New Fail-Safe Trade Indicator by jaggu

About:
Fail Safe indicators are made from stolid Moving Averages,which are more reliable than other lagging and leading indicators,since they follow market trend.

this 3 step simple & easy to use indicator is proven with tried and tested in various bull and bear markets with excellent results comparable to almost positional trade fail safe by jaggu.

Features:
Name fail safe comes from fact that,this indicator has to be updated daily and manually,free from any technical problem..so there is less chance of failing/or giving wrong trend.

this indicator is used as Reliable End of Day (EOD) indicator, since it depends basically on Open-High-Low-Close values.

this indicator is used for positional trade in trending market,in addition with intraday trades (with separate real time file for intraday trading also available)

How to use this Excel Sheet indicator:

 

In this,there are 3 separate indicators:

SL = this one gives the stoploss for your long or short position,

Day/Intraday trend= this indicator tells which is the best position for intraday trading

Positional trend= this indicator tells u whether the market is in down trend or uptrend.

Example Of Nifty (NSE 50) from 2008 onwards till dec 16-2010

Simple and Exponential Moving Average

Moving averages are lagging indicators,will give always late signals.
By weighing recent price data more heavily, exponential moving averages speed up the signal.

No matter which average you use,Simple and exponential moving averages will give similar signal. So,its best for you to choose whichever type of average you are most comfortable with it.


important :
1.An upward moving average is more bullish than that is moving sideways.
A downward moving average is more bearish than that is moving sideways.

2.Its bullish,when the price is above an upward moving average.
its bearish,when price is below a downward moving average.

3.If you are using more than one moving average on a chart, then it is bullish if the shorter moving average is above the longer one and the share price is above both moving averages. It is bearish when share price is below moving averages.

4.A 4-day moving average with a 9-day will be very similar to a 5-day with a 10-day.

5. to analyze the chart in the short,medium and Long term,Moving Averages should be 5 and 10-day for short term,30 and 50-day for medium,100,200-day for long term.

MACD:Meaning &Calculation

Moving Average Convergence/Divergence (MACD)

Introduction
Developed by Gerald Appel, Moving Average Convergence/Divergence (MACD) is one of the simplest and most reliable indicators available. MACD uses moving averages, which are lagging indicators, to include some trend-following characteristics.

These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The resulting plot forms a line that oscillates above and below zero, without any upper or lower limits.

MACD Formula
The most popular formula for the MACD is the difference between a security's 26-day and 12-day Exponential Moving Averages(EMAs).

Of the two moving averages that make up MACD, the 12-day EMA is the faster and the 26-day EMA is the slower. Closing prices are used to form the moving averages. Usually, a 9-day EMA of MACD is plotted along side to act as a trigger line. A bullish crossover occurs when MACD moves above its 9-day EMA, and a bearish crossover occurs when MACD moves below its 9-day EMA.

The histogram is positive when MACD is above its 9-day EMA and negative when MACD is below its 9-day EMA.

Interpretation
MACD is a trend following indicator, and is designed to identify trend changes. It's generally not recommended for use in ranging market conditions. Three types of trading signals are generated,
* MACD line crossing the signal line.
* MACD line crossing zero
* Divergence between price and MACD levels

The signal line crossing is the usual trading rule. This is to buy when the MACD crosses up through the signal line, or sell when it crosses down through the signal line.

When the MACD line crosses through zero on the histogram it is said that the MACD line has crossed the signal line.
The histogram can also help visualizing when the two lines are coming together.

A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish.

Positive divergence between MACD and price arises when price makes a new selloff low, but the MACD doesn't make a new low(i.e. it remains above where it fell to on that previous price low). This is bullish, suggesting the downtrend may be nearly over.

Negative divergence is when price makes a new rally high, but MACD doesn't rise as high as before, this is bearish.

Trading Signals
First check whether price is trending. If MACD is flat or stays close to the zero line, the market is ranging and signals are unreliable.
Go long when the MACD line crosses the signal line from below.
Go short when the MACD line crosses the signal line from above.

Signals are far stronger if there is either:
a divergence on the MACD line; or
a large swing above or below the zero line.

To Calculate MACD in MS Excel:.

Column | Description | Formula to enter

A = Company Name/date
B = Open
C = High
D = Low
E = LTP/close
F = Volumes

G (12DAY EMA) = first we have to calculate 12-Day Ema:
For 12 day Ema,we have to calculate 11-day Simple mov.aver(SMA).
Formula= Sum(E2:E12)/11 , enter formula in G12

In 13 row of G column we have to calculate ema

EMA formula = price today * k + EMA yesterday's * (1-k) where N is number of days in your ema

OR

X(EMA) = (K x (C - P)) + P

X = Current EMA,
C = Current Price,
P = Previous period's EMA*,
K = Smoothing constant
(*A SMA is used for first period's calculation),K = 2/(1+N),N = Number of periods for EMA

calculation
K = 2/(1+N)
12day=2/(12+1)=0.15
26day=2/(26+1)=0.074

so formula for 12day ema would be =E13*0.15+G12*(1-0.15) OR (0.15*(E13-G12))+G12, enter formula in G13, copy the formula till latest closing price.

H (26DAY EMA) = now we have to calculate 26 day ema,so u have to go thru the Mov.Aver.formula steps once again:
we have to calculate 25-day Simple mov.aver(SMA).Formula= =Sum(E2:E26)/25 enter formula in H26

so formula for 26day ema would be =E27*0.074+H26*(1-0.074) OR (0.074*(E27-H27))+H27,enter formula in H27,copy the formula till latest closing price.

