August 9, 2014

Question on which indicator I use

Question: Which Indicator do u follow ? KPL Swing, Donchian or any other ?


The answer is a bit complicated as I do not "follow" an indicator... I follow a system.

As a trend follower, the rule is simple... buy new highs / sell new lows. Or to expand this, buy on crossover of recent swing high with previous swing low as trailing stoploss. Position sizing takes care of risk management.

In following chart, this is shown via red lines (resistance, buy above levels) and blue lines (support, sell below levels).

Now to trade above stock, I do not need any indicator... a 30 second look at the chart is enough.

Same stock with kplswing plotted.

The process becomes automated with some pros and cons thrown in like delayed entry or whipsaw etc and so on.

Donchain will give exactly similar results - but this indicator is not available in Amibroker and besides, it plots only the levels; it cannot scan your database for signals.

So I use kplswing to "scan" for buy/ sell opportunities. I also use other AFLs to identify stocks near 52 week highs. For eg., yesterday I bought 30 shares of GATI (Rs.4150/-). I just happened to see the top gainers intraday (something I rarely do) and was pleasantly surprised to see this stock. I saw EOD charts and bought this stock (even though markets were deep in the red).

So I am following a basic system and can use any combination of indicators to scan stocks.

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