We have all learnt about averages in school, moving average is just an extension of that. Moving averages are trend indicators and are frequently used due to their simplicity and effectiveness. Before we learn moving averages, let us have a quick recap on how averages are calculated.
Assume 5 people are sitting on a nice sunny beach enjoying a nice chilled bottled beverage. The sun is so bright and nice that each one of them ends up drinking several bottles of the beverage. Assume the final count to be something like this:
| Sl No | Person | No of Bottles |
|---|---|---|
| 01 | A | 07 |
| 02 | B | 05 |
| 03 | C | 06 |
| 04 | D | 03 |
| 05 | E | 08 |
| Total # of bottles consumed | 29 | |
Assume a 6th person walks in to find out 29 bottles of beverages lying around them. He can quickly get a sense of ‘roughly’ how many bottles each of them consumed by dividing [the total number of bottles] by [total number of people].
In this case, it would be:
=29/5
=5.8 bottles per head.
So, the average, in this case, tells us roughly how many bottles each person had consumed. Obviously, there would be few of them who had consumed above and below the average. For example, Person E drank 8 bottles of beverage, which is way above the average of 5.8 bottles. Likewise, person D drank just 3 bottles of beverage, which is way below the average of 5.8 bottles. Therefore the average is just an estimate, and one cannot expect it to be accurate.
Extending the concept to stocks, here are the closing prices of ITC Limited for the last 5 trading sessions. The last 5-day average close would be calculated as follows:
| Date | Closing Price |
|---|---|
| 14/07/14 | 344.95 |
| 15/07/14 | 342.35 |
| 16/07/14 | 344.20 |
| 17/07/14 | 344.25 |
| 18/07/14 | 344.0 |
| Total | 1719.75 |
= 1719.75 / 5
= 343.95
Hence the average closing price of ITC over the last 5 trading sessions is 343.95.
13.1 – The ‘moving’ average (also called the simple moving average)
Consider a situation where you want to calculate the average closing price of Marico Limited for the latest 5 days. The data is as follows:
| Date | Closing Price |
|---|---|
| 21/07/14 | 239.2 |
| 22/07/14 | 240.6 |
| 23/07/14 | 241.8 |
| 24/07/14 | 242.8 |
| 25/07/14 | 247.9 |
| Total | 1212.3 |
= 1212.3/ 5
= 242.5
Hence the average closing price of Marico over the last 5 trading sessions is 242.5
Moving forward, the next day, i.e. 28th July (26th and 27th were Saturday and Sunday respectively) we have a new data point. This implies now the ‘new’ latest 5 days would be 22nd, 23rd, 24th, 25th and 28th. We will drop the data point belonging to the 21st as our objective is to calculate the latest 5-day average.
| Date | Closing Price |
|---|---|
| 22/07/14 | 240.6 |
| 23/07/14 | 241.8 |
| 24/07/14 | 242.8 |
| 25/07/14 | 247.9 |
| 28/07/14 | 250.2 |
| Total | 1223.3 |
= 1223.3/ 5
= 244.66
Hence the average closing price of Marico over the last 5 trading sessions is 244.66
As you can see, we have included the latest data (28th July) and discarded the oldest data (21st July) to calculate the 5-day average. On 29th, we would include 29th data and exclude 22nd data, on 30th, we would include 30th data point but eliminate 23rd data, so on.
We are essentially moving to the latest data point and discarding the oldest to calculate the latest 5-day average. Hence the name “moving” average!
In the above example, the calculation of the moving average is based on the closing prices. Sometimes, moving averages are also calculated using other parameters such as high, low, and open. However, the closing prices are used mostly by the traders and investors as it reflects the price at which the market finally settles down.
Moving averages can be calculated for any time frame, from minutes, hours to years. Any time frame can be selected from the charting software-based of your requirements.
For those of you familiar with excel, here is a screenshot of how moving averages are calculated on MS Excel. Notice how the cell reference moves in the average formula, eliminating the oldest to include the latest data points.
| Cell Ref | Date | Close Price | 5 Day Average | Average Formula |
|---|---|---|---|---|
| D3 | 1-Jan-14 | 1287.7 | ||
| D4 | 2-Jan-14 | 1279.25 | ||
| D5 | 3-Jan-14 | 1258.95 | ||
| D6 | 6-Jan-14 | 1249.7 | ||
| D7 | 7-Jan-14 | 1242.4 | ||
| D8 | 8-Jan-14 | 1268.75 | 1263.6 | =AVERAGE(D3:D7) |
| D9 | 9-Jan-14 | 1231.2 | 1259.81 | =AVERAGE(D4:D8) |
| D10 | 10-Jan-14 | 1201.75 | 1250.2 | =AVERAGE(D5:D9) |
| D11 | 13-Jan-14 | 1159.2 | 1238.76 | =AVERAGE(D6:D10) |
| D12 | 14-Jan-14 | 1157.25 | 1220.66 | =AVERAGE(D7:D11) |
| D13 | 15-Jan-14 | 1141.35 | 1203.63 | =AVERAGE(D8:D12) |
| D14 | 16-Jan-14 | 1152.5 | 1178.15 | =AVERAGE(D9:D13) |
| D15 | 17-Jan-14 | 1139.6 | 1162.41 | =AVERAGE(D10:D14) |
| D16 | 20-Jan-14 | 1140.6 | 1149.98 | =AVERAGE(D11:D15) |
| D17 | 21-Jan-14 | 1166.35 | 1146.26 | =AVERAGE(D12:D16) |
| D18 | 22-Jan-14 | 1165.4 | 1148.08 | =AVERAGE(D13:D17) |
| D19 | 23-Jan-14 | 1168.25 | 1152.89 | =AVERAGE(D14:D18) |
As it is evident, the moving average changes as and when the closing price changes. As calculated above, a moving average is called a ‘Simple Moving Average’ (SMA). Since we are calculating it as per the latest 5 days of data, it is called referred to as 5 Day SMA.
The averages for the 5 days (or it could be anything like 5, 10, 50, 100, 200 days) are then joined to form a smooth curving line known as the moving average line, and it continues to move as the time progresses.
In the chart shown below, I have overlaid a 5 day SMA over ACC’s candlestick graph.
So what does a moving average indicator, and how does one use it? There are many moving average applications, and shortly I will introduce a simple trading system based on moving averages. But before that, let us learn about the Exponential Moving Average.
13.2 – The exponential moving average
Consider the data points used in this example,
| Date | Closing Price |
|---|---|
| 22/07/14 | 240.6 |
| 23/07/14 | 241.8 |
| 24/07/14 | 242.8 |
| 25/07/14 | 247.9 |
| 28/07/14 | 250.2 |
| Total | 1214.5 |
When one calculates the average across these numbers, there is an unstated assumption. We are essentially giving each data point equal importance. We are assuming that the data point on 22nd July is as important as the data point on 28th July. However, when it comes to markets, this may not always be true
Remember the basic assumption of technical analysis – markets discount everything. This means the latest price you see (on 28th July) discounts all the known and unknown information. This also implies the price on 28th is more sacred than the price on 25th.
One would like to assign weightage to data points based on the ‘newness’ of the data. Therefore the data point on 28th July gets the highest weightage, 25th July gets the next highest weightage, 24th July gets the 3rd highest, and so on.
By doing so, I have essentially scaled the data points according to its newness – the latest data point gets the maximum attention, and the oldest data point gets the least attention.
The average calculated on this scaled set of numbers gives us the Exponential Moving Average (EMA). I deliberately skipped the EMA calculation part, simply because most of the technical analysis software lets us drag and drop the EMA on prices. Hence we will focus on EMA’s application as opposed to its calculation.
Here is a chart of Cipla Ltd. I have plotted a 50 day SMA (black) and a 50 day EMA (red) on Cipla’s closing prices. Though both SMA and EMA are for a 50 day period, you can notice that the EMA is more reactive to the prices and sticks closer to the price.
EMA is quicker to react to the current market price because EMA gives more importance to the most recent data points. This helps the trader to take quicker trading decisions. Hence, for this reason, traders prefer the use of the EMA over the SMA.
13.3 – A simple application of moving average
The moving average can be used to identify buying and selling opportunities with its own merit. When the stock price trades above its average price, it means the traders are willing to buy the stock at a price higher than its average price. This means the traders are optimistic about the stock price going higher. Therefore one should look at buying opportunities.
Likewise, when the stock price trades below its average price, it means the traders are willing to sell the stock at a price lesser than its average price. This means the traders are pessimistic about the stock price movement. Therefore one should look at selling opportunities.
We can develop a simple trading system based on these conclusions. A trading system can be defined as a set of rules that help you identify entry and exit points.
We will now try and define one such trading system based on a 50-day exponential moving average. Remember a good trading system gives you a signal to enter a trade and a signal to close out the trade. We can define the moving average trading system with the following rules:
Rule 1) Buy (go long) when the current market price turns greater than the 50 days EMA. Once you go long, you should stay invested till the necessary sell condition is satisfied.
Rule 2) Exit the long position (square off) when the current market price turns lesser than the 50 days EMA.
Here is a chart that shows the application of the trading system on Ambuja cement. The black line on the price chart is the 50-day exponential moving average.
Starting from left, the first opportunity to buy originated at 165, highlighted on the charts as [email protected] Notice, at point B1, the stock price moved to a point higher than its 50 days EMA. Hence as per the trading system rule, we initiate a fresh long position.
We stay invested by the trading system till we get an exit signal, which we eventually got at 187, marked as [email protected] This trade generated a profit of Rs.22 per share.
The next signal to go long came at [email protected], followed by a signal to square off at [email protected] This trade was not as impressive as it resulted in a profit of just Rs.4. However, the last trade, [email protected], and [email protected] were quite impressive, resulting in a profit of Rs.50.
Here is a quick summary of these trades based on the trading system fared:
| Sl No | Buy Price | Sell Price | Gain/Loss | % Return |
|---|---|---|---|---|
| 01 | 165 | 187 | 22 | 13% |
| 02 | 178 | 182 | 04 | 2.2% |
| 03 | 165 | 215 | 50 | 30% |
From the above table, it is obvious that the first and last trades were profitable, but the 2nd trade was not so profitable. If you inspect why this happened, it is evident that the stock was trending during the 1st and the 3rd trade, but during the 2nd trade, the stock moved sideways.
This leads us to a significant conclusion about the moving averages. Moving averages works brilliantly when there is a trend and fails to perform when the stock moves sideways. This basically means the ‘Moving average’ in its simplest form is a trend following system.
From my own personal experience of trading based on moving averages, I have noticed a few important characteristics:
- Moving averages gives you many trading signals (buy and sell) during a sideways market. Most of these signals result in marginal profits, if not for losses
- However usually one of those many trades results in a massive rally (like the [email protected] trade) leading to impressive gains
- It would be tough to segregate the big winner from the many small trades
- Hence the trader should not be selective in terms of selecting signals that moving average system suggest. In fact, the trader should trade all the trades that the system suggests
- Remember the losses are minimized in a moving average system, but that 1 big trade is good enough to compensate for all the losses and can give you sufficient profits
- The profit-making trade ensures you are in the trend as long as the trend lasts. Sometimes even upto several months. For this reason, MA can be used as a proxy for identifying long term investment ideas
- The key to MA trading system is to take all the trades and not be judgmental about the signals being generated by the system.
Here is another example of BPCL, where the MA system suggested multiple trades during the sideways market; however, none of them was really profitable. However, the last trade resulted in a 67% profit in about 5 months.
13.4 – Moving average crossover system
As its evident now the problem with the plain vanilla moving average system is that it generates far too many trading signals in a sideways market. A moving average crossover system is an improvisation over the plain vanilla moving average system. It helps the trader to take fewer trades in a sideways market.
Instead of the usual single moving average in a MA crossover system, the trader combines two moving averages. This is usually referred to as ‘smoothing’.
A typical example of this would be to combine a 50 day EMA, with a 100 day EMA. The shorter moving average (50 days in this case) is also referred to as the faster-moving average. The longer moving average (100 days moving average) is referred to as the slower moving average.
The shorter moving average takes a lesser number of data points to calculate the average, and hence it tends to stick closer to the current market price and therefore reacts more quickly. A longer moving average takes more data points to calculate the average, and hence it tends to stay away from the current market price. Hence the reactions are slower.
Here is the Bank of Baroda chart, showing you how the two moving averages stack up when loaded on a chart.
As you can see, the black 50 day EMA line is closer to the current market price (as it reacts faster) compared to the pink 100 days EMA (as it reacts slower).
Traders have modified the plain vanilla MA system with the crossover system to smoothen out the entry and exit points. The trader gets far fewer signals in the process, but the chances of the trade being profitable are quite high.
The entry and exit rules for the crossover system is as stated below:
Rule 1) – Buy (fresh long) when the short term moving averages turns greater than the long term moving average. Stay in the trade as long as this condition is satisfied
Rule 2) – Exit the long position (square off) when the short term moving average turns lesser than the longer-term moving average
Let us apply the MA crossover system to the same BPCL example that we looked at. For ease of comparison, I have reproduced the BPCL’s chart with a single 50 day MA.
Notice, when the markets were moving sideways, MA suggested at least 3 trading signals. However, the 4th trade was the winner which resulted in 67% profit.
The chart shown below shows the application of a MA crossover system with 50 and 100 days EMA.
The black line plots the 50-day moving average and the pink line plots the 100-day moving average. As per the cross overrule, the signal to go long originates when the 50-day moving average (short term MA) crosses over the 100-day moving average (long term MA). The crossover point has been highlighted with an arrow. Please do notice how the crossover system keeps the trader away from the 3 unprofitable trades. This is the biggest advantage of a cross over system.
A trader can use any combination to create a MA cross over system. Some of the popular combinations for a swing trader would be:
- 9 day EMA with 21 days EMA – use this for short term trades ( upto few trading session)
- 25 day EMA with 50 days EMA – use this to identify medium-term trade (upto few weeks)
- 50 day EMA with 100 Day EMA – use this to identify trades that lasts upto few months
- 100 day EMA with 200 days EMA – use this to identify long term trades (investment opportunities), some of them can even last for over a year or more.
Remember, longer the time frame, the lesser the number of trading signals.
Here is an example of a 25 x 50 EMA crossover. Three trading signals qualify under the crossover rule.
Needless to say, the MA crossover system can also be applied for intraday trading. For instance, one could use the 15 x 30 minutes crossover to identify intraday opportunities. A more aggressive trader could use a 5 x 10-minute crossover.
You may have heard this popular saying in the markets – “The trend is your, friend”. Well, the moving averages help you identify this friend.
Remember, MA is a trend following system – as long as there is a trend, the moving averages work brilliantly. It does not matter which time frame you use or which cross over combination you use.
Key takeaways from this chapter
- A standard average calculation is a quick approximation of a series of numbers
- In an average calculation where the latest data is included, and the oldest is excluded called a Moving Average
- The simple moving average (SMA) gives equal weightage to all data points in the series
- An exponential moving average (EMA) scales the data according to its newness. Recent data gets the maximum weightage, and the oldest gets the least weightage
- For all practical purposes, use an EMA as opposed to SMA. This is because the EMA gives more weightage to the most recent data points
- The outlook is bullish when the current market price is greater than the EMA. The outlook turns bearish when the current market price turns lesser than the EMA
- In a non-trending market, moving averages may result in whipsaws, thereby causing frequent losses. To overcome this, an EMA crossover system is adopted
- In a typical crossover system, the price chart is overlaid with two EMAs. The shorter EMA is faster to react, while the longer EMA is slower to react
- The outlook turns bullish when the faster EMA crosses and is above the slower EMA. Hence one should look at buying the stock. The trade lasts upto a point where the faster EMA starts going below, the slower EMA
- The longer the time frame one chooses for a crossover system, the lesser the trading signals.
Hello Sir,
First of all thank you so much for what you guys are doing . 🙂
I have a doubt.Can i select 9×21 crossover system on 5min. chart for intraday opportunities?
Thanks 🙂
Yes, you can use a 9 x 21 on a 5 minute candle.
I have a one question regarding use MA crossover system how its work and how we can find call . in both line.. for intraday.
Sure, please do ask the same.
Can you explain how to draw 15 * 30 mins crossover ? I am not clear
You will first need to decide on the number of candles for which you want the MA. Then, you can open a 15 min chart and add 2 moving averages with the period ‘X’ and ‘X*2’
Say you want to plot for 100 candles. Choose 100 for 1st MA and 200 for 2nd MA. That will give you a 15 min * 30 min crossover
The period you have mentioned is in days. How can we select no of candles in 15*30 minutes chart and how to plot chat for 15*30minutes. Please tell clearly as I am new to using the tools.
Sir, as you rightly mentioned, I’ve also noticed that MA’s perform whenever the market’s in a trend. However, I’ve observed this quite often and feel that the duration of the EMA crossovers need to be backtested on a scrip across its historical data points to arrive at the best possible trade entry/exit positions. For ex: I’ve found that a 5×20 EMA crossover on 5-min Heikin Ashi candlestick pattern works pretty well for HINDALCO.
