Back-testing of some candlestick patterns 🧵

I hv back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts.

Below is some interesting information.

Thread: Darvas Box Theory

#Darvas #knowledgesharing #Definedge

Nicolas Darvas (1920 – 1977) was a professional dancer and he travelled around the world. He founded a Dance company in 1950s. Someone offered him shares against his Dance programme and that is how he came across stock market and the business of trading.

He reportedly turned thousand dollars into millions in the late 1950s.

He wrote a popular book during 1960 “How I made $2000000 in Stock Market” in which he explained his Box theory. It is a must read.

He used a combination fundamental and technical approach for investing.

He believed in investing in only growth stocks. I think he did not explain a few things in his book, and I found some difference in interpretation of box-theory at various places because of that. This post is my interpretation of his theory.

Darvas was tracking stocks only making new high. I do not think he really talked about 52-week high. He mentioned about stocks breaking 2-3 year high. But 52-week high is mostly tracked for this theory so let us keep it that way to begin with for the sake of objectivity.

Thread: Camarilla Levels

Continuing our discussion on pivot levels, we look at the Camarilla levels which is another widely followed tool.

Word ‘Camarilla’ is borrowed from Spanish. It translates to a group of confidential & private advisers of the King or person in authority.

The Camarilla equation was first developed by a bond trader named Nick Scott in 1989. It is said that he didn't disclose the equation, but people studied the levels & reverse engineered it to find the formula. There r different versions of this formula.

We discussed about ‘Range’ in the earlier thread. The range is basically the difference between High & Low of the session.

High – Low = Range of the session
Continuing with the same levels as an example, If High of the day is 105 and Low is 95, Range of the session is 10 points.

Range shows us activity during the session irrespective of the trend.
Narrow range = Not much movement
Wide Range = Strong activity

Camarilla calculation depends on the Range of the session.

Let’s expand the range to 110%. If Current range is 10, let us make it 11.

Let’s now divide this Range in four parts.

9.17%, 18.33%, 27.50% and 55% of the range.

So, if Range is 10 points:
10 x 9.17% = 0.92
10 x 18.33% = 1.83
10 x 27.50% = 2.75
10 x 55% = 5.50

Thread: Parabolic SAR Indicator

Parabolic SAR (PSAR) indicator was developed by J. Welles Wilder.

#PSAR #Indicators #Definedge

The calculation of this indicator is a bit complex, but the concept is extremely useful. I will try to simplify it and explain the logic. I will briefly explain the concept, calculation and reading.

Let us think about creating an indicator that shows the trend.

Using the indicator, we can identify & ride the trend using the trailing stop-loss method.

For trailing the stop in uptrend, indicator needs to be placed below the candle. Similarly, it should be placed above the candle for trailing in a downtrend. We will plot it using ‘dots’.

So, the indicator & stop-loss will be rising in uptrend & falling in downtrend.

Let us define the trend as:

If Low of the candle > Stop-loss level in bull market = Trend remains bullish.

If High of the candle < Stop-loss level in bear market = Trend is bearish

Imagine you are driving a car on highway; you would like to accelerate if the road is clear. You will slow down if the road is bumpy.

Thread: Central Pivot Range (CPR)

CPR is another popular tool. Three lines are plotted on the chart when we plot CPR.

The three lines are: CPR, TC and BC.

Let’s understand the calculation.

You may recall that I explained the calculation of Pivot levels in an earlier thread. CPR stands for Central Pivot Range. It is always a center line of the three lines that gets plotted in the chart.

CPR is a Pivot price. Pivot is average of HLC as explained in the prev thread.

We also discussed about Mid-range of the session. Mid-range is average of High and low price of the session.

The mid-range of the bar is known as BC in the CPR calculation. BC stands for Bottom central pivot.

Pivot level captures the relationship of the closing price to the range of the session.

Pivot price above mid-price = bullish pivot
Pivot price below mid-price = bearish pivot

So, CPR line is Pivot and BC line is Mid-range.

