Sensex : A Roaring Bull , A Crippled Bull.

Here is a different take on the Markets.
I am pointing this out specifically to those medium-long term traders/investors who are fully dependent on the markets for their living and whose strategies only include buying. (Those who only go long)

I am one of you guys.
Mostly all of my strategies are on the long side. And I am a medium-term trader.
I hold my longs for at least a Quarter up to a Year.
I also include Fundamental Data in my decisions to buy a certain stock.
When I get my technical signal, I check the fundamentals. If they support further price appreciation, I buy the stock.

Now, the fundamental data that I have is from 2002. So I could only back test my strategies from 2002.
Guess what! I had varied success rate in many of those strategies. From 30% to as high as 60%. This is on Cash Markets. If I looked at the returns in the Futures markets, they were mouth watering . 3 of my strategies gave an average return of 150% of more. (Factoring additional capital requirement for MTM). I was over the moon. I couldn't wait to invest all of my capital into the markets, as soon as I got the signal.

Then, I happen to get my hands on the Sensex Data prior to 2002.



I tested all of my strategies (based only on the technical signals, since I don't have any fundamental data before 2002). They performed abysmally. I wasn't just losing money, my account would have been wiped out.

The period I am talking about is from 1994 to 2002. Sensex closed at 3346.06 on 24-Dec-1993. And on 31-Dec-2002, the Sensex value still was 3377.28.
Imagine someone who makes his living from Investing or even trading medium-term on the long side of the markets.
We had a similar period of stagnant prices from 2008 to 2013 where Sensex compounded at 0.71% for a period of 6 years.
You can argue that from 2003 to 2007, Sensex gave humungous returns. But from the POV of someone entering at the end of 2007, how would have he been able to make money??



My main strategy is buying Banks. Banks are a proxy to the Indian economy. You can even say, they are the facilitator of growth in any country. Luckily, Banking sector performed well during the period of 2008-2013. Based on my strategy, even if I had invested at the end of December, 2007; my Annual CAGR would have been 20% till 2013. Even though the Sensex returned only 0.71%.

When I looked at the period of 1994 to 2002, banks performed horribly, and not just banks. If you exclude the technology stocks, most of the Mid-Cap and Small-Cap stocks performed poorly.

SBI has never been a part of my portfolio. But I checked its prices from 1992 when it closed the year at 401. At the end of 2001, it was 172. The high reached in that period is 460.

I am completely lost here. I know that Banks will continue to grow. But they were also growing from 1994 to 2002. I fear what will happen if we enter a similar period. And not just Banks, other signals that I got, were also non-performing (ex of IT Sector)

I wasn't comfortable with short-term trading, So I took up Medium-term trading. And I have taken up Long-only strategies because all the strategies that I tested did not perform on the short-side. Some strategies kept me out of the Markets during big corrections. But I guess staying out of the Markets is not an option when you want to make a living from the Markets.

I guess my main aim in writing this is that I am looking for a Mentor. A Guide. Someone who has made his living by Long-only strategies. Someone who survived that period and is still active in the Markets. Someone who could share his knowledge with me. Guide me, educate me. I seriously doubt that he would get to learn anything from me. But if any of you guys could point out anything helpful.......it would be a life-saver.

I was planning to quit my job and take-up full time trading. Trading full time is what I want to do. But after looking at this, I seriously doubt that that dream will come true.

Help you guys! This is an SOS!:fatigue::annoyed::sos:
Cheers!

I would also request you to buy index based funds for long term. It is not just you majority of traders do sufferes losses. If you live each day like your it is your last day, one day it will be true.

I am not fully dependent on the market but I have a substantal amount invested. I go only long and I stay away from FNO

You are not one of us (investors) since you say that you are a medium term trader.

I dont know what your strategies are but just make sure when you backtest you are taking care of survival bias.


The tech bubble burst in 1999-2000. The stock market was already down when 911 terrorist attacks occurred. The world economy was not doing so well. Which is why the sensex was still at 3377.

What you and most other people fail to realise is that these were some of the best times to buy stocks. The old Buffett saying "Be greedy when others are fearful"

Greenspan in US and Japan started cutting interest rates so the FIIs borrowed money and started investing in emerging markets and so the Indian stock markets started booming in 2003.


This is where you strategy guys go wrong. You try to complicate matters by looking at all these technical charts and complex strategies. When the market corrects you are busy trying to figure out what went wrong with your strategy instead of investing big money in good companies.

How many annual reports have you read?


First decide what you want, short term trader, medium term trader or an investor.

First of all, thanks for replying.

Well, for me the case is simple, either I completely concentrate on Stock Markets or I have to join my dad's business. For that I have to provide returns every year. For that I have a hedge strategy in place, where my net portfolio was positive even in 2008.

Sure. If by survival bias, you mean that I also take into consideration all the companies that have stopped trading now. Then, yes. i have factored for that.
All these strategies that I talked about (....150%) are all F&O Strategies and have been tested on price action basis with price data from NSE for each and every expiry, as well as the lowest point reached in each expiry. Otherwise my cash portfolios have given around 35-40%. but that is again from 2002. And not before that. As I don't have the financial numbers.

To be completely honest, I haven't read a single Annual Report. I have a strategy that shuffles my portfolio every year and a half (factoring for LTCG). But I do study the numbers.

I know what I am. I am a medium-term trader who also looks at the fundamentals. Because all the strategies that I have tested, I have seen that when I filter out the wasteful companies based on their financials, the strategy performance improves dramatically. Granted I don't study each and every angle, but that is because as I said that I shuffle my portfolio twice in three years. So, I just look at the numbers, and not the distant future (like after 10 years where will the company be....that sort of thing), because I won't be holding that for 10 years.


But as you say that you are not fully dependent on the markets for your day-to-day living, the starting point is totally different for the both of us. I would have to churn out returns every year. And that is why, I started looking at short-term price action. Now for me, short-term is a month. Before that I started testing my strategies for a minimum holding period of one year.

I have Cash as well as F&O strategies that have banking sector as their universe. The Cash strategy's performance is the sheet that I have attached in the first post.

I assume that you were investing long before 2002....(maybe from early 90s). What I want to know is, if you remember your performance from 1994 end to 2001 end. Were you net positive in your portfolio? Because that is the period that scared me completely at first.

And also if you were investing in banks, how did the markets valued that sector. How did the markets (and you as well) view that sector?
Because I am a strong believer in the banking sector. There will be scams, there will be downgrades. The prices will be hammered. But if you can count on something, it is the fact that sectors and old companies will rise and fall, and new companies will take their place. But banks will always be there to hold the new companies' hand from their nascent stage till they fully mature.

And if you don't mind, I would like to pick your brains on issues that I might face in the future.

Cheers!

I am a government employee investing is my hobby i think trading or investing should notbe given priority on job