Agree, Rajiv. It is always good to trade with deeper insights.
Does it work for Intraday trade?
Yup, it does.
Sir can you tell me in last chart there are two moving averages .my ques. Is
Why those lines are getting up and down with each other.?
I’d suggest you read the chapter again, Sahil. Its explained well there.
how to avoid whip saws in the cross over systems
You can avoid whip saws to some extent by using a higher value moving average.
how to avoid whipsaw of higher value cross over , if you continue this there won’t
be any trade to take , can you elaborate on your answer. if you go on choosing higher value where is the end .
Agreed. The thing is, if you choose a higher MA cross over, whipsaws are reduced to a great extent. However avoiding whipsaws while using MA system is not possible…especially when the markets are moving sideways. So between the two i.e lower MA and higher MA, I would suggest a higher value MA crossover as it tends to reduces the whipsaws.
Karthik, Can you enlighten me on whipsaws. I’m new to that word
Whipsaw is a term used when the market fluctuates between two price points for a prolonged period. For example if a stock is trading between 950 and 975 for the longest period then both bulls and bears will find it difficult to make meaningful money. This is because the stock is fluctuating between two price levels (which are close to each other)…and usually the fluctuations are rapid. This is called “Whipsaws”.
Thanks Karthik for the explanation of whipsaw, I knew what it meant, but was not sure why this happens. One idea that i had was whipsaw was a result of some negative news in the market at that time.
Cheers, happy to clear that doubt for you 🙂
🙂
If there are whipsaws, then doesn’t it mean that there is no trend and we shouldn’t use MA Crossover in no-trend market.
Yes, MAs does not really give you great results when the markets whipsaws.
average is average whats higher and lower in it??
Moving average – changes as new data flows in.
but suppose if i wanna take average of last 5 sessions (1st day, 2nd day, 3rd day, 4th day, 5th day)and its 1000 then whats the higher value in this . the only value we have is 1000.whats the high average and low average we have only 1 average and ie 1000
i hope i made my que clear to u
What if the data on the 5th day is skewed and your average jumps to 1000 from the usual 650?
Which crossover system and candle chart are preferable for intra day trading in MCX bullion market. Thank you.
Irrespective of the asset class for intra day trading I would advice 10 or 15 mins charts..as longer the time duration is longer, the more reliable is the trading signal. Going by the same logic, I would advice you to use slightly longer term MA cross over for better accuracy.
Thanks Sir,
Thanks for your valuable guidance pl tell me in 10/15 mint chart or in intra day trading which indicator are best to do technical analysis,
I am new here in this field and using Zerodha as my preferred broker ☺
Thanks in advance!
I personally prefer the moving averages, they are simple and helps in most cases.
Karthik Can you Please explain something about divergence
Hi nitesh,
A stock is said to be in divergence when the momentum forms lower peaks while the stock is forming higher peaks….
Reverse is true for bear markets.. Hav a look at the following picture for a better understanding..
Thanks JAGADEESH
Jagadeesh has posted a quick background information. I will try and elaborate on it sometime soon…but I personally don’t like to look at divergence and convergence, hence have not covered it in Varsity.
Hi Karthik
How to Trade the Below Situation when no cross overs happening and the RSI and Stoacstics not in Favor of short trade
From what I can see from the chart, clearly the trade is in favor of a long position. This is because the MA cross over has already happened and it seems like a trend is being formed. I would wait for a retracement on low volumes to enter a position. Ofcoure, the other checklist items should also comply.
Hi Karthik,
In the below chart even though the Price is Retracing Upwards the EMA cross over has hapend , how trade can be avoided in this type of situation , also what other indicator i can mix with this to filter the same .
Nithesh, few things I notice from this chart –
1) I see a very nice double bottom formation ard 4345 suggesting a long
2) I see a hammer being formed at the end of the 2nd double bottom suggesting a long
3) Volumes are great
4) MACD crossover suggests a long
If both S&R also are supportive, then I guess this is a clear case of being long on this stock. Also, for it is best if you overlay the moving averages on the price chart and not on a separate plane.
Can you tell me what MACD, RSI, FSTO (in the given chart) stand for?
They are all technical indicators. I would suggest you go through Chapters 14 & 15 for more details.
Dear karthik,
Is it ok to use 3×13 EMA Crossover for short term trading?, also, if yes what other parameters to be considered in this case for better profit opportunity?
Yeah, you can use 3 x 13 EMA. In fact you can backtest this on Pi to figure out the profitability. Check this http://zerodha.com/z-connect/tradezerodha/pi-tradezerodha/eas-for-auto-buysell-signals-pi
Karthik could you please share this chart with us so that we can have idea about the formation?
Thanks.
Which chart, Swapnil?
bro see my jan 5 th comment on how whipsaws can be avoided , if you go on including indicators you can never trade totally confused ,in above situation ,even macd is telling it will go up .( flat macd method ).
Sir,
First of all, many many congratulations for your effort, I’ve not seen such an effort to educate & support traders. God bless.
I’ve a doubt regarding the MA crossover system (last figure of this chapter – 25&50 MA crossover). The first two trades are in loss, as we entered @ high and exit @ low, please clarify.
With best of my regards,
Arunava BHattacharya.
Thank you 🙂
Yes, the first 2 trades are loss making. This is because the stock was in a sideways movement. MA crossover works best when we have a trending market and fails when we are in sideways market. This is what is being highlighted in the chart.
sir if you observe care fully the candle in which crossover has happened in all the cases , there is one thing common .
Bullish Candle?
candle { crossover} high or low has to be broken and CLOSE above or below , THAN TAKE IN THE NEXT CANDLE . IT IS SIMPLE . STOPLOSS PREVIOUS CANDLE LOW OR HIGH , TECHNICALLY SPEAKING THERE HAS TO BE STRENGTH AFTER THE CROSSOVER TO MOVE . YOU COULD HAVE INSIDE BAR IF THERE IS NO STRENGTH , WHICH WILL GIVE THE DIRECTION OF THE TRADE .
Interesting perspective there. Hope readers benefit from the insight.
Dear Rajesh and Karthik
I hope you don’t mind my ignorance as I am totally new to this sort of analysis. It has been a commendable effort from Zerodha team to come with such an effort for novices like us.
Could you please explain in detail the perspective in the last reply of yours… I am not sure I got you.
Thanks in advance.
Hopefully Rajesh should pitch in 🙂
SIR CAN YOU INCLUDE ONE TOPIC ON HOW TO CUT DOWN WHIPSAWS . IN EVERY INDICATOR . IF THIS IS IN RESPONSES HERE ,THIS WILL NOT BE SEEN BY ALL .
Yes, one of the best ways to deal with this is keeping a ‘trailing stoploss’. Will talk about it sometime soon. Thanks.
if we r using MA system , i think Long/Short Entry into whipsaw is unavoidable (i.e. whipsaw is visible only in hindsight)
breakouts often happen after lengthy whipsaw.
what really matters is ‘exit’ condition.
if exit point is well defined , one can profit from whipsaws too.. or in some cases , whipsaws are very desirable. ( : scalping ? )
(e.g. , CLOSE > (REF(CLOSE,3) + 10))
You are right on this…also, whipsaws are very desirable for scalping…even here exit matters.
Hi Karthik,
I did not understand the code mentioned by DR1184 in the end of his comment. What does that mean?..
Also is there a chapter which takes us through the codes and formulas?..
The code is just an exit condition for the trade wherein it specifies “I would like to exit the trade when the closing price of the current candle exceeds the close value of the last 3 candles plus 10 more points”.
We are in the process of structuring the content for “AFL for traders” which is all about coding the formulas in the AFL (Amibroker formula language), will keep you posted on that. Meanwhile please do follow us on twitter for instant updates — http://www.twitter.com/ZVarsity
Can i use Moving average cross over system alone to take the trading decision? If so what’s the probability of success rate?
I have checked alone also it’s giving good result. Requesting your suggestion please.
Of course you can. But do remember a solid MA system with high success ratio requires you have a long term averages …something like 50 day x 100 day or 100 day x 200 day…but when you do so the number of trading signals reduces. In essence higher the time frame, better the accuracy and lower the number of signals.
Can i use Moving average cross over system alone to take the trading decision? If so what’s the probability of success rate?
I have checked alone also it’s giving good result even if low volume. Requesting your suggestion please.
Can i use Moving average cross over system alone to take the trading decision? If so what’s the probability of success rate?
I have checked alone also it’s giving good result even if low voume. Requesting your suggestion please.
If i am looking after 5 Mins intraday chart which time frame can give better result while using Cross over MA alone?
Try 21 x 9 average. I’m not saying this is the best combination…but you may want to just give it a shot.
When u say 5 minute intra day chart and 21*9 AMA, it means the candlestick will form every 5 minute and the two AMA will be 21 DAYS average and 9 DAYS average right?
Somewhere you had said 50*100 means number of candles you want and I’m getting more and more confused 🙁
How to interpret this whenever you say something about x * y
Virender, 5 * 21 day SMA means that a moving average will be formed using 5-day closing price and another moving average will be formed over 21-day closing price. Replace the day with minute, the interpretation remains the same.
Hi Karthik,
If i want to use 15*30min then 100ma and 200ma converts into 1500 and 6000 mins or what please confirm I am having a confusion in it.
I’m not sure what you mean by 15*30 mins. You will have to stick to one time frame, for example, 15mins. Once you do that, 100 MA will correspond to the last the average of the last 100, 15 minutes candle. Likewise with 200MA.
want trading in bank nifty future.I request any experience trader who can advice about MA, Indicators , Time frames etc .Thanks
The underlying does not make any difference. Whether you are trading Nifty futures, Bank Nifty Futures, or Crude Oil futures the principle of trading remains the same.
How to be cautious & avoid trading in whipsaws while using MA cross over strategy?
This really depends on your time frame. As a rule of thumb, the longer the MA combination the lesser the whipsaws. For example a 20 x 9 MA crossover system will generate lesser whipsaws when compared to 3 x 5 MA crossover.
Pls refer above comments . my resech on how to avoid whipsaws in moving avarages
Sure. I’ve not really worked with these MA combinations, hence cant really comment.
Consistently I tried 9X21 MA cross over in 5 Mins Intraday chart but sometimes it get failed. Can you suggest Crossover MA strategy with any combination for best results? Like candlesticks with R&S and Volume…
Even i tried triple combination cross over MA of 9X15X21, once 9 crosses 15, alert signal & after 21 taking position. Sometimes it’s not working well which results in loss.
Vasanth – to begin with try increasing your time frame. Maybe 5 mins is too short. Explore (paper trade) 15 mins time frame and on that try 3 x 5 or 9 x 21 combination. Also stick to indices to begin with.
Try 13 / 21 /34 in 5 min works 80% strike rate with momuntem indicator
Hi can we write in script to get alerts?. If you know, can I please guide me
Check this – https://zerodha.com/expert-advisors/
What does the below code mentioned in above link means?
BUY SCript:
REF(OPEN,1)>REF(CLOSE,1) AND
REF(OPEN,2)>REF(CLOSE,2) AND
REF(CLOSE,1)=REF(CLOSE,2) AND
REF(LOW,1)= REF(LOW,2)
Sell Script:
REF(OPEN,1)>REF(CLOSE,1) AND
REF(OPEN,2)>REF(CLOSE,2)
Looks like a script where buy and sell signals are generated based on comparing OHLC data.
Hi Karthik, thanks for presenting all this useful technical info in an excellent manner…hats off to you and your team. well my understanding is that trading based on MA crossover will not result into losses though sometimes it may be marginal profit or large profits and also at lower time frame with lesser period MA combination may result into higher whipsaws….is my observation correct?
You are absolutely correct on this one.
thanks Karthik. well I have a doubt. many a times candlestick pattern gets formed around S&R levels to confirm long or short but after sometime trend changes i.e. it breaks the S&R level and trade goes against us. against this pattern strategy, MA crossover strategy ensures that either trade is in our favour or marginally against unless strong gap up or gap down opening. so why have you kept the candlestick pattern on top in the checklist when MA crossover strategy gives better results? though it is good to have all the checklist items but its not possible in the intra-day trade. also how safe is to do intra day trade based on flat MA crossover strategy? thanks in advance for your time and advise.
Well, the problem with MA strategy is that they work very well in a trending market. But market can remain range bound for more time than anyone can imagine. In fact the whole of 2012 was range bound with virtually no movement in the market. In such circumstances MA based strategies just wont work, hence you will have to rely on candlesticks to identify opportunities. Like with anything else, relying on just 1 technique may be not a great idea in markets.
karthik sir..
25-50 ema day bearish indicator.
thank you sir
karthik sir..
25-50 ema day bearish indicator, gravita stock.
thank you sir
Yes, this is a bearish cross over…but there is a picture perfect bullish Marubuzo as well 🙂
hmmm thank you sir…
dear karthik ji..
I’m very happy because of I started own researching stocks, all indicators working & zerodha technical analyst module is super, it’s helped for a lot…must read patiently everybody who is in market and keep practising……i’m interesting to search own indicators is’t possible to imagine karthik ji…?
thank you
Glad to know this Girish. Yes, you can develop your one indicators…its just a matter of getting the thought process right.
hello Sir ,
. EMA would more whipsaws in sideways market.? if yes , is it good to prefer SMA ?
. MA gives us ‘late entry’ into a trend, how can we use PSAR along with MA system ? for right timing into trade.
thnx,
Rajesh
EMA is always more desirable as it takes into account the latest information from markets. Will probably include an additional topic on MA & PSAR sometime soon.
Dear Sir,
In the above Girsh Chart on Gravita India I would like to go long as the prior trend is downward and a marabozu formed at the bottom of the trend and RSI is rising from 30-50 range. But as stated by Girish C/O of EMA`S are not suggesting. Pl. correct me. Regards
Marubuzo is the only pattern which does not require a prior trend. As long as you think the trade is good to go, you should take it.
Sir,, where to get technical analysis software
Check out http://www.zerodha.com/pi
Hi karthik,
If i had missed a to go long during a short term ema crosses up over long term ema, Can i buy that stock after that? so that i can sell when the ema reverses?
You can as long as the run up in the stock (after the crossover) is not much.
superb ananlysis sir thank u so much
sir elborate about pi trading terminal pls
Thanks for your interest. We are thinking of putting up some stuff related to Pi soon.
IN SECOND CHART OF THIS NOTES HOW MANY DAYS HAVE U SELECTED OF BPCL STOCK SIR
AND THIS ALL FEATURES ARE AVAILABLE ON PI TRADING TERMINAL
AND WHAT IS DIFFERENCE BETWEEN 10 MIN EMA AND 10 DAYS EMA
AND AGAIN THE SAME Q IS THIS ALL INDICATORS AVAILABLE IN PI SOFTWARE
BPCL is EOD chart here. All these indicators and more are available on Pi. Please do visit http://www.zerodha.com/pi to know more.
10 mins EMA considers 10 min candles as look back period…likewise the 10 day EMA considers a lookback period of 10 End of day periods.
WHICH COMBINATIONS OF INDICATORS WE CAN USE FOR INTRADAY TRADING ON NIFTY SPOT WHICH CAN SUIT INTRADAY
KINDLY REQUEST U TO PLS SUGGEST
If you ask me – simple candlestick patterns with S&R levels should be just fine 🙂
thank u sir looking forward to other modules which are coming soon
We are working on it sir. We will put it up as soon as we can.
which is the best stochastic intraday set up
sir,how to plot EMA CROOSOVERS IN PI &when we plot s&r the graph gets smurged(iday)should we plot s&r cloe&open a new chart of same for better visbility(cstics)r is there any other way explian both question detailly as iam not so good at basics,bcoz of ur knowledge sharing we r trying
Can you please email sreenivasulu.m at zerodha dot com for this?
Sir, for intraday charts, MACD is better or EMA is better can we use 12*25 EMA for 5, 10 & 15 min Intraday Charts?
Certainly. Although I should tell you my views are biased as I always like to use the EMA for its simplicity and matter of fact approach.
Ok Sir, thanx a lot
🙂
dear sir, pls suggest me which is the best EMA that can b used in nifty future trading? AND what is the best MACD?
do we use a combination of candlestick pattern, s & r and volume in commodity trading and second question is can we use ema crossover with rsi in commodity pls do reply
thank u
Absolutely – all techniques of TA is applicable to Commodities and Forex markets.
Specially in crude oil, gold, silver,copper
Like I said – you can apply no problem at all.
Karthik thanks a lot for your efforts in this module. My learning has been tremendous and loving it. I have a specific query.
On PI i attempted to create EMA with 9X21, 21X50, 50X50 for 1 day intraday, 1 week and 6 months (tried all three EMA’s for each time frame) but could not find any crossover. I did it for Lupin Shares from 17-July-2015 to 24-July-2015. Also plotted all three in 3 different charts at same time on 24-July-2015 intraday there was not cross over happening at all. This particular share had beautiful price movement (a prerequiste for EMA). Can you help me where i am going wrong ?
