Crude Fall – A Game Changer for World Economy
Most of us loose money in trading. while 95% loose money and 5% makes money. Its true. Understand how to become 5% of the trader.
What is 80:20 Principal ?
The “Pareto principle” of the “80/20 rule” can be applied to the trading or speculation also. This principal is now applied successfully in business studies, sales, economy and many other theory. Now lets understand how how this 80: 20 rule can help you to optimize your trading and boost your profits.
As per wikiipedia the Pareto principle is a a principle which emphasis that that, roughly 80% of the effects come from 20% of the causes. IT happens to our life or business even on trading. Just for example, in any business it may happen that the 80% of your sales come from 20% of your clients.
80:20 principal In trading (Speculation)
The trade system profitability depends on discipline & emotionless and proven system based on proper money management principal. This is the essential for any trader’s success. To make money in trading, you may not have to have the most expensive or accurate system in the world. But you need to have a good system good system which can executed with discipline by using money management principal.
Summary- Learning from successful trader
80% of trading profits comes from 20% of transactions, these 20% are the large
Trades & called as as “trends”. Few Learning are –
- Small No of winning Trade (20% of profit gives him all the profit)
- Large winners ( interms of Value of money)
- Small losses ( in value terms)
Generally, small winners and the small losses will balance each other out, and you basically earn from the large winners. These large winner make more than 80% of your trading profits.
Analysis of Successful trader
We have found following trade analysis of a successful trader. Where he makes only 5% of the trade as big profitable trade. The success ration is around 30% only, but still he is able to make money. He catch the big trade and continued the trade with the trend. Where, he make small loss to profit or less trade (80%)
|Analysis of Successful Trader trade|
|Small loss to profit||40%||1000|
Few learning are –
- Spend much more time on trading psychology (or strategy ) &money management aspect rather than on researching new trading systems and ideas (Strategy is key to trading success).
- Make sure that your strategy (trading) should be able to take advantage of big moves.
Try to reduce 80% of the trading losses by avoiding emotional or impulse trading & continue to hold profitable position and cut loss making trade. 20% of trade gives 80% of trade.
Trend Following – India
Trend Following – Focus on Absolute Yield
“Trend Following” or “Be on The Right Side” is a trading system based on the principal of price analysis. Trend Following tries to take advantage of long, medium or short-term moves of the market. Smart trader takes advantage of these market trends by observing the current direction & using this to decide whether to buy or sell.
The objective of Trend Following is to produce absolute returns irrespective of bullish or bearish market condition. The success of trading system works on following principles –
- Strict Money & Risk Management
- Riding the Trend & “No Prediction”
- Emotionless Mechanical Execution
- Discipline & Consistency to follow the System
Some of the characteristics of the Trend following system are –
- Go with directional trend.
- Proven scientific approach to trading backed by Backtesting
- One may suffer temporary drawdown in case Sideways market (means no directional trend).
Trend following can be done in Indices ( Nifty & bank Nifty) or in stocks future.
What are the asset classes?
Asset Classes are Equity index and Equity, Commodity, Currency future or any other derivative asset class.But, presently, we have done backtesting in Nifty & Bank Nifty.
Who should follow “trend following”?
- Client is having money but no time.
- Those who want to make money in bull & bear market.
- Portfolio investor who is willing to hedge his risk & also wants to participate in market rally.
And it is not for
- Those who wants to earn money instantly
- Person who believe in prediction
How trend following scores over fundamental & technical?
Trend follower has pre-defined rules which are time-tested & objective in nature.
|Parameter||Technical (Discretionary)||Fundamental||Trend Following|
|Based on||Price, vol. & Indicators||Balance sheet& many more||Price|
|Prediction of price||Yes||Yes||No|
|Proven Consistence & track record||No||No||Yes|
When trend following works the best?
It works the best in tending market condition. The investment objective is to make return from up & down market condition. But, it does not work well in sideways market (means no clear directional trend).
The profitability of Trend following will decline only when human emotions: greed, fear and hope get disappeared.