What is the difference between both?
Mid-range is average of High and Low.

Pivot is average of High, Low and Close.
What will make the difference between the two?

Close.

IT WAS RISHI KANADA WHO GAVE THE ATOMIC THEORY & TALKED ABOUT THE GRAVITY OF EARTH, 2600 YEARS BEFORE AN APPLE FELL IN FRONT OF NEWTON'S EYES:

Scientists of the modern world credit an English scientist John Dalton (1766 CE -1844 CE) for the Atomic Theory.

And this is because, most of us are not even aware of an ancient Indian Sage named Kanada, who was the first to formulate the theory of atoms, almost 2600 yrs before Dalton and talk about earth's gravity.

Rishi Kanada was born around 600 BCE in Dwarka, Gujarat and he was the son of a philosopher named Ulka. He was fascinated with the minute detailing of the things right from his childhood. Once, when he was very young, he accompanied his father on a journey to Prayaga.

He saw plentiful grains scattered along the path leading to the shore of river Ganga. It's a tradition in Hindu families to scatter the grains for the ants and birds to feed on them. Suddenly, an ant caught his attention, who was feeding on a rice grain.

He was mesmerised by this very fact that how a small grain of rice becomes food for the ant but to satisfy the hunger of a person so many grains are needed together. This incidence made him realize the importance of a single grain of rice.

MEENAKSHI AMMAN, MADURAI (TN)
#bharatmandir #navratri2021

A paadal Petra sthalam where Shiva took the form of Sundareswarar (the handsome one) and married Devi Parvati (Meenakshi).
Devi is also known by the name Angayarkanni (mother with the beautiful fish eyes).
@GunduHuDuGa

Devi Meenakshi emerged from yagna fire as a 3 year old girl when Pandyan King Malayadwaja and Kanchanamalai were praying for a child.
It is said that Devi was born with three breasts and there was a prophesy that her superfluous breast would melt away when she met her husband.

Devi ruled over Madurai and captured Indralok. She went on to capture Kailasha. When she saw Shiva, her 3rd breast disappeared and she realised that Shiva would be her consort.
The divine marriage was attended by all Devas and Sri Vishnu (as her brother) gave her hand to Shiva.

It is said that Indra found a swayambhu lingam at Kadamba Vanam. He placed it in Madurai where the kshetram stands. Here, Shiva is seen on the vehicle of Indra.
The Golden Lotus Tank is said to be the place where a golden lotus blossomed for the puja performed by Indra.

The Meenakshi Thirukalyanam festival is celebrated in the Chithirai month to mark the divine marriage of Meenakshi Amman. The festival includes a procession where Meenakshi and Sundareshwara travel in a chariot and Sri Vishnu gives away his sister in marriage to Shiva.

Puthucode Annapoorneshwari Temple,
Palakkad, Kerala 🚩
#keralatemples
अन्नपूर्णे सदापूर्णे शङ्करप्राणवल्लभे 
ज्ञानवैराग्यसिद्ध्यर्थं भिक्षां देहि च पार्वति 

Temple is also called Puthukode Bhaghavathy Kshetram
Parasurama did Prathishta of Devi here. Temple is one amoung 👇

108 Durga temples
Navarathri festival is celebrated in a grant manner here. Annadanam is done daily on these days. The Idichu pizhinja payasam/ Chathachatayam is the main nivedyam in Annapoorneswari temple during Navarathri.
In the mornings, Devi Mahatmyam and Sundarakandam are

recited here daily.
Sri Godavarma Raja gifted lots of rice fields for the maintenance of the temple.
Annapoorneshwari holds Shanku and Chakra in her hands. Puthucode Annapoorneswari Temple is managed by the Naduvil Madom Devaswom.
🙏🕉🙏

@buzz_chronicles @AchuthArora @Abhirajputfit @rattibha Thanks bro!

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