Swing Trading Strategy - Funds & Risk Management
Description :
Before buying any stock you need to learn fund and risk management first, In this we discuss 7 points with 2 Fund mangement and 5 Risk management points, Analyse each point before enter and exit stock,
Fund Management
1. Invest only 5% capital in one Trade :
Invest only 5% capital in one trade means the 5% divided by total capital is equal to 20 trades, Donot invest more than 5 % capital in singel trade,
In stock market there is uncertainty and volatility, in a cycle one sector will bullish and another sector is bearish so we need a liquid cash available in all time in any condition so we need to infuse capital in small ticket size to achieve cash liquidity And it slso balance the portfolio in markets up and down by divested sector stocks,
For example : Your total capital is 1 lakh divided by 5% is 5000 ruppes, For each trade we invest only 5000 rupee only,
2. Average Stock by 5% down by Stock Entry point :
Average stock by 5% down by stock entry point means after enter the stock if stock price decline 5% from entry price add another 5% capital to average price,
Average formula is Add both entry capital and divided by Total quantity, For example you buy ABC stock @ 100 rupee of 100 quantity, If stock decline 5 rupee and CMP 95 rupee we will average and Add another 100 quantity @ 95 rupee than the average price is 10000+9500÷200 = 97.5 CMP,
Risk Management
3. Enter stock with P/E ratio less than Sector P/E :
Stock P/E ratio less than Sector P/E means the value of stock is under valued, And Stock P/E is near Sector P/E indicates stock is fairly valued, To avoid risk enter stocks with P/E below or near Sector P/E ratio,
4. Compare Stock chart with Peer Companies :
Compare s atock chart with peer companies means before enter stock you need to analyse a peer companies chart to guage sector performance,
5. Calculate Benchmark Index PCR to indicate Oversold and Overbought zone :
Calculate benchmark index PCR to indicate oversold and overbought zone means In indian stock market we consider a NIFTY 50 as benchmark index, The NIFTY 50 index as a weekly expiry so we calculate PCR of 3 expiry and average it,
The PCR reading is below 0.60 is oversold zone and PCR reading above 1.40 is overbought zone,
To avoid risk while enter stock try to enter below PCR reading 0.60 And try to exit stock above PCR reading 1.40 if PCR reading near 1 is neutral range,
6. Calculate India VIX for Volatility in Month :
Calculate India VIX for volatility in month means average past 30 day India VIX and diveded by 3.46 we get a volatility % of next month,
For example if 30 day average india VIX is 20 than divided by 3.46 means 20 ÷ 3.46 = 5.78 % is volatility for next 30 days,
To determine top and bottom of index we use India VIX to find add or substract volatility to present strike price to find support and resistance zone,
Traders use India VIX where vix is high it means volatility is high so avoid trading and Vix is low than volatility is low than investors will invest in market,
7. Analyse Candlestic Chart pattern of Stock before Enter and Exit stock :
Before enter stock analyse a candlestick chart pattern like Inverted head and shoulder, Cup and handle or Double bottom chart pattern to avoid risk before buying stock,
Before exit stock analyse candlestick chart pattern like Head and shoulder, Inverted cup and handle or Double top chart pattern to avoid risk before selling stock,
Note : Calculate PCR of nifty daily after market hours and Calculate India vix once a month in starting and Use 1D candle time frame chart for analyse chart pattern,
Description :
Before buying any stock you need to learn fund and risk management first, In this we discuss 7 points with 2 Fund mangement and 5 Risk management points, Analyse each point before enter and exit stock,
Fund Management
1. Invest only 5% capital in one Trade :
Invest only 5% capital in one trade means the 5% divided by total capital is equal to 20 trades, Donot invest more than 5 % capital in singel trade,
In stock market there is uncertainty and volatility, in a cycle one sector will bullish and another sector is bearish so we need a liquid cash available in all time in any condition so we need to infuse capital in small ticket size to achieve cash liquidity And it slso balance the portfolio in markets up and down by divested sector stocks,
For example : Your total capital is 1 lakh divided by 5% is 5000 ruppes, For each trade we invest only 5000 rupee only,
2. Average Stock by 5% down by Stock Entry point :
Average stock by 5% down by stock entry point means after enter the stock if stock price decline 5% from entry price add another 5% capital to average price,
Average formula is Add both entry capital and divided by Total quantity, For example you buy ABC stock @ 100 rupee of 100 quantity, If stock decline 5 rupee and CMP 95 rupee we will average and Add another 100 quantity @ 95 rupee than the average price is 10000+9500÷200 = 97.5 CMP,
Risk Management
3. Enter stock with P/E ratio less than Sector P/E :
Stock P/E ratio less than Sector P/E means the value of stock is under valued, And Stock P/E is near Sector P/E indicates stock is fairly valued, To avoid risk enter stocks with P/E below or near Sector P/E ratio,
4. Compare Stock chart with Peer Companies :
Compare s atock chart with peer companies means before enter stock you need to analyse a peer companies chart to guage sector performance,
5. Calculate Benchmark Index PCR to indicate Oversold and Overbought zone :
Calculate benchmark index PCR to indicate oversold and overbought zone means In indian stock market we consider a NIFTY 50 as benchmark index, The NIFTY 50 index as a weekly expiry so we calculate PCR of 3 expiry and average it,
The PCR reading is below 0.60 is oversold zone and PCR reading above 1.40 is overbought zone,
To avoid risk while enter stock try to enter below PCR reading 0.60 And try to exit stock above PCR reading 1.40 if PCR reading near 1 is neutral range,
6. Calculate India VIX for Volatility in Month :
Calculate India VIX for volatility in month means average past 30 day India VIX and diveded by 3.46 we get a volatility % of next month,
For example if 30 day average india VIX is 20 than divided by 3.46 means 20 ÷ 3.46 = 5.78 % is volatility for next 30 days,
To determine top and bottom of index we use India VIX to find add or substract volatility to present strike price to find support and resistance zone,
Traders use India VIX where vix is high it means volatility is high so avoid trading and Vix is low than volatility is low than investors will invest in market,
7. Analyse Candlestic Chart pattern of Stock before Enter and Exit stock :
Before enter stock analyse a candlestick chart pattern like Inverted head and shoulder, Cup and handle or Double bottom chart pattern to avoid risk before buying stock,
Before exit stock analyse candlestick chart pattern like Head and shoulder, Inverted cup and handle or Double top chart pattern to avoid risk before selling stock,
Note : Calculate PCR of nifty daily after market hours and Calculate India vix once a month in starting and Use 1D candle time frame chart for analyse chart pattern,
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