Is it better to stay invested in market or buying when there is a dip using the accumulated amount ?

Can we make more money by investing only when the market falls by more than 5 percent ? 

Idea sounds good until we take a look at the numbers. But, don't forget we might also miss some good market runs if we don't invest. 

I tested the monthly data from Jan 2009 to Jan 2021.  Making investment at the end of month, we acccumulated 10191 Niftybees whose value at the end of Jan 2021 was 14.8 Lakh. 
Total amount invested was 7.19 Lakhs.

But, if we keep on accumulating the money and invest only when the market falls by more than 5 percent. We had 9260 Niftybees whose value is 13.52 Lakhs. 

If we keep SIP on, we will make 9.46 percent more returns in NIFTYBEES.

I have not considered any returns on the accumulated money that is lying idle in the bank. If we consider that too, more or less returns will be same. 

Excel Numbers 

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NIfty Range for the last couple of years

This graphs below are showing nifty range(high-low) for different years.

Python script for doing the same.

http://pastebin.com/6K724iv1

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How to identify trend days

Identifying trend days

1. Few of the trend days that I observed starts with a gap. Now, it doesn't mean the market is going to close in the direction of gap. Sometimes, markets even does the opposite, it will open 100 points up and will close 100 points down.

2. First 5 min bar will be a WRB(Wide range bar - big in size) bar. 

3. The correction bars will be very small in size.

4. On some trend days it will touch the 21 ema and on some days it will maintain a distance from 21 ema.

5. It is better to wait till the end of day to extract the full juice out of it.

On those days you need to make a entry fast if a doji appears on chart by keeping SL at doji low or on pullback. Better option would be wait for pullback and make an entry when pullback gets over.

Why I am insisting on pullback?
Because some non trending days will also match the characteristics of trending day.  On sideways days, there will be many days following pt.1 and pt.2 but the pullback bars will itself be large in size and pullback will be big.

See some charts below to analyze what I am trying to say.

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NR 7 and NR21 Trading

Link : NR7 tutorial


NR21 stocks

AUROPHARMA

BATAINDIA

BHARATFIN

BRITANNIA

CAIRN

CENTURYTEX

COLPAL

CONCOR

CROMPGREAV

DHFL

EXIDEIND

HINDUNILVR

JETAIRWAYS

JISLJALEQS

LICHSGFIN

MINDTREE

NCC

NHPC

OIL

PETRONET

POWERGRID

SINTEX

SRF

TATAGLOBAL

TORNTPHARM

ULTRACEMCO

WIPRO

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When does nifty make high and low for the day?

When does market make high?

09 represents time from 09:15 to 10:00
10 represents time from 10:00 11:00

HTML Code:

Count Time 
 404 09
 101 10
  73 11
  67 12
  86 13
 176 14
 297 15

Majority of the time markets make either in the morning or in the evening.

When does market make low?

HTML Code:

 319 09
  93 10
  85 11
 126 12
 114 13
 213 14
 252 15

It's interesting to know these stats. Don't know how can we take advantage of these figures.

What we see in the chart are the point with low time(x axis ) and (y axis ) for a day.
The x axis and y axis are actually in seconds. Like 09:16 a.m. will be 09*60+16 => 556. 

A single point represent a trading day.
X axis Low time
Y axis High time

If there is a point in the left top, that means for that trading day Nifty made the high at the end of the trading day and low at the open.

If there is a point in the right top, that means for that trading day Nifty made the high at the end of the trading day and low also at the end of the trading day. That's why chart is not dark at right top.





 

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Why people are not able to make money by investing?

The answer is impatience.

If you buy 10 stocks, 5 of them are gonna rise and 5 of them are gonna lose(just taking a 50% scenario). People will book profit as soon as those 5 stocks rise by 10% and they will keep hold on to their losers.

But, if someone just keep holding on to both losers and gainers, they will surely make money.

Business today mentioned 13 stocks in  may 2014. I did this study around 2 months back so profits are calculated as per that and overall profit was 60%. I have taken split into account too.