CORRECTION TO ABOVE:
create EMA with 9X21, 21X50, 50X100 for 1 day
Thanks Varun. I would suggest you email [email protected] regaring Pi, he will help you with it.
This is not regarding PI but regarding Moving Averages. i understand it conceptually but not able to use it effectively.
Ah, got it. Sorry moment I saw I though it was a query on Pi 🙂
What periodicity have you selected?
i attempted to create EMA with 9X21, 21X50, 50X100 for 1 day intraday, 1 week and 6 months (tried all three EMA’s for each time frame for same frame in differnet charts) but could not find any crossover. I did it for Lupin Shares from 17-July-2015 to 24-July-2015. Also plotted all three in 3 different charts at same time on 24-July-2015 intraday there was not cross over happening at all.
I suspect you could inadvertently missing something here Varun. Can you please mail [email protected] and check with him once?
Sir,
I trade intraday in Nifty. I have to pick only 5 points with 50 qty. Because I want to make 20-30 trades daily so I can get huge profit by end of day.
Kindly tell me these parameters :
1. Periodicity, interval & days in chart
2. EMA Crossover Slow & Fast interval
3. How to draw a moving average line on the volume bars
4. Which indicators should I use? ( MACD, RSI, BB )
I’m afraid I may not be the right person to answer this, for I don’t know how to generate these kinds of trades on a daily basis. However I can answer your 3rd question –
To plot the MA over volumes – it depends on the software you use. Usually this can be done by dragging and dropping the volume indicator from the tool bar on the volume data.
karthik,
How can i draw MA on volume chart in kite?Which variable to select in studies list??
Yes, this is possible.
But which variable to select in study list?
In studies select moving avg
In field select volume in place of close
Done
Cheers!
Suppose I want to do intraday trading with my capital x 10 or 20 ( brokers capital or margin money or leverage etc. in say TATA MOTORS cash equity segment. Hence my capacity now is to buy 1000 shares at one go or sell the same. Can you tell me exactly as to I have to look to which indicator so that I can buy shares or take entry? Same for selling or exit? Or say first sell then buy at low? From the candles I am sure even God can earn profit. Some other tools like PSAR, AVERAGE, SUPER TREND must be used. What is this 20 days EMA and 50 days EMA? Where can I get it? Where exactly MCAD is used?
For margins – https://zerodha.com/margin-calculator/SPAN/
MACD – http://zerodha.com/varsity/chapter/indicators-part-2/
EMA is discussed the same chapter.
Say I want trade with TATA MOTORS futures contract 1 lot. Lot size I will know. My question is will I be able to buy this futures contract of TATA MOTORS of 29 Oct 2015 @ current market price. Or it’s price is special and different from current market price of TATA MOTORS?
You could look up futures price directly on Kite or Pi.
1) is it true that moving averages do not generate false / loss making calls ?
2) i use PI and i am not aware which indicators to use for intraday trading ?
3) what should be ideal timeframe for candlestick chart for intraday & ideal MA gap between short & long MA for MA signal generation ?
4) anyway to combine other indicators with MA to generate better signals ? which combination would u suggest ?
5) if you can be kind enough to share which indicator / combination you use for your trading ?
thank you
1) MA do tend to give out false signals especially during sideways markets
2) Start with simple MA indicators, this should be good
3) Higher the frequency, lesser the noise component. Suggest you use 15 mins data for intraday
4) MA + Candlesticks + Support Resistance should be a good start
5) Many, depends on the situation. More often than not i look at MAs.
I got that : One can decide to make fresh buy position as soon as stock prices goes above the 50 Day SMA butif Day SMA ? then he will not be able to maximize profit ? How can he decide to sell at highest or near High price b/w those 2 points? If he waits for stock to come down the 50 Day SMA, he would be missing the oppurtunity to sell at high b/w those 2 points.
You cant really time the markets to perfection. Even if you capture 40% of the rally, its job well done.
1) is it true that moving averages do not generate false / loss making calls ?
2) i use PI and i am not aware which indicators to use for intraday trading ?
3) what should be ideal timeframe for candlestick chart for intraday & ideal MA gap between short & long MA for MA signal generation ?
4) anyway to combine other indicators with MA to generate better signals ? which combination would u suggest ?
5) if you can be kind enough to share which indicator / combination you use for your trading ?
thank you
I have just gone through EMA cross over chart pattern and want to experiment 15*30 minutes on day trading. Is 15*30 ok or anyother else to be tried?
Kindly inform if the same chart is available in Kite or PI software and if yes, in which drop down box or how to create? I request to guide step by step.
I ll be highly grateful to you.
Regards,
Yes, the same is available in Kite and Pi. You just need to overalay the moving averages on the prices. Suggest you call our support and they will explain this better to you.
15 * 30 is good to go with! All the best.
Hi,
I am using 9-21 EMA and 9 RSI (80%-20%) is it right setting for intra-day trading?
Yes, as long as it works 🙂
Dear Sir, I am trading in Copper and Crude using 10 min sma crossing 50sma . also watch 200ema. all on 3 min and 5 mins chart. but some times the chart line takes a u turn on touching the slow one. this makes a lot of trouble. can you suggest a better format for trading in copper and crude? i would like to learn some better ideas from you. how it can be organised. please suggest
Pradeep – very shortly we would be covering commodities. Suggest you kindly wait for a little more time.
in PI MACD is plotted below the chart i wish to plot the MACD on live chart . shall i do it manually ?
i understood the long cycle= 26, short cycle = 13 , but what exactly does the signal cycle = 9 mean ?
which should be given more importance, MACD or MACD histogram ?
should RSI be used only as a supportive indicator to our buying & shorting desicions or we can trade using RSI indicator alone?
Regarding how to plot, I would suggest you reach out to my colleague Srini – [email protected]
I would suggest you pay attention to the MACD line as such.
Also, your main thesis to trade should stem from candlestick/fundamentals/quants. Indicators alone should not be your main criteria to set up trade.
yes i do take candlesticks into consideration .
1) what exactly do u mean by fundamentals & quants ( strictly w.r.t commodities ) ?
2) “pay attention to MACD ” you mean simple MACD or MACD HISTOGRAM ?
3)should RSI be used only as a supportive indicator to our buying & shorting desicions or we can trade using RSI indicator alone?
4) once a good strategy is finalized then is automatic trading a good option for retail traders ?
5) what are the most common auto-trading strategies used in markets by retail / institutional traders ?
Answers as below –
1) Fundamentals such as demand and supply situation, production data etc. Quant is more of statistical data.
2) MACD Line
3) Supporting indicator
4) Yes
5) Moving average system perhaps?
i would like to know /learn more about ” quants ” . what can be an ideal source for this ?
with regars to supply & demand , production data … shall we consider CME to be relevant ? what other sources for the same ?
You will have to start with understanding basic calculus to deal with Quants for Finance. If you are not familiar with calculus, then here is a good book to start with – http://www.mhprofessional.com/product.php?isbn=0071795537&cat=145
CME is good.
1) basic calculus seems like something i did during my 12th boards , i think i should be workable for me .
i downloaded the sample pages it just had problems & solutions ….. how exactly should i use this book , like a workbook to practice problem solving ?
2) is it a good idea to trade options based “ONLY” on MACD signals of underlying ? (my idea is buy only OTM / far OTM CE-PE , as per the signal , without considering/calculating any of the greeks )
1) The idea is to first get comfortable with basic mathematics. Once you do that you can look for a structured program on financial mathematics – I guess Coursera has few.
2) No.
thanks merry christmas & happy newyear 🙂
Hi Karthik,
Can you please refer to the Adani Ports chart?
Is the bullishness to be continued based on the MA Crossover and last candle being a Bullish Maribozu?
Regards,
Somnath.
It certainly looks bullish, but do watch out for the low volume on the Bullish Marubuzo.
Dear Karthik,
Please refer to the ACC chart, do you think its the time to take long position?
Well, the hammer looks enticing. Please make sure other items on the checklist align.
Karthik,
The ACC chart is of 10*21 EMA, but as i have learnt from theory in this chapter, Buy signal is generated when the short term MA turns greater than Long term MA. But according to the chart it should be a sell signal… Am i going wrong somewhere?Plz help
Not really Arun, the stock is trending up and MA’s are suggesting a buy.
But the shorter Ema (10) is less than 21 ema at the hammer formation.So how it can b a buy?
I personally like to make the decision to buy or sell based on candlesticks. Indicators including MAs only give me that 2nd opinion.
Hello sir can u tell me in intraday trading for crude oil and nickle which technical indicator should be uaed like sma , stochastic, or RSI and which configuration should we taken
All indicators are applicable to commodities as well. I personally prefer the 9 and 21 day EMA for intraday trading.
Hi Karthik
Apologies for this silly question. Could you help me to know how do I draw this 9*21 EMA in the chart for any commodities in intraday?
This should be quite simple. Which s/w do you use? If you are using Pi or Kite our support executive should be able to help you, suggest you give them a call.
Thanks Karthik. The support executive did help me the other day when I called them. I’m using PI.
Sure, by the way you should also try Kite – https://kite.zerodha.com/
hi karthik
i really liked the way u refer to all the doubts.
even i have a doubt actually and i hope i will get something from u.
my doubt:
is yes definitely all the trading system with moving averages works upto 70% accuracy and our entry points will be accurate but am not able to book profit am unable to decide how much profit to take. when price reaches certain level am unable to decide whether i have to book my profits and get out of the trade or have to continue so that price will go further. for example i use 200 ema with 15 min time frame few days back in nifty i took long position around 7450 and price reached 7600 and i thought price may go further but it started declining now today it reached 7507 and i couldn’t encash maximum profits. can u please suggest me who to deal with this
Harish – this is a tricky problem. Why don’t you try having a short term moving average to trail your stoploss?. This should help you lock in your profits as the stock moves in your favor.
thank u for responding to my problem.
s we can use short term moving average to lock in profits it will work fine when there is a short term trend like i have posted a picture.
but what if there is a big trend like below picture,
in that we will get out of trade at some point according to short term moving average and book good amount of profits, but when to re enter into trade when rally continues?
Well, if you are following a moving average system (any system actually) then the only way to ensure success is by taking all the trades that the system suggests. You cannot be subjective here. So you will be required to reenter when the MA suggest a crossover a generates a buy signal.
if at all using a short term moving average is beneficial which short term average to use? can u please suggest any one?
For day trading I prefer 9×21 crossover on a 5 min chart.
but 9*21 generates lots of false signals and how to identify false signals? is there any other indicator which can be clubbed with 9*21 to avoid false signals? if s please suggest me how to use it.
or else out of your experience if u have any trading strategy either long term or short term please share with us.
Harish try and increase the MA timeframe for fewer false signals. Something like 21 x 50 should also be ok. I’ve been discussing a lot of strategies in the Option strategies module (Module 6).
Hello Karthik,
What would be entry point and stop loss for 9 cross 21 or may be strategy for that matter .
I understand that Entry point would be the cross over point but what if cross over has already happened few hours back and in that case what would be my entry point and Stop loss for the same .
Please suggest .
The best thing to do is to wait for a retracement till the moving average.
Yes Karthik That’s fine . But you know the cross over for 9*21 doesn’t happen that often as 9*21 ON A 15 MIN Chart happens once or twice In a day and that too rarely and waiting for it to happen again is like am not going to trade at all for that day . What be your suggestion on this . Do you say that I should start looking for an different opportunity on a different stock if the crossover has happened couple of Hours before .
Thank you in advance
Yes, you should expand the watchlist, Anuragh. It is best if the trade originates on its own rather than we trying to forcibly look for one.
ok, sir thank u, will check option strategies
Sir, I am 24 year old. I don’t have any economic, finance or commerce background. But, I am good at Mathmatics since. I enjoyed your tutorials a lot and understood market from scratch.
I have Rs.20,000 to invest in and start trading alongside a job. Is it possible to start trading with such a low investment ?? Could you please help. Thank you.
My sincerer advice – don’t use that money for trading. I’d suggest you invest that money and learn the how long term investment works before getting into trading.
Thanks sir. Could you please suggest me what are sources to learn about long term investment. I started an SIP of Rs2000. Would be grateful if you suggest what all should I study before start trading. Thanks.
I’d suggest you read our module on FA, you will get a good idea on long term investing – http://zerodha.com/varsity/module/fundamental-analysis/
I’ve been reading the text book for last few days but nothing came that close to understand MA the way you have articulated Karthik. Indeed very simple and anyone can understand this. Now apologise for my lack of knowledge. Can you help me to know how do I draw these MA in the chart when I open a chart for a commodity?
Thanks for the kind words and encouragement Joe 🙂 I’ve posted the answer in your other comment.
Hi karthik,on August 24th our market has crashed one of the biggest single day fall since 2008 recession anticipated further fall but very next day market rebounded more than 100 points and stocks like Hdfc recouped the loss,how can we predict after a great fall like I mentioned that a bounce can happen,or it was domestic play…
Honestly its very difficult to predict such short term moves. However years of solid market experience will help you to some extent.
What is short covering? Intra day due square off obligations required to go for buy but how it is happening in futures and equity market?long unwinding is just the opposit of short covering…
Short Covering = the act of traders covering their short positions (preferably with a profit). Short covering requires you to buy back futures, hence leads to a mini rally.
Long unwinding is just the opposite.
Which time frame and ema time frame suitable for intraday trading to generate accurate signal
Depends on your risk appetite. I prefer 9 x 21 minute EMA crossover.
This Saturday afternoon is turning out be great benefit to me as I’m reading these modules Karthik and reading all the comment sections that many people have posted. Can you also start writing blog please.
Would my below assumptions correct when I read this statement ‘ Depends on your risk appetite. I prefer 9 x 21 minute EMA
crossover’
1. For trading about 3 hours in the India commodites segment(let’s say from 8.30 PM to 11.30 PM Singapore time), it is good to choose a 5 minute chart(I’m fine with the risk:reward and have done the position sizing as well) and no overnight risk(I mean I don’t keep positions open for the next day)
2. On this 5 minute chart of ONLY one day(do you want me to choose multiple days(?)), select 9*21 minutes EMA to get some reliable accurate signals
3. write/print the rules in a piece of paper that you have highlighted and stick in the wall right in front of the trading PC and start trading!
Yup, you can certainly choose 5 mins chart and overlay the 9 x 21 Minute EMA but then you need to be sure about the risk reward ratio and other things.
Good luck Joe, stay profitable 🙂
9*21 minutes? It is 9*21 days right? Confused confused confused.
It can be days or minutes, based on what you select!
hi karthik. how do futures position influences the equity price? theoretically underlying price should influence fno? here iis it happening other way around? how futures short covering influence equity price?
Spot always influences the derivatives market. Both short covering and long unwinding are transient and does not dictate long term outlook. This is exactly why you need to be quick while trading short covering and long unwinding.
which one is better stochastic or MACD ? & why ?
Depends on the situation. They are two different indicators with their own merits and disadvantages. Cant compare them.
ok but can you give details on them seperately ?
their own merits & disadvantages seperately ?
which indicator to use under which situation ?
if you don’t mind , can you share what tech.indicators you use for your personal trading ?
thank you
MACD is discussed in detail here – http://zerodha.com/varsity/chapter/indicators-part-2/
Will be putting up another chapter on indicators shortly.
I personally prefer MA for active trading.
both of them have whipsaws / false alerts , how to minimize those ?
when is the commodity module coming up ?
You can minimize them by increasing time frame. For example 21 day MA produces more whipsaws than 50 day ema.
Commodities is after Option Strategies…maybe by mid March.
Dear Sir,
I’m a newbie. Awesome material. I’m reading the Moving Avg Chapter and couldn’t understand the following(apologies if its dumb)
Under section 13.3, in the example for Ambuja Cements, you have said the first buy signal is [email protected] when price is above 50 EMA. But isn’t the price 165 below the EMA line? (it should be higher isnt it?) I felt the same for [email protected] where the price seems higher(rather than below) than EMA line. Where am I going wrong? Pls clarify
rgds
Oh, the markings maybe confusing you, sorry about that. Please check the close of the candle to get more clarity.
my client id is rb1210. i dont know how to plot Simple moving average for differnet time horizons like 20 days, 50 days and 200 days on pi could you please help me out.
Please contact our support line – 080 40402020 for this.
Dear Zerodha.
I was trading from last two years blindly after coming yo zerodha I didn’t traded but learnt many things here. Thank u for providing not only technology but also amazing knowledge.
I have one question
I have a data history of last one year .if I want to calculate MACD how many data points has to be considered. I.e MACd value for today EOD is from last 30 readings ? Or from last one year i have to calculate. Same question is applied to other indicators too.
Usually for short term trading, 1-2 year look back period is good enough.
Omg. U replying to me question at 5am???
Thank u for replyin . What I understood from ur answer is, my calculation for macd will start from 17/05 /15 to get value for 17/05/16. ( for short term), I.e My first set of EMA will start from 17/05/15, get EMA from 17/05/15 to next 12 and 26 days.
Yes, for 1 year EMA, you go back year ago…for 2 years you go back 2 years…so on and so forth!
