Bill Williams - Trading Chaos - Sensex

Simple Charts ( http://simplecharts.blogspot.com/) is for people who believe that Price is all inclusive and you need no more than Price itself to trade. The blog shows the Charts for various timeperiods - 1Day ( Intraday), 5 Day ( Intraday), 1 Year ( Daily), 1 Year ( Weekly). These charts for various time periods show us various Moving Averages ( Simple and Exponential) which are respected by markets everytime. This is still in development phase and future improvements are in pipeline. Happy Informed Trading  because beauty is in being simple.


Options Data updated every hour. Please check at 10.15 AM,11.15 AM,12.15 PM,1.15 PM,2.15 PM,3.15 PM.

Suggestions are welcome
Moneyflow table shown below gives you the liberty to watch where the money is moving i.e. which Nifty levels are generating interest amongst traders. Specially useful in analysing emotional buying of first 30 minutes and last 30 minutes of professional actions which actually charts the future path.


Put Call Ratio
Put Call ratio is a good sentiment indicator which helps to gauge market direction.


For complete view visit Market Watch

Friends, I am trying to implement an Trading Strategy proposed by Mr Bill Williams called Chaos Trading( read his book Trading Chaos: Applying Expert Techniques to Maximize Your Profits) on excel to give an insight in current confusing markets. This is an honest endeavour to understand what is the present trend and following steps which will lead to identify profitable trades. What I have done is to understand the theory through various sources ( books & websites) and present it in an easily comprehensive manner for all and sundry. I will be more than happy to receive your comments to improve this for future trading. Also, I am ready to remove this if it violates any copyright/intellectual rights issues.

Coming back to the Chaos Trading Strategy.
This trading strategy is a simple logic based strategy which tells us to first identify the trends, verify the trends, identify the trading signals, verify the trading signals and execute them if the sentiment is conducive. Seems like very easy and logical but I am amazed as to how it has been done in a very orderly manner in this trading strategy along with verifiable results.

First Step:
Chaos Trading begins with what is called Alligator indicators. In simple words Alligator indicators are composed of three balance lines which have been smoothed with various time periods. There are three Alligators indicators : Jaw, Teeth and Lips. When the markets are range bound the Alligator sleeps which means all three lines are intertwined. The scene changes when there is trend in markets. In an uptrend the price will be above all three line and in downtrend the price will be below all the three lines. The trading opportunity is created when the three lines start diverging and ends when the three lines converge.




Second Step:
the good part of this trading strategy is that it verifies every step. So, since we identified the trend in last step, now is the time to verify it. Gator indicators are nothing but delta value of three different lines. However it brings fore the fact how all three line are behaving in relation to each other. Lines converge when the difference become lesser and lines diverge when difference becomes greater. Analysing both the delta values gives us a clear picture of the Alligator.


Third Step:

This is the most important part of the strategy which actually gives us the trading opportunities. A buy signal is generated when in last five days the highest high is preceded by two lower highs and followed by two lower highs. Similarly for sell signal, there should be lowest low preceded by two higher lows and followed by two higher lows. The explanantion provided earlier is valid for uptrend. The reverse will happend in downtrend.


Fourth Step:
It involves use of two oscillators , Awesome and Acceleration / Deceleration Oscillator (AC). These are simply the delta of moving averages of (High+Low)/2 in different time periods. They show the trend as well as generate buy and sell signals which is to verify the previous signal generated in Third Step.



Fifth Step:
This the step which helps us to dertermine the trading environment based on movement of the oscillators.


I have tried to provide a simplistic understanding of the Trading Strategy. Please observe and understand before using this. As usual data has been extracted from Yahoo, so it will be incorrect for "Today" untill Yahoo updates its feed.

An insight on current scenario has been updated in my last post London Bridge is Falling........................

Bill Williams - Trading Chaos

Simple Charts ( http://simplecharts.blogspot.com/) is for people who believe that Price is all inclusive and you need no more than Price itself to trade. The blog shows the Charts for various timeperiods - 1Day ( Intraday), 5 Day ( Intraday), 1 Year ( Daily), 1 Year ( Weekly). These charts for various time periods show us various Moving Averages ( Simple and Exponential) which are respected by markets everytime. This is still in development phase and future improvements are in pipeline. Happy Informed Trading  because beauty is in being simple.


Options Data updated every hour. Please check at 10.15 AM,11.15 AM,12.15 PM,1.15 PM,2.15 PM,3.15 PM.

Suggestions are welcome
Moneyflow table shown below gives you the liberty to watch where the money is moving i.e. which Nifty levels are generating interest amongst traders. Specially useful in analysing emotional buying of first 30 minutes and last 30 minutes of professional actions which actually charts the future path.


Put Call Ratio
Put Call ratio is a good sentiment indicator which helps to gauge market direction.


For complete view visit Market Watch

Friends, I am trying to implement an Trading Strategy proposed by Mr Bill Williams called Chaos Trading( read his book Trading Chaos: Applying Expert Techniques to Maximize Your Profits) on excel to give an insight in current confusing markets. This is an honest endeavour to understand what is the present trend and following steps which will lead to identify profitable trades. What I have done is to understand the theory through various sources ( books & websites) and present it in an easily comprehensive manner for all and sundry. I will be more than happy to receive your comments to improve this for future trading. Also, I am ready to remove this if it violates any copyright/intellectual rights issues.

Coming back to the Chaos Trading Strategy.
This trading strategy is a simple logic based strategy which tells us to first identify the trends, verify the trends, identify the trading signals, verify the trading signals and execute them if the sentiment is conducive. Seems like very easy and logical but I am amazed as to how it has been done in a very orderly manner in this trading strategy along with verifiable results.

