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Strategy Fundamentals
Portfolio (Realtime trading exercise)

January 15, 2000. The investment approach we take here may sound very risky to you; but I think this is the most conservative approach to investments. Most of the investors take far more risk than they are aware of whenever they invest into any stock. I am here just starting a real time trading simulation exercise just to show you guys a possible business like appraoch to investments.

Objective: Short to medium term aggresive trading with a target to double the money being risked within a year.


  1. Set aside an amount we would be comfortable losing. Let us call this risk-capital. Here we will start with imaginary 10,000 dollars. How much is an ideal risk capital? From one third to one fifth of your total investible funds.
  2. Enter into a trade only when the potential profit is three times the risk being taken.
  3. Keep a target not to make more than ten trades in a year. (Hard to control...)
  4. Risk only one-tenth of your risk-capital in an individual trade. Risk 1000$ in each trade.
  5. Never rush yourself into a trade until the risk-reward scenerio is at least 1:3.
  6. Never keep more than three losing positions open at any time. Close one of the losing positions if you find a great opportunity.
  7. Fill up the trade sheet, before you enter into a trade. Write down what you are buying and why. What would be the stoploss and what is the target.

Strategy fundamentals:

  1. Be opportunity oriented; and never stock oriented. Whereever and whenever you get an opportunity, just get on.
  2. Be patient. Opportunities do come every now and then. Stock markets are here for last many years and they are going to be here for many more years. Never rush into a trade thinking that you are going to miss it out.
  3. Be courageous. When our trading strategy flashes a trade signal, enter into a trade. Let not our emotions, a friend or any analyst on the TV stop from it.
  4. Be content. If our target price is reached, close the trade no matter how good it feels.
  5. Be quick to cut losses when the stoploss price is reached.

Realtime trading exercise:

Risk capital 10,000$. Target trades 10. Risk 1000 dollars per trade.

Date Symbol Position Rate Stoploss Target Amount Invested Amount Risked Positon Closed Profit/Loss
1/15/00 KM Buy 500 9.5 8.5 14.87 4500 500 8.5 -500
1/15/00 PLC Buy 2000 2.12 1.62 3.90 4250 1000 Opened 4.5 on
1/15/00 ORCL Buy 2 Puts @100 5 0 20 1000 1000 0 -1000
3/20/00 IDC Buy 200shares 28 23 50 5600 1000 23 -1000
3/20/00 NTAP Keep a limit order to Buy One Put 200 10$(should
be executed when stock is 210plus
0 40 1000 1000 3/30/00
40$ Stock price 155 split adjusted
3/20/00 IOM Buy 1500 4.06 3.45 6plus 6000 1000 3.45 -1000
4/03/00 AMZN Buy 5 puts at 60$ 2 0 10 1000 1000 10(48$
4/15/00 IOM 50 Call Options @5- 05/00 0.18$ 0 1$ 1000 1000 0 -1000
4/15/00 MO 9 calls @22.5,05/00 1.12$ 0 5 1000 1000 4.75$
5/15/00 Dell 5 calls
@50, 06/00
2 0 8 1000      
6/8/00 EEEE 1000 4 3 8 4000      
6/8/00 ZIPL 500 5 3 15 2500      
              TOTAL PROFIT 10,000

Trade justifications:

KMart: Purely technical. 9.25 is a very strong support level. Economy and Christmas both great. Some good news expected or the quarterly result should take the stock to its target.

PLC: Purely technical. 2 dollars a strong support level. Volume dried up. A little higher bottom seems in the formation and the uptrend is likely very soon. New CEO. Revenues increasing. (03/08/00. Great. Opened at 4.5$ beyond our target of 3.9$. As per strategy, just get out at the target)

ORCL: NASDAQ and this stock both have shown too much volatility (big movement days) during last 2 weeks or so. This should be interpreted as a top-formation and widespread profit-taking by bulls, traders and other knowledgeable sources. ORCL has just bounced back from recent low and it does have broken the upward trend line.

NTAP: Trend line is broken. (great. Book the profit on 03/30/00.)

AMZN: see the stock tips page. (04/13/00. stock price is 48 today!!!!. At the closing, put option should be worth 13 dollars at least)

IOM: Risk 1000$ by buying 50 call options currently quoted 1/8, 1/4. Better than expected results; heavy volume; stronger when tech sector is down 25% last week. Play with quaters like in Las Vegas.

MO: Very strong on the charts. Buy 9 call contracts at 1 1/8. Broken the downward trendline. Great value.

Dell: Very strong breakout from the downward channel on 5/12/00. Should go up fast. Stoploss:44

EEEE: 4$ is a good support level. It is a fast growing 1 b$ sales company...Good value..

ZIPL: A good upward breakout...

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