Ok thanks. Now question is how Google finance or PI finding da values. ? If im looking for chart of one month den how many reading its taking. If same chart I change into 3 months den again software ll do calculation? Again how many readings its taking. As I saw MACD value for today is X value on one month chart and MACD value is Z on 3 months charts for da same day. I don’t knw I asked in proper way or no . Hope u understood my question
These are calculated on a rolling average basis. The reference point keeps moving as and when you keep moving the reference time period.
Hi,
When i apply 1min, 3min and 5 mins charts, which EMA and Which SMA and EMA cross over should i take in to consideration?
Regards,
SaikiranGarapati
This depends on your risk appetite. Lower the frequency of the EMAs then more number of signals and more noise. Higher the frequency, lesser number of signals but also the quality of signals improve.
Dear zeordha.
Do u ppl block “reply” option if post is more than 3?, I dint seen reply option for my above post. 🙂
As I said I used to trade blindly before. Last year I joined zerodha and learnt many things here. Thanks again for ur knowledge sharing.
U said reference point keep moving. I didn’t got it. Its moving to how many points behind. In Google finance der is no option for assigning points behind ( don’t know abt pi),
Oh no, there is no blocking of that sort. Maybe this is a bug, let me request our tech team to look into this.
Regarding ref point – today is 18th May, if I need one year SMA I’d look back from 16th May 2015 to 17th May 2016, tomorrow would be 19th may..so my look back would shift to 18th May 2015 to 17th May. So on and so forth.
Thank u sir.
If I want 20 days EMA for 19_05_16, then how PI or Google finance calculating ? Is it last 20 readings from 19_05_16 back side?,, as per ur answer if I want macd(26,12,9)for 19/05/16 then readings from 23/04/16 ( 19th -26) is enough ?
For 20 day EMA, look back is 21 days. For MACD (26,12,9) look back period would be 27.
Hello Sir! I am a great fan of your work towards educating us with immense knowledge about markets. The only query which I have is whether should we consider volumes during intraday trading using EMA’s? Also, what other parameters should we consider while trading with EMA technique in order to improve our accuracy? Should we use different indicators like RSI,MACD,etc with EMA’s. Also should we consider S&R while using EMA’s. Once again thankyou Sir.
Yup, it makes sense to keep volumes in perspective. From my experience EMA + S&R helps much better than overlaying other indicators.
I use 5 and 15 minutes candlesticks.
Which Moving Average crossover is best for intraday trading? (Please answer in hours:Minutes)
15 mins is good.
Ok. I will use 15 mins candle sticks. Which moving average cross over should I use? Ex: 11 mins ,20 mins and 60 mins
10 mins should work ok – this is purely for intraday trading.
Sir,do you provide pdf of zerodha varsity (chapters).plz mail me.
You can download it from the module home page.
Hello Karthick, First of all thanks for the clear explanation of the concept
How can I set MA crossover of 5min x10min for Intraday trading in zerodha kite platform? is it possible?
Welcome.
Yes, you can. Here is the link to Kite User manual which will explain everything about charts and other aspects of Kite – https://kite.trade/docs/kite/ and for charts in particular – https://kite.trade/docs/kite/#indicators-studies
Hi Sir, in the “SMOOTHING” method for intraday, can I use 5 minute chart and on top of it use 15 minute EMA and 30 minute EMA for crossing method? what time chart would you advice for intraday? 5 minute is ok or should I use any other? Thank you.
Shorter the time frame, higher is the noise component. I’d suggest you use a slightly long term chart. I personally 10 or 15 mins charts for intraday.
It would be great if these contents were in video format because, the contents are good but are too lengthy and time consuming, i usually prefer to learn from youtube.
Agreed, but we do not have the resource and bandwidth to make video content 🙁
What is ‘offset’ variable that Is available when plotting the moving average indicator?
You can ignore that Arjun. It helps you displace the data, although does not really improve the predictability of the indicator.
When on the chart when i move my cursor over previous candle charts, I can see OHLC values change for the instrument. in this case bank nifty however the values for the moving average indicator can’t be seen.
1. What can I do to get these values on display as well and
2. Where are the settings to change the line width of my MA. its too thin for my linking.
Thanks in advance.
Ah, not sure. It seems to be working for me. Can you contact our support for this? Thanks.
When you say 9×21 crossover on a 5min chart for intraday is it 9×2 1min OR 9X21day.Excuse me if that Is a dumb question
No question is dumb! We are all in the process of learning 🙂
9 min over 21 minute on a 5/10 minute chart.
In 5 min chart, each candle is 5 min duratuon ( u can call it period). so 9×21 ema crossover on 5 min chart means 9 period and 21 period ema crossover.
karthik sir, pls correct me if i m wrong.
Yes, you are correct. No problem with it.
Pls clarify.
There was a hammer formation in L&T two days back with good volume and traded near the strong support in EOD chart.
But the price has broken the 50 & 100 Day SMA.
Is it good in going long?
Hammer by requires a downtrend as prior trend, do you see that happening in L&T?
Hi karthik,
can we initiate a buy(long) just after some time or half wau through when the faster EMA crossed over the slower moving EMA and will be still be able to book profits when the reverse cross over happens?
Well, its always good to have some confirmation and play it safe 🙂
Hey karthik,
Thanks for that .I have one more question. Is there a way where we can track if 50 day EMA of stock or for that matter any stocks under watchlist crossed over its 100 day EMA and create alerts for that so that we can take a look at trading decision.Thanks again for your time.
Of course you can, check this – http://zerodha.com/z-connect/tradezerodha/pi-tradezerodha/eas-for-auto-buysell-signals-pi
Thanks karthik
Welcome!
sir how to find support and resistance in uptrend and in down trend?
Check this – http://zerodha.com/varsity/chapter/support-resistance/
Sir , Can you tell me which is the good ema crossover system for day trading by your experience?
Simple 9mins by 21 min EMA is good to begin with. Give it a try.
Sir, tell me what is period value to add 9 or 21 min ema.
You can plot this on the 10 min chart.
which are important and useful indicators for intraday trading ?
Many – MA, MACD, RSI, ADX etc. Check this – http://zerodha.com/varsity/chapter/supplementary-notes-1/
which timeframe chart should be used to find candlestick patterns in intraday trading ?
I’d prefer either the 10mins or 15 mins candles for intra day trading.
Karthik, for intraday trading, if 9 period ema crosses 21 period ema on 5 min chart we can buy and be in trade till crossover changes direction and come out of that particular trade. my question in at that point can we consider of entering in new trade to sell and square off later when ema crossover changes direction again? and keep repeating it whenever we get signals? or is there something that we should go long only or short only based on some other signal or conditions?
Yes, you can trade the averages…works well as long as there is a trend in either directions. But when the markets consolidates, the whipsaws tends to give you many trades with none of them materializing.
can u PLEASE add SCREENER IN “KITE ” ?
Sure, will convey it to the team. Thanks.
Is there any way to filter the stocks based on technical indicator?
Let’s say, I need those stock of which 20 EMA has crossed 44 EMA. What would be the query for this strategy?
Yup, check this – https://www.youtube.com/watch?v=uZmZ51k3pPk
Double Exponential Moving Average is there in kite or Pi?
I’m afraid not. Also, I’ve not really heard of a double MA. Is it a custom indicator?
The formula for DEMA is: DEMA = ( 2 * EMA(n)) – (EMA(EMA(n)) ), where n= period. Double Exponential Moving Average (DEMA) is a smoother and faster Moving average developed with the purpose of reducing the lag time found in traditional moving averages.
If Zerodha introduces Double/Trible EMA, it will be great for traders . Thanks in advance
Double Exponential MA Formula: D-EMA = 2*EMA – EMA(EMA)
Triple Exponential MA Formula:T-EMA = (3*EMA – 3*EMA(EMA)) + EMA(EMA(EMA))
Ok. I’m not sure if we can have this in Kite. However, you can use the exper advisor feature in Pi and run your own custom indicator. Check this – https://zerodha.com/expert-advisors/
MA Crossover seems to indicate a trade very late. Please refer chart of DLF. It is moving up since 27th Dec 2016 when its price was INR 102. Today it have moved to INR125. DMI also says that it is in a trend. But still 9-days EMA hasn’t cross 21-days EMA. Most probably it will cross tomorrow i.e. after price moving 20%!
Yes, you are right. In fact, for this exact reason the moving average is considered a lagging indicator.
karthik please make some arrangements in kite so that we can increase the thickness of movingaverage lines as per our requirement right now it is very thin and we can not increase the thick ness what is happening is we can not see proper with such thin line with other indicators such as ichimoku trading system along with moving average.please do it its a request
Venkat – when you hover over the line, it automatically thickens. Have you tried this?
and another request increase the colours choices in kite of all indicators which is restricting a lot and confusion goes on with less colour choices. thanking you.
Sure, will pass on the feedback.
good morning karthik sir, i have a doubt regarding MA crossovers..
1. first of all is period in intraday 1min chart while applying crossover means 15mins only?
2.im using 1min chart for intraday with 15mins x 30mins crossover…i checked for different stocks after the markets are closed and found out that the indicator is generating good profits for the 1st 1 to 1.5 hrs after the markets are opened..as you said it is not giving good results in sideways markets. now my doubt is when i checked on the live market im not able to plot the graph till 10 ‘o’ clock or more than that showing an error msg on pi which is causing loss of profit in the uptrend market. At 10 ‘o’ clock im able to plot the graph with 15mins EMA and at 10:10 im able to plot 30mins EMA. how to overcome this problem. if i use lesser time frame im not able to get accurate signals… pls give me solution for this
3. yesterdays with INFRATEL stock im able to get a profit of 12000 on paper 🙁 for 1 lot of JAN futures. the profit can be increased to 18000 if i able to get in the market at 9:30 to 9:40 but im only able to get into the market between 10 to 10:15 due to not able to plot the graph.
4. im able to plot the graph at 10:00 and the graph is showing EMA line from 9:30
hello karthik sir….i think i found a solution for my problem on my own…pls tell me whether it is right or wrong…if i take 1min chart from yesterday itself then i will get correct signal to enter into the trade in fact i can enter into the market at 9:15 or 9:20 itself…for eg for todays market i will take 1min chart for yesterday itself..am i right sir.. 🙂
Somewhat, I posted a reply to your earlier comment.
The periodicity can be anything – ranging from 1 mins to 1 day. If you opt for 15×30 mins…then you will have to wait for 30mins for the data to generate.
hello karthik sir…i have another doubt pls dont get angry on me…this may be silly math doubt but my is not able to agree for this
YES BANK is trading at 1168 at 9:20 this morning and at 11:10 first EMA crossover too place and got sell signal at 1188 (im not using expert advisor sir…im observing the ema line move and when it crosses i sell)..for 1 lot of jan futures we get 14000 profit and after 1.5hr again we get the same buy and sell signal which gives profit of 23per share total profit will be 29400… sir do we get such huge profits on investment of 40000 using EMA lines…is it safe trading with EMA during trend…im not able accept the fact that we get such huge profts…pls help me
It really depends on how when you manage the trade. There is a big difference between paper trading and actual trading. Things appear to be in control when you paper trade…but with an actual trade its easy to lose control. However, a good trade aims to be indifferent to the two. Its hard to achieve this state…but one can.
sir can you be ore specific about the difference…i am a client of zerodha form 2013..im somewhat used to trading on live platform but i used to trade without using any technicals…so i ran into losses so i thought i should learn and then trade…so i stopped a year ago and i found varsity in last december it helped me a lot…ive gone through all the chapters..im able to understand and visualize while reading…even though i have a little experience trading on live platform still will i find difference… l will try to achieve the difference and thanks for your support sir.. i bow to you
When you paper trade, you are emotionless. Even if you make a big loss, deep down you know its not real. But when you trade in real markets, a small loss to give you big pain. This make a big difference, as it can influence you to take irrational decisions.
Good luck Chaitanya. I hope you find success soon.
Hi karthik
sorry to say u that i m really stuck in between the course I was so eagerly studying as at the crucial points I cant see any charts mentioned by u. I m refering to my mobile pho e. Kindly let me know if there is way out.
thanks
Mehul – some of the graphs in the comment section may not be visible (there was an update which messed up the images in the comments), but the graphs in the main chapter is.
Or if u can suggest any good book to refer on TA where all the aspects are covered
thanks
Which aspects are you looking for Mehul?
Hi karthik
Got the problem solved
Can see the charts
Kindly ignore the above msg
Thanks
Great!
what period ema should one use for daily and weekly charts?
No set rule here, Hemant. For short term, I use 9 and 21 period EMAs.
Dear Karthik,
Amazing Modules..!!!!
I have one question –
What role does OFFSET plays while looking at MA charts?
Thanks Shubham.
Offset is used as a smoothing parameter. You can ignore this.
What is the difference between trend strength and momentum of stock? Both basically mean the same.
Yup, both are the same.
Sir, Is it necessary to set up moving average on the basis of closing price?
It is better on closing prices, but is not mandatory.
Will it be stupidity to trade in sideway market chart with crossover method?
You will have multiple crossovers, hence too many buy and sell signals.
hello Karthik Sir… I may be wrong but in my opinion single EMA is more beneficial than crossing over two EMAs because as per charts we are getting crossover(many times) in the end of the trend or at higher point. Your words on this will help. Thank u..
Using two EMAs will help you identify longer trends and reduces the number of false trades.
In above charts all the averages giving buy signal after the market is already up and giving sell signal after the market is already down, why?
Wouldn’t it be difficult to take decision when to enter and when to exit?
Averages is a lagging indicator, Ayush. It confirms an existing trend.
Dear sir
How to set up smoothened moving average 3,8,13 ( allegator indicator settings ) in Zerodha PI or in kite ?
Select the indicator study and edit the settings.
Other moving averages are there. But smoothened moving averages are not there, I think. Please confirm. I think it is not possible to put the indicator of smoothened moving averages.
Are you taking about these indicators in Kite?
From the very beginning I read all chats on this moving averages forim
Lot of moving averages values time frames shared
As a filtered one can you please tell me which Ema values and which timeframe
Best for index, equity stocks and commodities
Kindly mention time frame for doing intraday as well one or two days holding
Also best settings to trade on moving averages
Thanks lot
Sreeram, as you may have realized there is no such thing as the best EMA/SMA. One has to calibrate it to suite the time frame and stock (index) that her or she is trading. Having said that, I think for intra-day 9 minute EMA works for me…and 21 day EMA for overnight positions.
Dear sir, excuse me for asking further
I like to know settings in Ema cross over
Is it good to use ema9 and ema21 cross over in 5 min charts
For doing stocks and commodities
Let me know whether it can be done same 5 min commodities
Thank you very much
Yes, its applicable.
Thank you very much sir
I have a strategy which is shared by a trader in Fb
Ema 9 crosses above 21 , we have to check Candle high value of the buy arrow candle
That high has to be broken on the following any one candles before reverse signal
If rule satisfied enter a buy in next candle open price
Stop-loss 0.5 percent below buy price
Once stop-loss hit, wait for sell entry
No re entry in buy side again
Similar for reverse trades
Can you suggest me this strategy is profitable
I’m not sure, Sreeram. You need to back test this extensively before using it in the market.
Sir ,
You mentioned 15 * 30 mins can be used for intraday and more aggressive trader 5 * 10 mins.
I am bit confused here…
you mean to say in 1 min chart ,we need to use 15 ema and 30 ema cross over or 5 ema and 10 ema cross over?
I prefer to use 5 mins,10 and 15 mins charts for intraday.
Please suggest what ema cross over we need to used for above time frames?
You can use any time frame and apply these averages. Shorter the time frame, more number of signals and higher is the noise component. Higher the time frame, then vice versa.
Hence, moving averages help better for those who mostly invests for a long term purpose and for a short term purpose we can use candlestick methods with volumes for better result.
Am i right?
Yup.
firstly i thanks very much for your insightful modules. secondly, trading in crude oil is baffling me. it seems that there is no strategy trading in crude oil. whether 9×21 ema crossover works or any other strategy. pls help and post some strategy of trading in crude oil intraday
All TA patterns are applicable on Crude as well…so try resorting to good old charts 🙂
pls suggest whether 9×21 crossover works in crude oil trading
You can apply the moving averages, however you need to backtest to check if it works well. Good luck.
I am looking a chart on Kite and have got a 50 SMA drawn. Please let me know, how can I see the value of SMA at any particular point.
Please enable the crossair and move along the curve, you should be able the see the value on the right.
Thank You Sir 🙂
Welcome!
Very clear and useful Sir.
Cheers!
Is it possible to plot 30 min and 15 min ema in zerodha kite?
Of course it is possible. You can watch this for now – https://www.youtube.com/watch?v=5M232FaN5Ks&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1&index=10&t=9s , we are soon replacing this with a new video.
i want to place 4 hour or 5 days moving average on 5 minute chart in kite ,how can i do this
To see an hourly moving average on a 5 minute chart, you need to multiply by 12 (60 min in hr divided by 5 min candle) so this will be around 252 and it will need to be entered into the moving average value box on the 5 min candle chart, Hope this helps.
