Monthly Archives: December 2012

Beat Volatility With Systematic Trading

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Generally, volatility is the worst thing for stock market traders. On the other hand, professional traders, specially who have good knowledge in trading options make best use of volatility. As an investor people get affected by volatility too. Our market with so much political chaos is not a good place for investing. This is why more and more investors are turning to risk free assets like FDs, Govt Bonds, and Mutual Funds.

Mutual Funds, for me is not a good option for a person wants to have some say in managing his own funds. Most MFs are investing in stock markets nowadays. So, funds are exposed to market risks and volatility. You are not geeting any bonus or dividends paid by the companies of whom your fund is holding shares. Then you will have to pay exit load to sell your MF Units, when it is showing gains, within one year of investment. So, for a person, wants to actively manage his financial position, Mutual Fund investment is worthless in many counts.

Why wait for 10+ years for getting return of 12-15%?

Is there a better way to manage better retrun than this?

YES. If you have some access to stock market, you can really manage your funds in a far better and get much better return with all other benefits.

What you need

You must have a cash trading account with a Stock Broker. If you are familiarized with computer and internet then it will be easy for yourself. Else Mobile applications can be used for placing orders. If not, you can take services like Phone Trading or some other helps most brokers are offering nowadays.

Choosing Right Scrip for Systematic Trading

There are many sectors like bank, metal, auto, oil & gas, infrastructure. We love bank stocks, because if banks do not move nothing moves. So best way is focus on bank stocks.

The stocks to be traded are need to be picked carefully. Rule is, pick a stock which moves at least 10% each month. Means that difference between Low and High of any given month should be minimum 10% of the stock’s value – the more the better. Backtest for at least 2-3 years to see the monthly movement. You can pick up 1 or 2 main large cap stock(s), like SBIN, INFY.

The System

Buy on 5% decline — Book on 10% rise from the buy price.

In case of SBIN, consider its price at 2000, so we will buy say 2 nos. 100pts drop and sell those 2nos at 200pts from that buy level.

Example: Buy SBI on 5% dip from its recent high. Means 100pts drop from its recent high. Suppose SBIN recent High was 2400. Buy SBIN < 2300. Mark this trade for sell > 2500. Now, suppose SBIN hits 2500 you book out, irrespective of whereever SBIN goes from there. If SBIN drops from there, your next entry point is < 2200, then < 2100, then

Buy < 2200 sell >2400, buy < 2100 sell > 2300, buy < 2000 sell > 2200.

No need to follow any chart or speculate. Just follow the price. Whatever happens in the market you are either investing at a better price or booking 10% of your investment in a quick time. You have picked a stock which moves minimum 10% each month, so that gives you ample opportunity to roll your investment.

Decide what quantity to trade

Yes, this is vital. You should not run out of funds when the stock is at a low. So, how to plan it?

Look at your fund. Say you have 10,000 investment ready fund. Your SBIN entry price is 2200. Find out 52 weeks Low. it is around 1600. So at 1 SBIN each, you will get 6 entries till 52wks low. Like this you can decided what quantity you can trade each time. The quantity can be adjusted depending upon the fund.

This is the best and safest stock trading strategy for all novice or amature traders.

For any queries we are available at trademysystem@gmail.com.

Category: Trading System
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