SAR level for May 21
Nifty SAR 5047
Bank Nifty SAR 9423
CNX IT SAR 5767.44
Book profit in Nifty Futures between 4990-5030 too but going Long in Nifty at this place is not recommended.Long Position in Nifty should be initiated if market substain above 5047 with a stoploss of 60 points.
Book profit in Bank Nifty at 9350 going Long in Bank Nifty at this place is not recommended.Long Position in BankNifty should be initiated if market substain above 9423 with a stoploss of 100 points.
Book profit in CNX IT at 5700 going Long in CNX IT at this place is not recommended.Long Position in CNX IT should be initiated if market substain above 5767with a stoploss of 80 points.
Trading Futures and Options on Futures involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
May 20, 2010
Parabolic Time/Price System (SAR - Stop and Reverse)
This is a useful technical indicator in a trending market for identifying when to enter into a long or short position and when to stop and reverse your position.
Patterns
+ for Long (Buy) and R for Long to Short Reversal - for Short (Sell) and R for Short to Long Reversal
How to use it?
Go long (buy) when the SAR is below the price and go short (sell) when the SAR is above the price. When the price penetrates the SAR, it is a Stop and Reverse point. If the price penetrates the SAR from above, stop going long and reverse to short. If the price penetrates the SAR from below, stop going short and reverse to long.
Background
This technical indicator is introduced by J. Welles Wilder, Jr. in his book "New Concepts in Technical Trading Systems" released in 1978. The name of the indicator is due to the nature that it resembles a parabola curve. It is a very popular technical indicator for setting trailing price stops for long or short positions.
Brief explanation for better understanding of this technical indicator
The general formula for calculating SAR is as follows:
SAR for the Next Day = SAR Today + Acceleration Factor * (Extreme Point - SAR Today)
Acceleration Factor starts from 0.02 and is incremented by 0.02 each time a new Extreme Point is reached and is capped at a maximum of 0.20. When the position reverses, the Acceleration Factor is reset to 0.02. The Extreme Point is the extreme price point since the position started. If you have started long 10 days ago, it is the highest price of the stock since then. If short, it is the lowest price of the stock since then.
To illustrate an example for the formula, let’s assume you are going long and the price is on an uptrend.
The SAR today is 30. From the point you have started long, the highest price reached is 35.
SAR for the Next Day = 30 + 0.02 * (35 - 30) = 30.3
On the following day, the price increases to 36.
SAR for the Next Day = 30.3 + 0.04 * (36 - 30.3) = 30.528
For going short, the example above is calculated in a similar manner except that the Extreme Point is the extreme low.
Assumptions
We will trade
2Lot of Nifty Futures
2 Lots of Bank Nifty
1 Lots of CNXIT
Stoploss for each Counter
Nifty: - 60 points
Bank Nifty: - 100 Points
CNX IT 80 Points
Nifty Calculation
Let us assume we are going short and the price is on downtrend.
The Nifty SAR is 5050 (SPOT, not Futures), from the point we have started, the lowest price reached is 4924.30.
SAR for the Next Day =5050 +0.02*(4924.30-5050) =5047
Bank Nifty Calculation
Let us assume we are going short and the price is on downtrend.
The Bank Nifty SAR is 9430 (SPOT, not Futures), from the point we have started, the lowest price reached is 9108.20
SAR for the Next Day =9430 +0.02*(9108.20-9430) =9423.56
CNX IT Calculation
Let us assume we are going short and the price is on downtrend.
The Bank Nifty SAR is 5770 (SPOT, not Futures), from the point we have started, the lowest price reached is 5642
SAR for the Next Day =5770 +0.02*(5642.20-5770) =5767.44
Patterns
+ for Long (Buy) and R for Long to Short Reversal - for Short (Sell) and R for Short to Long Reversal
How to use it?
Go long (buy) when the SAR is below the price and go short (sell) when the SAR is above the price. When the price penetrates the SAR, it is a Stop and Reverse point. If the price penetrates the SAR from above, stop going long and reverse to short. If the price penetrates the SAR from below, stop going short and reverse to long.
Background
This technical indicator is introduced by J. Welles Wilder, Jr. in his book "New Concepts in Technical Trading Systems" released in 1978. The name of the indicator is due to the nature that it resembles a parabola curve. It is a very popular technical indicator for setting trailing price stops for long or short positions.
Brief explanation for better understanding of this technical indicator
The general formula for calculating SAR is as follows:
SAR for the Next Day = SAR Today + Acceleration Factor * (Extreme Point - SAR Today)
Acceleration Factor starts from 0.02 and is incremented by 0.02 each time a new Extreme Point is reached and is capped at a maximum of 0.20. When the position reverses, the Acceleration Factor is reset to 0.02. The Extreme Point is the extreme price point since the position started. If you have started long 10 days ago, it is the highest price of the stock since then. If short, it is the lowest price of the stock since then.
To illustrate an example for the formula, let’s assume you are going long and the price is on an uptrend.
The SAR today is 30. From the point you have started long, the highest price reached is 35.
SAR for the Next Day = 30 + 0.02 * (35 - 30) = 30.3
On the following day, the price increases to 36.
SAR for the Next Day = 30.3 + 0.04 * (36 - 30.3) = 30.528
For going short, the example above is calculated in a similar manner except that the Extreme Point is the extreme low.
Assumptions
We will trade
2Lot of Nifty Futures
2 Lots of Bank Nifty
1 Lots of CNXIT
Stoploss for each Counter
Nifty: - 60 points
Bank Nifty: - 100 Points
CNX IT 80 Points
Nifty Calculation
Let us assume we are going short and the price is on downtrend.
The Nifty SAR is 5050 (SPOT, not Futures), from the point we have started, the lowest price reached is 4924.30.
SAR for the Next Day =5050 +0.02*(4924.30-5050) =5047
Bank Nifty Calculation
Let us assume we are going short and the price is on downtrend.
The Bank Nifty SAR is 9430 (SPOT, not Futures), from the point we have started, the lowest price reached is 9108.20
SAR for the Next Day =9430 +0.02*(9108.20-9430) =9423.56
CNX IT Calculation
Let us assume we are going short and the price is on downtrend.
The Bank Nifty SAR is 5770 (SPOT, not Futures), from the point we have started, the lowest price reached is 5642
SAR for the Next Day =5770 +0.02*(5642.20-5770) =5767.44
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