First Step:
Chaos Trading begins with what is called Alligator indicators. In simple words Alligator indicators are composed of three balance lines which have been smoothed with various time periods. There are three Alligators indicators : Jaw, Teeth and Lips. When the markets are range bound the Alligator sleeps which means all three lines are intertwined. The scene changes when there is trend in markets. In an uptrend the price will be above all three line and in downtrend the price will be below all the three lines. The trading opportunity is created when the three lines start diverging and ends when the three lines converge.




Second Step:
the good part of this trading strategy is that it verifies every step. So, since we identified the trend in last step, now is the time to verify it. Gator indicators are nothing but delta value of three different lines. However it brings fore the fact how all three line are behaving in relation to each other. Lines converge when the difference become lesser and lines diverge when difference becomes greater. Analysing both the delta values gives us a clear picture of the Alligator.


Third Step:

This is the most important part of the strategy which actually gives us the trading opportunities. A buy signal is generated when in last five days the highest high is preceded by two lower highs and followed by two lower highs. Similarly for sell signal, there should be lowest low preceded by two higher lows and followed by two higher lows. The explanantion provided earlier is valid for uptrend. The reverse will happend in downtrend.


Fourth Step:
It involves use of two oscillators , Awesome and Acceleration / Deceleration Oscillator (AC). These are simply the delta of moving averages of (High+Low)/2 in different time periods. They show the trend as well as generate buy and sell signals which is to verify the previous signal generated in Third Step.



Fifth Step:
This the step which helps us to dertermine the trading environment based on movement of the oscillators.


I have tried to provide a simplistic understanding of the Trading Strategy. Please observe and understand before using this. As usual data has been extracted from Yahoo, so it will be incorrect for "Today" untill Yahoo updates its feed.

An insight on current scenario has been updated in my last post London Bridge is Falling........................

London Bridge is Falling........................

Surprised!!!

Actually I meant to say Indian Stock Market is on a verge where the fall is going to be very severe. Nifty and Sensex after a month long flat-ish formation have created a situation where a big fall is imminent. The recent structure on weekly charts have paved the path which will keep the news channels busy for couple of weeks in December and may be January too.

Let's get straight to business
The weekly chart of Sensex clearly shows that we have reached the end of a triangle in a downward trend. Rsi sub 30 is also not a good indicator for coming weeks. Slow Stoch has clearly changed course which can spell disaster for Sensex. Levels to watch out next week would be 9341 on upside and more importantly 8467 on downside.

If we watch Nifty weekly chart , the the conditions are identical.RSI and Slow Stock do not augur well for Nifty too. Levels to watch out in coming days would be 2833 on upside and 2571 on downside.

360 Degree Analysis for Nifty has thrown up the following levels

UPSIDE :
2592.43    2603.14    2613.85    2635.28    2656.7    2667.41    2678.12    2699.55    2720.97    2731.69    2742.4    2763.82    2785.25    2795.96    2806.68    2828.1

DOWNSIDE:
2809.39    2797.59    2785.78    2762.18    2738.57    2726.76    2714.96    2691.35    2667.74    2655.94    2644.13    2620.53    2596.92    2585.11    2573.31    2549.7    2526.09    2514.29    2502.48    2478.88    2455.27    2443.46    2431.66    2408.05    2384.44    2372.64    2360.83    2337.22    2313.62    2301.81    2290.01    2266.4

Here is an interesting read
What the Bear Market Has in Store, Part 1

"Forecasts for the Bear Market
Finance
- Stock markets around the world will continue to fall. Ultimately, the averages will drop more than 90 percent.
- Real estate values will fall more than they did in the 1930s and 1940s.
- Rating services will resume the trend of downgrading bond quality. Eventually, states, counties, cities, corporations and even nations will default on bonds in record amounts.
- Debt packages made of mortgage-backed bonds, auto loans and credit card debt will become viewed as unworthy investments.
- Many, if not most, pension plans will fall in value and be unable to provide the promised benefits. Anger over this development will result in demonstrations, violence and tardy and ineffective political reform.
- Prices for collectibles will continue to fall. Many will become little more than curios.
- More banks will fail than failed in the 1930s.
- The total amount of credit outstanding worldwide will decline substantially.
- The Federal Reserve chairman will be labeled a fool who is greatly responsible for the collapse."

Warren Buffett

"With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly."

Update on 12/12/2008

London Bridge is proving to be stronger than what I had thought. However the manipulations in our indices have to respect some technical aspects. Let's see how long can this continue. One interesting thing was the tussle which was seen in the indices throughout the week. Fantastic!!! Bulls may have succeeded in preventing bears to take over but have a strong trendline against them ( see updated chart). Under no circumstance can this  lead to situation where Nifty can go beyond 3000 levels. This has been evident in todays pull back after 2945 levels. Important thing to note here is the vested interest of manipulators who have specific expiry levels in their minds. Also, It has been observed over last few months that whenever Nifty falls it is always very close to expiry where only a certain section of traders/FII's/Manipulators make profit

Updated weekly levels from 360 degree analysis

High

2714    2736.62    2747.93    2759.23    2781.85    2804.47    2815.78    2827.08    2849.7    2872.32    2883.62    2894.93    2917.55    2940.17    2951.47    2962.78    2985.4
 

Low


2945    2920.46    2908.19    2895.92    2871.38    2846.83    2834.56    2822.29    2797.75    2773.21    2760.94    2748.67    2724.12    2699.58    2687.31    2675.04    2650.5    2625.96    2613.69    2601.42    2576.88    2552.33    2540.06    2527.79    2503.25    2478.71    2466.44    2454.17    2429.62    2405.08    2392.81    2380.54    2356    2331.46    2319.19    2306.92    2282.38    2257.83    2245.56    2233.29    2208.75    2184.21    2171.94    2159.67    2135.12    2110.58    2098.31    2086.04    2061.5