How risky is trend following?
Life is risky. One can have car accident while cross the street. But if you have concrete plan, risk can be managed.
What is money Management?
Money management, or position sizing, is critical component of trend following system.
Risk per trade
- How much quantity to trade on how-much amount by accessing the risk per trade.
Is Leverage used in trend following?
All great traders made fortune using leverage. But trend following is not about using reckless leverage. It follows strict money & risk management technique.
If trend following works so well, why it is used by few participants and not popular?
We feel that –
- Investors want to hear prediction backed by great fundamental analysis. These stories are more appealing to them rather than a simple statement saying : “just follow the trend”
- Trend following is the “core strategy” used by FIIs, Commodity Trading Advisors ( CTA) , & Futures Fund Manager to make money.
Can Trend following be applied to day trading?
Advise -Useful – Nifty trend following , Bank nifty trend following , Indices trend following & stock future trend following. One wish to share knowledge & get an idea about our system, may contact us at firstname.lastname@example.org.
Related articles across the web
“Someone’s sitting in the shade today
because someone planted a tree a long time ago.”- or
Saving $50 a week over 10 years will allow you to save $26,000, not
including interest, and like the tree it has taken years to grow, Warren Buffett,
As warren Buffett said in above the statement tried to explain the importance of saving and how a significant investible corpus can be created from small but regular savings. No one is born knowing how to save or to invest. Every suc¬cessful investor starts with the basics. In the difficult economic and political times, saving money for a bad time or investment is must. Planning for the future is essential for financial security
Do you remember your parents told “Money doesn’t grow on trees”. Yes, they were right. Actually it grows on other money. It takes money to make money. Here, we will try touch upon two tolls i.e savings and investment & will see how can your money works for you.
Step – 1 What is Savings & investment
Saving is generally short term goals for any individual. People try to save out of his daily routine expenditure & save it in banks & withdraw it when you need it.
Read more at – http://www.einfomet.com/save-money-invest/
Exchange Traded Fund (ETF).
Exchange traded fund (ETF) are traded on the recognized stocks exchanges and usually it is the mutual funds schemes or Index or other asset class (like for example Gold). ETF can be bought and sold like any other stocks or securities. Mostly across the world most of the Indices are traded in ETF forms. The ETF can be hold as dematerialized forms in the Investor accounts. Though usually, most of the ETF are traded in secondary market, but practically, both primary & secondary market can co-exists in a particular country.
Read more at http://www.einfomet.com/exchange-traded-fund-etf/
Food for thought for Priority Investor – Dividend and Rental Income approach
After 2008 global turmoil, there has been a debate on earning from dividend yield stocks and earning from rental property (Residential and as well as commercial). Both of them scored high on various parameters such as principal of an investment, cash flow benefits & risk profiling. It’s a superior vehicle for building wealth for the investor. Though the yardstick for analyzing dividend paying stocks and rental property asset may be different for our priority customer, but both of them certainly can match cash flow requirement and ability to provide the higher return in alternate asset class.
Analysing Dividend yield and Rental Income comparison
“Google Search” now can predict Next Stock market Crash
Do you remember Amitabh Bachchan (famous Indian Actor) dialog in “PAA” ( a Hindi Indian Movie) that “Google se Bach ke kaha Jaoge” ( Means You cannot escape from Google”). Yes, now it is true for stock market investor also. By looking at a specific topics (rather Keyword) people search for on internet by using Google search, the new analysis can tell you is the stock market is headed for a crash?
As per the study by the National Academy of Sciences, researchers from Warwick Business School & Boston University have created a method to identify search terms that precede a stock market crash. They have developed algorithms to identify the trend based on search engine. The algorithms based on Wikipedia into different financial topics such as “management,” “business,” & “bank). The institute has done extensive research based on these algorithm & then consulted Google Trends to find spikes in business- and politics-related queries. Based on their study, they have found “rise in certain terms” which can predict stock market falls in advance.
