KAGI CHARTS

BREAKOUT
SYSTEM
 SYSTEM 1
 Buy a stock on breakout on a closing basis on the
kagi charts
 Keep the reversal for the stock at 3%.
 Close the position if the stock retraces 5% intraday
or 3% on a closing basis from the highest close.
 Trail the stop loss as long as the stock keeps
moving up on a closing basis.
 2 ball park targets are 25% and 50%.
 Try and get at least 10 positive returns out of 20
trades.
 Selection of stocks should be on the basis of
momentum. Always select stocks which are of
a bullish in nature. That is they are making
higher tops and higher bottoms.
 If there is an event like results, fed meet, etc.
then avoid taking fresh positions ahead of
events or square off existing positions.
 Select 35 to 40 stocks keeping in view
liquidity, their past performance and
fundamentals. Stick to frontlines and large
caps and few of the mid caps.
 Advantages of System 1

 The losses will be restricted to -0.1%

to -5% where as the profits will be
between +0.1% to 50%.
 The breakouts may occur at a early
stage and may result in a greater
percentage move.
Disadvantages of System
1
 If the Nifty is in a bearish zone then there are greater
chances of your position to be stopped out. As even a
2% negative movement on the Nifty would mean that
the stock would hit the stop loss.
 If this bearishness in the Nifty last for a long time say
2 to 3 months then you can have 4 to 5 or even more
positions getting stopped out in succession resulting in
erosion of huge capital .
 This system can also have huge number of breakouts
in a short period of time resulting in over trading and
subsequent losses
In order to tackle the disadvantages
arising out of System 1, I have
developed System 2. In this system
we also take consideration of the
Nifty before taking positions in any
stock.
 System 2
 Track the Nifty on the Kagi Charts. Keep the
point reversal in Nifty as 100 points.
 Buy or take position in any stock on breakout
only if Nifty and the stock has given a breakout
based on the Kagi Charts.
 Once position in the stock has been taken then
use the same principles of System 1.
 Close the position if the stock retraces 5%
intraday or 3% on a closing basis from the
highest close.
 Trail the stop loss as long as the stock keeps moving up on a
closing basis.
 2 ball park targets are 25% and 50%.
 Try and get at least 10 positive returns out of 20 trades.
 Selection of stocks should be on the basis of momentum.
Always select stocks which are of a bullish in nature. That is
they are making higher tops and higher bottoms.
 If there is an event like results, fed meet, etc. then avoid taking
fresh positions ahead of events or square off existing positions.
 Select 35 to 40 stocks keeping in view liquidity, their past
performance and fundamentals. Stick to frontlines and large
caps and few of the mid caps.
 Advantages of System 2
 The losses will be restricted to -0.1% to -5% where as
the profits will be between +0.1% to 50%.
 The positions in stocks would be taken only if the Nifty
is in a bullish mode. This would increase the
probability of trade being profitable.
 A lot of the stock breakouts would be ignored if the
Nifty has not given a breakout. This would result in a
limited number of trades with greater probability of
profits then losses.
 The system is simple and not very complex.
 Break Out Chart
The position in the stock is taken when the stock breaks out on
a closing basis above the previous top.

Break Out on a Closing Basis

 Reversal Chart
The reversal line is made
only when the stock reverses
3% on a closing basis from
the highest or lowest close.
Reversal Line

Break Out on a Closing Basis

 Simplicity is the soul of efficiency.
 There are two ways of constructing a software
design: One way is to make it so simple that
there are obviously no deficiencies, and the
other way is to make it so complicated that
there are no obvious deficiencies.
- C. A. R. Hoare
 A complex system that works is invariably found
to have evolved from a simple system that
worked.