5 Minutes Investing - Investopedia

ravi_s_ghosh · #1 21st February 2006, 11:47 AM

5 Minutes Investing - Investopedia

Hello friends,

I found this very interesting article (click or copy&paste this link >>> http://www.investopedia.com/universi...fiveminute.asp) on investopedia which tries to eliminate any prediction from long-term investment, cutting losses, and letting profits run. Also, this article describes various stock market myths and words of wisdom. It is a very lengthy article. If you are running short of time, then just check:
Chapter 4: Stock Picking
Chapter 6: The World's Worst Trading Strategy
Chapter 7: The Reverse Scale Strategy
Chapter 8: Margin Power

OR you can directly check
Chapter 9: Implementing the Reverse Scale Strategy

Now, the questions I would like to put forward are:
1. How effective do you consider this strategy?
2. How can be this strategy altered to suite Indian context?
3. Is there any testing methodology you can suggest?

I would request senior members to put their views.

Thanks

Ravi S Ghosh
ravi_s_ghosh@**********

Traderji · #2 21st February 2006, 02:21 PM

I personally recommend and use the The Reverse Scale Strategy as a part of my trading strategy.

This strategy involves adding on fresh position only in the direction of the profitable trend.

srisara · #3 21st February 2006, 03:45 PM

Traderji,

I too read this strategy just 1-2 days before and still analysing it. The strategy looks very good and it has some of the best money management techniques in it. Also, it has solid techniques to protect your money.

The technique deals mainly with a fixed amount of investment and doesnt tell us how to play in variable capital investment.

Like Initially my investment may be to start with 2-3 lacs and eventually i can take this investment to around 10 lacs. In that case how to split the capital among the stocks is a big question.

I hope traderji will enlighten me on this....
Satya

ravi_s_ghosh · #4 22nd February 2006, 11:32 AM

Thanks for yous reviews. Apart from the variable capita stuff raised by srisara, the question that still remains unanswered is that how can we modify this to suite indian markets. Stock picking part of the article asks to avoid stocks below $15 which cannot be directly applied to indian stocks as it would be hard to find stock with prize above $15 and hitting 52-week high. So, what can be the indian equivalance of this prize. Like this, there may be many more things to alter in reverse scale strategy. Hope, traderji could shed some light on them...

thanks

ravi s ghosh
ravi_s_ghosh

Traderji · #5 22nd February 2006, 12:21 PM

I personally avoid stocks below Rs. 50.00

Also if you want to scale in and increase your trading capital with time just decide on the amount (which has to be a fixed Rs. amount) and keep trading.

srisara · #6 22nd February 2006, 04:54 PM

Quote:

Originally Posted by Traderji

I personally avoid stocks below Rs. 50.00

Also if you want to scale in and increase your trading capital with time just decide on the amount (which has to be a fixed Rs. amount) and keep trading.

Traderji,

Do you use the same formula of 1.5 for Decision Point 1,2,3 ? the model suggest a time frame of 5 years and its only 1 way of investing and investing (assuming what all you invested doesnt touch those Stop Losses) and he never talks of taking regular partial profits.

I think if the subject of taking regular profits from the market is described clearly for the method, then its a good techinque i believe to implement.

Traderji, If you have any more new or intersting points on this, please enlighten us..
Thanks & Regards

Satya

aca_trader · #7 22nd February 2006, 10:47 PM

Quote:

Originally Posted by ravi_s_ghosh

Thanks for yous reviews. Apart from the variable capita stuff raised by srisara, the question that still remains unanswered is that how can we modify this to suite indian markets. Stock picking part of the article asks to avoid stocks below $15 which cannot be directly applied to indian stocks as it would be hard to find stock with prize above $15 and hitting 52-week high. So, what can be the indian equivalance of this prize. Like this, there may be many more things to alter in reverse scale strategy. Hope, traderji could shed some light on them...

thanks

ravi s ghosh
ravi_s_ghosh

Instead of fixing an arbitrary price limit, a better way can be to look for liquidity. A very cheap stock (Only in Price per share terms) IFCI is certainly tradeable but not a Rs. 11,000 Laxmi Machine Illiquid stock. Same will go for Zandu. The Best Idea can be generated by using an average of Vol*Price (The field vol_val in NSE Bhavcopy) for a given period.

ravi_s_ghosh · #8 25th February 2006, 07:48 PM

Quote:

Originally Posted by aca_trader

Instead of fixing an arbitrary price limit, a better way can be to look for liquidity. A very cheap stock (Only in Price per share terms) IFCI is certainly tradeable but not a Rs. 11,000 Laxmi Machine Illiquid stock. Same will go for Zandu. The Best Idea can be generated by using an average of Vol*Price (The field vol_val in NSE Bhavcopy) for a given period.

Now, we need a limit for VOL*PRIZE. what would that be.

thanks

ravi s ghosh
ravi_s_ghosh@**********

aca_trader · #9 25th February 2006, 07:56 PM

Quote:

Originally Posted by ravi_s_ghosh

Now, we need a limit for VOL*PRIZE. what would that be.

thanks

ravi s ghosh
ravi_s_ghosh@**********

No Limit,
Make a comparative and select liquid and illiquid stock suitable to your trading methodology.

Regards,
--Ashish

purnimat · #10 8th December 2007, 03:32 PM

respected sir/madam,

i had a query to ask it would be great if you could help me out with this query

Query : an unlisted company gives its shares to its subdaries or public for Rs100/- and then it gets listed and its shares are valued at Rs60/- why does this happen???

and when this listed compay buy backs its shares it buy's it at Rs100/- and it shows in the exchange for rs60/-why does this happen???

please let me know the answer for the same and which guidelines in sebi or taxation would help me find this answer

thanking you and awaiting ur kind reply

Purnima Thakur

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