2. SYSTEM 1SYSTEM 1
Buy a stock on breakout on a closing basis on the kagiBuy a stock on breakout on a closing basis on the kagi
chartscharts
Keep the reversal for the stock at 3%.Keep the reversal for the stock at 3%.
Close the position if the stock retraces 5% intraday orClose the position if the stock retraces 5% intraday or
3% on a closing basis from the highest close.3% on a closing basis from the highest close.
Trail the stop loss as long as the stock keeps moving upTrail the stop loss as long as the stock keeps moving up
on a closing basis.on a closing basis.
2 ball park targets are 25% and 50%.2 ball park targets are 25% and 50%.
Try and get at least 10 positive returns out of 20 trades.Try and get at least 10 positive returns out of 20 trades.
3. Selection of stocks should be on the basis ofSelection of stocks should be on the basis of
momentum. Always select stocks which are of a bullishmomentum. Always select stocks which are of a bullish
in nature. That is they are making higher tops andin nature. That is they are making higher tops and
higher bottoms.higher bottoms.
If there is an event like results, fed meet, etc. then avoidIf there is an event like results, fed meet, etc. then avoid
taking fresh positions ahead of events or square offtaking fresh positions ahead of events or square off
existing positions.existing positions.
Select 35 to 40 stocks keeping in view liquidity, theirSelect 35 to 40 stocks keeping in view liquidity, their
past performance and fundamentals. Stick to frontlinespast performance and fundamentals. Stick to frontlines
and large caps and few of the mid caps.and large caps and few of the mid caps.
4. Advantages of System 1Advantages of System 1
The losses will be restricted to -0.1% to -5%The losses will be restricted to -0.1% to -5%
where as the profits will be between +0.1% towhere as the profits will be between +0.1% to
50%.50%.
The breakouts may occur at a early stage andThe breakouts may occur at a early stage and
may result in a greater percentage move.may result in a greater percentage move.
5. Disadvantages of System 1Disadvantages of System 1
If the Nifty is in a bearish zone then there are greaterIf the Nifty is in a bearish zone then there are greater
chances of your position to be stopped out. As even achances of your position to be stopped out. As even a
2% negative movement on the Nifty would mean that2% negative movement on the Nifty would mean that
the stock would hit the stop loss.the stock would hit the stop loss.
If this bearishness in the Nifty last for a long time say 2If this bearishness in the Nifty last for a long time say 2
to 3 months then you can have 4 to 5 or even moreto 3 months then you can have 4 to 5 or even more
positions getting stopped out in succession resulting inpositions getting stopped out in succession resulting in
erosion of huge capital .erosion of huge capital .
This system can also have huge number of breakouts inThis system can also have huge number of breakouts in
a short period of time resulting in over trading anda short period of time resulting in over trading and
subsequent lossessubsequent losses
6. In order to tackle the disadvantages arising outIn order to tackle the disadvantages arising out
of System 1, I have developed System 2. In thisof System 1, I have developed System 2. In this
system we also take consideration of the Niftysystem we also take consideration of the Nifty
before taking positions in any stock.before taking positions in any stock.
7. System 2System 2
Track the Nifty on the Kagi Charts. Keep the pointTrack the Nifty on the Kagi Charts. Keep the point
reversal in Nifty as 100 points.reversal in Nifty as 100 points.
Buy or take position in any stock on breakout only ifBuy or take position in any stock on breakout only if
Nifty and the stock has given a breakout based on theNifty and the stock has given a breakout based on the
Kagi Charts.Kagi Charts.
Once position in the stock has been taken then use theOnce position in the stock has been taken then use the
same principles of System 1.same principles of System 1.
Close the position if the stock retraces 5% intraday orClose the position if the stock retraces 5% intraday or
3% on a closing basis from the highest close.3% on a closing basis from the highest close.
8. Trail the stop loss as long as the stock keeps moving up on aTrail the stop loss as long as the stock keeps moving up on a
closing basis.closing basis.
2 ball park targets are 25% and 50%.2 ball park targets are 25% and 50%.
Try and get at least 10 positive returns out of 20 trades.Try and get at least 10 positive returns out of 20 trades.
Selection of stocks should be on the basis of momentum.Selection of stocks should be on the basis of momentum.
Always select stocks which are of a bullish in nature. That isAlways select stocks which are of a bullish in nature. That is
they are making higher tops and higher bottoms.they are making higher tops and higher bottoms.
If there is an event like results, fed meet, etc. then avoid takingIf there is an event like results, fed meet, etc. then avoid taking
fresh positions ahead of events or square off existing positions.fresh positions ahead of events or square off existing positions.
Select 35 to 40 stocks keeping in view liquidity, their pastSelect 35 to 40 stocks keeping in view liquidity, their past
performance and fundamentals. Stick to frontlines and large capsperformance and fundamentals. Stick to frontlines and large caps
and few of the mid caps.and few of the mid caps.
9. Advantages of System 2Advantages of System 2
The losses will be restricted to -0.1% to -5% where asThe losses will be restricted to -0.1% to -5% where as
the profits will be between +0.1% to 50%.the profits will be between +0.1% to 50%.
The positions in stocks would be taken only if the NiftyThe positions in stocks would be taken only if the Nifty
is in a bullish mode. This would increase theis in a bullish mode. This would increase the
probability of trade being profitable.probability of trade being profitable.
A lot of the stock breakouts would be ignored if theA lot of the stock breakouts would be ignored if the
Nifty has not given a breakout. This would result in aNifty has not given a breakout. This would result in a
limited number of trades with greater probability oflimited number of trades with greater probability of
profits then losses.profits then losses.
The system is simple and not very complex.The system is simple and not very complex.
10. Break Out ChartBreak Out Chart
The position in the stock is taken when the stock breaks out on a closing basis
above the previous top.
Break Out on a Closing Basis
11. Reversal ChartReversal Chart
Break Out on a Closing Basis
Reversal Line
The reversal line is made only when
the stock reverses 3% on a closing
basis from the highest or lowest close.
12. Simplicity is the soul of efficiency.Simplicity is the soul of efficiency.
There are two ways of constructing a software design:There are two ways of constructing a software design:
One way is to make it so simple that there are obviouslyOne way is to make it so simple that there are obviously
no deficiencies, and the other way is to make it sono deficiencies, and the other way is to make it so
complicated that there are no obvious deficiencies.complicated that there are no obvious deficiencies.
- C. A. R. Hoare- C. A. R. Hoare
A complex system that works is invariably found toA complex system that works is invariably found to
have evolved from a simple system that worked.have evolved from a simple system that worked.
