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© WaveCrest Technologies Pvt. Ltd. Money Management & ProfitGyan for ProfitGyan advisors with emphasis on Risk Management
© WaveCrest Technologies Pvt. Ltd. What is Risk Management? Lets begin this discussion by asking some simple questions – Why do you keep a Stop Loss? May be because Stop Loss is the only thing which protects you from loosing your entire capital and helps you bail out if the call goes wrong. But does it actually do so alone ? Ask any fund manager, any reputed advisor or even the who’s who of this Industry, they don’t believe in keeping a Stop Loss alone. Instead they bring in this magnificent term ‘RISK’ into play. Then what exactly does Risk% do and how does it help your clients ? Lets explain this by a simple example – You recommended to buy IDFC at Rs. 40 and kept a stop loss of Rs. 30. Your client has a portfolio of Rs. 40,000 and decided to buy 1000 shares of IDFC. Imagine your call turns around and hits the stop loss. Your client would not only loose Rs. 10,000 but also approximately 25% of his entire capital. And just to recover this 25% loss now he needs to earn approx 33% returns on his portfolio (10,000/30,000). Risk% controls how much your clients invests where and at max how much would he loose if this call turns around. If instead you would have told him to take a Risk of 2% on his portfolio for this call then no matter what ever happens he wouldn’t loose more than 2% x 40,000 = Rs.800 on this call. And he could have bought only 80 shares which is calculated by (Rs.800/Rs.40 – Rs.30) Makes sense, but how do you calculate this Risk% individually for all your clients ? Answer is very simple – you don’t, you can’t and you can never calculate it unless you have tons of financial information about your client. Which includes his total investments, his portfolio size and even the cash which remains with him to invest !
© WaveCrest Technologies Pvt. Ltd. Tell me More about Risk ? Okay, this is not something new to all of you. A simple question which really has deep roots. What is the average turnover of the number of clients who get their subscription renewed ? 50%, 60% or more ? You all know the answer to this question. But did you even think why was the renewal rate so low when you boost of such an awesome accuracy rate ? Its simple your calls were good, worth a pat on the back but your clients wrong strategies spoilt it. Clients generally overtrade and always think they would make good profits like in our IDFC example, but it is you who has to realize that when your clients overtrade they are risking not only their capital but also are putting a big question mark on your renewal fee. We can tell you tons of stories about such clients, a simple Google search or a browse through the forums on ‘valuenotes.com’ will reveal the picture to you. Its high time you guys wake up and realize Risk Management as a concept has to be built in this industry, if you won’t practice it some competitor would. And in the long run apart from relationships the only factor which would decide success is not how much money your clients make but ‘How many clients make that much money?’ Now, using Risk% we define before hand how much your clients would loose or make if the call turns around and goes in for a toss. The mathematics of Risk Management is explained in the next slides.
© WaveCrest Technologies Pvt. Ltd. Mathematics behind Risk ? Risk helps you calculate the number of lots/shares your clients can trade in using the formula. Lots/Shares = (Total Portfolio Size * Risk%)/( Diff bw Trade Price & Stop Loss) Lets now calculate it for Different Clients using 2 different examples. A client who has a total portfolio of Rs. 1,00,000, a client who has Rs. 2,50,000 and a client who has Rs. 5,00,000 Ex 1: You take a Risk of 2% (you are very sure of this call) and recommend a Buy on Reliance with a Trade Price of 1300 and place your stop loss at Ex 2: You take a Risk of 1% (you are skeptical and are giving this call under pressure) and recommend a Sell on BHEL with a Trade Price of 1400 and place your stop loss at Details100,000250,000500,000 Capital at Risk (Risk% x Capital) 2,0005,000 10,000 Stop Loss Difference Rs. 5 Quantity 400 qty1000 qty 2000 qty Details100,000250,000500,000 Capital at Risk (Risk% x Capital) 1,0002,500 5,000 Stop Loss Difference Rs. 8 Quantity 125 qty 312 qty625 qty