252??? i think for 4 hour ema on 50 mi chart it should be 48 ema .(60 mi *4 hours=240 mi/5mi=48), & anything for 5 days eod ema on 5 mi chart in kite
Instead Of Crossover Can Traders Use Only 50 Day EMA? Considering That The Price Closes Above 50 Day EMA And That Too Pretty Much In The Support Zone With Almost 50% Extra Volume Than It’s 10 Days Average Volume?
Yup, that is possible.
Hello sir
How could we add moving average on volume chart in Kite or Pi?
Suggest you drop in email to [email protected] , he will be able to help you out. Thanks.
Hi, I have been following these modules and they are just great. The explanation and examples are simply amazing. I have a little doubt here and I guess I am totally confused with the below information…
Rule 1) – Buy (fresh long) when the short term moving averages turns greater than the long term moving average. Stay in the trade as long as this condition is satisfied
Rule 2) – Exit the long position (square off) when the short term moving average turns lesser than the longer term moving average
From the graphs it appears that it is profitable to go long when short term moving average is lesser than the long term (because share prices are low) and square off when short term goes higher than the long term (because current prices are higher). What am I missing?
Crossover of moving averages gives you more conviction for the ensuing trend. When the short term MA is lower, the chances of the trade going sour is higher. Hence its better to wait for the crossover.
Hello sir
I have a little confusion in moving average. When we analyse day chart and use 50 MA it means we are using 50 days MA. Now when we are using 5 min chart for intra day and using 50 MA, what does 50 stand for? Does 50 MA mean past 50 min data or 50 sticks each of 5 min?
Varsity student
Thank you 🙂
It means you are looking at the average of the last 50, five mins candle 🙂
So generally speaking, if you are looking at last n period moving average for x frequency, then essentially its the n period moving average of the last x candles. Hope I dint confuse you with that!
If the frequency is 5 min and i am looking for 20 MA it means 20 candle sticks having 5 min of frequency. Right? And if it is true then i am looking for past 5*20= 100 min data?
What i want to say is if i am using 75 MA for 5 min candle stick , i am looking for last one day data, for 150 MA i am looking for last 2 days. ( No of 5 min candle sticks in one day= 75)
No, as I said it is not a straight forward multipication. In this case the system will calculate the average closing of that last 75 data points and plot the value on 76th day.
Yes, you are looking at 20 period average 5 mins candles. No, 5*20 does not mean 100 min data. This is not a straight forward multiplication.
Hello Karthik,
Is EMA is available on Kite ? Since i did not find anything like EMA on Kite there is just one thing available called Moving Average, if it exits on Kite can you please tell me from where to access it?
Of course its available. Load a chart, select Moving averages from studies and change the type to exponential, and you are good to go 🙂
Thank you .. now its perfect..! I have been doing some thing similiar.. Now more smooth with Expo
Good luck, Prashant!
Hi,
In Kite I can see Moving averages as a study but in Pi all I see is moving average envelope. Why is the difference?
They are two different charting engines, Ankit.
Hi Karthik,
Thanks for your response, but could you explain a bit more about the engines and does that mean Pi will not be able to show EMA?
Charting engines are programs which power charting on trading platforms. EMA does work on Pi.
First of all thank you very much for all modules which is highly informative. However, I would like to know if there is Demo account for trading practice and video classes for this technical analysis.
Thank you Karthik for the support.
Thanks for the kind words, Nishitha. Unfortunately, there are no demo accounts. But we do have a ton of videos on our youtube channel. Check this out – https://www.youtube.com/user/zerodhaonline/playlists
YOU CAN TRY NSE PATHASALA FOR MOCK TRADING PRACTICE. I FIND IT A GREAT TOOL TO KNOW HOW WE ARE GOING TO PERFORM IN REAL LIFE TRADING. LINK IS THERE IN NSE SITE
I’ve heard good thing about NSE pathasala too 🙂
The content is great and way it is presented is impeccable. I thank you for creating such an enriching resource. Can you please tell me which tool do you use for plotting? I will be grateful.
Thanks for the kind words, Raghav. I use Zerodha’s Kite platform for charting.
Sir, I trade in mcx metals mostly I use 15 minutes chart.. I want to ask that is it possible to trade in 1day candle basis.. Is it safe to enter a any intraday position
You can look at EOD data, in fact, if you ask me this is a better approach.
Sir how to write script for triple crossover 15,21,34, to get alerts or to backrest? Can u please guide..
*backtest
Sir What is EOD data?where I can find it?
End of day data is called EOD. You can see the EOD data on kite itself.
Sir I want to ask you a question personally that sir I made a lot of loss in this day trading I’m not good at it but I learned all technical analysis indicators and all by help of zerodha varsity but still I’m in loss, sir I’m very beginner in this market most probably 6 months.i’m 22 years guy . But my capital Is all about to end I’m struggling sir from 150000 lakh rupess now I have only 30000 rupess.. Sir can you tell me that how can i recover my capital any strategies.. Please sir please help me to find a right way.. My email Is [email protected] sir if you want then you can pm me or you can tell me here.. Please sir
Sourav, I’m really sorry this happened. My guess is that you have over traded without a proper thesis. Recovering 1.5L from 30K is a huge task and I’ve explained why here – https://zerodha.com/varsity/chapter/position-sizing/
I’d suggest you take a break, get your act right and then approach the market with a fresh mind.
Thank you very much sir. I read very carefully those information you gave me.. I exactly did same as poker game.. Now I understand thank you for that information..
Good luck, Sourav!
excellent writing and explanation for beginners in trading. of all the material I read its the best!
Thanks, Gautham!
Hi Sir,
The moving average study given in zerodha is simple moving average or exponential moving average?
Thanks,
S
Both.
Dear sir,
in this chapter you say 15×30 minutes cross over for intraday. but in MA the minimum period is 1 day how can we fix 15×30 minutes crossover or 5×10 minutes cross over.
You can select 15 and 30 MA frequency from the drop down.
Excellent explanation on SMA & EMA I read first time for average trading. It clears all my doubts
Glad to know that Jitu 🙂
Happy learning.
Hi Karthik
I understood that MAs are good indicators for going long on a stock. Does that same hold for shorting too? Is it a good option to short when short term moving average goes lower than the long term moving average?
Also, I am new to trading so I wanted to understand how exactly going short works. In a call, we have the actual possession of the stock, and we can sell later whenever we want. But in shorting, do we have to compulsorily close the trade the same day itself? Or is it possible to carry it for 2-3 more days/weeks?
Yes, it does. You can use MA to short stocks as well. I’d suggest you look at the explanation on shorting here – https://zerodha.com/varsity/chapter/commonly-used-jargons/ and then here – https://zerodha.com/varsity/chapter/shorting/
Hello sir,
In 9×21 ma, if 9ma is already above the 21ma.. How to decide the entry then?
As the stock is in uptrend cause its 9ema is already 21 ema can u pls suggest when to enter
You will have to wait for the cross over to occur.
how to set multiple moving average like 50, 100, 200 in kite?
Check this – https://www.youtube.com/watch?v=5M232FaN5Ks&index=10&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1
EMA lines when viewed through charts on KITE on desktop , are very thin and almost not visible . Why don`t you give us an option to increase the thickness of the line so that they are always visible boldly . When the same EMA line viewed on Android mobile, thickness of lines is OKAY but would like it to be bolder / thicker — Kindly give us the option of selecting line thickness on desktop & mobile
The lines are quite thick already, anything thicker than this can get quite distracting. Don’t you think?
Issue is when you choose multipe EMA and give multiple colours,
For single EMA , line becomes bold when you hoover mouse above it.
Difficulty is when having 2 or more EMA`s I cannot hoover my mouse, above all EMA`s simultaneously, to check crossovers
On desktop its not visible properly even when you enlarge the area
On Investing.com website , see how they allow you to increase line thickness as per your need. Its an excellent idea
Got it, will pass on the feedback to Kite team.
I have shifted to Zerodha recently, as it was recommended by one of my friend. Main reason was the flexibility it allows and this study material, which is simple to understand for a novice trader like me. Thank you for this study material.
I have one question on EMA. This tool seems to be a effective way to decide on trades. However, is it available in Zerodha account or it needs to be purchased separately. I mean unless I have the chart, I will be unable to decide on trade. OR is it that I will have to manually calculate and plot graphs in Excel. Please guide.
Thanks for the kind words, JD Thakar!
EMA is an integral part of the charting engine in Kite. No need to pay for it. I’d suggest you look at videos on Kite here – https://www.youtube.com/watch?v=1Jy23XfKwG8&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1
Hi karthik,
5 days EMA is calculated as by taking closing price of 1st,6th,11th,16th,21st/ 5 (assuming there is no holidays in between ). Am i right????
It’s calculated taking the latest 5 days closing average.
One should prefer SMA crossover system or EMA crossover system?
And for exiting signal while using EMA crossover system when should one check the chart like end of the day depending on the closing price or should check from time to time during the trading day and exit the trade depending where the current price is??
I personally prefer EMA crossover on an EOD basis. However, if you have a trade live, then tracking it during market hours helps in better management.
for the intra day study the 9×21 , so here 9 and 21 in the day only? right? EMA unit is only in days right? hope i unestand it right
If you load 9 x 21 on an EOD chart, then 9 and 21 will represent days….however, if you plot this on a 5 min chart, then 9 and 21 will represent 9, 5 mins chart and 21, 5 mins chart.
thanks for the reply. but can u please explain what is it.and what is offset or and field. and why i set to EMS then it is automatially set to SMA only? thanks in advance.
Ah, I’ll try and put up a note on this shortly, Himanshu.
Mr Rangappa
Your observations are very good a person will never make loss if he follow this system in trading ,i am using this 30 to 50 hourly time frame even he will have losses it will be recovered very soon but one support he must take is of fractals ,and ADX and DI crossings .
Thanks for what you have written here .In my opinion this is one of the best methods of trading .
Your opinion on fractals and ADX DI indicators in Kite zerodha it is doing fine.
Thanks
sunil kumar minz
Happy learning Sunil. Remember, there is no foolproof trading technique – always watch out for risks 🙂
Stop loss is there to cover risk,here fractals comes to play and ADX indicator ,that,s my question for you i just wanted your opinion in using these indicators as your total article on moving averages is very very help full and superb.Because i want to enhance my lots with 10 to 15 lots of nifty and bank nifty futures,i wanted your opinion.
Thanks again
I’ve heard about fractals, but have no experience trading based on that. So I’m not sure if I can give you any meaningful inputs.
Thanks
Cheers!
I have a question on the EMA cross over strategy. When the faster moving EMA has crossed above the slower moving average we will create a long position. When the faster average moves below slower we square of the position.
After squaring off do we create a fresh short position at that point ?
You can, in fact, many active traders do – it really depends on your capital and risk appetite.
Hi, I have Query.
so for the “50 day EMA with 100 Day EMA” (Few months) and “100 day EMA with 200 Day EMA”(long term) in these scenarios we can only go long, Right? Thanks
You can always change the time period!
Hi, how do I add EMA (say 50,100 or 200) and volumes info. in the Charts in the Kite. Thanks.
Load the moving average, select the ‘Volume’ in the field section instead of the default which is ‘open’.
Hi, What if 50, 100, 200 EMA never intersect for almost a year. what does that signify.(example Dilip Buildcon)
Well, that means the stock is trending and there are no signals to trade. The only option is to reduce the frequency and look for shorter term signals.
Hi, Suppose I have gone long when the faster EMA crosses and is above the slower EMA
How does one determine the target price using the “Moving average crossover system” for example “9 day EMA with 21 day EMA” or “50 day EMA with 100 Day EMA”. Thanks.
If its purely a MA crossover system, then you will have to wait for the reverse to happen i.e wait for the faster to move below the slower MA.
Thanks. Really appreciate the effort you and your team are putting in. Please keep up the good work.
Cheers!
Hi Karthik,
This chapter has been quite an eye-opener for me. At least, now I am confident that we can create good trading systems. I have been backtesting MA crossover system and it seems to give good results for many stocks on NIFTY. Yes, whipsaws are there but then it also lets one ride on rallies. Thank so much.
My question, how does one set a stoploss and target while placing orders, say on a Zerodha platform like Kite?
Unlike candlestick patterns used with Support/Resistance, the MA crossover system in advance doesn’t really give us any target or stoploss. How do we approach this situation then?
Does Bracket order make more sense to be used in this trading system because it has the option to add a trailing stoploss? Even, with trailing stoploss what should be the approach to set a target in advance if we aren’t able to monitor the chart minute by minute?
Nishanth, you can always use S&R for identifying target and stoploss. Also, the idea with MA is to follow the trend, given this, there is no way you can identify a target or stoploss. You just ride the wave, as long as it lasts.
BO makes sense if you doing intraday.
Hi There Mr rangappa
In my viewpoint larger time frame MA crossover works fine for investments and especially for stocks e.g. 50 day and 100 day or 20 day&50 day.while for trading purpose 20 hourly and 50 hourly for trading . your opinion,please.
Yup, I agree with you.
Thanks
This type of support gives moral booster that i am not totally on wrong side,as i am doing fine with my trade and investments,losses are inevitable but small losses and big gains should be, our motto.
True! Good luck, Sunil.
Congratulations zerodha team and many many thanks.
You guys are so prompt in updating the e kyc parameters amazing really fantastic .I updated my aadhar updation today it hardly took 5 minuts to complete it ,you guys know how to do things .Though this not the right place to write such words,but z connect is not updated since 17th aug,17.
Thanks again.
sunil kumar minz.
Sunil, thanks for the kind words, I’ll pass that compliment to our beautiful technology team 🙂
Lots of work getting done in the background, Z-Connect will be updated with all that info soon.
EMA CROSSOVER WHICH IS BETTER FOR SWING TREAD.
I’d prefer EMA crossover for overnight position panning across multiple days.
Hi Sir,
for intraday what is best settings for MA, EMA, Supertrend? Which indicator is better to use for intraday?
I’d suggest you stick to EMA. My personal preference is 9 over 21-minute candles.
Hi Karthik
Back with another query, Please correct me. The below details for EMA cross-over
1. Intraday – 9x 21 day EMA on 10 or 15 Min Chart look back of 3 to 6 months
2. Swing Trader – 25 x50 day EMA on 1 hour chart with look back of 3 to 6 months
3. Short term – 50×100 Day EMA on 1 day chart with look back 1 year
4. Long term – 100×200 day EMA on 1 week Chart look back 3years+
Also is it possible to add MA on Volume chart in pi.
Thanks & Regards
1) Intraday – 5-8 trading sessions is fine
2) Swing trading – EOD is good, at least 3-6 months charts
3) Yes
4) Yes
Thanks Karthik 🙂
Cheers!
Hi Karthik,
We have interacted on another forum as well.
Would appreciate if you could furnish me with the tradescript code for calculating DEMA and TEMA. I have the formula but I am unable to compile EMA of EMA i.e. EMA(CLOSE,EMA(CLOSE,50)) in Pi. The argument required is ‘periods’ but I guess the EMA(CLOSE,50) returns a vector. Is there any math function to convert the vector into integer (or period)? I went through the tradescript guide but in vain. Or is there a direct DEMA/TEMA function that we can access? Any help would be highly appreciated. Thanks.
~Abudhar al Hassan.
I’d suggest you email my colleague Srini for this – [email protected] . Thanks.
Did that. Thank you very much.
~ Abudhar al Hassan.
Good luck!
karthik for crudeoil trading what ema crossoverwould you prefer for 15 min,1 hour,daily timeframe
15mins would be good for intraday.
karthik i am asking ema crossover values for above question
Got it. I think the 9 and 21 over 15M EMA will be good, at least for a start.
I’m using 9 day EMA with 21 day EMA for intraday. I need your suggestion what is the time frame along with this should be used.
Thanks for the material and this helps me a lot.
Try the intraday chart of 10 or 15 mins for the last 5 trading sessions.
Can you elaborate what does trading sessions refer in above context
The times when markets are open is referred to as a trading session. For example, we have 5 trading session, Monday to Friday between 9:15 AM to 3:30PM.
karthik build some strategy upload page so that traders can benefit from it..
Sir Which is the Golden Cross Over?
I Have Asked Many People and Each One has a Different Answer For the it.
A golden Crossover is when a 50 day moving average crosses over a 200-day moving average.
Hi Karthick
can i use this MA cross over for Crypto currency also? What is your advice as cryptos are very volatile?
The basic premise of TA is that it can be used on any asset which has time series data, so given this, you can apply TA on Crypto, in fact, I’ve seen people using TA on Crypto. But the swings are wild and your stoplosses / target needs to be deep.
Hi Karthik, Thanks for educating us.
I have one query. I trade in crude using 30 minutes mostly for intraday (Sometimes 1 to 2 days). is it ok to use 9 * 21 EMA and what difference does it make between using 15 minutes chart v/s 30 minutes chart. please explain
Yes, 9*21 EMA works, however, I’d suggest you do your backtesting once. Generally, higher the time frame better is the quality of signal…hence I’d prefer to use the 30 mins versus the 15 mins chart.
