My stupid trading strategy

[jxcess]

I am a finance student and a newbie at trading. I have just thought of a simple trading strategy and want your advice on it. Suppose, I have around 1 lakh rupees for trading. Now, I look at previous day's top losers. For example let's say yesterday's top losers in nse were Sail and SBI. So I expect the stock to appreciate by at least 1% today (since they have fallen by a huge margin yesterday). So I buy any 2 such stocks in 2 different industries (in my case, steel and banking which I feel minimizes risk) at Rs 50,000 each. Then give a sell order for 1% above purchase price and stop loss 1% below purchase price. If the markets are good both stocks would appreciate by 1% giving me a profit of Rs 1000. Thus, I can hope to make a Rs 1,000 everyday. If the markets are bad then a loss of Rs 1000 but if 1 stock performs well and other doesn't they will have a negating effect as both stocks are form different industries.

I just want to know what you experts think of my trading strategy? I know it's stupid but please do advice me as this a learning phase for me. Thank you.

 

[Sunny1]

yes its stupid strategy. if 1% reaction occurs it will be fast that you might miss it....and logic of since they fallen by huge margin....such things dont work in market.

my advice is ...watch and observe market and few stocks for few days. observe thier movements...rallys, corrections...familiarize your self with stock behavior and market. then start thinking about 1% rallys and corrections....you will do better...
you can do this by charts or just by reading price volume change.....


Nevertheless if you want try that strategy than go ahead and do it....with limit of 10 trades and than review the performance and see if it suits you. again 10 trades and review...do this 2-3 times to see if this strategy works or not..

 

[timepass]

It is a contra strategy. It is good that so early in your trading you are practising target and stop loss. Now try the "trend is friend" trick for breakeven after expenses. If you can sustain it, you will learn cherry picking by instinct.

 

[jxcess]

It is a contra strategy. It is good that so early in your trading you are practising target and stop loss. Now try the "trend is friend" trick for breakeven after expenses. If you can sustain it, you will learn cherry picking by instinct.

Thanks for the reply. but can u please explain what a contra strategy is and what you mean by "trend is friend"? Can u provide any links, would be very helpful?

 

[jxcess]

yes its stupid strategy. if 1% reaction occurs it will be fast that you might miss it....and logic of since they fallen by huge margin....such things dont work in market.

my advice is ...watch and observe market and few stocks for few days. observe thier movements...rallys, corrections...familiarize your self with stock behavior and market. then start thinking about 1% rallys and corrections....you will do better...
you can do this by charts or just by reading price volume change.....


Nevertheless if you want try that strategy than go ahead and do it....with limit of 10 trades and than review the performance and see if it suits you. again 10 trades and review...do this 2-3 times to see if this strategy works or not..

I have been observing stocks and I have seen that 1% changes don't take place instantly. Today I made a 1% profit by short selling SAIL but i gave the sell order around 10.30 am and square off was done around 1.30 pm. So to achieve that 1% target it took me 3 hours. Also I have noticed that stocks most of the times don't rise or fall below 5%.

 

[DanPickUp]

I am a finance student and a newbie at trading. I have just thought of a simple trading strategy and want your advice on it. Suppose, I have around 1 lakh rupees for trading. Now, I look at previous day's top losers. For example let's say yesterday's top losers in nse were Sail and SBI. So I expect the stock to appreciate by at least 1% today (since they have fallen by a huge margin yesterday). So I buy any 2 such stocks in 2 different industries (in my case, steel and banking which I feel minimizes risk) at Rs 50,000 each. Then give a sell order for 1% above purchase price and stop loss 1% below purchase price. If the markets are good both stocks would appreciate by 1% giving me a profit of Rs 1000. Thus, I can hope to make a Rs 1,000 everyday. If the markets are bad then a loss of Rs 1000 but if 1 stock performs well and other doesn't they will have a negating effect as both stocks are form different industries.

I just want to know what you experts think of my trading strategy? I know it's stupid but please do advice me as this a learning phase for me. Thank you.

Hi

You should not talk about a stupid strategy. You better call it a question about a strategy.

Have you ever thought to use options instead of putting 50'000 R on the table for one or two shares?

With one option your risk is less as you need less money. If you think the stock will go up, so buy one at the money option and place a limit sell order by you broker, which includes the one percent move you expect.

If your orders are placed, then you will be filled at the moment your price is hit and not after three hours.

By the way, check this links:

http://www.investopedia.com/dictionary/#axzz1ehjMaRFV

This is a dictionary with hounder'ts of topics to read on.

http://www.investopedia.com/articles/forex/09/trade-with-the-trend.asp#axzz1ehjMaRFV

http://stocks.investopedia.com/stock-analysis/moneyshow/WhatitMeanstoBeContrarian.aspx#axzz1ehkR03wP

Just some thoughts from an option trader.

Good luck

DanPickUp

 

[jxcess]

Hi

You should not talk about a stupid strategy. You better call it a question about a strategy.

Have you ever thought to use options instead of putting 50'000 R on the table for one or two shares?

With one option your risk is less as you need less money. If you think the stock will go up, so buy one at the money option and place a limit sell order by you broker, which includes the one percent move you expect.

If your orders are placed, then you will be filled at the moment your price is hit and not after three hours.

By the way, check this links:

http://www.investopedia.com/dictionary/#axzz1ehjMaRFV

This is a dictionary with hounder'ts of topics to read on.

http://www.investopedia.com/articles/forex/09/trade-with-the-trend.asp#axzz1ehjMaRFV

http://stocks.investopedia.com/stock-analysis/moneyshow/WhatitMeanstoBeContrarian.aspx#axzz1ehkR03wP

Just some thoughts from an option trader.

Good luck

DanPickUp

I have a fair idea of what options and derivatives are. But I am not familiar with trading in them on the web portal and that's what makes me nervous. I am using geojit as my online broker.

 

[trump]

careful, leverage is double sided sword, it cuts both sides, but still options are better for beginners.but one needs to know about them in detail,because one has to trade volatility,time decay and mkt direction, its not easy,even the big sharks of option mkt the option writers go kaput many times.But no need to fear , one can start with paper trades and see what the results are before putting real money on line.also another thing, you say that you have a trading capital of 1 lakh, but you want to use it fully everyday, be careful it may lead to ruin, even if you are right more than 80% of time, still the math is against you.before trading any real money with any strategy it should have positive expectancy to survive first , let alone be profitable.good luck dear.

 

[timepass]

Jxcess, you have been here for nearly 2 years. If you are a regular visitor, you must be having an idea about "trend is friend". If not, study the threads here diligently. You will get a fair idea about how to evaluate a scrip on various time frames. At present you seem to be looking only at yesterday's values. It is possible for a scrip to sustain a downside or an upside for days at a stretch.

 

[parth.dalal]

go for high bets stocks like delta corp.

watch the market for the first hour, if any positive news in general, bet on such high bets stocks. this has worked for many.