Basis of the Study
Search engines “Google” record everything we search for. Google has supreme leadership position with 114.73 billion search queries or have around 65.2 % market share. China search giant Baidu has 8.2 % and Yahoo has around 4.9 percent%. The method shows that increases in searches proceeded falls in the stock market. Based on Google Search optimization, the researcher applied an appropriate set of keywords related to finance.
Records of these search queries allow the research to learn about how people gather information online before making any investment decisions in the real world. So, there is a link between search & action. These data certainly help to finds trend from what large groups of people may do.
Summary of Observation
FDI IN INSURANCE
The government has raised long awaited FDI in insurance from 26% to 49% in the Union Budget 2014- 15. It is expected that the government wants to promote “FDI” selectively. The proposal is pending since 2008. The increase in the FDI limit to 49% would certainly help domestic insurance firms to get access to the much needed capital from its overseas partners.. This is the big positive & stocks like , Max India, Bajaj Finserve , Exide industry Aditya Birla Nuvo is like to get benefited.
With this, lets understand the impact on longer term perspective.
As per Harsha Kapoor, Managing Partner – Avizare Solutions,) FDI Will make the Indian Insurance sector more vibrant and dynamic in the intermediate and long term. Insurance companies and other players have to gear-up and plan now to reap the future benefits. They have prepared an excellent fundamental report & the report can be viwed at link below-
Longer term Growth Driver
1) Rising income & growth of middle class
2) Financial Sophistication
3) Societal changes and urbanization
Focus of Insurance will shift to –
• Shift focus to untapped markets
• innovate on products and services
• Strengthen risk management practices
• Achieve operational efficiency
Foreign Partner will have first right of refusal
Another issue that the Government’s decision to increase Foreign Direct Investment ( FDI) cap in the insurance sector to 49% could reopen the prickly issue of pricing the additional 23% stake sale to the foreign partner. The much needed increase will like to t open gate. Most insurance joint ventures (Like SBI life , HDFC life etc) have given its alliance partner “the right of first refusal” rights to buy additional stake. This includes, company like like SBI Life and HDFC Life etc. As per HDFC Standard life, the first right to buy stake for at market price is with Standard life, if limits are raised.
– See more at: http://www.einfomet.com/fdi-insurance/#sthash.ils6KcdC.dpuf
Fixed income is as “Asset Class” generally defensive in nature. It provides capital stability, income, liquidity and diversification to other growth- oriented asset classes. Fixed income asset provides fixed income stream. The investor gets returned, by way, of interest to the investor for a particular fixed period of time. Upon maturity, the investor gets back their principal along with Interest due if any. Irrespective of any market fluctuation, the income for the investor is fixed & that is the reason it is usually called as “Fixed Income”. However, fixed income assets historically have had a lower rate of return than other riskier asset class.
– See more at: http://www.einfomet.com/fixed-income-asset-class/
Billionaire investor Shivanand Mankekar bought Jain Irrigation
The billionaire investor & professor Mr Shivanand Shankar Mankekar has recently bought 82 lakh shares or 1.86% stake in Jain Irrigation ltd as per the June ending quarter. Domestic institutional investors (DII) have increased their holding in the company to 14.71% & foreign institutional investors (FII) hiked their holding marginally to 39.52% from 39.14%. However, retail investors reduced it to 17.08% in the June quarter from 18.74%.
Read Motilal oswal fundamental report . Click here to get report MOTILAL OSWAL ON JAIN IRRIGATION
Who is Prof. Mankekar?
Professor Shivanand Shankar Mankekar, in his mid-50s, lives in Mumbai. But, Mankekar is no ordinary professor. Mankekar as per information teaches financial markets at Jamnalal Bajaj Institute of Management in Mumbai. He came in to limelight with his “Pantaloon investment in 2003. It is said to be early investor Pantaloons, has said to be given 100-times of his investment. His present successful Investment includes United Spirits is worth about Rs 500 crore. He has also significant holding in companies like Talwalkars health, and MT Educare , among others.
He is largest Retail investor in United sprite.
Read More about him & his portfolio – .