One could do that on today's price and would still find it profitable.

Article Link

Some of them are going are give tremendous trends and some will lose but overall had 60% gain over 2 year span.

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My Journey into markets

I started my journey 5 years back in stock market and I had my ups and downs. Like, most people I was also trying to find the holy grail but the truth is there is no holy grail.

First year

I came to know about the biggest and successful investor of market "Warren Buffet". He uses a fundamental approach for investing. Started using his philosophy of value investing using p/e ratio and read books from Benjamin Graham. Made some wrong calls as I was trying to catch the bottom and didn't use a stop loss as I was doing a value investing.

Then, started reading the books on how to read the balance sheet of a company. This also didn't help as there were a lot of companies and how many balance sheets can I read and I couldn't make much sense or fruitful decision out of it.

I think as a retail Investor it's hard to do "value investing" as you need to look at lot of factors. But, some people are still making money using this approach and I am not denying that.

"If you had spent Rs 55,000 to buy a Royal Enfield motorcycle in 2001, you would now have an old, rugged bike. But if you had invested the same Rs 55,000 in shares (at Rs 17.50 per share) of Eicher Motors, the company that makes Enfield bikes, your investment will be worth Rs 6 crore now."

Many companies like Asian Paints, Maruti, Tata Motors, Tech companies, Pharma companies would have made the money for you and they can still make.

Second year

Came to hear about Technical analysis i.e. reading from the chart and joined some forums like babypips, elitetrader, traderslaboratory and traderji etc. I started learning about support and resistance, bullish patterns, bearish patterns, trend lines and these things were making sense, I also read from the books like Steve Nisson candlesticks and tried to read Albrooks books and his lectures but couldn't understand. But, these things were just making sense and not money.

So, I went to the next stage of technical analysis and started learning about indicators stochastics, RSI, williams etc. They sometimes worked and sometimes they didn't. After that, I started mixing multiple indicators as I thought it if two indicators will agree on the same thing, then it's a high probabilty trade. But, that failed as the indicators were showing the similar characteristics. Started learning about EMA crossover, Bollinger bands, ichimoku trading, cowbunga trading system and a lot more systems and applied  them over the charts. Now, everything was visible on the chart just not the candles. That also didn't work out. I also went through a lot of methods mentioned on forums with which people were making money.

So, finally I thought market is not for me as almost 95% of the traders lose money and I am one of those. I went onto made some investment in mutual funds which are giving me good returns today.

Third Year

Started focusing on my career and didn't look much into markets, I was making investment through mutual funds only.

Fourth Year
Totally out of touch.

Current Year
Came back in Feb. Made some investment in stocks which were really down and made some money. Started reading about technical analysis again and still I was not successful. I thought the problem was not with the strategy and it was with my psychology. So, I started reading about it but that also didn't help as the problem lied with the trading methods I was using and they didn't had an edge and  I didn't back test them properly. Started going through the threads again of traderji, got some hard-copy of threads and I tried to see where would I trade and compared with them. I gave some serious thoughts to risk management and money management. Well, not much to money management as I am trading with a low capital.

I went back to indicators again but left them within a week as they didn't work out for me. Stochastics is still there but I just use them for looking divergence.

Now, I look at pure price action and also a 21 EMA/SMA is there on my chart.  I go with the trend and things are making more sense to me now than my initial years. I sit with patience now and only takes the trade which gives me a good risk reward ratio as I believe on low risk reward the market won't move in that direction as smart player will not take that trade.

We need not only learn but we need to apply it too.

I feel like I am on to something good now and I can make money. May be again, I am still in one of the phases of learning. I am also learning to invest in fundamentally sound midcap companies these days.


Learning to trade is a hard process as you have to go through a lot of failures. You need to practice only one thing in market and become master of that. As Bruce Lee said "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times." We need to practice only one trading style and follow that but first you have to find out what suits you which can you practice 10,000 times.

Thankfully, I played with small money in my initial stages, I will increase the capital once I see consistency in my profits. I hope I will be successful one day.

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