© WaveCrest Technologies Pvt. Ltd. Real Effects of Risk? We are very sure, you would still be skeptical as to why should you use Risk. The actual effect of Risk can only be seen once you understand the equity draw down table. The equity draw down table helps you see that if you loose say an x% of your portfolio then how much returns you would need to generate on the remaining capital to reach the same level again. If your client suffers a 2% loss then it is very much recoverable, but as he keeps on incurring more and more losses the chances of his recovering or even reaching back to his original portfolio becomes really skeptical. Imagine someone who invests 100% of his portfolio in Options and that particular option has a stop loss of 50% of its buying price. You can be very sure your client is doomed if this happens because recovering 100% in a single month and that also with the restraints of a smaller portfolio would be really difficult, unless you can control how much of his entire portfolio should he invest in each trade and what is the amount he should risk on that particular trade depending upon how sure you are about your trading call. That is why a number of Mathematicians and Fund Managers stick to the 2% principle. They would not take a risk of 2% on any of their trades, and some very successful fund managers limit that risk to less than 1% even. We at ProfitGyan set max and minimum risk limits you can take on a call on daily basis after looking at the prevalent volatility. Generally we keep the Risk between 0.50% %(only for high liquidity and 100% sure calls). Loss IncurredReturns Required 2.00%2.04% 10.00%11.11% 25.00%33.33% 50.00%100.00% 75.00%300.00%
© WaveCrest Technologies Pvt. Ltd. Effects of Drawdown And trust us over 40% of your clients face severe consequences because of the lack of knowledge about Disciplined Investing, Diversification or Risk Management. But now, you need not show any data to your clients telling them if they have this portfolio size they should trade in these many lots and all. Let your gut feeling about how successful your call is define their Profit’s and Losses. We are very sure there are some calls, some chart patterns which keep on repeating and some others which do not repeat at all. Now take on high risk for patterns which are repetitive in nature and are successful 90% of the times and reduce the risk incase of patterns which are not repetitive in nature and have a low probability of risk. Hmmm… now we are talking right ? Okay let this be an eye opener for all of you out there, the Risk% we are talking about is not only for your clients but it also works for you. Did you know, we did a sample study of the monthly data published by some of the advisors and found that their performance could easily be increased by more than 18% if they start incorporating Risk% in their trading calls. Imagine: Your clients would loose less on your loosing calls. They would earn more on your Profit making calls. They would never ever loose their entire trading capital while trading your calls. They cannot blame you that your calls made them loose a lot in the markets. Last, but not the least you can redefine the way they trade and help them trade better. Giving calls is very easy, anyone can become a trader and start giving calls but managing the trade and taking positions is the art of the game. No one, and we mean it no one apart from your client has his financial information based on which these decisions should be made. We would say either start educating each of your client individually and spend months doing it, or let us do this dirty work for you. The next couple of slides would explain you how we at ProfitGyan do it.
© WaveCrest Technologies Pvt. Ltd. How does ProfitGyan do it ? At ProfitGyan you have two plans – Regular Portfolio Plans and SMS Only Plans. Now this is where the actual difference starts: We assure you ProfitGyan is not just some portfolio tracker or a medium to get new clients, it is much more than that. We do not mean to scare you or anything but imagine even if 1 advisor learns about Risk Management and starts implementing it, he can quadruple his client base like anything and we assure you we would do whatever is in our powers to do it for him because we would genuinely believe that he wants to help his clients and not only fill his pockets with clients hard-earned subscription fee. Till date, you did not have the powers in your hands but today you do. The extent of power which Risk leaves in your hands is for you to realize and imagine. We are there to support you as always. And if you think ‘that’s it ProfitGyan just does this much’, you are totally wrong. We at ProfitGyan do not suggest a quantity to trade in for your clients based on Risk but also on his Diversification (so that he does not invest all his investments in one stocks), Cash Availability (amount of cash which is available with him currently), Financial Goals (so that he can avoid calls which are risky) and even send Quantity on the basis of Intra-Day margins. Hmm… now are we talking ?? The next couple of slides would show you the calls which we help you send out… Regular Portfolio Plans/UsersSMS Only Plans/Users They get access to the Portfolio Manager to track their Portfolio Details.They do not get access to the Portfolio Manager. You can balance their risk, lookup their portfolio and even launch PMS.They would continue trading the way they do currently, no change. Application & You can remind them to exit their Loss Making stocks.You will never get to know what they are upto, unless they loose out. In order to be successful, he needs to update his Portfolio 2 minutes a day.No guarantees, he continues the way he was till now. Suitable for users who have access to the Internet for 2 mins or more a day.Created primarily for Tier II and Tier III cities with limited Internet.
