Safe Trading
“You don’t make money unless you are willing to take some risk and leave some money on the table”. “You also need the discipline to buy when everyone sells, and sell when everyone else is buying.”
There are many ways to trade the market. For instance, A Chinese hedge, also known as a "Reverse Hedge", involving a short position in a convertible security and a long position in its underlying asset. The Chinese hedge looks to capitalize on mispriced conversion factors. The trader will profit when the underlying asset depreciates, diminishing the premium on the convertible security. It is not so easy in practice. Managing a hedge fund can be an attractive career option because of its potential to be extremely lucrative. To be successful, a hedge fund manager must consider how to have a competitive advantage, a clearly defined investment strategy, adequate capitalization, a marketing and sales plan and a risk management strategy.
How to analyze data like proprietary valuations, forecasts, and ratings data for more than 6,000 equities trading on the Indian markets. Elimination is the best way to comes up with the top 20 stocks expected to generate the best performance based on today’s market conditions.
With this equity research, combined with the technical analysis and market timing will generate return in a short duration. I repeat, It is not the ONLY way to mop up profit and the old practice of Buy and Hold Investing policy still reigns for handsome profit. Even though there is an echo in market for long that “Buy and hold is dead” and “Over the last 10 years, it has made nothing.”
Here we discuss about a Trading Strategy, not a buy-and-hold investing strategy, which trades around “points of volatility” for stocks in time frames of days or weeks – occasionally months. Against “Buy and hold”, ‘Buy and trade’ captures the volatility of the market and converts it into quick profits.”
To apply this strategy, first wait for stocks to be temporarily depressed in price through market conditions, news, or even rumor. Then buy them at their lows and waits for them to come up in price again. Many stocks have a “volatility point,” a price range around which they fluctuate. If you trade as the stock moves up and down within that range, you can quickly rack up some impressive gains.
One can use a two-step approach to making money by trading: first know which stocks to buy and sell, and second, own proprietary system for timing the trade entry and exit points.
Develop Stock Valuation Models and econometric models for forecasting stock price movement. When calculating the fair market value of a stock, use variables such as long-run earnings per share growth, duration of business growth cycle, volatility of EPS growth rate, beta risk of the firm, correlation between EPS and the interest rate environment, dividend payout ratio, and buffer earnings.
You can use Fair Market Valuation 12-month historic and forecasted EPS values and the current 30-year treasury as primary determinants. When calculating risk/return values such as the Sharpe ratio, historic periods used are 5 years.