I (MACD[FAST LINE])= Subtract 26-day ema from 12-day ema.so formula =H27-G27, enter in I27,copy the formula till latest closing price.

J (9-day ema[Slow Line]) = first we have to calculate 9-Day Ema of MACD(trigger/signal line)
calculate 8-day Simple mov.aver(SMA).Formula =SUM(I27:I34)/8,enter the formula in J34
then,Ema kicks in
K = 2/(1+N), so 2/(9+1)=0.2
=I35*0.2+J34*(1-0.2),enter the formula in J35,copy the formula till latest closing price.

K (MACD Histogram)= we have subtract Slow line(J34)from Fast line(I34) so formula =J34-I34,enter in K34,copy the formula till latest closing price.

Moving Averages:Meaning &Calculation

Moving Averages

Moving averages are one of the most popular and easy to use tools available to the technical analyst.A moving average series can be calculated for any time/data series.

In finance, it is most often applied to stock prices, returns or trading volumes. Moving averages are used to smooth out short-term fluctuations, thus highlighting longer-term trends or cycles.

Moving averages work best when a security is trending and are ineffective when a security moves in a trading range.

The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).

Simple Moving Average (SMA)
A simple moving average is formed by computing the average (mean) price of a security over a specified number of periods.

The formula for a 10-day simple moving average of closing price is:
SMA = pM + pM-1 +pM-2 + ...+ pM-9/ 10

All moving averages are lagging indicators and will always be "behind" the price.

When prices are trending, moving averages work well. However, when prices are not trending, moving averages can give misleading signals.

If the price were rising, the SMA should be below the closing price to be considered bullish.

Exponential Moving Average (EMA)
In order to reduce the lag in simple moving averages, technicians often use exponential moving averages (also called exponentially weighted moving averages).

EMA's reduce the lag by applying more weight to recent prices relative to older prices. The weighting applied to the mostrecent price depends on the specified period of the moving average.

The shorter the EMA's period, the more weight that will be applied to the most recent price.

The formula for an exponential moving average is:
EMA = price today * k + Ema(previous)* (1-k)
OR
X(EMA) = (K x (C - P)) + P

The simple moving average obviously has a lag, but the exponential moving average may be prone to quicker breaks.

Some investors prefer simple moving averages over long time periods to identify long-term trend changes.

Some traders prefer to use exponential moving averages for shorter time periods to capture changes quicker.

Simple moving averages work well for longer-term situations that do not require a lot of sensitivity.
Exponential moving averages are usually best for short-term situations that require a responsive moving average.

To calculate EMA,we have to first calculate the simple average...thats why i have to calculate SMA before EMA.

If you want a 10-day EMA,u have to calculate Simple Mov.Aver. for first 9 days i.e add up all closing prices and divide by 9.

From the 10th day the formula for EMA starts in..

EMA = price today * k + EMA yesterday's * (1-k)
K = 2/N+1
where N is number of periods/days in your ema

OR
X(EMA) = (K x (C - P)) + P
X = Current EMA
C = Current Price
P = Previous period's EMA*
K = Smoothing constant
(*A SMA is used for first period's calculation)
K = 2/(1+N)
N = Number of periods/Days in your EMA

The result will the same,but i prefer the first one.

K = 2/(1+N)
5 EMA =2/5+1=0.33
10 EMA =2/10+1=0.18
25 EMA =2/25+1=0.076
50 EMA =2/50+1=0.039
100 EMA =2/100+1=0.0198
200 EMA =2/200+1=0.00995

so for EMA formula would be like this:
5 EMA =E6*0.33+G5*(1-0.33)
10 EMA =AB25*0.18+AC24*(1-0.18)
25 EMA =E26*0.076+I25*(1-0.076)
50 EMA =E51*0.039+K50*(1-0.039)
100 EMA =E101*0.0198+M100*(1-0.0198)
200 EMA =E201*0.00995+O200*(1-0.00995)

for eg for 50 day EMA is
EMA = price today * k + EMA yesterday's * (1-k) =E51*0.039+L50*(1-0.039) = 894.6377071
OR
X(EMA) = (K x (C - P)) + P =0.039*(E51-L50)+L50 =894.6377071

To Calculate Moving Average in MS Excel:.
Column | Description | Formula to enter
A = Company Name/date
B = Open
C = High
D = Low
E = LTP/close
F = Volumes

G = 5SMA =SUM(E2:E6)/5 ,enter in row cell 6 ,copy formula till last price
H = 5EMA =SUM(E2:E5)/4 , enter in row cell 5, =E6*0.33+H5*(1-0.33) ,enter in row cell 6, copy this formula till last price.

I = 25SMA =SUM(E2:E26)/25 ,enter in row cell 26, copy formula till last price
J = 25EMA =SUM(E2:E25)/24, enter in row cell 25, =E26*0.076+J25*(1-0.076) , enter in row cell 26, copy this formula till last price.

K = 50SMA =SUM(E2:E51)/50, enter in row cell 51, copy formula till last price
L = 50EMA =SUM(E2:E50)/49, enter in row cell 50 =E51*0.039+L50*(1-0.039) enter in row cell 51, copy this formula till last price

M = 100SMA =SUM(E2:E101)/100, enter in row cell 101, copy formula till last price
N = 100EMA =SUM(E2:E100)/99, enter in row cell100, =E101*0.0198+N100*(1-0.0198) enter in row cell 101, copy this formula till last price

O = 200SMA =SUM(E2:E201)/200,enter in row cell 201,copy formula till last price
P = 200EMA =SUM(E2:E200)/199,enter in row cell200,=E201*0.00995+P200*(1-0.00995), enter in row cell 201,copy this formula till last price