Since I started using my FPC exit strategy, I have actually started to like down trends just a little. And this one is special.
BAJAJ_AUTO has been a stellar performer for almost 2 years, up over 200% in that time. But it has lost over 25% of its market cap just since Sept. 27th. Trading that with a long position seems like a death wish, doesn't it? Well, friends, sometimes things are not what they seem.
First of all, over the last 12 months, this stock has produced over 20 buy signals and every single one would have been profitable. Not just profitable - PROFITABLE. The average trade was +1.33% and lasted just 3 days. That's an annualized return of 111%.
"Yes", you say, "but that's because it was in a strong uptrend most of the year. It isn't any more. It's dropping like a rock." That's a fair point. Uptrending stocks are generally easy pickings for long trades and staying away from downtrending stocks is an excellent general rule.
But allow me this counterpoint. Since Sept. 27, the beginning of this plummet downward in the stock, my system would have generated 9 trades. All 9 were wins, averaged 1.98% and lasted an average of 2 days. That's right, the trades during the slump were actually MORE profitable than the trades from the rest of the year. In fact, they helped make that average I mentioned earlier higher than it would have been. The trades in the last 2 months produced gains that if annualized, work out to almost 250%. If I could, I would buy it if it went under 9421 at any point in the next trading session.
Per my usual strategy, once I'm in I'll add at the close on any day it is still oversold and I will use FPC (first profitable close) to exit any lot on the day it closes at any profit.
As always - this is intended as "edutainment" and my perspective on what I am or would be doing, not a recommendation for you to buy or sell. Act accordingly and invest at your own risk. DYOR and only make investments that make good financial sense for you in your current situation.
BAJAJ_AUTO has been a stellar performer for almost 2 years, up over 200% in that time. But it has lost over 25% of its market cap just since Sept. 27th. Trading that with a long position seems like a death wish, doesn't it? Well, friends, sometimes things are not what they seem.
First of all, over the last 12 months, this stock has produced over 20 buy signals and every single one would have been profitable. Not just profitable - PROFITABLE. The average trade was +1.33% and lasted just 3 days. That's an annualized return of 111%.
"Yes", you say, "but that's because it was in a strong uptrend most of the year. It isn't any more. It's dropping like a rock." That's a fair point. Uptrending stocks are generally easy pickings for long trades and staying away from downtrending stocks is an excellent general rule.
But allow me this counterpoint. Since Sept. 27, the beginning of this plummet downward in the stock, my system would have generated 9 trades. All 9 were wins, averaged 1.98% and lasted an average of 2 days. That's right, the trades during the slump were actually MORE profitable than the trades from the rest of the year. In fact, they helped make that average I mentioned earlier higher than it would have been. The trades in the last 2 months produced gains that if annualized, work out to almost 250%. If I could, I would buy it if it went under 9421 at any point in the next trading session.
Per my usual strategy, once I'm in I'll add at the close on any day it is still oversold and I will use FPC (first profitable close) to exit any lot on the day it closes at any profit.
As always - this is intended as "edutainment" and my perspective on what I am or would be doing, not a recommendation for you to buy or sell. Act accordingly and invest at your own risk. DYOR and only make investments that make good financial sense for you in your current situation.
Trade active
Well that was a disappointing start to this trade. It's still early, though. Algo is still flashing a buy signal, so I would have added another lot at the close at 9137.45. Starts like this to a trade are why I always tactically average into every trade and why I use equal amounts of money on each lot. This second lot buys more shares because of the cheaper stock price. So when the stock eventually moves up, the second lot will have an even bigger impact than the first, or at least offset the %gain being on a smaller number with regard to share price.Lots held:
9420.95
9137.45
Note
With the bump up, I'd have sold the lot purchased yesterday for 9190.35 at the close for a 0.58% gain in 1 trading day. Still a ways to go for that first lot to be a profitable trade, but I just lowered the level I need to get to to reach break even by harvesting the gains on that second lot. If I had simply added to the trade by regular dollar cost averaging and held until the whole position was profitable, I'd have reduced my average share cost, but I'd have doubled my exposure to any further declines, which would compound my losses on a further slide in the stock. Both ways can work, but this way tends to decrease the break even point on the trade without increasing position risk nearly as much.
