50000 to 20 lacs in 1 year

Ajax · #1 2nd February 2008, 04:00 PM

50000 TO 20 LACS IN 0NE YEAR

MECHANICAL TRADING SYSTEM.

Initial Capital Rs. 50000/-
All cash scrips traded in NSE ( Mkt price > 100 )
Margin Trading - Yes .. 50% margin trading
Entry : Buy signal generated .. Next day employ entire capital @ Buy Stop
Exit : Stop Loss .. 1.5% below Buy Stop
Target -- 10% above buy stop
Maximum holding period per trade - 14 bars
Trailing Stop Loss - Chandelier exit plan
New trade : On next buy signal . employ entire capital+profit/loss from previous trade
same entry & exit strategy
and so on & on
Only longs. No shorts..

Result: 50000 deployed on 1 Jan 2007 becomes 20 lacs as on 22 Jan 2008

IS IT POSSIBLE TO EXECUTE ABOVE STRATEGY.........IN REAL TERM

What are the possible bottlenecks??

Regards

Ajax

bhaveshdj · #2 2nd February 2008, 05:46 PM

What are your buy and sell formulas?

I used a similar system in amibroker which generated terrific returns on paper. When I used it in real life I lost around rs.35000/-
Reasons:
1. They used future values in formulas.
2. The period you are using and which I used was the biggest bull period in Indian history, but this may not work in current bearish times.
3. We dont have the discipline and patience to trade this type of systems.
4. I am not sure whether our brokers give 50%margins.
5. If you employ entire capital in one company, using 50% margin, it if you have 50k and buy 1lac of shared in one company, and due to some unforseen circumstance or bad news or big fall like we say recently or due to continous lower circuits, the price of that co falls 50%, your entire capital is wiped out.

So I advice you to first paper trade your system manually for full six months.
Then never use margins, dont be greedy.
Buy shares in 5 companies of 10k, so that you live to fight even if one co. falls drastically.
Also go long only in bull market. for eg, you may decide to go long only when nifty is above 50day avg and liquidate all positions if nifty falls below the 50day avg, this will save you during falls like we experienced recently.
Finally read books on trading psychology, money management, position sizing, etc.
There is no holy grail or magic formula.
Only if you have a solid business plan, entry rules, stop losses and exit rules, and follow your plan consistently with discipline, you will succeed.
If you follow any magic formula, you will lose 50k and probably lot more.

Take care,
Bhavesh.

marcus · #3 2nd February 2008, 05:48 PM

lol ............... very interesting Ajay.............

marcus · #4 2nd February 2008, 05:50 PM

I should I add I used a similar system which gave 900% backtested returns and posted the system on Traderji back in 2006-2007 ....... I'm told it gave around 100% and then there was a terrible drawdown of 35% after which it was no longer traded

uasish · #5 2nd February 2008, 05:59 PM

Quote:

Originally Posted by bhaveshdj

What are your buy and sell formulas?

I used a similar system in amibroker which generated terrific returns on paper. When I used it in real life I lost around rs.35000/-
Reasons:
1. They used future values in formulas.
2. The period you are using and which I used was the biggest bull period in Indian history, but this may not work in current bearish times.
3. We dont have the discipline and patience to trade this type of systems.
4. I am not sure whether our brokers give 50%margins.
5. If you employ entire capital in one company, using 50% margin, it if you have 50k and buy 1lac of shared in one company, and due to some unforseen circumstance or bad news or big fall like we say recently or due to continous lower circuits, the price of that co falls 50%, your entire capital is wiped out.

So I advice you to first paper trade your system manually for full six months.
Then never use margins, dont be greedy.
Buy shares in 5 companies of 10k, so that you live to fight even if one co. falls drastically.
Also go long only in bull market. for eg, you may decide to go long only when nifty is above 50day avg and liquidate all positions if nifty falls below the 50day avg, this will save you during falls like we experienced recently.
Finally read books on trading psychology, money management, position sizing, etc.
There is no holy grail or magic formula.
Only if you have a solid business plan, entry rules, stop losses and exit rules, and follow your plan consistently with discipline, you will succeed.
If you follow any magic formula, you will lose 50k and probably lot more.

Take care,
Bhavesh.

Impressed with your Level Head approach.

bhaveshdj · #6 2nd February 2008, 06:00 PM

thanks a lot uashish, u made my day!

surfingminds · #7 2nd February 2008, 06:39 PM

I would definately do my research in such kind of strategies..
As I believe its possible but should be implemented manualy and then realy on some automation..

regards.

bhaveshdj · #8 2nd February 2008, 06:54 PM

It is possible but lots of paper trading, proper money management and discipline and experience is required. Also you have to have courage to face any downdrowns such systems may have. Such systems may give 9 losers and then a winner that more than compensates for the losers. most people will lose faith after 3/4 losers. Also we should stay out of long positions during down markets and reenter only when markets shows reviving signs.

punj47 · #9 2nd February 2008, 10:00 PM

Keep an eye over small shares they can give better resuls in few days

Shishya · #10 2nd February 2008, 10:18 PM

try backtesting your emotions...

that's the next and a far bigger challenge..