Sie sind auf Seite 1von 4

Hi

<<Name of the Candidate>>

We congratulate you on subscribing this strategy module and we thank you for your trust and payment.

The definition of the term strategy is that something which is planned in advance and someone follows the set
plan without applying any judgement latter on. So if any strategy is right, all persons following that strategy
will make profit, however, results or performance will vary but not significantly.

After reading this content you will have:-

1 Knowledge of the basic of portfolio management


2 How Randomness of the market fooled everyone
3 How Technical Analysis is always a 50~50 proposition
4 A System to trade where all metrics such as Entry, stop loss , Exit are fixed
5 Back Testing of that system from 2008
6 How our research team Double money in 10 months

Before starting out the strategy session, we would like to share our own journey how we have formed this
mechanics and what are the problem we faced while implementation.

There are two research team in our organization one who trades derivatives ie options. Other team which was
about to be formed was Equity Team. Our director called us and said Let’s make some money trading equity
and remember your target will be to double money in 12 months if trend of the market is up and if it is down
you are allowed to lose max 15% of the Capital.

The first thing we decided (We = Research Team) that we will read as many books on Investing as possible from
“ The Intelligent Investor” to Reminiscences of Stock Operator to Value Investing by Green Wald to Volatility by

Page | 1
Sheldon Natenberg to Trading Systems by Urban Jaekle and countless articles on internet relating to investing
and trading.

There was only one question which was bothering our mind Why retail investor loses in this game? and if real
money is made in the long term then Why everyone is not rich by now?

There will be no meeting in 6 months and research team was given full freedom to do whatever they want but
they will not short any shares, will not do intraday trading and will not risk more than 1% of the capital in one
trade or scrip.

As there was no compulsion on monthly review, we were not serious about the target of doubling our money in
a year. So we took it very casually and started buying shares after some fundamental or technical analysis. We
purchased a book on Technical Analysis and read about Support, Resistance, Demand, Supply, Bollinger bands,
Renko , Gann Angles , Advance Decline Ratios , Envelopes and Charts.

We fully understand the fact, that retail investor like you has the desire to become a informed investor ,however,
he lacks the knowhow to understand this game .Instead of applying your own brain it is always better to read
books on Investing or Trading. The things which you will realize from your mistakes, you will see the solution
of it on the first page of the book. A classic to read is Reminiscences of a Stock Operator.

This project was started in April of 2017. We started buying shares based on tips and technical analysis pattern.
We thought if we are able to make 10% in a month we will reach our target of doubling our money easily. So
we had a general understanding of the term trend which was nothing but Higher High and Lower Lows which
could be easily understood from below diagram: -

Page | 2
If NIFTY is trending at say 10000 points and after a month it is at 10100 points it means it is in bull run period.
So long it closes above 10000 points or above 10100 points subsequently it is said to be in trend.

As our risk capital per trade was 1% max,based on moving averages we bought 100 shares ( ie 100 different
companies ) over a period of one month and started taking profit of minimum 10% on every opportunity and
leaving the losses intact to handle them latter.

By doing this we made a return of 10% in first month and we were left with few shares with losses. We used to
read in books that you should let your profit run and cut your losses but we thought we knew more than books
as our target of 10% was achieved. We again started buying shares of companies and started taking profit on
the first occasion if 10% was reached and let our losses run. After 45 days of this project one day we observed
that our portfolio was full in red with no opportunity to take profit. We observed losses in ALL the shares and
there was no money left to buy new shares as well.

Now there was no solution left with us as shares where not coming to profits and losses was increasing day by
day so we decided to book all losses and see what was the return we made in this period of first 2 months. We
observed that we made Zero % return in 2 months surprisingly our losses and profits taken where more or less
same.

Page | 3
We did all mistakes which a common self- directed investor can make when it comes to investing but as our size
was small ie 1% of our capital we survived.

At this point of time, we were little down with regard to our energy levels and decided to further carry on
reading books again. One thing was clear to us that you should have a target stop loss so that your losses are
always in control and we decided to keep 10% as the number. So, if we bought shares at 100 Rs, the moment
it was at 90 we were out of the trade means squared off that position.

Our derivative team are very experienced traders and they are all very old as compared to our age so we decided
to contact them. We asked only one question to them, What makes you to decide when to enter trade? The
answer which we got from them which we wouldn’t have dreamed in our life was “Volatility”. We had no clue
and one of our team member reframed the question? How you decide which shares are going to go up or down
The answer again we got was “You don’t have to know the direction to make money in market”. The final
question was ,Which technical patterns they used to make trades , whether it is moving averages , MACD ,
Bollinger Bands and most importantly charts? Again, the answer which we got we would not have dreamed
“Nothing”.

Only one advise which we got from the most experienced trader was “Keep what goes your way, forget
losers and focus on gainer”. This was counter intuitive to whatever we have learned so far so we decided to
ignore all technical and fundamental analysis and start developing our own trading system…
While reading the book on Trading Systems written by Urban Jaekle which was mainly on developing a trading
system and testing it’s performance we evolved in the field of Investing and we decided that as team we will
not apply our judgement to the individual positions and do everything as per plan.

Our trading system will have following rules :-

Page | 4