Swing Trading Strategy
That can help you generate Monthly Income !
A thread 🧵
Using RS , MACD , 21 EMA and Price Action
All Concepts with charts Explained !
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UNDERSTANDING MACD
Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of stock.
It is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. 2/n
The result of that calculation is the MACD line. A nine-day EMA of the MACD called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals. 3/n
Traders may buy the security when the MACD crosses above its signal line and sell—or short—the security when the MACD crosses below the signal line. 4/n
UNDERSTANDING RELATIVE STREGTH
1.Relative strength is a strategy used in momentum investing and in identifying value stocks. 2. It focuses on investing in stocks or other investments that have performed well relative to the market as a whole or to a relevant benchmark.
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For example, a relative strength investor might select technology companies that have outperformed the Nifty50, or stocks that are outperforming the Nifty 500
HOW TO APPLY IN TRADINGVIEW?
Type
“Relative Strength”
Choose any
I USE By bharattrader
By traderlion
By Modhelius
6/n
WHY RS?
Helps to filter out stocks in good momentum and that are giving better returns than nifty
These stocks tend to outperform the market for a long term
These are potentially superstocks
65 period signifies 3 months of trading
In 3 months we have around 65 trading days 7/n
UNDERSTANDING 21 EMA 1. The 21 ema will help us to identify the trend of stock 2. A stock above 21 ema will never be shorted and a stock below 21 ema will never be bought
A trending stock will always be above 21 ema and will generally pullback to 21 ema to give multiple entries
Combining all the tools
Buy Signal Rules
Stock above 21 ema
Macd buy crossover
Rs line increasing and in positive
Volume up on updays and down on downdays
Target 10 to 15%or can be trailed using 21 ema
Stop loss max 7% in any case or nearest swing whichever is less
LONG: 9/n
Sell Signal Rules
Stock Below 21 ema
Macd Sell crossover
Rs line decreasing
If Rs line is in negative that’s too good
Price near resistance or bearish patterns like double tops etx
Target 10 to 15%or can be trailed using 21 ema
SHORT SIGNAL:IGL 10/n
Stop loss max 7% in any case or nearest swing whichever is less
Ideal stop loss 5%
Position size 5 to 8%
11/n
How you can get out at tops
During distribution stock generally goes sideways
RS keeps on decreasing and soon MACD gives sell signal
Always wait for close below 21 ema before exiting a stock
During sideways zone at top of trend instituations will generally book profits
12/n
#LAURUSLABS AND #HINDCOPPER
using the same strategy we are exiting at potential tops 13/n
#POLYCABS EXAMPLE
Whipsaws 1. As we are using lagging indicators we may get multiple buy sell signals in short span of time
Even if we get Multiple Sl hit
2.The sl during sideways will be generally small as we are keeping 21 ema as stop loss
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3. Sl % should be in 4 to 5 % range 4. You may enter late and exit late if you follow exactly the signals as indicators are lagging 5. Its better to be a small part of the larger trend and getout
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When not to take trade
Even if you get a buy signal sometimes its good to avoid trades to avoid big draw down
One such instance is when the price has deviated more than 10% from the 21 ema when the signal is given #MINDAIND 16/n
High Reward trades
1 stock will compensate for all your minor losses
This is a trend following system hence if you catch even 1 stock out of 10 that could give 30 40% in short time this could take your returns to multifold
As we are having a max loss limit of 7% 17/n
Please Note :
This is a momentum based trend following strategy .
The returns may vary depending upon the trend of overall market .
All Strategy have Drawdown period.
Please Backtest and try it on your own with small amount to Check the Success ratio . 18/n END
A Shortv Thread on indicator : ADX
Average Directional Index a Quick Guide
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One of the best and easiest ways to increase your chances of making winning trades is to trade with the trend
The average directional movement index or ADX is an indicator that will not help you find a trend,but can show you how strong a trend is
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What is the Average Directional Movement
Index?
1. The average directional movement index was created by J. Welles Wilder in the 1970s.
2. The ADX combines two indicators to create a smoothed moving average that is then shown on your charts.
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Complete Guide to Swing Trading
A Mega Thread 🧵
With Live Charts and Examples
Comment " Yes " and Retweet if You want PDF version
Criteria for Swing Trading :
Uptrend HH HL Structure
Stage 2 Uptrend
Volume Expansion during Breakout
Pullbacks with Lower Volume
Base Formation ( Rectangle , Vcp Etc)
Relative Strength > 0
21 ema > 50 ema > 200 ema
Stocks near 52 week High
Stocks near All time High
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What is HH HL Structure ?
1. A stock Maintains Bullish Momentum till it holds the last Swing . 2. Swings is an area from where stock reverses 3. As it is widely known Trend is your Friend A structure of Higher High is good for buying as overall momentum is in buying side
A Thread on Risk Management and Art of Position Sizing 🧵
⏺️A part of Risk Management that could make or
break your trading career
⏺️Position sizing refers to the number of units an
investor or trader invests in a particular security.
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Determining appropriate position sizing requires
an investor to consider their risk tolerance and
the size of the account.
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POSITION SIZING :
In simple Language how much Percentage of your Portfolio you should invest in a particular Script .
This is very important factor that changes your returns drastically .
There are rules to be followed
Either Fix Risk per Trade
Or Capital Allocation
3/n
How to use Top Down Approach for Stock Selection ?
Concept : Relative Strength
Weak Vs Strong Sectoral Analysis
Weak Vs Strong Stock Analysis
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Step 1 : Choose the Strongest Sector
Use The concept of Relative Strength to identify Strong Sector .
Example Comparing Auto Vs Nifty
Here we can See the 65 RS line is Positive and Increasing meaning A outperformance of AUTO index 2/n
How to use HEIKINASHI CANDLESTICK Charts ?
Trading Strategy and Its Rules
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What is Heikin Ashi? 1. Heikin-Ashi, also called Heiken-Ashi, is translated as an "average bar" in Japanese. 2. The Heikin Ashi strategy is a useful tool used in identifying market trends and
predicting the future prices of assets.
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3. The Heikin Ashi can be used alone or in conjunction with candlestick charts. 4. These charts can be very useful as they make it easier to read candlestick charts
and analyze market trends , without noise 3/n
About Darvas :
In the late 1950s, Nicolas Darvas was one half of the highest paid dance team in show business.
Darvas turned a $36,000 investment into more than $2.25 million in a three-year period.
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It was on a two-year tour of the world that he initially developed his ‘Darvas Box’ method of screening stocks – a method of picking stocks based on the stock’s price and volume .