Hi sir I just wanted to know can we do intraday trading for new issued IPO in the market i.e the same day on which it was listed.Could you help with that? Do we need to subscribe the IPO beforing listing?
Yes, you can trade intraday once the stock is listed on the exchange. Just make sure that the stock doesn’t belong to Trade to Trade category
sir can i use ma 5 or 10 or in 1min chart?
Yes, you can.
Dear Sir,
How to apply the 5 X 10 Minutes cross over in KITE platform?
All you need to do is to load two moving averages on the same chart i.e the 5 and 10 mins chart. Once you have these on the charts you will know when the crossover happens.
Hi Karthik – it is said that MA system works in trending market. Does it matter whether trend is up or down with respect to trade signal? I mean suppose stock is in UP trend but stock price cross EMA from +ve to -ve(may happen once stock made top), should we go for shorting?
Not really, MA system just confirms the trend – and the trend itself can be an uptrend or a downtrend. You can short provided you have the staying power – cause the trend can last for few weeks.
The plain vanilla single MA seems to be more profitable than the cross-overs.
The crossover lags too much and the sell signal in the above charts is more or less near the buying level or even lower sometimes.
If we look at the price level when those cross-overs took place we don’t really see cross-over making any sense.
Is it just the above examples or this is the inherent issue with crossover strategy?
Agreed, especially if you have the stomach for sideways movement.
Lets say my trading rule is to exit if the price traces back to 30 EMA. Now next day split is announced say 6:35. so the price opens below 30 EMA, but i know that this is not a retracement but due to the split. So how should i discount this factor and adjust my exit strategy? If you can give any new idea?
For this, you need to look at the split-adjusted (or bonus adjusted) charts.
where can i find bonus adjusted chart for split adjusted chart?
Your charts will be adjusted for it.
Dear SIr,
Presently i am using kite version 3 for trading but I am unable to set time frame of 15 min (EMA) in as it has least count of 1 day.
Plz help.
Not really, Nitish. Load the chart for 15 mins and overlay with MA, set the period as 15, and you will be good to go.
Hi Karthik,
Can we use this system for only going long or can we also do shorting as well using EMA’s
You can use this for shorting as well, Satish. But works best with futures.
dear sir
how do i draw emacrossover on kite
Hello sir, in one of the discussions you have mentioned to set trailing stoploss based on smaller moving average, Can you relate the same for crossover of 9 x 21?
Sorry, not really sure what you mean by this.
in a discussion you suggested to use short term moving average to trail the stoploss to lock profits. So in a 9 x 21 crossover system what could be the short term moving average that could be used to trail stop loss Sir?
The 9×21 EMA is quite a short term already, not sure if deploying another MA on this system is justified.
I am very new to share market Sir, varsity inspired me to trade Sir. While backtesting I found that it is difficult to test a strategy with stoploss and trailing stoploss, so my question is ‘Is there any quantitative way to fix stoploss and trailing stoploss for MA crossover strategy?’
Check this – https://zerodha.com/varsity/chapter/volatility-applications/ , volatility based stop loss.
Hi Karthik,
I have a question regarding the trade setup while only relying on the cross-over MA trading system. Suppose, I’m interested in a short-term trade, thus using a 9 x 21 EMA. I take a long position when the 9-EMA breaches the 21-EMA. What would be the trade set-up at this point as the market would be higher than the intersection point of the EMAs?
Suppose, the market is trading at ₹107 and the intersection points of the two EMAs is ₹102. Would the following trade-setup make sense?
Buy at ₹107 (the market) and the stop-loss at ₹102 (the intersection point).
Yes, buying at 107 with 102 as SL is perfectly valid. Also remember, MA is a lagging indicator, hence the signal to buy or sell is always delayed.
Thanks Karthik.
I backtested this particular algo on Streak and didn’t get good results.
Scrips – SUNPHARMA NSE, ICICIBANK NSE, ITC NSE, INFY NSE, RELIANCE NSE
Initial Capital -10000000
Quantity – 100
Stop Loss – 1%
Target Profit – 0.5%
Order Type – MIS
Candle Interval – 1 Hour
Algo – Buy when 9EMA crosses over 21EMA and exit when 9EMA crosses down 21EMA.
I don’t see good results for the period – 27/2/2017 to 26/2/2018
All of them results in losses. Any way I can improve this or can you shed more light on this algorithm and how to use it correctly. Thanks.
Firstly, a SL of 1% against a target of 0.5% is not a great idea. The risk-reward just does not match. It should be the other way round.
Although I admire MA for its simplicity, I’d also suggest you overlay this with candlestick pattern.
How to plot 15 by 30 minu
How to plot 15 by 30 min crossover?
In a Kite chart, click on Studies, search for Moving Average and enter the period as 30.
Repeat the same process and enter the period as 15. You can choose different colours to recognise the crossover
Hi Karthik
First of all, heartfelt thanks to you and Zerodha for introducing us to stock trading fundamentals in such an informative and lucid manner. I had a query on MA – volume charts on kite are in blue and red unlike the all blue charts shown in demonstration. Now as you told volumes correspond to the number of shares bought not sold in a time period so how do we track in dual coloured charts -what does the large red coloured bars reflect – high volumes of selling and thus smart money exiting … is it? If not, can we switch to single coloured volume charts on zerodha.
Please guide. Thanks in advance.
The colour of the volume denotes the price action on the stock (if the close is higher than previous day’s close, it is a blue bar, otherwise red) for that timeframe.
Hi karthik, I have a little doubt, I would like you to clear it please.
My Question is – It is mentioned that faster moving average i.e with shorter time period is more susceptible to the new data than the slower moving average or with larger time interval but I am not able to find the mathematical proof behind this, I even tried to to proof by myself but no luck. Would you give me the reason behind the assumption ?
Pankaj….do this. Take a random data array of 30 data points, plot 9 and 21 day moving average. Include a large data as 31st data point and see how both the averages react.
Hi Karthik
First of all let me thank Zerodha Team for providing excellent technical information & thank you also for giving replies on all queries patiently, just now I have gone through MA chapters based on which trade can be initiated at crossovers at different time frames,say 15 – 30 mnts time frame with 9EMA X 21EMA for intraday then what should be target & stop loss points based on different MA cross overs? because a full time employee may not find time to watch position continuously !! after trade is initiated stock/index price may rise and come to back to same price where trade was initiated or even it can go below that also in that case that there may be huge loss if trade is in futures ,just for time being let us ignore profit /target but what about losses then how to avoid /arrest such big losses which can happen within minutes due to any unforeseen market conditions?
I hope you will reply me with best solution for the same.
Thanks for the kind words, Bhoopal.
The moving average system you are talking about comes with its own sent of stoploss and target. YOu just have to follow the crossover on the two lines and follow through, and the system will guide you when to enter and exit. In fact, all trading systems come with their own SL and target.
The stoploss and target is applicable when you trade based on candlestick patterns or any other price charts.
Hi Karthik,
Thanks for your reply ,but still I have some doubt for example “x” stock opened @ Rs.500 whose high & low prices were Rs. 520 &Rs. 510 respectively on 15 mnts candle time frame and later crossover was happened at Rs.515 at which I have initiated the trade, now should I fix SL as Rs.510/- based on previous candle low & target as per EMA next crossover ?
Pls clarify & I will be grateful to you if you can cite an example in your reply based on MA crossovers.
It is best that you follow the MA trend and accordingly exit the position(either Stoploss or Target) when there is a reverse crossover.
If your having issue with actively following the positions, you need to develop a trading system with a different indicator that gives you a fixed stoploss that you could set while setting up the trade (possibly Fibonacci retracement lines)
I am using 3 min chart, so please tell me which one is best setting for crossover moving average and which setting neet to be require like simple, exponential or etc..
Amit, 3 mins is too short according to me. Please try 15 min at least.
Hi, Can anyone explain weighted moving average (WMA) ?
Will try an include a supplementary note on this. Thanks.
Hey, Greetings of the day!!
In all the above mentioned trading systems (especially crossover EMA), considering a stock whose prices fluctuate frequently, by the time the shorter EMA rises above the other, the prices would already have risen considerably. Aren’t we missing out on chances of booking higher profits already.
In most of the cases in the above graphs, the prices have been hesitated while the shorter EMA is above longer EMA.
Yes, that’s the reason this is called a lagging indicator. The reason one would trade using these systems is to capture a part of the larger move…and not the entire move.
Is there any was to set positive moving average and negative moving average with different colors in Pi. (By positive moving average i mean suppose we are on daily chart if 20d moving average for today is more than the 20d moving average of yeserday.)
Ankur, isn’t it easier to read the movement by looking at the moving average line itself? If it has moved up or down from yesterday’s candle
How do I make a EMA crossover system in android kite app? Is there any way I can set targets using this mechanism while doing intraday trading? I wish to use 50 and 100 EMA crossover with 1min points?
Himanshu, you simply have to overlay the two averages on the price chart. Alternatively, check out https://www.streak.tech/
Hi Karthik
Few doubts —–
1) Does intraday trades have slightest of an impact on the stock prices or they are purely governed by delivery based trades ?
2) If I place an intraday order and convert it to delivery by the end of the session, will it highlight in the overall volume for the day?
3) Was shorting banned during the 2008 global crisis ? If yes then was trading in F&O banned too ? (Little out of the topic I Know)
1) It does have an impact and contributes significantly to the daily volatility
2) Yup
3) No, it was not.
On studies box which one should be taken for the moving cross over system?
You need to select the moving averages.
Sir,
What is the difference b/w linear weighted moving average and exponential moving average,, And i cannot find linear weighted moving average on kite.
Ah, I’m not sour linear weighted MA. I need to figure this out myself. EMA gives more weight to the recent data points as opposed to the older ones. So in a 10 day EMA, data points of 7,8,9, and 10th day is given more significance as opposed to 1,2,3,5, and 6th day.
Excellent module and response karthik. Does trend matter in crossover MA system. If sort is placed where slower MA crossed faster MA , at that point trend needs to consider or not?
In fact, MA is an indicator of trend. So if there is a trend, the MA will let you know.
To use the exponential moving average crossover between 9 day EMA with 21 day EMA ( upto few trading session) and 25 day EMA with 50 day EMA (upto few weeks) what should be the duration of candlesticks ? Should it be 15min or 30min or 1hr or 1 day ?
If you are using intraday, I’d suggest you use 15 or 30 mins. Else EOD for swing trades.
Zerodha Team, Need your help. I went through the videos, varsity docs, but not confident yet on EMA period setting. I would like to learn about EMA period usage in Kite. Using Kite Suppose I am viewing 15 minute candlestick chart and I have applied two EMA as
EMA with period value 15
EMA with period value 30
1. Can you please tell me what is exactly happening here?
2. Does it mean I am comparing EMA (15min into 15) vs EMA (15min into 30)? i.e., 225 min EMA vs 450 min EMA?
3. How do I apply 15 x 30 minutes EMA on a 15 minute candle?
4. How do I apply 15 x 30 minutes EMA both on a 3 minute candle and on a 5 minute candle on the same chart itself ?
5. How should we calculate the period in kite for days, hours, minute on different candles say 3min,5min,1hr candle. I would like to know how the calculation works.
6. Does the calculation differs for commodity, stock options trading since the trading hours is different for mcx, nse.
7. On a single chart of say crude oil
a. 3min candle: Apply 3 day Exponential moving average and 15 minute Exponential moving average
b. 5min candle: Apply 20 day ema
How to calculate the period in Kite and also does kite support the same with both 3min and 5min candle ?
Thanks in Advance Zerodha Team.
1. You are choosing an EMA for 15 candles of 15 mins vs 15 candles of 30 mins
2. Yes
3. You apply a 15(15 minute period= 225 mins) EMA and a 30(30 minute period= 450 mins) EMA, that will perform the same task
4. You cannot apply EMAs for 2 candles of 2 different timeframes in a single chart. You can, however, use the multiple charts option on Kite and use 2 different timeframes separately
5. Equities trade for 6 hours 15 minutes, Currencies trade for 8 hours, agri commodities for 7 hours and non- Agri for 13 hours and 30 minutes. So you can calculate by dividing the timeframe with the same
6. EMA is calculated on the last ‘x’ number of candles. Non- Agri commodities will have more 15 min candles in a day compared to equity.
7. 810 EMA vs 5 EMA? Can’t really understand what you meant there
Pl tell how to get the 5 x 10 minutes moving average crossover to identify intraday opportunities. Thnx.
Please plot these averages on the price movement and look for crossovers. This should help you with signals.
For short term trading we can use candlestick data of past 3-6 months with 50 x 100 day EMA?
But which candlestick chart to use as in EOD or 1 week charts for last 3-6 months?
And for long term ie 100 x 200 day EMA we have to use 1 month candlestick charts and data period past 1-3 years?
I’d suggest EOD chart for this. For long term too, I’d suggest EOD charts.
could u suggest me some recommended and free technical analysis software (reputed) for performing ema and sma, bollinger analysis etc
I cant think of any apart from Kite 🙂
Apart from Kite, I also like chartink.com
Karthik, how about waiting for 5 minutes to confirm if the Short MA is staying above Long MA or reversing and avoid stop loss as the last chart?
5 mins can be a bit too short-term for establishing the trend, Chirag.
In the last chart, after first arrow, if we entered long, we would have lost as the price went down in spite of SMA being above LMA. What do we do in such cases??
Hence the need for a SL 🙂
What is the best time frame to trade positional, say on Friday or Monday in Bank NIfty?
How many days should I consider for both moving average?
Also please suggest a good script that I can chose from Zerodha Expert Advisors page for my above query. Thanks in advance
Try Infosys.
There is no best time as such, Viraj 🙂
For short term, look at 21/9 day average.
While reading your options module regarding choosing the right strike price, the first step was to decide my prediction of the underlying.
In case of EMA, we don’t predict but go with the flow and make profits as long as the condition of sell does not hit.
How to select a strike price in case I want to trade options using EMA Crossover system Intraday?
If the signal triggers at a point where there is ample time to expiry (like 15-20 days), go for slightly OTM options…else stick to ATM. Remember, the chances of going wrong with ATM options is low. This is assuming your analysis is right in the first place.
W.r.t. Bank Nifty, I’d consider ample time to expiry as 3days or higher, right?
‘Cos on 9th Morning (Monday) 9AMA crossed 21AMA at around 26500 and if I had purchased slight OTM 26700 if not 26800, then too would have made great money.
Yes, that would make sesnse, as long as you are talking about Bank Nifty weekly expiry.
EMA is working like a charm for me. Today almost at the end of the day, I saw on a 5 min 9*21EMA chart of Nifty Bank creating a long position. Immediately I bought a nearest ITM strike (26800) at 84 and within 6 minutes the same chart of Nifty Bank gave sell signal, made 10 points in no time.
Good luck, Chirag! Hope you have more success in your way.
As said regarding taking trades based on moving averages, that we should take all the trades which are signalled , but does the technical analysis check list applies for trading with 50 ema?
In crossover system, should we wait for both averages to cross each other either buy or sell side? Because sometimes till the averages crosses each other, the profit gets converted into losses.
Its better to wait for the actual crossover before initiating the trade, Archit.
Hi karthik,
In the kite chart, the moving average is Simple Moving Average or Exponential Moving Average?
You can choose either of the two. I’d prefer EMA.
You have written-
“Buy (fresh long) when the short term moving averages turns greater than the long term moving average.”
Here when the short term EMA turns lesser than long term, can I buy an ITM PE Call, since I know that the price will fall as the smaller has crossed the longer downwards?
The thing with MA is that it can crisscross the signal line a couple of times before the trend emerges…by which time the option may lose its value.
I am thinking of using EMA strategy only when the trend emerges in a 15min chart. Ofcourse what I earn will be very less if the trend reverses immediately but as you’ve also said, I will make big during rallies.
I am a risk averse trader and have found moving averages will suit me for Option Trading but the only problem is selection of strike price at that moment and the expiry.
1. Should I buy the next weekly BNF (not coming) expiry to reap gains of MA? (But premiums are too high)
2. Currently I take a Long position if available on Thursday or Friday for the coming Thursday expiry and square off in a day or two when the trend reverses, should I not do 1. and continue with 2.?
Chirag, if the strike selection confuses you, I’d suggest you stick to ATM options.
1) Since you are buying, I’d suggest you stick to monthly options
2) Buyers need more time to expiry, so better to stick to monthly options.
Ok then I’ll stick to Nifty 50 stocks and keep scanning them for buying opportunities of either CE or PE with strict stop loss. Thanks! Will keep you posted by August end.
Good luck, Chirag!
whats the line ” Market discount everything means”? pls explain
It means that price you see on the screen is reflective of all the known and unknow information related to the stock.
Hi Sir,
1. What is an Offset in a moving Average? What is it used for ? What is the ideal value for this parameter? ( I could see this parameter in Kite).
