Review of the original system has been designed and shared by Vishwanathan Sundaresan (Vish) And discussion of modifications done by Shiva Galrani 3x5 MACO System Overview Works great on Nifty Futures (NF) or BankNifty Futures (BNF) Time frame – Daily Use Nse Adj close price (Future – Not Spot) 3EMA – 3 day EMA of the Adjusted EOD close 5EMA – 5 day EMA of the Adjusted EOD close Buy when 3EMA crosses above 5EMA Sell when 3EMA crosses below 3EMA On last day of Future series expiry, cover existing position and carry forward the position to next month series. 3x5 Entries on Chart Entry & Exits – What to do & When C/f Longs in Bank Nifty Future - Reversal Point – 11,250 Markets at 9:30 am Open below 11250, 9:30 below 11,250 Enter Market order to cover Longs & Go short Open above 11250, 9:30 below 11,250 Open below 11250, 9:30 above 11,250 Open above 11250, 9:30 above 11,250 Enter Stop Loss Order @11250 to Cover Longs & Go Short 9:30 to 3:00 pm Avoid watching markets “regularly” Markets at 3:15 pm Market order or SLO hit in day and BNF is Above 11250 Enter Market Order to Cover Shorts & Go Long You may only enter a Stoploss for your Intraday order as per your risk appetite (I don’t enter it) Market order or SLO hit in day and BNF is Below 11250 Intraday Shorts C/f to next day Above all try not to worry on what markets are doing. SLO not hit and BNF is still Above 11250 SLO expires. Longs C/f to next day Never Modify your Stop Loss order. Entry & Exits – What to do & When C/f Shorts in Bank Nifty Future - Reversal Point – 11,250 Markets at 9:30 am Open above 11250, 9:30 above 11,250 Enter Market order to cover Shorts & Go Long Open below 11250, 9:30 above 11,250 Open above 11250, 9:30 below 11,250 Open below 11250, 9:30 below 11,250 Enter Stop Loss Order @11250 to Cover Shorts & Go Long 9:30 to 3:00 pm Avoid watching markets “regularly” Markets at 3:15 pm Market order or SLO hit in day and BNF is Below 11250 Enter Market Order to Cover Longs & Go Short You may only enter a Stoploss for your Intraday order as per your risk appetite (I don’t enter it) Market order or SLO hit in day and BNF is Above 11250 Intraday Longs C/f to next day Above all try not to worry on what markets are doing. SLO not hit and BNF is still Below 11250 SLO expires. Shorts C/f to next day Never Modify your Stop Loss order. 3x5 Modifications - Synopsis Risk Management – Trade in one lot of NF / BNF for every 50K of capital invested. So if investing 2 lakhs, maximum lots I trade is 4. (This needs to be adapted as per your risk appetite. For conservative traders suggested level is to trade 1 lot per lakh) Initial lots – Minimum quantity of lots that is always in trade (My personal preference is to keep this at 50% of maximum lots). Addition to existing lots – To be done after 3 days of trend & only on 3ema touch. (Reasons follow in upcoming slides) 3ema touch rule for booking profits– Exiting at beginning of day to reenter at lower prices (in case of longs) 50% of capital is actually invested as margin requirement. Instead of keeping the other half idle, Invest at least 60% of the same using 3x5 long only on cash stocks. Select Nifty 50 stocks give superior results (DLF, SBIN, ICICIBANK for example) 20% of annual gains are set aside for donations, 30% invested on personal needs and 50% ploughed back in the system Adding to a current position Add to a current position only if ALL the following criteria is satisfied. The trend is at least 3 days old. So if the intial trade was signalled on day 1, we add only from day 4 Add on pullback to 3ema only. Order entry follows same rule as initial trade day. Enter order at 9:30 to buy additional lots at 3ema touch By day end if the signal has whipped back, cover the added lots also along with the initial lots. Subsequent addition follows the same rule as above. Only replace first rule that the last addition was done at least 2 days ago. So if Initial trade was on day 1, 1st add was on day 4, 2nd add to be done only on day 6 How much to add : My personal rule is Initial lots are 50% of maximum allowed lots and maximum 2 additions of 25% each 3EMA Touch rule to book profits Enter this trade only if ALL the following are True (assuming you are holding long positions) Gap up or jump in initial 15 mins till 9:30 Your initial position was traded at least 3 days ago Your current position is in profit (as