The BullBull Early Warning System For Day Trading

trading strategy with supertrend and DMI

Wouldn’t it be nice if you had a trade setup that helped you figure out the trend in advance?

Of course it would.

Because it will help you enter into a trade quickly and exit when the others are getting in.

This is one such system. Here are some facts about the system:

FACTS, CONDITIONS, CAVEATS

Success rate: 60%-70% if you are checking MANUALLY.

DO NOT WRITE ANY ALGO ON THIS STRATEGY WITHOUT INCORPORATING MACHINE LEARNING. IF THE ALGO IS PROGRAMMED IN A SYSTEM LIKE ZERODHA’S STREAK, IT WILL FAIL as there will be many whipsaws and you will end up losing money on brokerage.

Time Periods: It will work well on 30-Minute and 1 Hour Charts. On lower periods, it did give a few unreliable signals, but you can always experiment.

Trend: This strategy works very well if the trend is known (even knowing the trend for a couple hours is good enough).

TECHNICAL INDICATORS USED and STRATEGY

Super Trend (7,1) – This is the faster indicator that works by giving an advance warning. Color Codes: Green for Up arrows and Red for Down Arrows; trend lines in white so that the user is not confused.

Super Trend (7,3) – This is the slower and indicator that confirms the trend. This is the usual signal at which many traders take a position. Color Codes: Black for Up and Down Arrows; trend lines in white so that the user is not confused.

VWAP – Sends out a profit booking signal. Line in Pink

DMI (7,7) – Confirms or denies the Supertrend (7,1) signal. DI+ in green, DI_ in red, ADX in black. If you don’t know how this signal works, please read this article.

Now open the following image in a new window and read the strategy below:

trading strategy algorithm

EARLY WARNING SYSTEM STRATEGY

ONE

When SuperTrend (7,1) gives a buying (green arrow) or selling (red arrow) signal, and if the signal is confirmed by VWAP (price crosses above VWAP) or DMI (DI+) rising, then it confirms a buy trade.

In the chart above, SuperTrend (7,1) gave a buy signal when Nifty was in 10620’s. DMI DI+ also rose and DI- fell confirming higher highs and higher lows. Price crossed above VWAP.

This was all systems go, and Nifty was a buy.

Now look at the traditional Super Trend (7,3) – it gave a signal after 4 candles (4 Hours), which could have been the time when people would have jumped in. At this time Nifty was about 10680. You could have sold off at this stage. Let the herd jump in – you get out.

TWO

The Supertrend (7,1) Sell signal on 2-7-18 was confirmed by rising DI- and falling DI+ and with the price crossing below VWAP. This was a sell signal.

Note that the regular Supertrend (7,3) confirmed it after 2 hours.

THREE

The Supertrend (7,1) Buy signal on 2-7-18 (green arrow) was NOT confirmed by rising DI+ and falling DI-  BUT the price did crossing above VWAP. This was a buy signal confirmed by 2 indicators. At this time the Nifty was 10650. We still don’t have a sell (except when the price dropped below the VWAP at 10,700).

Note that the regular Supertrend (7,3) has yet to signal a buy, and it’s been 14 hours.

Had you waited for Supertrend (7,3) to send a signal, you’d have lost out on 60 points of gains.

CONCLUSION

This is how this strategy gives you a signal in advance.

Now that you know the strategy, apply it to indices and FNO stocks and check results. Backtest, do paper trades, tabulate results, etc., before you are comfortable or sure. Good luck.

 

25 Comments on "The BullBull Early Warning System For Day Trading"

  1. can this be traded on 15 mins also ??

  2. In spider software it asks for per period setting for VWAP. so what period we should select?? by default it is set at 5

    • sunil.tinani | July 5, 2018 at 6:56 am | Reply

      VWAP is based on tick data, so I’m unsure about the period. Do this, set it between 0 and 5 and check how it changes on the screen. Choose the VWAP closest to the price.

  3. Dilip Dixit | July 5, 2018 at 8:13 am | Reply

    sir, can we save this setup on investing.com or not?

  4. Very informative article. I just back tested on reliance chart today and each of the line matches with price action. Thanks for giving these good information.

  5. fantastic video,Sir kindly post youtube video , which is of grethelp to novice investors like me . It is wonderful .

  6. Sir, some clarification on this chart.
    1. Whether we should use normal candles or heikin ashi candles.
    2. What if we get a buy on ST 7,1 but the price is below VWAP, but there is a positive cross over in DI+ and DI- and vice versa above VWAP , but not crossover.
    3. What would be the SL if the Price is below VWAP and we get a buy signal

    • sunil.tinani | July 6, 2018 at 1:06 pm | Reply

      1.Normal. But Heiken Ashi’s work very well with ST
      2. It’s a good signal, and vice versa
      3. 0.5% to 0.75%

  7. Very good article.Did you hide supertrend lines,if so how to hide the same.

  8. hello sir … ST(7,1) , VWAP , HEIKIN ASHI and finally DMI WITH 5MNTS FOR INTRADY …. I’LL DO FROM NOW , I CHECKED ALL CHARTS IT’S SAFE TO ME BECAUSE I’M LOSER TILL NOW …. THANK YOU FOR YOUR TEACHING THANK YOU VERY MUCH SIR

  9. sir, can we save this setup on CHARTINK.com or not?

  10. Krishna Mohan | July 12, 2018 at 12:38 pm | Reply

    This is an incredible and super technique. It has worked so well with signals on entry and exit. Thank you so much Mr Sunil for providing this technique.

  11. Pushkar N. Joshi | July 18, 2018 at 9:58 am | Reply

    Hello Sir,

    Will it work for commodity as well?

  12. Sir if possible please write an article on TIME CYCLE ….

  13. Hi Sir,

    what would be the SL and target keeping in mind it is intraday. thanks in advance.

    • That depends on your trading style. Typically traders try and earn 2% a day and set stop losses between 0.5% and 1%

  14. Sir, this is one of the best setups for an intraday trader. However, can you say how to filter the stocks for the next day? Thanks in advance.

  15. Aravind Nagaraj | September 7, 2018 at 6:57 am | Reply

    Hi,
    Thanks for the setup. Needed a clarification. In the article the DMI settings are 7,7 but the chart has 7,14 as the setting. WHich DMI setting should i choose? And what is the logic behind it.

    Thanks,
    Aravind

    • The 14 factor smoothens the ADX. Work with 7,14. The interpretation is that the DIs reflect highs and lows of 7 days while the ADX is smoothened by a factor of 14

Leave a comment

Your email address will not be published.


*