Whilst the Bank’s fixed deposits (FD) are at around 6% pa, Mutual fund returns are running around 20% (though at times there are negative returns). In a recent research published by MoneyControl.com, the best of them gave about 26%. Then the question that hits our mind is “how will any person be able to double their money in just a year”
Big institution players generally enjoy much higher returns than a common man as they use statistical and financial model approach. They use techniques generally unknown to common man. This knowledge is generally is not thought in our schools and colleges.
So, is it too difficult? Not at all. If you follow these few tips, it will help you achieve your goal.
Do it yourself
Do your own investments into the stock market. Investing in equity market through any mutual fund or a stock trader will not get the full ROI from the market. Your returns are paid out to you after deducting all the operating cost and their own profits. Which means you get only 10-15% of the profits that your money actually makes.
So the first thing you do is have your own demat account and deal with the market yourselves.
Know the Swing system
There is always a swing in the market. When you look at a stock of a particular company, you will see a 1-2% returns on a particular day and 1-2% negative returns on other days. Over all on an average for that particular stock you will see a 1-2% return in a month. So capturing the knowledge and information on which days that this stock grows and which days they dip is important. The Entry and Exit strategy is important and can easily help you generate 10-12% gains. Knowledge on technical analysis will help you to identify which stock to buy and at what price. You can observe live data from https://beta.nseindia.com/market-data/live-equity-market
Don’t buy in dips, buy at high price
Common myth is buying in dip and sell in raise and that’s what general person does. However while buying in dips in a falling market will accumulate the stocks which ends up into a liability than a asset. You don’t know if it is a start of bearish market or an indication of short-term crash or small correction in market. Traders and short-term investor don’t think on that way. They always buy the stock when price is increasing.
In late 1950’s Nicolas Darvas, a highly paid dancer analyzed the stock market market and made wise investment. He turned $36,000 into $2.2 million in 3 years’ time by just investing in stocks that breaks the previous high, he used to buy that stock. He never invested in falling stocks. His advice is to always buy in the beginning of a bull market and sell at the saturation point.
Use margin money for higher return
Margin Money is something that is the virtual money that you have to trade. It is generally 10-20 times that of the invested stock in daily trading. While you have Rs. 1 lakh of stocks in hand, you can trade with a margin money of 10times. However these margin money have to be closed before the end of the day. So even if a stock price moves at 1%, you are actually seeing a returns at 10%.
This is the standard strategy that your trader uses. He takes your 1 lacs and then adds the 9 lacs of margin money, trades with 10lacs stock, but gives you return on only your 1lac.
The Golden Rule
Many times, you will hear about someone losing a huge money in stock market. 99 of 100 times is because of the greed. Experts say not to risk more than 1% of your total capital. This is golden rule. Never trade against the market. Traders with small capital cannot influence the market. So, go by the trend. Always a trend following system provides higher return.
- When stocks meet certain criteria as per technical analysis then only you need to enter into the system. Every day you don’t trade on the same stock.
- When bull market starts you get multiple opportunities to earn profit.
- If you buy and hold for long term you lose the profit
- Every day you will get few stocks to trade knowing the right one is important
- There are multiple instruments in stock market which provides you to sell the stocks first which you are not holding. Then when the market crashes still you can earn money.
- SEBI allows trading Index which provides higher return than this.
About The Author
Founder Director at GenYAnalytica Solutions Private Limited.
A Data Science Management consultant with over 23 years of experience in finance domain. He builds and implements Artificial Intelligent Tools in the areas of Stock Trading, Commodities, Forex, etc., He also provides training on
- Technical Analysis of the stock market
- Trading and Investment using Technical Indicator and Machine learning.
- Quantitative Analytics using statistical model
- Portfolio Management
- Risk Management and Risk Optimization
- Algorithmic Trading and Trading System building
- Hedge fund management