Presentation on theme: "Some Concepts: 1+1=11. Managing Trades. Preface This is the first publication of ours in the second season of some concepts section. Here we would divulge."— Presentation transcript:
Preface This is the first publication of ours in the second season of some concepts section. Here we would divulge some of the striking simple strategies that we have accumulated over a period of time from our experience. The sole motive remains to share for the benefit of the retail traders and investors, so that they could earn more and loose less. Stock Market is like a car in which you are moving towards success. While analysis (prediction work) is the engine of the car, strategies form the gearbox of the car. So even if the engine is low powered, you can choose the right gear to reach the destination. Sounds simple? It is simple actually. When something is right and correct, the positive effect appears instantly. Hope to see the change in your trading profile.
In this presentation, we are going to present upon a concept based on old hindi saying ek aur ek gyaraah, Or, 1+1=11.
Do you get sure shot trades from your sources, advisers and analysts that buying blah blah stock at 100 tgt 120? Ask yourself…
You booked at 105 itself, because it went up INTRADAY…. Or it went up BTST…. Is that so? And moreover you book only 25% profits everytime and you loose all the profits in 1 loosing trade? Is that true?
Lets take an example. We at ActiveTrades advised satyam at 99 for tgt 125. (2 weeks back). The message was: Buy Satyam abv 99 tgt 104-105, 108, 125.
Almost all of our clients bought the stock. BUT…….
About 50% booked at 105, Some booked at 110 Some booked at 125. TGT WAS HIT. Stock went up one way to 125. 25%+ returns in few days….. Rocking trade it was.
But effectively, people earned only 5-10%. Why? They booked at 1 st or 2 nd Target. They did not wait for 3 rd Target.
There are some people who do not book at 1 st and 2 nd targets, they instead ALWAYS wait for 3 rd target. But, there are very few trades which hit 3 rd target.
Then what to do? If you book only 4-5% profit and not 25% profit, your profits and losses are going to be equal or the net profits after cutting losses would be less. If you book only at 3 rd target, there will be only few trades which will not hit their stoplosses. What to do??
What to do? BOOK 1 lot or half quantity in cash. For the second lot or remaining half, keep your price as the stoploss, or if the stock has high probability to move up, keep the stoploss as the stoploss. The best would be to ask your analyst to provide a trailing stop.
So, You are in a profit of 10,000 Rs per lot (on an assumed lot size of 2000 shares) And 1 lot holding. Or half quantity, if in cash.
Stock touches 100 after hitting tgt1 104.5 and you hold it with your price as stop. There is no monetary risk in holding as even if it hits, on the second lot, the loss is 0. Moreover, the profits from lot1 have already been booked.
100 to 109 straight!!!!! TGT2 hits……… Here you should book 2 nd lot too. Profits: 10000+20000 on 2 lots.
For the third target, buy smaller quantity in cash and hold with a trailing stop for tgt3. Or Hold lot2 with a trailing stop if provided.
Yipppieeeeeeeeeee! 125 hits! (satyam actually did 127 128… and many TV analysts started giving tgts of 135 140 ) You book 1000x15 = 15000 Rs.
Total Profit: 10000 + 20000 + 15000 = 45000 Rs Risk: Starting risk (SL 2 rs, 2 lots) = 2x2x2000 = 8000 Rs. Trailing Risk: -10000 (-ve as 1 st lot profit is booked)
So, instead of taking 1 lot and exiting at 104 for 10000 Rs profit at 2x2000=4000 Rs risk, we made 4 times profit at twice the risk. This explains the benefit. The Reward/Risk ratio gets doubled. The overall success will therefore become 10 times+
Book 2 nd at tgt2 Buy smaller quantity in cashExit smaller quantity at tgt3. Book 1 lot at tgt1 Keep SL of price or keep original SLHold the other lot Buy 2 lots instead of 1 Keep SL as provided.
The added advantage comes at an added risk. For the medium-high capital traders, there is no risk. But for people who have smaller capital, the risk of higher % of total capital erosion remains. How to manage that? Usually a bullish stock fails to perform only if the Nifty corrects. A possible way to safeguard from the risk of additional lot is by hedging against Nifty short. Add a Nifty Short and exit that once there is a good profit in the trade. The profits get reduced, but that is the rule. To reduce risk, profit gets reduced as well. Another good way is to take a stock specific short. But in a wholely bullish market, it is difficult to find a bearish stock.
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See how precisely we advised, and we even sketched the forward chart… And see the future movements indicated by grey and red. You can read the complete report at the Nifty View page.
The actual chart… It is an old chart. Now Nifty is around 4600+