Saturday, August 12, 2006

How to make Rs 10 Lacs in 3 years, and from how much?

HOW DO YOU MAKE Rs 10 LACS IN 3 YEARS? What is your starting capital?By Rameshbabu Velidi

The question is not a simple one.
There may be more than one answer.

Time peroid=3 years=36months each having 22 trading days.=792 days of trading.
Medium to invest=stocks(simple),index futures,options-both the last 2 need study
10laks=target amount at the end of 792days
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Assuming you make 4% a month, or 10% a quarter of three months,

If you start with Rs 3 laks, assuming no losses, at 4% gain every month, you will end up reaching a target amount of 12.31 laks after 36 months.

If you just trade for for 31 months you reach 10.11 laks.
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Assuming you make only 2% a month on 3 laks, you reach a conservative estimate of
6.12laks at the end of 36 months. if you dont loose any thing.
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Assuming you manage to make 3% every month by your trading, you reach a
target level of 8.69 Laks at the end of 36 months.
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That is calculations to begin with.

The fact remains in trading losses are always there. How much and how do you control it decide the maximum loss one can encounter. so you have to make allowances for the losses apart from profits.
The only way you can do it is by trying for more profits and less losses.

How do you handle these losses?
Fix up your maxium loss level in advance and get out of market once your loss levelk is hit.
Money management is the key. trade ten trades,have 6 losses at 2% each,gain 4 trades at 8% each,net gain=32-12=20%

If you want to make 4% a month, you need to aim at making 8% , and even if you loose 4%, still you reach your target.

what is thing you will trade? onE OF= stocks,futures,options
which is the method you will use?
Daytrading,Swing trading,Long term trading

Day trading.
Not an easy thing if you dont know what giant evil demon you are dealing with, and if you dont have right kind of weapons,you might loose all you got.
weapons=a trading software, auto squareup facility, a very low brokerage at 0.02%,faster trade execution,and right stocks with high volatility to trade,and above all
A strict risk control strategy in the face of sudden market crashes. Smart people with smart techniques can only do this.

Swing Trading.
you buy stocks at right timing ahead of uptrends,well before a trend really begins, and you exit after weeks and months with maximum profits. If a marketcrash occurs after you bought stocks,you must have an automatic exit from all your positions minimising major losses. point is you invest along with major indices and exit fast if the indices begin to dive down.Trendline techniques can help a lot.

Long term trading.
Part-1 Warren Buffet style=value investing
Part-2 Nicolas Darvas style=Box theory

Part-1
Every one says Dont buy and hold-you will loose.
Warren buffet is one guy who proved to the world that you can make maximum profits doing a buy and hold,but only if you select best of the stocks and buy them at best of times at lowets of prices. it means vision,waiting,long period of time,proper evaluation and selection of stocks,above all right timing to enter.
People who bought infosys shares at 90 rupees or 150 rupees reached a value level of 3 laks from 9000 or 15000 rupees in a span of three years. these people just bought and stayed cool.wipro -same thing happened.

Part-2 Nicolas Darvas The great Box theory.
Darvas found that prices fluctuate normally in a box where the top of box is the highest price in a short span of 3 to 5 days,and bottom of the box is the lowest price made by the stock in same time span. The theory says prices consolidate in a narrow box zone before they break out in price through the top of the box.
Simple approach is VERY POWERFUL.
wHAT TO DO? just buy a darvas box software, buy only if the price breaks through the top of box and sell off if the price falls through the bottom of the box.
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now think about all these methods pick your vehicle and travel to your destination.

....What is the mininmum amount we need to invest in
stocks...to make 10 lakhs in 3 yrs???...

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