© WaveCrest Technologies Pvt. Ltd. Message Sending Formats ProfitGyan can not only send calls to your clients who trade in Stock markets, but also to those clients who trade in Futures, Options, Commodities or even the Forex markets. Regular Portfolio Users (who trade in Stocks) - All calls which go out are sent as the message below: Regular Portfolio Users (who trade in Futures, Options or Commodities) - All calls which go out are sent as the message below. However please note that in some cases the application might suggest your client to buy 0.65 lots or 0.34 lots or some other weird quantity. This happens only in cases when the client does not either have sufficient funds to buy even 1 lot of the said stock or his risk is not permitting him to trade in that lot. In such a case we think its better that if a client knows he is not advised to buy this stock but if he wishes to he may at his own risk, so that later ProfitGyan or you the advisor is not blamed. Under trading is as serious a risk as Overtrading is, both of them do not allow you to trade the right way, so it is better left to the client to decide. SMS Only Users (who trade in any asset) - All calls which go out are sent as the message below. ProfitGyan is much more intelligent than we or even you would imagine it to be, it is an application which is extremely dynamic and can work they way you want it to, rather than you working the way it wants you to. We would say acknowledge this change, because charging hefty subscription charges would now warrant your clients to look back and see what they are getting in exchange. The change is for you to play with Positional: Mr. ProfitGyan please buy 243 shares of NAGARCONST at 75, SL:72, TP:80. Positional: Mr. ProfitGyan please buy 2 lots of NAGARCONST at 75, SL:72, TP:80. Positional: Mr. ProfitGyan please buy NAGARCONST at 75, SL:72, TP:80.
© WaveCrest Technologies Pvt. Ltd. Examples of Risk% Risk% can be defined as the gut feeling which you have for your trades. All of you out there already have an excellent accuracy rate, trust us the only thing missing is Risk. The moment you build it in, our Math Models show that a high accuracy coupled with excellent Risk Management serve as 1+1 = 5. You can keep on increasing or reducing Risk based on your calls accuracy or keep it fixed at a standard percentage of 2% for all your calls. However we would recommend you to keep on increasing or decreasing it, Take a base of lets say 1% on each call you take; If you think this is a repetitive chart pattern and would be 95% successful, add 0.50% to your call; If you are very sure you would make money on this trade and the markets favors you, add 0.50% more. If you are trading in excessively liquid markets like Nifty or Forex, add another 0.50%. It is not at all essential that you need to have the same benchmarks we have specified above, set them for yourself. A true advisor is one who grabs the opportunity thrown at him and converts this opportunity into results. And you can enter this Risk% in your advisory panel before sending the trading call to your clients.
© WaveCrest Technologies Pvt. Ltd. The Way you are Doing It ? After all why should you change ? We know this question is somewhere there at the back of your mind still. After all, your clients love you the way you are and you have been delivering till date. Then why should you change and after all for something like ProfitGyan which is just a NEW BABY in your world, redefining and telling you what to do. Well, its simple: You are in an Industry which has no entry barriers, anyone and we mean anyone can create a website by spending less than Rs and start giving calls. Well, how do you differentiate yourself then ? Every second person can stand up and say he is the best and is delivering such and such calls, how do you authenticate it then ? You tell us ? Even if one advisor starts following Risk Management and starts delivering what would you do ? Start learning about Risk Management then, or start it right now and have a head start, the first mover advantage. You look out for a Discount, Bargain or Sales every now and then, rite ? Then why do you think if we deliver so much to your clients in the same subscription fee they would not want more ? Any guesses ? If you think ProfitGyan is a marketing gimmick, we are sorry you are at the Wrong Place. Before getting any advisor on board we really try and ascertain how has he/she done for their clients in the past and will they be able to stand on our Ethics. We only want advisors who are ready to help themselves and their clients GENUINELY. Out of more than 250 advisors on the net even if we are able to get atleast 10 GENUINE advisors and help them practice Risk Management, we would think our job is done. Come on Get up, you already have a head start and are among the selected few, go ahead promote yourself and practice it. Tell your clients what you are doing. The journey to success may be rugged or you can’t see it but trust us even if one of you can see it. You have already defeated your competitor !! Happy Investing !!
© WaveCrest Technologies Pvt. Ltd. Try and create as many OLD BOLD Traders as you can, and that is the day you can call yourself a successful advisor. We thank you for your time and would be happy to hear about any suggestions, comments or improvements we can make to serve you better. You can mail us at Have a great Day and we really are looking forward to see you with your Risk Management in place ! Having trouble call us up and we would be happy to help Well as they say “There are a lot of Bold Traders, but very few Old Bold Traders.”
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