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 OverviewWorks great on Nifty Futures (NF) or BankNifty Futures (BNF)Time frame – DailyUse Nse Adj close price (Future – Not Spot)3EMA – 3 day EMA of the Adjusted EOD close5EMA – 5 day EMA of the Adjusted EOD close

Buy when 3EMA crosses above 5EMASell when 3EMA crosses below 3EMA

On last day of Future series expiry, cover existing position and carry forward the position to next month series.

3x5 Entries on Chart

Entry & Exits – What to do & WhenC/f Longs in Bank Nifty Future - Reversal Point –

11,250

Open below 11250,

9:30 below 11,250

Open below 11250,

9:30 above 11,250

Open above 11250,

9:30 above 11,250

Open above 11250,

9:30 below 11,250

Enter Market order to

cover Longs & Go

short

Enter Stop Loss Order @11250 to

Cover Longs & Go

Short

Markets at 9:30 am Markets at 3:15 pm

Market order or

SLO hit in day and BNF is Above 11250

SLO not hit and BNF is still Above

11250

Market order or

SLO hit in day and BNF is Below 11250

Enter Market Order to

Cover Shorts & Go Long

Intraday Shorts C/f to next day

SLO expires.

Longs C/f to next day

9:30 to 3:00 pm

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.

Entry & Exits – What to do & WhenC/f Shorts in Bank Nifty Future - Reversal Point –

11,250

Open above 11250,

9:30 above 11,250

Open above 11250,

9:30 below 11,250

Open below 11250,

9:30 below 11,250

Open below 11250,

9:30 above 11,250

Enter Market order to

cover Shorts & Go Long

Enter Stop Loss Order @11250 to

Cover Shorts & Go Long

Markets at 9:30 am Markets at 3:15 pm

Market order or

SLO hit in day and BNF is Below 11250

SLO not hit and BNF is still Below

11250

Market order or

SLO hit in day and BNF is Above 11250

Enter Market Order to

Cover Longs & Go

Short

Intraday Longs C/f

to next day

SLO expires.

Shorts C/f to next day

9:30 to 3:00 pm

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.

3x5 Modifications - SynopsisRisk 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

Adding to a current positionAdd 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 4Add 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 touchBy 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

3EMA Touch rule to book profitsEnter this trade only if ALL the following are True (assuming you are holding long positions)

Gap up or jump in initial 15 mins till 9:30Your initial position was traded at least 3 days agoYour 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 satisfiedSell at the most half your position at 9:30Enter Buy order at 3ema of yesterday’s close price. This is the price at which traded price = 3emaIf Buy back order is executed you have made 50 / 125 points on NF / BNFIf 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.

Backtest results analysis (Jun-05 to Oct-12)Yearly comparison (1 Lot trades only...25K margin per lot, 50K capital per lot…No Pyramiding or increase in lots assumed)

Bank Nifty 2005 2006 2007 2008 2009 2010 2011 2012 TotalIntraday trades 6 20 21 19 20 22 19 17 144 System Trades 18 34 32 34 38 30 43 28 257

Brokerage paid 3,600 8,100 7,950 7,950 8,700 7,800 9,300 6,750 60,150

Intraday points loss (585) (1,696) (4,102) (4,597) (4,151) (4,209) (2,919) (2,990) (25,250) System Gain / Loss 2,200 4,326 5,914 10,471 7,921 7,397 5,583 6,675 50,486

Net Points Gain / Loss 1,616 2,630 1,812 5,874 3,770 3,187 2,664 3,685 25,237

Rs Gain per Lot 36,790 57,660 37,342 138,894 85,543 71,882 57,288 85,365 570,763

NiftyIntraday trades 7 18 22 28 24 29 23 19 170 System Trades 15 32 32 32 38 40 39 18 246

Brokerage paid 3,300 7,500 8,100 9,000 9,300 10,350 9,300 5,550 62,400

Intraday points loss (294) (1,240) (2,729) (3,195) (2,487) (1,480) (2,540) (1,563) (15,527) System Gain / Loss 856 2,403 3,351 4,618 3,200 2,651 3,488 2,524 23,092

Net Points Gain / Loss 562 1,163 623 1,424 712 1,172 949 961 7,565

Rs Gain per Lot 24,780 50,656 23,038 62,187 26,315 48,241 38,137 42,482 315,836

Diff b/w BNF & NF 12,010 7,003 14,304 76,707 59,229 23,641 19,151 42,883 254,927

Backtest results analysis on tradesMore profits in longs than in shorts

Nifty Lose Trds Losing Pts Win Trds Winning Pts Total Trds Total PtsLong Buy 49 (1,685) 74 14,992 123 13,307 Short sell 69 (2,053) 54 11,838 123 9,785

118 (3,738) 128 26,830 246 23,092

Long Buy 42% 45% 58% 56% 50% 58%Short sell 58% 55% 42% 44% 50% 42%

Bank Nifty Lose Trds Losing Pts Win Trds Winning Pts Total Trds Total PtsLong Buy 56 (4,977) 73 34,146 129 29,169 Short sell 63 (4,304) 65 25,621 128 21,317

119 (9,281) 138 59,768 257 50,487

Long Buy 47% 54% 53% 57% 50% 58%Short sell 53% 46% 47% 43% 50% 42%

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

No. of Days in Trade

Total system trades

Net P&L on Trades

Total Losing Trades

Net P&L on Losing Trades

Total Winning Trades

Net P&L on Winning Trades

1 39 (1,433) 38 (1,447) 1 14 2 27 (726) 27 (726) - - 3 23 (622) 22 (623) 1 1 4 26 (274) 19 (512) 7 238 5 15 339 4 (171) 11 510 6 17 792 5 (73) 12 864 7 11 617 2 (172) 9 789 8 11 739 1 (14) 10 753 9 12 1,449 - - 12 1,449

10 6 790 - - 6 790 11 10 2,027 - - 10 2,027 12 6 1,232 - - 6 1,232 13 7 2,349 - - 7 2,349 14 6 1,474 - - 6 1,474 15 4 978 - - 4 978

16 to 40 26 13,362 - - 26 13,362

246 23,092 118 (3,738) 128 26,830

Backtest results analysis (Jun-05 to Oct-12)Bank Nifty

No. of Days in Trade

Total system trades

Net P&L on Trades

Total Losing Trades

Net P&L on Losing

Trades

Total Winning Trades

Net P&L on Winning Trades

1 33 (3,017) 33 (3,017) - - 2 36 (2,645) 35 (2,646) 1 0 3 27 (1,658) 23 (1,765) 4 107 4 23 (828) 15 (1,055) 8 228 5 23 334 9 (611) 14 945 6 16 2,628 1 (8) 15 2,635 7 18 2,135 3 (179) 15 2,314 8 9 2,202 - - 9 2,202 9 11 3,192 - - 11 3,192

10 13 4,621 - - 13 4,621 11 9 3,458 - - 9 3,458 12 3 2,941 - - 3 2,941 13 5 3,264 - - 5 3,264 14 3 2,016 - - 3 2,016 15 1 495 - - 1 495

16 to 40 27 31,350 - - 27 31,350

257 50,487 119 (9,281) 138 59,768

Moment to reflectDouble your money every year (based on backtest results)

With Minimal knowledge of technical analysisInvesting about 15-30 minutes twice a dayNo 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

3x5 Backtest Data

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

Any Questions