!
Here are the important things to remember (for long positions – reverse for short positions.):
- The 10 EMA must be above the 30 EMA.
- There must be plenty of space in between the moving averages.
- Both moving averages must be sloping upward.
- When the larger moving average which is sloping upward suddenly flatten’s and starts trending in the opposite direction is when you should become a bit cautious on the direction of the trend ( 30 Ema )
The 200 period moving average
The 200 SMA is used to separate bull territory from bear territory. Studies have shown that by focusing on long positions above this line and short positions below this line can give you a slight edge.
You should add this moving averages to all of your charts in all time frames.
The 200 SMA is the most important moving average to have on a stock chart. You will be surprised at how many times a stock will reverse in this area.
USE THE FOLLOWING PARAMETERS TO SELECT TRADES OTHER THAN THE MOVING AVERAGES : Relative strength index: macd : highs and lows: bearish and bullish divergence: last daily candle : reconfirm it with commodity channel index and composite index: break out levels: pivot’s with aide of supports and resistance:
Study material on how to trade Divergence : Price and momentum indicator the RSI: Relative strength index
PARAMETERS USED TO SELECT TRADES : Relative strength index: macd : highs and lows: bearish and bullish divergence: last daily candle : reconfirmed with commodity channel index and composite index: break out levels: pivot’s with aide of supports and resistance: nifty levels also precisely cross checked: moving averages cross over’s the golden and dead crosses : stochastic index : Volumes : Divergence
The recommendations made herein or otherwise do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein or otherwise will be profitable or that they will not result in losses. Readers using the information contained herein or otherwise are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness. The recommendations are based on the theory of Technical Analysis and do not reflect the fundamental validity of the Scrip.
This blog is purely a technical trading site and free for all.