of yesterday close) Difference between NF / BNF and their 3ema is at least 50 / 125 Action to do if ALL above are satisfied Sell at the most half your position at 9:30 Enter Buy order at 3ema of yesterday’s close price. This is the price at which traded price = 3ema If Buy back order is executed you have made 50 / 125 points on NF / BNF If the order is not executed (markets have gone up without touching 3ema, you wait for them to do so and enter as per addition rule. In the meantime you still have half your position to keep the cash coming in. Backtest results analysis (Jun-05 to Oct-12) Yearly comparison (1 Lot trades only...25K margin per lot, 50K capital per lot…No Pyramiding or increase in lots assumed) Bank Nifty Intraday trades System Trades 2005 6 18 2006 20 34 2007 21 32 2008 19 34 2009 20 38 2010 22 30 2011 19 43 2012 17 28 Total Brokerage paid 3,600 8,100 7,950 7,950 8,700 7,800 9,300 6,750 60,150 Intraday points loss System Gain / Loss (585) 2,200 (1,696) 4,326 (4,102) 5,914 (4,597) 10,471 (4,151) 7,921 (4,209) 7,397 (2,919) 5,583 (2,990) 6,675 (25,250) 50,486 Net Points Gain / Loss 1,616 2,630 1,812 5,874 3,770 3,187 2,664 3,685 25,237 Rs Gain per Lot 36,790 57,660 37,342 138,894 85,543 71,882 57,288 85,365 570,763 Nifty Intraday trades System Trades 7 15 18 32 22 32 28 32 24 38 29 40 23 39 19 18 170 246 Brokerage paid 3,300 7,500 8,100 9,000 9,300 10,350 9,300 5,550 62,400 Intraday points loss System Gain / Loss (294) 856 (1,240) 2,403 (2,729) 3,351 (3,195) 4,618 (2,487) 3,200 (1,480) 2,651 (2,540) 3,488 (1,563) 2,524 (15,527) 23,092 Net Points Gain / Loss 562 1,163 623 1,424 712 1,172 949 961 7,565 Rs Gain per Lot 24,780 50,656 23,038 62,187 26,315 48,241 38,137 42,482 315,836 Diff b/w BNF & NF 12,010 7,003 14,304 76,707 59,229 23,641 19,151 42,883 254,927 144 257 Backtest results analysis on trades More profits in longs than in shorts Nifty Long Buy Short sell Lose Trds 49 69 118 Long Buy Short sell Bank Nifty Long Buy Short sell 42% 58% Lose Trds 56 63 119 Long Buy Short sell 47% 53% Losing Pts Win Trds (1,685) 74 (2,053) 54 (3,738) 45% 55% 128 58% 42% Losing Pts Win Trds (4,977) 73 (4,304) 65 (9,281) 54% 46% 138 53% 47% Winning Pts Total Trds Total Pts 14,992 123 13,307 11,838 123 9,785 26,830 56% 44% 246 50% 50% 23,092 58% 42% Winning Pts Total Trds Total Pts 34,146 129 29,169 25,621 128 21,317 59,768 57% 43% 257 50% 50% 50,487 58% 42% Backtest results analysis (Jun-05 to Oct-12) Nifty No. of Days Total system Net P&L Total Losing Net P&L on in Trade trades on Trades Trades Losing Trades 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 to 40 39 27 23 26 15 17 11 11 12 6 10 6 7 6 4 26 (1,433) (726) (622) (274) 339 792 617 739 1,449 790 2,027 1,232 2,349 1,474 978 13,362 38 27 22 19 4 5 2 1 - (1,447) (726) (623) (512) (171) (73) (172) (14) - 246 23,092 118 (3,738) Total Winning Trades 1 7 11 12 9 10 12 6 10 6 7 6 4 26 Net P&L on Winning Trades 14 1 238 510 864 789 753 1,449 790 2,027 1,232 2,349 1,474 978 13,362 128 26,830 1 - Backtest results analysis (Jun-05 to Oct-12) Bank Nifty No. of Days Total system Net P&L on in Trade trades Trades 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 to 40 Total Losing Trades 33 36 27 23 23 16 18 9 11 13 9 3 5 3 1 27 (3,017) (2,645) (1,658) (828) 334 2,628 2,135 2,202 3,192 4,621 3,458 2,941 3,264 2,016 495 31,350 33 35 23 15 9 1 3 - 257 50,487 119 Net P&L Net P&L on Total Winning on Losing Winning Trades Trades Trades (3,017) (2,646) 1 0 (1,765) 4 107 (1,055) 8 228 (611) 14 945 (8) 15 2,635 (179) 15 2,314 9 2,202 11 3,192 13 4,621 9 3,458 3 2,941 5 3,264 3 2,016 1 495 27 31,350 (9,281) 138 59,768 Moment to reflect Double your money every year (based on backtest results) With Minimal knowledge of technical analysis Investing about 15-30 minutes twice a day No Software. Only spreadsheet is required. Important requirement is discipline and Risk management. Most important task is to take all trades as signaled by the system as the next trade could be a big trend Disclaimer Backtest results are not indicative of future returns and please do your own due diligence before investing. I have to present all the possible scenarios in the system and its backtest. But markets do tend to surprise and test you in new ways always. So please please do some due diligence and paper trade this system before committing real money on this system Any Questions