Piyush Sharda asks:
The 3 points below talk about using ema and oscillators over various time cycles to get in and out. I am not able to understand and apply it. I would be very grateful if you could explain them with illustrations:-
1. If I wait for a daily buy signal, I miss 200 points from the bottom before the trend turns up. And after the trend turns up , market pulls back as a correction before rallying further and you may end up holding at higher levels for a brief period of time. So we look for the hourly trend to take position but this should be done only when the daily is in oversold status.
2. Similarly when the hourly is in oversold status, look at 5 minute to give you a buy signal for a possible reversal in hourly.On the fateful 27th Oct, Nifty's low of 2253 was accompanied by an excellent +ve divergence which helped to take a buy call even before the hourly buy signal.
3. Always give more weightage to the higher time cycle and play the lower time cycle till a "overbought or Oversold" situation arises in the higher time cycle when one should approach with caution but continue in the same direction.
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I have given here a combination of "Hour" & "5-Minute" time cycle to spot entry as well as reversal points..
A. Once Nifty has made 4675 & 4835 lows, a channel will be in place and the trend is in force till the channel holds. We have had our entry @ 4675 when a larger +ve div showed itself. We also re-entered at the conclusion of correction prior to the budget day @ 4835.
Here, in the "hourly" chart, you spot a divergence developing with macd oscillator at the "Oversold as well as the Overbought" zones. At such junctions, go one level below this time cycle to "5-minute" to spot a well formed divergence.
This Hourly table shows you the exact time of entry in Hourly time scale and compare it with "5-Minute table", you get a better entry & exit.
After observing the "Oversold & Overbought" status in "Hour time cycle", look out for a "positive or Negative Divergence" for a good entry price in "5-Minute time cycle" as shown below which is well formed. Though a negative divergence is developing in the 5-Minute presently, Nifty has managed to stay above all emas(All time cycles) and it need to be followed up on Monday....
This "5-Minute table" shows you the exact time of entry in 5-minute time scale and compare it with "Hourly table", you find here a better entry & exit.
This above concept may be applied for positional traders by combining "Day & Hour" and Medium term investors by combining "Week & Day" and Long term investors by combining "Month & week".