Monday, December 14, 2020

Nifty MA Oscillator Custom Indicators for Accurate Trading

Trend following methods – One of the powerful trend following method that has worked extremely well in the current market environment is combination of two moving averages along with the Bar technique.

Bar Technique – As long as the low of the prior day’s is protected on closing basis one can continue to ride on the upside. The same can be observed from the lows of 11557 made on 2nd November 2020. There has been 28 days and the prior day low is not taken out on closing basis except on the outside candle formation. The overall trend does not change when an outside or an inside candle forms as the same indicates indecisiveness.

Nifty daily chart (chart from the latest monthly research report)

technical analysis, elliott wave,stocks, nifty

Moving average crossover method – In addition to the Bar technique talked above another way to follow the trend is two use cluster of Moving averages. As shown on figure 5, there are two averages shown in the above chart – 5 days EMA and 20 days EMA. These averages are selected in order to capture the minor swings and intermediate swings. Both of these averages are providing support to prices to respective degrees. As long as the red (5 days EMA) is above the blue (20 days EMA) the trend remains positive. It was only twice the same has whipsawed during the up move but there was never a lower high and lower low below the 20 days EMA. This is simple but powerful method.

Moving average Oscillator – We have translated the above moving averages in the form an indicator shown in Figure 5. This is the difference of the two averages. An important observation is that the 5 days EMA has a tendency to move away from 20 days EMA but only to an extent and then the mean reversion takes place. So entering the trend when the difference of MA is at …………… points is not a good strategy. When the difference between averages reduces to …………. has been the ideal area to look for buying opportunity. The same can be observed from the indicator very clearly. This is simple but powerful way of looking at indicators and then getting confirmation from prices. Do note long positions should be taken not only on basis of this indicator but the same should be used to understand the overall context of the market and entry can then be done on basis of price confirmation and Elliott wave patterns.

In a nutshell, one can follow this simple yet powerful methods for trading accurately in direction of the trend until the same is complete.

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