2.What is displaced moving average?Is it used to forecast the trend?Kindly explain in details.
Offset helps you move (displace) the moving average into the future. There is no ideal value but I see people use 5 days as default offset value. Both are similar.
Hi Sir,
What is the use of offsetting a moving average.In what way it helps in technical Analysis? How to use it ? Can u explain in detail !!
I personally don’t find it useful either 🙂
where can i get inrtaday charts like for 5mn?
bty. You are doing a very good job
Ram, its available on Kite itself.
Thannks
Thanks
Thanks Karthik for wonderful blog.
Could you please tell me,
1)Which EMA cross over do you prefer for swing trading,trade which remains approax. for 2 to 7 days ?
2) Which one would you use for swing trading,
SMA cross over , or EMA cross over ?
Thanks.
1) I’d suggest you look for 9 and 21 or 20 over 50 EMA
2) EMA
Hello Karthik,
I am adding 3 rd question,
3) Which moving average would you prefer for swing trading,
SMA,EMA,or EMA ?
I know these depends on us.
I just needed your opinion.
I prefer the EMA i.e Exponential Moving Average.
Sorry, There is no option to edit.
3)SMA,EMA or WMA ?
great sir thanks.
Googe luck 🙂
Hi Karthik!
Can I get to know whats the MACD – MA Convergence and Divergence and how it is beneficial? I understand Crossover is one of the key point of MACD. Can you explain this and why MACD isn’t included in this topic?
MACD is explained here – https://zerodha.com/varsity/chapter/indicators-part-2/
I could not find out the EMA in the studies in Zerodha…. Can you please let me know if it goes by other names
Open the chart in Kite, under the studies dropdown, look for the EMA option.
Hi Karthik
It seems you love moving averages,me too it rarely fails i will regret why in the early times i did not realized this.These days kite is slightly not giving precise information in its candle bars,and not properly works in first 2 minuts .Anyways it works fine.
Zerodha is the only brokerage firm giving such nice free classes on technical analysis Big thanks for it.
I would like to know if i combine mov.avg with ADX and DI indicator the momentum indicator
sunil k minz
Yes, Sunil, I like it for its simplicity 🙂
You can combine it, with ADX or DI to gain insights into the strength of momentum.
Reg. EMA crossover, it looks nice but one hitch. STOPLOSS. You haven’t spoken anything regarding it. If it is tight, probably one would get stopped out on a potentially profitable trade. If it is generous, risk/reward ration is not attractive. What is your view on “what should be the stop loss”?
EMA (or even SMA), is not the best indicator to identify SL, simply because it gets choppy when the stock is moving sideways . You should opt for CS patterns instead.
Hi, When you said do 15 Minutes X 30 Minutes EMA for intraday. You meant period of 15 X 30 and 1 Minute candlesticks?
I’d suggest you use 5 or 10 mins chart instead of 1-minute candlesticks.
Hello Karthik,
From INTRADAY perspective for Plotting EMA on 5 min chart I have queries below
1.what are the periods needs to be selected for both the charts so that I could see a crossover happening.
2. What options needs to be selected for “Field and Type and Offset”
3. Should EMA be used only if there is any trend observed(Up trend or Down Trend) like today as of 04/12/2018 SUNPHARMA was in downtrend . Please explain this elaborately.
4. What is the difference between Trend and Momentum . Aren’t both the same
Thank you In Advance.
1) You can start with 9 and 21 EMA on the 5 mins chart, check if this works for you
2) The field is the price. You can ignore the offset
3) EMA is a lagging indicator, it is used to identify the trend after it has gained some momentum.
4) Yes, both are used interchangeably.
Thank-you for the responses above .
I tried the way you had mentioned but i couldn’t see any crossovers happening either in 5 min or 3 min period . Multiple Crossovers happen only in 1 Min time frame.
Also how do we know if any Trend has already formed without these indicators letting us know . Do we have to look out for any other Indicator in conjunction with this which shows a clear indication that a trend has already been formed and which could allow us to take a stance accordingly.
Anuragh, I’d suggest you change the settings to see which one works for you. You can always check the rate of at which the returns vary i.e momentum to figure out if a trend is in place or not.
Dear sir,
I just started learning TA, INDICATORs.in our Zerodha Kite, I didn’t find MA CROSS OVER indicator in the studies menu. Where it’s available and at what name?
Thanks sir
You can observe the crossover when you load 2 or more moving averages on the chart.
Thanks sir… clear now…
Good luck, Dhinesh.
Sir,
Is there any Module for Mutual Funds? I mean how to choose best performing funds?
Not yet, Gaurav. We will include one.
How to find Hull Moving avarage in Zerodha?
Yes, in Kite, load the chart and select Moving average. Now under the dropdown option, select Hull.
Sir, can you please tell me more about 15*30mins and 5*10mins for intraday I’m confused what is exactly 15 or 5. And also can you tell me the best crossovers to consider while intraday trading?
It is a 15 min moving average over a 30-minute average. There is nothing like the best crossover for intraday. You will have to figure out what works for you by trial and error.
Hi karthi,
Can you let me know how we can keep moving average of 15min and 30min in KITE? I can see only days i.e. from 1,2, 3, etc.,
All you need to do is change the frequency to the desired time frame, like 15 or 30 mins. When you load the chart, the first dropdown starting from the left gives you these options.
Can u help me with displaced moving averages and how to put in kites chart
Hi karthik,
can you suggest best cross over points for BANK NIFTY OPTIONS TRADING?
Im not sure about this, Siva.
Hi Karthik,
Greetings! How to do the set up of MAs in Zerodha? I mean how do i select number of days for shorter and longer MAs for the particular stock ? will the system automatically trigger the ‘Buy’ and ‘Sell’ signals once appropriate conditions are met? Many thanks
The settings for long/short MA has to come from your own experimentation. I generally prefer 9 and 21 day EMA. If you are looking for automatic triggers, I’d suggest you look at Streak (available for free this month) – https://www.streak.tech/
Hi Karthik,
What time frame we should keep while plotting the graph for the 9X21 EMA / 25×50 EMA for doing positional trading (time frame of 10 to 15 days).
Thanks,
Manish
I personally prefer the end of day charts for this, Manish.
Thanks Karthik for your reply
End of chart means i need to keep the time frame of 1 D in the chart.
Thanks
Manish
Yes, Sir.
Thanks sir.
Hi Karthik,
Moving Average crossovers are mostly lagging indicators. They often cause stop loss to be hit.
What else do you think will give better gauge of the market before moving average.
Gourav, I personally find MA to be the most veratile system/indicator. The lag is emphasised when the stock is trending, but then when there is momentum in play, it lets you ride and book healthy profits.
Hi Kartik.. I try to follow simple strategy.. Since I am new to Intraday trading, so I have set a target of profit per day around Rs.2500/- per day and maximum loss of Rs.3000/- per trade and Rs.6000/- max loss for a day. This means I stop trading for the day if I gain around Rs.2500/- or lose around Rs.6000/-.
I trade Equity Futures and only in 2-3 stocks because I have been tracking those stocks for a long time and now I am familiar with them.
Its been a week and I have gained around Rs.16,000/- on a capital of 1 Lakh. Its too early to comment if I can make this consistently or not. I would like to have your opinion….
Do you think my money management is fine considering the fact that I am a newbie?
Also it would be great if you can suggest what should I do to move ahead from here?
The risk to reward is not proportionate…in effect, you are risking 6K for a gain of 2.5K. Lets assume you are have been lucky so far…what if you hit 10 straight loss-making trades in a row?
Yes. I understand that now.. Also I think it’s just my luck till now. I don’t have a robust strategy which is backtested.
Can you suggest how can a beginner develop his own strategy..? And will you suggest any book for that..?
Its just that there are too many strategies and trying and testing each one might not be possible.
I understand, Anitesh. Why don’t you start with the time testest ones? Like the MA crossover or the MACD+Candlestick pattern? You can also check https://streak.tech/ for backtesting your strategies.
Sir 9*21 for ema which is period and offset is it 9period 21offset or vice-versa
You can use this at any time period. I personally prefer the EOD time period, even for intraday trading.
Sir to take nism certification varsity modules syllabus is enough for it.
I think this should help.
Hey karthik,
I am new here and it was almost a brain storming session for me to read continiously till this chapter from the first chapter of this module.. but it was totally worth it. I tried to find those single stick patterns and analyse them they were of great help. I Also observed multiple candlestick patterns in various stocks and then they were moving just as you said! And the way you explained these was totally simple as well as descriptive. So thankyou for that.. clearly you have written that with all your heart so it was sooo hard to stop reading it further..
Actually i had a query in moving averages as you said one should long when the faster moving average cuts from below the slower moving average.. so can i do the opposite as when Slower moving average cuts faster moving average from below can i enter into a short position? I tried to observe it and in infosys i observed this two times in current month between 1 dec to 5 dec that if i had entered in a short position i would have incurred a loss.. eventhough the loss is quite less in both cases i.e. almost a rupee difference per share.. to be noted that i have used 9*21 chart in 15 mins timeframe… so i wanted to know your opinion about taking a short position in the exact opposite situation when you suggested to go long.. also please tell me what is EOD time period.. as i cant recall it..
Again Thank a ton for your efforts!! 🙂
Also if i entered in a long position and the faster moving average is way too high than the slower moving average hence i am in reasonably higher unrealised profits.. and then i saw some dojis or spinning tops or a hanging man or any other bearish pattern or even i see selling from the smart money and we know we should trade in the flow where smart money is moving.. but on the other side the slower moving average has not given any signal to settle the trade yet, should i wait for the moving averages to cut and provide me a signal to sell..or settle it at the time i see bearish patterns as if i wait for the faster moving average to come closer or even to cut slower moving average and when it cuts i will realise relatively lower profits than what i could have booked if i had sold at the time of getting a comfirmation from those bearish patterns. Also what will be the stoploss trigger in cross systems.. i think that should be the point where we entered in trade but that can be hit multiple times in some situations where market is not in complete upwsrd or downward trend. Please Correct me if i am wrong here.
In a sense true, Yash. In such a situation you can even trail your profits to lock in your profits and ride the wave.
Thanks for the kind words, Yash. Such encouragement keeps us motivated 🙂
Yes, you can short the stock by all means. However, I hope you are aware that you cannot short and hold the position in the equity market (Spot market). You will have to do this in either the futures market or the options (buy puts).
Yes i am aware of the same. Actually i was thinking about going short in intraday Trades.
I am going to start getting in-depth knowledge of f&o soon with CA final SFM so that i can get exam oriented as well as practical knowledge side by side. Will surely apply these techniques in that segment. Also i tried to apply supertrend 7,3 along with EMA crossovers and i found that supertrend was avoiding the trades that EMA crossovers would have suggested in sideways market. So in such a case i want to know your opinion on which one is better.. supertrend or EMA crossovers.. i thought why choosing one when you can apply both simultaneously.. will there be any limitations that i am not aware of if using these two simultaneously. Also i am having a track on volumes before entering a trade.
Supertrend uses MAs as a core concept. Traders sware by supertrend, but I’d prefer good old EMA for its simplicity.
Sir,
If I choose a 3 minute candle and select 2 EMAs first of period 5 and second of period 10 then will it be a 15 X 30 crossover pattern?
Please respond. Thank you.
It will be 5×10 EMA crossover on a 3-minute candle.
Dear Karthik Ji
I want to initiate trades based on crossover system that too in Intraday time frame only,so when I should I initiate trade?
either after particular time frame candle close is above/below crossover or just immediately after crossover is done?
Can I use 5x 10EMA crossover on 15 mnts time frame or only I should use 9×21 EMA
I read in one of your answers that CS patter should be opt for SL for crossover system ? what is CS pattern?
I will be thankful for your prompt reply.
If you are looking at intraday, then you can initiate this based on a simple 9 and 21 day EMA crossover. You can initiate this as soon as the crossover is done.
Dear Sir,
How do I use the 15 x 30 minutes crossover on the kite software or app? How should I get the days part into minutes?
Regards,
Sid
Also can I use this for understanding stock movement for option trading? Which one should I use? 15×20 MINS? OR SHORTER?
Yes. Higher the better.
Check the 1st drop down on the chart, you can use this to modify the frequency.
Dear Sir,
Would plz suggest me best strategy for sure shot 30 points in Mcx Gold Intraday??????
I’d be God, if I could do that, Amit 🙂
According to u, what is best strategy to trade gold intraday??? Which EMA corssover according to u is best for Gold intraday????
Well, trend following via EMAs certainly help, but may not be the best, Amit.
Hi, I tried plotting the charts after reading the content here, but i don’t seem to understand what “offset” stands for in Zerodha?
Ah, you can ignore that bit, Shrey.
Sir since moving averages are lagging indicators instead of going with full quantity can we go with half quantity because before crossover there will be already trend will be established so instead of going full we can go and trade with half quantity right.
Yes, you certainly can split your cash and manage the trade better.
CONGRATULATIONS 💐💐karthik sir for becoming No1 brokerage in India congrats for the whole zerodha team and nithin.
Thank you so much 🙂 I think the journey has just started!
Sir what is market profile and order flow analysis and how important is it I don’t find any material here on these topics.
I’ve not written about in Varsity. Maybe I will sometime.
Dear Karthik,
First all let me congratulate you for becoming India’s number 1 broker, absolutely amazing job.
I can tell you that you guys are the best and nothing can Zerodha’s trading platform.
All said, there is a small issue ( I think, it’s small and should be given attention to ). In your Pi trading platform you offer Expert Advisory code for Ichimoku Cloud but the indicator itself is not available in the Pi platform. After many reminders and emails to Zerodha I still get the same reply from you guys to use Kite for Ichimoku.
To be honest when you are planning your trade using a particular strategies/indicator it’s not very convenient to change platform. You really want to see all the details in one screen so you can make your trading decision smartly.
Also, I guess Ichimoku is consider a very basic Indicator which is available with almost every trading platform in the world.
I just hope it not too much of work and by paying little attention to small details you will make many people happy. I have seen in your Trading Q&A and observed that there are many request for the same.
So, I’ll really appreciate if you can take this matter seriously and try to help us by providing us Ichimoku cloud in Pi software. At least I can say for myself that I’ll perform better if it is available for us. Once again please please don’t ignore my request and hopefully you will help me out with this.
Thank you very much indeed for all you do for us. Really appreciated all the time and energy you put in for us. Please please please don’t disappoint me on this one.
Regards
Ron
Good to hear from you, Ron. I will pass on this info to the team.
Hi,
Crossover EMA is explained brilliantly and in easy way. After a long research on crossover EMA, my doubts are clarified in this article. Before reading this study, i was very confused with respect to which crossover EMA to be used for short term trading and for long term trading. It will be very helpful for me if you clarified that which time frame candle should be used for intraday trading.
Thanks.
Ajay, for intraday, I personally find 9 day EMA over 21 day EMA quite helpful. I’d suggest you check this and improvise on it.
Thanks for reply. But which time frame candle should be used for intraday.
Like I’ve mentioned earlier, you can start with 9×21 and calibrate as you progress.
on 5 minutes charts??
Maybe 10 minutes chart.
Dear Karthik
EMA crossovers in addition to S/R levels you talked about is mixing of two independent strategies. Would it not be better if we take every EMA crossover trade without considering S/R levels so that one big trending trade will overshadow the marginal profits or few minimum losses..because after all we want to ride the trend and it may easily surpass historical supports and resistances in that case leaving S/R levels with no utility in bigger picture scenario.
Sunil, of course it does. In fact, if you decide to follow only EMA, then you should take all signals hoping for that 1 trade which can compensate for all the tiny losses when the mkts traded sideways. No point complicating this by looking at S&R.
My suggestion to look at S&R and EMA was from a very short term perspective.
Thank you Karthik for replying in the most satisfactory manner.
From SHORT TERM perspective, I think it would be right to exit the trade once the target as per S/R level is hit; instead of waiting for one wild swing . Correct me if I am wrong.
Regards.
Of course, you are free to add as many calibration techniques as possible to enhance the profitability of your system!
Hello,
Can you please tell me what time frames and crossover EMA’s are ideal for intraday and swing trading. I am confused a bit.
Thanks in advance.
I personally prefer EOD time frame. Crossover EMA’s…hmm there is no such thing as ideal 🙂
YOu will have to experiment and figure out what works for you.
Sir I think 9*21 moving average is better than 9*18 MA crossover is it true?
Not really, what works for you may not work for others. No good or bad MA.
Today I buy stock of JSW steel and on basis of Bollinger band macd and some 1-2 other indicators.Today is the bearish market and my stoploss is hit.How can I find my mistake in this trade and I took risk to reward as 1:2.
You need to access the overall set up, Akshay. Did it match all the checklist items?
we use 9 day * 21 day ema crossover for short term trading and for intraday trading in 5 minute charts how much candle do u suggest for better results. whether 5*10 minute candle is better or 15*30 minute is better for intraday trading
5*10 is ok, make sure you look at, at least the last 5 days charts for this.
How do we set targets and stoploss here ?
