Experiments in Technical Analysis Karthik Marar

Now let us take look at my very first workable trading system. Of course I have come a long way
from there. This system though very simple did provide many profitable trades and I hope will
help the beginners to get some insight and help them in their path towards their own profitable
trading system. Step by step we will cover more advanced systems, Indicator etc. This system,
which I fondly called MABIUTS (Moving Average Based Intermediate Uptrend System. Forgive
my penchant for funny names) will be a good starting point for the thread. I will talk about the
setup and entry only. I will not cover the position sizing and money management part here
because each individual has his flavor of MM.

It was a time when I was trying the grasp the intricacies of Technical Analysis. I was looking at
various Indicators without really getting the grasp of their working and drawbacks. The
indicators gave conflicting signals leaving thoroughly exasperated.
Finally I decided to make a system, which will be a very simple one yet gives me reasonable
profits. I started experimenting with simple moving average cross over systems, but was quite
unhappy with the frequent whipsaws. Then I decided to approach the problem in an
unconventional way different from the normal use of Moving averages. I listed the objective as
follows

1. The system should be simple

2. Based on simple moving averages
3. It should be able to identify an Intermediate Up trend ( Ahh… I am a big Fan of Saint,
you know) and latch on to the trend.
4. The Time frame should be medium.
5. Visual pointer like Bullish, bearish and neural (sideways) on the charts to make an easier
understanding.

With these set of objective I set out to make my system. First step was to identify an Uptrend
using Moving averages. That time I was very familiar with the 3-13-39 system from the great
thread by Traderji. After some experimentation I decided to use just the 13 day EMA with a
signal line of a 9 day EMA of the 13 day EMA.

So my setup was EMA(13) greater than 9 day EMA of EMA(13).

Now what about the entry? I wanted to enter on confirmation of starting of Intermediate Up
trend. Now my Pivot Analysis studies (Some of you may be familiar with my thread on pivots)
came to my aid. So the entry would be when the price crosses the previous High Pivot. (The
previous peak)

I kept the exit also very simple. When the he EMA (13) cross below the signal line, I will exit the
trade. (Trailing stops etc were a far cry for me those days)

It was a simple and elementary Trading system. But worked well during the bull market. It
caught on most of the intermediate up trends and kept one on the right side most of the times. It
also gave signals for entry or adding on pullbacks in an uptrend. It identified most sideways
movements. It was good for safe, stress free positional trades.

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Of course It had its share of drawbacks. Some entries were signaled at the top which proved to
be loss making. The system also was unable to handle big drops.

Overall it was very satisfactory system in a bull market and of course in a bear market the system
will fully keep one aside. The system with its simplicity may be a good one for beginners.

Let me reiterate the rules again.

Setup: EMA(13) of close > Signal Line

Entry: Close crossing the previous peak
Exit : EMA(13) crossing below the Signal Line

Signal Line : EMA(9) of EMA(13)

I had implemented the same in Metastock and has now recreated the same in Amibroker. It has
the following features.

Buy and Sell indications – Arrow and “B/S” Texts. Amibroker is more flexible hence has the
price also.
Chart Bars color coded with green for Bullish, Red for Bearish and blue during pullbacks and
sideways movements. The blue indication puts one on alert.

Color-coded ribbons in Metastock for Bullish, Bearish and neutral zones.

MABIUTS– Metastock – Chart : Satyam Computer

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Experiments in Technical Analysis Karthik Marar

Metastock Expert Formula

Fill the following in the appropriate Tabs

Trend

Bullish - Formula : Mov(C,13,E)>Mov(Mov(C,13,E),9,E) AND C>Peak(1,C,2)

Bearish – Formula : Mov(Mov(C,13,E),9,E)>Mov(C,13,E)

Highlights

Name Condition Color

Bullish Mov(C,13,E)>Mov(Mov(C,13,E),9,E) AND C>Peak(1,C,2) Green
Bearish Mov(Mov(C,13,E),9,E)>Mov(C,13,E) Red
Neutral Mov(C,13,E)>Mov(Mov(C,13,E),9,E) AND C<Peak(1,C,2) Blue

Symbols

Name Condition Graphic

Buy Mov(C,13,E)>Mov(Mov(C,13,E),9,E)AND Buy Arrow
Cross(C,Peak(1,C,2)) Below Price Plot
Label : B
Color : Green
Below Symbol
Sell Cross(Mov(Mov(C,13,E),9,E),Mov(C,13,E)) Sell Arrow
Above Price Plot
Label : S
Color : Red
Above Symbol

Note: the Formula uses the Peak function. The Peak function used the zigzag function, which is
based on the % move. One can adjust the % value to suit the volatility of a particular stock to get
better results.

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MABIUTS– Amibroker– Chart : Infy

Amibroket AFL

_SECTION_BEGIN("Price");
SetChartOptions(0,chartShowArrows|chartShowDates);
_N(Title = StrFormat("{{NAME}} - {{INTERVAL}} {{DATE}} Open %g, Hi %g, Lo %g, Close %g
(%.1f%%) Vol " +WriteVal( V, 1.0 ) +" {{VALUES}}", O, H, L, C, SelectedValue( ROC( C,
1 )) ));
Buy=EMA(C,13)>EMA(EMA(C,13),9) AND Cross (C,Peak(C,5,1));
Sell=Cross (EMA(EMA(C,13),9),EMA(C,13));
MYcolor = IIf( EMA(C,13)>EMA(EMA(C,13),9) AND C>Peak(C,2,1), colorGreen,
IIf(EMA(C,13)>EMA(EMA(C,13),9) AND C<Peak(C,2,1),colorBlue, colorOrange ));
PlotOHLC( Open, High, Low, Close, "", Mycolor, styleBar );
shape = Buy * shapeUpArrow + Sell * shapeDownArrow;
PlotShapes( shape, IIf( Buy, colorGreen, colorRed ),0, IIf( Buy, Low, High ) );
GraphXSpace = 5;
dist = 1.5*ATR(10);
for( i = 0; i < BarCount; i++ )
{
if( Buy[i] ) PlotText( "Buy\n@" + C[ i ], i, L[ i ]-dist[i], colorGreen );
if( Sell[i] ) PlotText( "Sell\n@" + C[ i ], i, H[ i ]+dist[i], colorRed);
}
_SECTION_END();

Comments can be posted on Traderji forum or emailed to : Karthikmarar@yahoo.com

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