Everything is a tradeoff in the markets, never forget that. You get nothing for free. Here, I'm potentially sacrificing the speed at which I can get the trade to profitability in exchange for lower risk. Especially on a stock like this one in the midst of a downturn, I choose risk reduction. It also frees up the capital I used to buy that second lot to enter other trades that may perform better over the short term than keeping it tied up here might.
Lots held:
9420.95
Note
Adding again at 9013.50Lots held:
9420.95
9013.5
Booked profit so far:
52.90 (0.58% on lot)
Note
I'd have closed the most recent lot at 9033.65 for a 1 day gain of 0.22%. Not much, but it further reduces the effective cost of that original lot. Still a way to go for this trade to end the way I want it to, but every time I close a lot at a profit, I'm closer. Current lots held:
9420.95
Total booked profits so far:
73.05
Note: The math I'm using here on booked profits for illustration purposes is as if 1 share is being bought and sold to keep things easier to follow. That number would obviously be multiplied by the number of shares traded in each lot. For how I trade, it is important to keep the amount of capital allocated to each lot the same in each trade, but it would tend to purchase more shares per lot as the price drops. It's why I usually use the %, since that is a simpler method to keep track of the performance of each equal sized unit of capital, regardless of its number of shares.
Note
I forgot to update this when I saw it this morning. I'd have added another lot at the close at 8642.25.Current lots held:
9420.95
8642.25
Note
I'd have sold the most recently purchased lot at the close for 8835.85 for a +2.24% gain in 1 trading day.Lots currently held:
9420.95
Note
It's a closed market day here in the US and I have a broken ankle and it's 6 degrees F (-14C) outside right now, so I'm bored this morning. So I thought I'd add a little insight into this trade and my system of trading in addition to a trade update today. Even though I'm not actually in this trade since I am in the US, I posted it as an idea and I believe in accountability, so I will continue updating it as if I was trading it. To say this trade hasn't gone according to the original plan would be an understatement. I always hope these trades are quick in and out trades. On top of that, it didn't provide an additional entry from the end of November all the way to early January. That's not normal. It's definitely not unheard of, but it sure isn't typical. But trades like this one are also the best at illustrating why I trade the way I do.
When you trade, you NEED to have a plan for when things don't go according to plan. Hope and begging the stock to go up because you're over-levereged ISN'T a plan, by the way. That's important no matter how you trade. Maybe it's using a stop-loss or whatever. But trading without a plan for bad times (that you KNOW works) is asking for trouble. Without it, you're just guessing and hoping and you're left to your emotions - and that is NEVER a good idea. Emotions and trading are NOT friends and are a potentially VERY expensive combination.
It may seem rather nonchalant when I say this, but my original plan is that plan - it is both plan A and plan B. What I mean by that is that this trading system is designed for, and was backtested on, worst case scenarios. On stocks that endured declines MUCH worse than this has been. Arguably, it has been designed FOR situations exactly like this trade and worse.
It's not magic. It simply exploits the tendency all stocks have to fluctuate in price over the short term, even during long down trends. The many small gains made during those fluctuations cancel out (ultimately) the losses in lots taken near peaks in the stock's trading. For more on this idea, see my idea regarding
CAN here: 
The ultimate point I'm trying to make is that this is a somewhat slow, but steady, long term wealth-building system - not a big swing "to the moon" bet it all system. The way I've designed this system is that the odds are always in my favor and I "walk away from the table" before I get a chance to give my hard-won money back.
Over the short term, on a single lot entry, that lot may "struggle" to make money. But overall, over the long haul, the small wins overwhelm the lots that struggle with sheer volume. Even on this trade, the original lot is down 9.3% (which is nothing, really). But if the 3 other wins so far are used to effectively reduce the cost basis of that original lot, I'd only be down a little over 6% and I still have the same level of capital exposure I had on day 1 of this trade. Since this way of trading generates a LOT of small wins, they simply add up and cancel out any losers given a long enough period of time. And almost all the "losers" at a particular point in time end up being winners too, but the system doesn't necessarily rely on that.
