magic of moving averages (learn how magically moving averages … · nifty -----simple moving avg...

Magic of Moving Averages

(learn how magically moving averages can helps trader and investors)

10th October, 2018

• Moving Average - MA

• A moving average (MA) is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations. It is a trend-following, or lagging, indicator because it is based on past prices.

• The two basic and commonly used moving averages are the simple moving average (SMA), which is the simple average of a security over a defined number of time periods, and the exponential moving average (EMA), which gives greater weight to more recent prices. The most common applications of moving averages are to identify the trend direction, and to determine support and resistance levels.

Source – INVESTOPEDIA.COM

https://www.investopedia.com/terms/t/technicalanalysis.asp

https://www.investopedia.com/terms/l/laggingindicator.asp

https://www.investopedia.com/terms/s/sma.asp

https://www.investopedia.com/terms/e/ema.asp

Simple Moving AveragesHow to start to trade with moving averages?

“Consistency” is more important than “Average Period” that we use for ploting M.A.

Most commonly used moving averages

Design Specific Strategy : (Since from the beginning)

Strategy 1 : Crossover of simple moving averages

Strategy 2 : Trend following - Select 50 days SMA for positional traders.

Strategy 3: Median level between UPWARD TREND and DOWNWARD TREND.

Source - Own observations and findings

Filtering noise from random fluctuations

18:F M A M J J A S O

Lnr IRIS

Source : www.SpiderSoftwareIndia.Com 9975

10050

10125

10200

10275

10350

10425

10500

10575

10650

10725

10800

10875

10950

11025

11100

11175

11250

11325

11400

11475

11550

11625

11700

Cr

75.00

150

225

10301.05

155.99

Price Avg(S,10)

Vol

NSE NIFTY [N59901]10301.05, -0.45%

Dly

1

11171.55

5

10417.80

43

10866.45

44

10524.00

46

10701.20

47

10701.20

NIFTY --------

SIMPLE MOVING AVG

Source – Spider Software Pvt LTD

Trend following or lagging

Source - Spider Software Pvt LTD

16:ON D 17:J F M A M J J A S O N D 18:J F M A M J J A S O

Lnr IRIS

Source : www.SpiderSoftwareIndia.Com18000

18500

19000

19500

20000

20500

21000

21500

22000

22500

23000

23500

24000

24500

25000

25500

26000

26500

27000

27500

28000

Cr

100

200

300

24527.65

155.99

Price Avg(S,50)

Vol

BANKNIFTY [N59906]24527.65, -0.37%

Dly

3

4

28377.90

6

Most commonly used moving averages

Source - Own observations and findings

5 days SMA - To identify short term trend of the market.

20 days SMA – to identify medium term period.

50 days SMA – to identify supports in falling markets and resistance in rising

markets.

200 days SMA – Favourite SMA of Fund Managers.

Fibonacci numbers – 5, 8, 13, 21, 34 and so on. From Fibonacci followers.

Strategy 1 : Crossover of simple moving averagesAfter crossing upward - first drop and rise.After crossing down ward – first rise and drop.Follow the ratio of 1:4.Current example of 5 and 20 days SMA


18:J J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8

Lnr IRIS


300

305

310

315

320

325

330

335

340

345

350

355

360

365

370

375

380

385

390

395

400

405

410

415

420

425

Cr

2.00

4.00

371.40

0.76

Price Avg2(S,5,S,20)

Vol

JSWSTEEL [N11723] 371.40, -1.29%

Dly

after crossover first drop and recovery

D 0

Crossover - LT


18:J J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8

Lnr IRIS


1215

1223

1230

1238

1245

1253

1260

1268

1275

1283

1290

1298

1305

1313

1320

1328

1335

1343

1350

1358

1365

1373

1380

1388

Lk

50.00

100

1245.65

12.39


Vol

LT [N11483] 1245.65, 2.01%

Dly

1287.01

03/09/18 Mon

Op 1375.00Hi 1390.00Lo 1360.10Cl 1363.00Av 1357.25Av 1310.05

Qt 23.48

Crossover – SUN PHARMA


18:J J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8

Lnr IRIS


540

546

552

558

564

570

576

582

588

594

600

606

612

618

624

630

636

642

648

654

660

666

672

678

Lk

75.00

150

225

605.70

15.69


Vol

SUNPHARMA [N3351] 605.70, -0.66%

Dly

Buy

Buy

SELL

D 0

0.00

10/10/18 Wed

Op 610.00Hi 619.50Lo 605.60Cl 605.70Av 603.34Av 629.39

Qt 15.69

Crossover – TCS – SAVED FROM SELLING


18:J F M A M J J A

Lnr IRIS


1400

1450

1500

1550

1600

1650

1700

1750

1800

1850

1900

1950

2000

Cr

2.50

5.00

7.50

2089.40

0.08


Vol

TCS [N11536] 2089.40, -0.11%

Dly

FAILED TO GIVE SELL CALL

D 0 D 29B 1:1

D 0

0.00

03/08/18 Fri

Op 1956.50Hi 1982.05Lo 1956.50Cl 1979.45Av 1957.83Av 1967.19

Qt 0.15

Crossover – Maruti -


18:J 11 18 25 J 9 16 23 30 A 6 13 20 27 S 10 17 24 O 8

Lnr IRIS

Source : www.SpiderSoftwareIndia.Com

6800

7000

7200

7400

7600

7800

8000

8200

8400

8600

8800

9000

9200

9400

9600

9800

Lk

5.00

10.00

15.00

6966.25

6.46


Vol

MARUTI [N10999] 6966.25, 3.98%

Dly

13

9350.00Confusion

CLEAR SELL CALL

0.00

10/10/18 Wed

Op 6748.00Hi 7025.00Lo 6723.25Cl 6966.25Av 6931.72Av 7768.45

Qt 6.46

Strategy 2 : Trend is Friend : take long trades (above Average Level) Also a stop loss for Trend following method.


