Thursday, September 2, 2010

JNSAR - a Stop And Reverse Trading method.

Trading based on JNSAR: My sincere gratitude to MOK for his constant workings on it, co-sordinating with Piyush sharda, Manojag, Yoda, assortz, RM, Sujatha, aarvee to find out the flaws, adding the "Filtering idea" and also the idea of "Ploughing back the profits" to increase the trade size once a solid base is built. MOK is still at work. In due time, he will deliver the final product. MOK has been the added spirit and enthusiasm to this "trading method". He is currently busy with his project commitments. In the meantime, "why let go off opportunities..?" ***************************************************************** JNSAR is a number based on market's strength and weakness as well as the balance of demand and supply. Whatever the number may be, a choppy market could whipsaw the number occasionally to shake off your confidence in them. However, staying with one method brings you consistent winnings. Step:1: As the JNSAR for yesterday was 5468 and the previous trade taken was a sell @ 5483 on 25.08.10, the moment Nifty breached 5468 yesterday, you close out your earlier short and take a long position in minimum 2 lots - Stop and reverse (SAR). Step:2: If after triggering a reversal trade @ 5468 and markets fall again, you do not change the trade on the same day as JNSAR is done only once a day but do so only the next day based on next day's JNSAR. (Risk averse could have a Stop loss in extreme choppiness but the essence of JNSAR is to keep the trade once triggered and manage it the next day only. If and when such extremes take place, I'll be around to alert you. This has not happened in the last 3 years). Step:3:Once a new trade is taken in aminimum 2 lots, you book on one lot with a profit of 50, 100+ points and keep the 2nd lot till a reverse trade is triggered based on each subsequent day's JNSAR. Step:4: After booking out on the 1st lot, if Nifty climbs back substantially and start to fall again, take a new trade again. For Eg: After triggering a sell @ 5483 on 25.08.10, Nifty fell to 5392 on 27.08.10 and the 1st lot was booked @ 5397 and on Monday, it rebounded to 5469 and started to fall breaking day's low @ 5441, another sell could have been taken and another profit booking would have been done. This step is optional and suited for the experienced. Step:5: You may use the filter of 0.2% to 0.3% on JNSAR for 2 days once JNSAR new trade is taken to give the new trade a fighting chance & survive. For eg: For the new long trade taken @ 5468 yesterday, the JNSAR of today @ 5457 may be altered to minus 0.3% to 5441. Step:6: Donot count your winnings. Stay focussed on each trade. I show the winnings in the table to show you that " I T I S P O S S I B L E". Some readings are listed below. You will also find some write ups on it under "Always start trading with these"-step:6 on the side of this blog. The Stop and Reverse (Known as SAR,) is a trend following indicator, that was developed by J. Welles Wilder. The Parabolic SAR is based upon the theory that a strong trend will continue to increase in strength over time, and will therefore follow a parabolic arc. The Parabolic SAR is displayed as a single parabolic line underneath the price bars for a long (upwards) trend, and above the price bars for a short (downwards) trend. The Parabolic SAR is displayed on the same chart as the price bars, and is the yellow lines in the example chart (full size chart).

Calculation Trading Use As the Parabolic SAR is a trend following indicator, it is only designed to be used in confirmed trends, and will give very bad results in a small ranging or sideways market. Entries are signaled by the start of a new parabolic arc, and exits are signaled by the price touching the parabolic arc. As the price touching the parabolic arc, is also the reason for the start of a new parabolic arc, the exit from the current trade and the entry into a new trade occur at the same time (hence the name Stop and Reverse). An alternative way of using the SAR might be to indicate the direction of the current trend, and then make entries and exits based upon another indicator (such as a momentum indicator). More on SAR method.