Trading Strategies Using Technical Analysis

[Apurv7164]

There you go Apurv dear. ACC has indeed run up. Trading at 942.

Tc

Yeah.... i have already started making plans to get married ADX....lolz... on a serious note - I have trailed my stop loss to 950... is this ok?

 

[Apurv7164]

Just a word on Investing and trading.

If we have a portfolio, in which alpha is generated with given set of stocks. We need to make sure that when the market goes into volatile phase or starts to correct, short selling becomes an instrument to rebalance the alpha lost by market correction on portfolio.

This is where a trading technique or a system comes in handy. During consolidation, our alpha won't be affected much and we must not get into the frenzy of trading. However, when signs emerge of correction, then we must be prepared to short sell in order to restore the alpha lost in correction. This is how one can be a long term investor and at the same time be a short term trader in order to balance alpha. In other words, Trading instrument simply becomes another portfolio vehicle ensuring alpha generation capability.

Tc

What is alpha?

 

[alroyraj]

What is alpha?

Alpha is the amount by which a selected stock or security outperforms the market for a given risk (Beta). Beta is the degree of correlation with the market index. Here Raunak seeks to outperform his selected benchmark i.e. Nifty via superior stock selection much like a fund manager .

 

[alroyraj]

Hi Raunak,

I am tempted to try this out.
But having fear as market at two year's highest level. I am sure you might have discussed this point before starting investment.
Just want to know should I start now? Or wait for couple of months to get one correction phase?

pls let me know which are Z category stocks in your list which are not worth investing.
Also let me know, can I try this with lower value. say Rs2000/lot/stock. Will it be OK? OR I will be spending more on brokrage (Using ICICI)?

I think your aim is much bigger than just out performing. You are aiming for 100% to 300% returns in 2-3 years. Nifty will not be @11000 - 20000 in 2to 3 years.
I think that is the reason I do not see any Index stock in your list.

According to recent report FII have largely exited investments in small caps and have focussed on the larger caps. Hence many are available still at attractive prices. For a long time now the action has shifted to small and midcap. Any correction will have a small blip but the targeted returns are potentially higher.
Since brokerage is a percentage it will not matter either ways. For starters you can look at returns for 3-6 months. Short term calls are less riskier than trying to do intraday and you can get better returns.

 

[jagankris]

Raunakji and Experts,

I have a couple of question regarding Investment and Trading.

As traders why should we have a long term perspective of Investment ?

In what way a short term portfolio(1week to 1 month holding) different from a long term Investment portfolio ?
How the returns are expected to exceed the returns of a Swing trading Portfolio ?

Note:- Lost hope in investment after burning my fingers in Sathyam, Teledata.

 

[SwingKing]

According to recent report FII have largely exited investments in small caps and have focussed on the larger caps. Hence many are available still at attractive prices. For a long time now the action has shifted to small and midcap. Any correction will have a small blip but the targeted returns are potentially higher.
Since brokerage is a percentage it will not matter either ways. For starters you can look at returns for 3-6 months. Short term calls are less riskier than trying to do intraday and you can get better returns.

Well, I won't read too much into what FII report says about where they are investing. Trading where the action is something one should focus on. Historically, in every economy, midcaps have always outperformed large caps. Also, Midcaps and small caps also fall a lot more than large caps. Hence, the risks are more in such stocks.

But if you pick the right kind of midcaps, the gains are just staggering. How many large caps are the best performing stocks every year? Some manage to creep up, but the majority of best stocks year on year in terms of risk reward are usually midcaps. Small cap are a bit scary though.

Tc

 

[SwingKing]

As traders why should we have a long term perspective of Investment ?

Well, it entirely depends on your mindset. If you are a trader, then you don't need to bother about anything else. As I have posted earlier, I cover up some of my investment draw downs by trading. So, in short I am a medium term trader and long term investor. My time frame in defining what is Long term and what is short term is not fixed,it changes with volatility.


In what way a short term portfolio(1week to 1 month holding) different from a long term Investment portfolio ? How the returns are expected to exceed the returns of a Swing trading Portfolio ?

It is different in terms of alpha and beta both. In short term portfolio, your gains are less and your risk is relatively high. Depending on your skill set you can find suitable risk to reward trades. In long term, you have time on your side and if your investments are sound, then the gains can be spectacular.

For a short term portfolio's returns to be greater than long term portfolio, you need to have the right sort of environment. For eg, when the volatility is high, your short term returns can out run the long term portfolio returns. But, how many traders actually know how to position themselves in high volatility environment? That my friend is key to returns in the shorter term. And don't forget the risk that high volatility environment brings to a trader.



Note:- Lost hope in investment after burning my fingers in Sathyam, Teledata

What are the odds of this happening again to you. Satyam I agree was a shock for many. But how often does this happen? You can't draw inferences based on some trades. Furthermore, one year like 2008 will sway your faith away from trading. So many traders in that year swore never to trade again. Hence, its a double edged sword dear. Ultimately you need to know what works for you.

Tc

 

[SwingKing]

Yeah.... i have already started making plans to get married ADX....lolz... on a serious note - I have trailed my stop loss to 950... is this ok?

I would keep a SL of 920 as of today. Its a little volatile on shorter frames and hence it has more than 70% chance of hitting 950. Keep SL lower and let profits run.

Tc

 

[nimish_rulz]

What is alpha?

Alpha is the outperformance of the portfolio relative to the market. Its not same as Beta, beta is the sensitivity to the market. Alpha is the extra positive return generate through your wise investment decisions. Alpha is sometimes measure by Sharpe Ratio. Most hedge funds strive for achieving a high alpha even through market neutral strategies. As Alpha is what an investment manager's ranking is based on. Also sometimes called as abnormal rate of return this applies to CAPM(Capital Asset pricing model). The extra return not anticipated by the investment is also known as Alpha.

Hope that solves it and I didnt confuse you.

 

[Apurv7164]

Alpha is the outperformance of the portfolio relative to the market. Its not same as Beta, beta is the sensitivity to the market. Alpha is the extra positive return generate through your wise investment decisions. Alpha is sometimes measure by Sharpe Ratio. Most hedge funds strive for achieving a high alpha even through market neutral strategies. As Alpha is what an investment manager's ranking is based on. Also sometimes called as abnormal rate of return this applies to CAPM(Capital Asset pricing model). The extra return not anticipated by the investment is also known as Alpha.

Hope that solves it and I didnt confuse you.

Absolutely not... in fact it helped me understanding and learning new topic.. this is the first time I got to learn about Alpha...