16:ON D 17:J F M A M J J A S O N D 18:J F M A M J J A S O

Lnr IRIS


18500

19000

19500

20000

20500

21000

21500

22000

22500

23000

23500

24000

24500

25000

25500

26000

26500

27000

27500

28000

Cr

100

200

300

24527.65

155.99

Price Avg(S,50)

Vol

BANKNIFTY [N59906]24527.65, -0.37%

Dly

3

4

28377.90

6

Strategy 3: Median level between UPWARD TREND and DOWNWARD TREND. Most commonly used 20 days.


18:M J J A S O

Lnr IRIS


10260

10320

10380

10440

10500

10560

10620

10680

10740

10800

10860

10920

10980

11040

11100

11160

11220

11280

11340

11400

11460

11520

11580

11640

11700

11760

Cr

75.00

150

225

10443.90

49.86

Price Avg(S,20)

Vol

NSE NIFTY [N59901]10443.90, 1.39%

Dly

1

11171.55

5

10417.80

43

10866.45

44

10524.00

46

10701.20

47

10701.20

NIFTY --------

SIMPLE MOVING AVG

SELL

PAUSE AND SELL

0.00

10/10/18 Wed

Op 10331.85Hi 10445.20Lo 10318.25Cl 10443.90Av 10975.84

Qt 49.86

Reliance – Re entry


18:J 16 23 30 A 6 13 20 27 S 10 17 24 O 8

Lnr IRIS


1020

1040

1060

1080

1100

1120

1140

1160

1180

1200

1220

1240

1260

1280

1300

1320

Lk

75.00

150

225

1104.10

48.47

Price Avg(S,20)

Vol

RELIANCE [N2885] 1104.10, 1.29%

Dly

16

24

1141.47

06/09/18 Thu

Op 1230.15Hi 1265.70Lo 1225.35Cl 1261.40Av 1242.60

Qt 111.95

BAJAJ FINA – FOR INVESTORS 200 DAYS SMA


12:FMA M J J A S O N D 13:J F M A M J J A S O N D 14:J F M A M J J A S O N D 15:J F M A M J J A S O N D 16:J F M A M J J A S O N D 17:J F M A M J J A S O N D 18:J F M A M J J A S O

Lnr IRIS

Source : www.SpiderSoftwareIndia.Com

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

2800

Lk

50.00

100

150

2290.50

46.11

Price Avg(S,200)

Vol

BAJFINANCE [N317] 2290.50, 11.14%

Dly

6

2660.25

BUYING OPPORTUNITY

BUYING

D 0 R 3:19 D 0 D 0 D 0 D 0 D 0 S 10:2B 1:1

D 0 D 0

HDFC BANK – FOR INVESTORS 200 DAYS SMA


08:JO ND09:J MA MJ J A S O N D 10:J MA MJ J A S O N D 11:J MA MJ J A S O ND 12:J MA MJ J A S O N D 13:J MA MJ J A S O N D 14:J MA MJ J A S O ND15:J MA MJ J A S O N D 16:J MA MJ J A S O N D 17:J MA MJ J A S O N D 18:J MA MJ J A S O

Lnr IRIS


300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

2100

2200

Cr

5.00

10.00

1968.95

0.20

Price Avg(S,200)

Vol

HDFCBANK [N1333] 1968.95, 1.46%

Dly

S 10:2 D 0 D 0 D 0 D 0 D 0 D 0 D 0

Maruti – 20% below 200 days SMA


08:SND09:J A MJ J A S O ND10:J MA MJ J A S O N D 11:J MA MJ J A S O ND12:J MA MJ J A S O ND13:J MA MJ J A S O ND 14:J MA MJ J A S O ND15:J MA MJ J A S O ND16:J MA MJ J A S O ND 17:J MA MJ J A S O N D18:J MA MJ J A S O

Lnr IRIS


1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

7500

8000

8500

9000

9500

Lk

50.00

100

6959.30

7.39

Price Avg(S,200)

Vol

MARUTI [N10999] 6959.30, 3.88%

Dly

11

9996.40

413

9350.00

20 % BELOW 200 DAYS SMA

Trait

D 0 D 0 D 0 D 0 D 0 D 0 D 0

0.00

10/10/18 Wed

Op 6748.00Hi 7025.00Lo 6723.25Cl 6959.30Av 8940.93

Qt 7.39

Data Points of Nifty @ 10198


INDIA VIX – 21.50 (SHOWS FEAR AND BOTTOMING FORMATION)

PCR – 0.85 OF SAME SERIES (OVERSOLD ACTIVITY).

DAILY RSI – IT WAS AT 21 (OVERSOLD BUT FIRM GRIP OF SELLERS)

INR – WAS AT 74.20

Crude was at 87.

Nifty Pull back is due up to 10550 or 10750 max.


18:A 13 20 27 S 10 17 24 O 8

Lnr IRIS


10260

10320

10380

10440

10500

10560

10620

10680

10740

10800

10860

10920

10980

11040

11100

11160

11220

11280

11340

11400

11460

11520

11580

11640

11700

11760

Cr

75.00

150

225

10426.85

83.76

Price Avg(S,200)

Vol

NSE NIFTY [N59901]10426.85, 1.22%

Dly

1

11171.55

5

10417.80

43

10754.70

44

10540.65

46

PAUSE AND SELL

Technical Analysis: When to Buy/Sell Fundamental Analysis: Why to Buy/Sell

Question & Answer

Queries should be specific to stock that are in FNO segment.

22

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23

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