How as in the technicality of placing the order or the identification of these levels?
identification of levels .. is it by identifying support and resistance ?
In the above chapter, it says that you exit the position when the shorter average(eg. 50 day) turns less than the longer one(eg. 100 day) . How do we judge the “turn”?
Also, if we have to wait for the short average to cross with the longer average again but in the opposite manner of a golden cross (death cross) to exit the position, won’t that lead to missing of the highest price for exit? I backtested it and many times waiting for the death cross leads to a loss of more than 20 percent. Even in the example chart in the module. The averages don’t actually cross when the suggested exit point comes (BPCL).
Yes, it will. But remember, the MA system is not about getting the timing right..it is about catching a part of a larger trend.
what are field,type,offset and underlay in ploting moving average across a chart is there any tutorial to know in detail about this.
I want to know about 15*30 and 5*10 cross overs
I’d suggest you ignore the offset bit, it does not really add much value. The rest is explained in the chapter.
Can you please explain exactly how to place these moving averages on a chart, say for example 15*30 mins for intraday with all the necessary time frames? I also dont know how to select the number of candles for a particular chart.
If you are interested in intraday trading, I’d suggest you look for at least 10-15mins chart. Yes, you can use 15*30 for intraday with 3-5 days of the intraday chart.
Dear Karthik Ji
Could pls clarify the below content which was mentioned in your Zerodha varsity in MA chapter ?
“Needless to say, the MA crossover system can also be applied for intraday trading. For instance one could use the 15 x 30 minutes crossover to identify intraday opportunities. A more aggressive trader could use 5 x 10 minute crossover”
As per the above if i want to trade on 15 x 30 mnts crossover then which MA should I use i.e. 9 x 21 day on 15 / 30 mnts
or 25 / 50 day for Intraday on 15 /30 mnts or 5 /10 mnts ?
You need to load 15-minute time frame and overlay on it 9 and 21 EMAs. If this does not work, then maybe you should try changing the values. The idea is to experiment and calibrate these to match your risk-reward temperament.
Dear Karthik ji
Which crossover either 9 x 21 EMA or 5×10 EMA on 1 hr time frame is best crossover for good profits ?
I wish there was a simple and direct answer for that 🙂
You really have to experiment and figure out which one works well for you 🙂
What do you mean by EMA is 9 over 21 minute candles
I want to know 9 is minute or day
What do means by cross over exactly
Its explained in the chapter/comments itself, Pankaj. Can you please read through it again? Thanks.
Hi Karthik ,
I had gone through complete TA and Options Theory for Professional Trading ,among that ,the concept which have more confidence on Candlestick pattern(15 min time frame ) and EMA (5*10) that trading is possible with these concept .Moreover i am trading for past 6 month based on EMA crossover .
The advice which i required from Pro trade like you ,whether i can take this trading as a carrier for rest of the life in discipline manner . Right now i am trading in Bank nifty Option
1.If 5 EMA greater or crossover 10 EMA will take CE as position ,This CE position will be squared off when 5 EMA lesser or crossover 10 EMA
2.If 5 EMA lesser or crossover 10 EMA will take PE as position ,This PE position will be squared off when 5 EMA greater or crossover 10 EMA
Is any thing want to correct me pls
The short answer is no. Trading as a full-time career is too risky and unstainable. Only a few amongst 1000s survive. Do this as a secondary job, but do something which will give you steady cash flow every month.
Please let me know if any pre defined function exist for hull moving average. I have find out SMA, EMA and TMA for moving average screener. But I am unable to code for hull moving average function in zerodha PI…..pls help me
I’m not too sure, let me check this up.
How can I load 21 sma band (high to low) in zerodha kite. Which option I should go?
You can load the SMA, need to check on the band.
How can I setup 15*30 min EMA in zerodha.
You can load both the EMAs on the price data, Sujin.
My doubt is how to calculate Length in MA. Can anyone clear it out for me?
The length (look back period) I suppose…this depends on your trading style. If you are doing intraday, then you should be looking at say the 10-minute average. If you are doing an end of the day, then maybe a 50-day average will help.
Can you please explain about this?
About?
About how can I setup 15*30 min EMA in zerodha?
Sujin, do check this thread – https://tradingqna.com/t/how-do-i-add-a-moving-average-overlay-on-volume-in-kite/13565
you said that In case to avoid the sideways market the “MA Cross over should be high “.
Instead can we use ADX Indicator to avoid sideways market
Yes, ADX too is a momentum indicator, you can use this to identify trending and sideways markets.
Sir in 10 min EMA & 10 Days EMA i understood that in 10 Days EMA lookback period is of 10 days but in 10 min EMA the lookback period is of 10 minute candle but for how much time/days?
Vikas, just like the 10 day EMA, the 10 mins EMA looks at the last days candle to evaluate the 10 min EMA.
Hi Karthik,
If we want to take the trading decision for intraday on 9 * 21 on 5 minutes chart, Do we need to wait till it generates 21 five minutes candles (i.e 5*21 =105 minutes)? How to take trading decision in the first one hour based on 9*21 – 5 minutes candles?
Thanks
Satya.
Hmm, yes. But then you can always look at the intraday charts, which are continuous.
Dear Sir,
Thank you so much again for the wonderful modules. Its very simple but very powerful.
I have two doubts here
1. can we do shorting when the short term moving average turns lesser than the longer term moving average also?
2. Can we initiate a trade only with EMA?
Please clarify…
1) Yes, you can
2) Yes, you certainly can.
Hi Karthik,
Since the average is considered based the previous values also, I have noticed significant difference between the short term moving average line crossing point and spot price.
If we want to go long based on 9*21 five minutes candle chart for intraday trading, when the short term moving average line crosses the long term moving average line, we are supposed to initiate the trade, but the spot price is far higher than the crossing point. Still do we need to initiate the long trade though it is higher than the crossing line.
Thanks & Regards
Satya.
Yes, because the idea here is to trade the moving average and not the spot price directly.
Hi Karthik,
How to check the intraday charts, if there is any link to go through, please share.
Thanks
Satya.
Satya, just change teh frequency to either 10 of 15 mins, and thats the intraday chart.
Hi Karthik,
As moving average cross over system gives the signal once the trend is established, we are already entering into the trade at higher level than moving average crossing point ( we miss some initial part of bullish trend), again during sell time, once the bearish trend established we will wait for the crossing point and again we miss some points from high ( we exit after some days of bearish trend).
Basically we are missing some trend at entry and exit level. Is there any better system to overcome this? Am I missing some thing here?
Thanks
Satya.
Hmm, I understand. However, it is not possible to capture the trend in entirety 🙂
Anyway, to overcome this, you can overlay other momentum indicators such as MACD, but that will just start complicating the system.
Hello,
first of all thanks for this wonderful explanation. I wanted to ask that what should be candlestick pattern for Ema cross of (25,50).Like i should keep the candle for 1 day or 1 week. Because i dont have time for intraday buying and selling.I just want to buy on monday a good number of stocks and sell it on maybe friday or next monday. Like a MID TERM POSITIONAL CALL.
I’d suggest you look at EOD candle for medium term or swing positions.
there are arithmatical mistakes in the pdf version of this module,also some charts and topics are not there.
Will review it. Thanks for pointing.
but for 9 ema and 21 ema putting 30 min candle is giving me a perfect result . I want to ask what should be my candle patten and ema cross format for a positional trading like keeping a stock for a week and then selling it
Yes, its best if you can hold the position for a few sessions.
Hi,
What is the best time period for 9*21 EMA for Nifty Intraday. (1,3,5mins)?
To begin with, you may want to check the 10 min chart for this.
Dear Karthik,
When I use the moving average line of say, 9 and 21 days, your advice has been to keep the trade till the 21 day line crosses the 9 day line. With this strategy, when I sell the stock, it may not be at the peak, and some profits maybe lost. Is there any reason it is suggested to keep the trade till the condition is satisfied?
The thing is that it is tough to capture the entire rally since it involves timing the market. Given this, even if you manage to capture 50% of the rally, then its job well done. This is what the system helps you do.
And one more thing when the cross-over happens the market is already up or down by a very huge margin. How to make sure that we are not entering when its a peak of that rally.
You cannot be sure about that, you will have to take the trades as suggested by the system.
hello karthik
i am very confused while apply ma crossover on a crude oil or silver bcz if i am using longer EMA than it does not seems like profitable and if i am using shorter EMA than there is so much trading signals in a single day so here again a major problem bcz in MA CROSSOVER we are not selecting the trade bt we must trade so please help me in this condition.
Rajesh, the thing is that you cannot force fit a trade 🙂
I’d suggest you continue to use long term average lines and wait for the right opportunity to get into a trade.
For intraday as you have mentioned 15 x 30 minutes exponential moving averages. By this, I have to set the period as 15 in one moving average and 30 in another moving average. so what should be the candles sticks for it 15 minutes or 10 minutes or any candlesticks based on our needs?
15 minutes is good enough, I’d suggest you start with this.
Mr Karthik
totally a beiginner in the world of trade.
beginning is reading ur tuorials and opening of acct on zerodha.
can u tell pl if there is any tutorial onusing the zerodha platform and how to open the various MAs, vol etc u hav covered till now
thanks
Everything we have has been put up online, here. We don’t have physical classroom sessions.
how do you decide how many day averages you want
No rule for that, your market experience guide you.
Mr Karthik
when ive opened a day candle with two EMa cross over (short, long) and then change the candle to minutes candle, does the EMA cross also change automatically to min or is it reqd to be done manually. i,m talking abt looking at charts on kite
thanks
Vikas, it changes but takes upto 30 secs.
How minimum can you go with crossover emas in terms of time intervals ? Can it be 5 or 10 seconds also ? And will the same 9 and 21 apply for small and large emas ?
Rohit, it has to be in multiples of 1 minute.
Hi Karthik,
Please reply,
are these,
9 day EMA with 21 day EMA –
25 day EMA with 50 day EMA –
50 day EMA with 100 Day EMA –
100 day EMA with 200 day EMA
automatically created in zerodha upon setting some settings or do we have to manually draw this MA graph or is there any different software available for it?
Regards,
Kiran
Kiran, you will have to specify this when you load the indicator.
Hello Team,
Happy New Year.
I am new here and would like to know as to why standard EMAs are used for trading. Say why 9 x 21 day EMA instead of 8 x 20 day EMA? Is there a calculation behind it ?
There is no specific reason to choose 9×21 over 8×20, its just a matter of preference and convenience of using them over the years.
Hello sir,
Thanks for the immediate response.
Can you suggest some books that specifically deal with the indicators and has all the calculation behind it ?
I am sure they are not needed for the trading part, but I would like to learn more about it.
Hmm, there are no specific books on indicators. However, I remember reading/seeing a slightly elaborate section on indicators in this book – https://www.amazon.in/Technical-Analysis-Trends-Robert-Edwards/dp/0814408648
January 16, 2020 at 10:17 pm
Dear Karthik,
Can i add the following parameter to your chart
StochRSI(14,14,E,3)
RSI period =14
Stochastic period =14
Average Type = E
Average Period = 3
Please let me know how to add the following parameter to the chart
Hi Karthik,
I see there is a moving average type “time series” while adding a moving average indicator.
Can you please explain me about how zerodha calculates that TSMA?
It would be helpful if you could share the formula or related links where i can find the explanation.
I have searched internet but not able to find how TSMA is formed.
Thanks,
Shanmu
I’m not sure about this, need to check. By the way we do not compute any of these indicator values. It either comes from chartIQ or Tradingview.
Hi
Sometimes when I use the crossovers, there is a late entry. That is the peak has already been reached by the time the moving average crossover occurs.Next sell of begins.
This sell off continues till the cross over is complete resulting in big losses. So by using a crossover I am actually entering into a losing trade. It would be great
a) if you had tips on how to avoid these kind of crossover situations.
b) Also what kind of stop loss do you recommend for the crossover strategies. I generally trade daily or weekly timeframes.
Jay, this is the nature of the MA system. It makes you trade several average/loss-making trade before you hit that 1 megatrend trade. The thing is that you will have to take up all the trades and you cannot pick and choose which one to trade and not to trade…since you’ll never know which trade would result in the megatrend trade. Having said so,
1) Use slightly larger term averages…something like a 50 x 100
2) Stick to the SL suggested by the system.
Hi,
You are right, I trade 50×120 and usually the megatrend takes care of the losers.
My concern is that the losers are sometimes too big, of course you can never get a loser free trading system.But you do want to minimise these losses as much as possible.
Can you suggest a stop loss for a moving crossover of 50×100 over daily or weekly timeframes?
Jay, you are right…there is no fool proof system 🙂
I’d suggest you stick to the daily timeframe.
Hi Karthik,
Thanks for the detailed explanation of each and every concept.
I am a bit confused between mean reversion and momentum strategies. Chart patterns discussed here are reversal patterns.
My questions are
1) Are reversal patterns part of mean reversion strategies?
2) Can be use moving averages for mean reversion strategies?
Thanks
1) No, patterns are not related to mean reversion. The indicator Bollinger band is a good example of mean reversion.
2) No, MA is a momentum indicator, not mean reversion.
Hi can you tell the combination for intraday trading as i didn’t get the meaning of 15*30 as mentioned above.
By 15 * 30, I mean 15-minute cross 30 minutes moving average.
What type of view and studies should I set for tracking smart money in stocks ? For eg. Does viewing 30 min chart of a stock for 9 day EMA and 21 day EMA crossover on closing price with 10 day SMA on volume good enough ?
You can track the FII and DII inflows for this, Gaurav.
I do not see a EMA option on my indicators in the Kite app. How do I put the EMA?
Look for moving average and change the type to exponential.
Does the moving average system eliminates the need to set target price while trading? As my understanding of this chapter says that we sell the stock only when exit signal is triggered by the MA system.
Vasu, the MA system does not give you a target, however, comes with an in-built SL mechanism. The system allows you to stay in the trend as long as it lasts.
Thanks Karthik and kudos to you guys for providing such an awesome material.
Happy learning, Vasu!
sir, in 100×200 EMA cross, how to identify buying and selling position, I’m little confused like, EMA should be 100 and EMA cross should be 200?? please explain.
If 100 EMA crosses over the 200 EMA, buy. Sell otherwise.
How do you plot a Smoothed Moving Average on Kite chart? I see the option for Simple moving average, exponential Moving Average & many others, but not able to find settings for Smoothed Moving Average. Thanks in advance
I need to check this. Btw, a MA itself is smoothening out the series, right?
Dear Sir,
Thank you for valuable details explained clearly.
As i am beginner i still have some questions. Please help to clarify those.
I have Three questions in this chapter
Q1: In the section 13.3 first diagram, it is shown once the MA line is crossed by the CMP (Price fallen below the MA), but in the diagram, it is mentioned as “Ignore”. Can you please tell me what is the criteria to ignore such cases?
Q2: In the section 13.4 last diagram, the second buy signal (cross over point to buy), and corresponding sell signal (cross over point to sell) leads to loss in the trade. Is it to show the intention of the trainer to tell that there can be loss making trades also Or is it profitable trade. From my understanding it does not look like profit making trade.
Q3: In Continuation to Q2, can you please explain how to we place trade set up with such MA (cross over indicators). By Trade setup i mean entry point, exit point and stop loss. If this is already answered in forth coming chapters please ignore this Q.
Thanks & Regards
Praveen Aruru
1) I’m unable to spot the ignore bit, can you please tell me which diagram you are referring to?
2) The thing is that you will know if its profit or loss only on hindsight. In real markets, you need to act as soon as the price crosses over the MA, hence one would have close the trade.
3) The set up is explained in this chapter only no?
hello sir,
U said we can use 15*30minutes (MACD) for intraday
MACD settings are limited to days only .
how we can convert it into minutes.
Plz guide
You can change the chart period to intraday periods.
How to get “Smoothed Moving Average” on Kite chart? There are many option for Simple moving average, exponential Moving Average & many others, but not able to find settings for Smoothed Moving Average.
Please guide
Did you check both ChartIQ and TradingView?
Sir,
While analyzing ‘5 min’ chart and moving average period is set to 10. what does it mean?
will it show moving average of 5×10= 50 minutes or 1×10= 10 min.?
It is the 10-period average of the 5 mins candle.
How do I get 100 day or 200 day Exponential Moving Average Line on Zerodha – Kite App.
I am able only able to get length and offset option in MA and EMA. Nothing related to period.
Earlier there was option under studies option to change period but now instead of studies we have indicator with no option to change the period in MA or EMA.
Please advice. I am unable to install PI due to some issues in my laptop.
I think its best if you call the support desk for this, Arjun. Will be hard to explain here.
Dear Sir,
Could you plz tell suggest some business news sources that would better insight of companies and their management.
ET and HBL do a good job, Saurabh.
Dear Sir,
If we remove a few data points that are highly volatile while calculating the EMA. Does it lead to better predictability?
Hmm, it smoothes out the data, but that also means you are tampering the data, which you should not be.
Dear Sir,
I am aware of ET, but what is HBT?
Is it Hindu business times?
Business Line I mean.