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In the below Live Chart, the colored lines are EMA lines (3 day, 15 day, 34 day and 100 day as seen on top left corner of the chart).

The candle sticks in the chart is the Nifty value on a daily basis (White hollow candles are markets going up on a particular day and blue shade candles are markets going down on a particular day).



Below is a swing strategy by which a trader can estimate the approximate time by which the market would start correcting or rally against the current trend.
Use this strategy on Nifty futures, one can also derive a strategy from it for any particular stock they trade in through some trial and error.

This Strategy is highly inspired by the concept of 'Market Reversion to mean'.

Reversion to Mean rules for NIFTY
  • Nifty Futures price has to revert to 3 EMA within a maximum of 3 days before it goes anywhere else.
  • Nifty Futures price has to revert to 15 EMA within a maximum of 6 weeks before it goes anywhere else.
  • NIfty Futures price has to revert to 34 EMA within a maximum of 16-18 weeks (4 months) before it goes anywhere else.
  • NIfty Futures price has to revert to 100 EMA within a maximum of 28 weeks before it goes anywhere else. (7 months)

How to apply the above rules in Trading

Short Term Bull Strategy
  • When the 3 day EMA cuts above the 15 day EMA, buy Nifty.
  • When the 3 day EMA is above the 15 day EMA for a week, its time to exit buy Nifty (book profits).
Short Term Bear Strategy
  • When the 3 day EMA cuts below the 15 day EMA, sell Nifty.
  • When the 3 day EMA is below the 15 day EMA for a week, its time to exit sell Nifty (book profits).

Long Term Strategy
  • When the 3 day EMA cuts above all three EMA's (15 day, 34 day & 100 day), its a strong bullish signal. Buy Nifty on dips. 3 day EMA will normally break below 15 day EMA 3rd time. Avoid going bullish 3rd time, when 3d EMA comes DOWN towards 15d EMA as Nifty will most probably correct on trend change the third time.
  • When the 3 day EMA cuts below all three EMA's (15 day, 34 day & 100 day), its a strong bearish signal. Sell Nifty on rises. 3 day EMA will normally break above 15 day EMA 3rd time. Avoid going bearish 3rd time, when 3d EMA goes UP towards 15d EMA as Nifty will most probably rally on trend change the third time.

Let me know if the above strategy works for you.

Cheers !