Earn money from system trading – Banknifty

 

 

 

 

 

 

Earn money from system trading – Banknifty

Result of System Trading

 

 

 

 

 

 

 

 

 

 

 

Key factors

  • It’s simple back testing on banknifty for last 12 years
  • We have used Moving average crossover
  • It is not optimised in different parameter
  • The position for this entire period is remain 1 lot
  • No leverage used & leverage can maximize the return
  • No position sizing is being used.
  • This is only for education purpose
  • Need to applied money management rule

 

Technique used

Moving Average Cross over

There are many techniques where you can ride the trend while exiting the same with small stoploss. The modern day trend follower use moving average cross over to buy and sell. Today we will learn the moving average cross over and how to benefit from that..

But before , we need to userstand what is trend following & its basics

What is trend following?

“Trend Following” or “Be on The Right Side” is a trading system based on the principal of price analysis. Trend Following tries to take advantage of long, medium or short-term moves of the market. Smart trader takes advantage of these market trends by observing the current direction & using this to decide whether to buy or sell.

The objective of Trend Following is to produce absolute returns irrespective of bullish or bearish market condition. The success of trading system works on following principles –

  • Strict Money & Risk Management
  • Riding the Trend & “No Prediction”
  • Emotionless Mechanical Execution
  • Discipline & Consistency to follow the System

May read more about Trend following at – http://www.einfomet.com/trend-following-india/ or www.trendfollowing.com

Few Key Feature of trend follower

  • Trade Both long & short in the same asset class.
  • Trend trade generally will have one position or nil position depending on their model
  • Following money management & Risk Management principal
  • Generally diversified with different asset class like ETF, Index, Commodity , Interest rate future , currency, Agro commodity etc

 

How they use Moving Average crossover to trade.

 

What is moving average ?

As per Investopedia , A moving average (MA) is a trend-following or lagging indicator because it is based on past prices. The two basic and commonly used MAs 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 bigger weight to more recent prices.

Read more: Moving Average – MA Definition | Investopedia http://www.investopedia.com/terms/m/movingaverage.asp#ixzz4ZCPShWsM
I am not going into details of Moving average & let’s understand the key feature & how to use it for your trading

You may read the usage of moving average in the attached link – http://www.newtraderu.com/2013/05/26/ten-things-traders-need-to-know-about-moving-averages-2/

 

Crossover

 

Key takeaway  & how to trade

  • When the short term moving average ( let’s say 5 day or 10 day) cross the higher moving average ( let’s say 30 day or 50 day) , you may enter in to the trade.. Or vise varsa & you may enter into the sell mode or cut your position
  • Legendary trend trading pioneer Richard Donchian used a five and twenty day moving average cross over system for buys and sell signals.

 

 

 

 

 

 

Anybody interested to know more about system trading , may mail me at bonpriya@gmail.com or twitter id @einfomet

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