As long as you don't run out of money before then by committing too much capital to each lot chasing a bigger payday, you win. Now what's the catch? You get nothing for free in the markets, after all. The catch is that during bull runs in the stock I might not make as much as buy and hold, especially if a stock absolutely rips upward (but sometimes you can and may well outperform). That's why I rotate gains directly back into other stocks that are signaled as buys by my algo as soon as possible. Still, in strong bull markets, I can underperform marginally. But in bear markets I VASTLY outperform buy and hold. The goal is beat the long term market average consistently with far less risk than 100% buy and hold. And the secret to that nobody tells you is that avoiding a 10% loss is actually better than making a 10% gain.
Example - if a stock rises from 100 to 130, it's a 30% gain and you make 30 profit. If a stock loses 30 and goes from 100 to 70 it's a 30% loss. Those seem like equal magnitude, but they aren't in the market. After a 30% loss, to get back to 100 now, gaining 30 back when you start at 70 is not a 30% gain that's required - it's a 42.9% gain that is required (30/70 = .429). You have to make 12.9% more to get back to even than if you'd have just avoided the loss to begin with. That's effectively earning a 12.9% gain if you miss that loss. That's what gives me such dramatic outperformance on the way down in a bear market. I miss most of the losses and the market has to play catch-up on the way back up during any bear market rallies. It also reduces my portfolio's volatility, which helps keep those emotions in check. So when I am casual about adding to my position (as I would have at today's NSE close) after my original lot is down 9.3% in the midst of a >30% correction in the stock, it's not that I don't have a plan. It was the plan B all along (plan A is always make money immediately).
In fact, during this 30%+ decline in the stock since the 12,666 high, 12 buy signals have been produced. 11 would have closed profitably so far and the net gain (including the 9.3% loss I'm holding) is +11.6%. Yep. A GAIN of 11.6% while the stock is down 32.5%. That's beating B/H by over 40% and that's not counting the extra work it will have to do to get back to break even while I'm still making money on the upswing. Going back to the example from earlier, it's like I've gone from 100 to 111.6 while it has gone from 100 to around 67.5. Even if I don't make anything while the stock recovers, buy and holders would need a 65% gain in the stock to catch up at this point. And I would definitely be making money if it went up 65%.
So being unfazed at this point in the trade for me isn't an unreasonable reaction at all - it's common sense. More small profitable trades will follow, with one of them likely being the original lot that is down 9.3% currently. When that happens is irrelevant to me as long as I keep racking up those other wins along the way, and the odds are in my favor that I will.
So no worries - I would be adding another lot at the NSE Monday closing price of 8544.40. I'll obviously update any buys or sells but my next major update will likely be when the overall set of trades reaches break even which will likely be while that original lot is still unprofitable.
Stay calm, good luck with your trading everyone, and remember to always have a plan!
Lots currently held:
9420.95 (-9.3%)
8544.40 (+0%)
Total profits on lots already closed = +3.04%
Net loss so far = -6.26%
Note
Still on sale - I'd have added another lot at the NSE closing price of 8445.0Lots currently held:
9420.95
8544.40
8445.00
Note
OK I don't know who to believe any more regarding closing prices for this stock. Yesterday, the NSE website and Google both listed the closing price at 8445.0 but here on Tradingview it was 8468.55. Now today the NSE has the same price for yesterday as this does, but it lists today's closing price as 8439.15 while here it is 8460.85. Since the price is listed in local currency, it can't be an exchange rate fluctuation so I don't know what's going on.I really don't feel like chasing all over the internet to get the facts straight, though, especially because I don't even actually own the stock. So from now on, I'm just going to use TV's closing prices. As a result, I'm adjusting yesterday's lot price up to 8468.55. Today's purchased lot price reflects TV's data as of right now as well. Sorry for any confusion.
Lots currently held:
9420.95
8544.40
8468.55
8460.85
Note
Adding again at 8399.95Lots currently held:
9420.95
8544.40
8468.55
8460.85
8399.95
Note
With all the excitement about AI here in the states this morning, I forgot to update this. I would've added at 8384.6 and hoping for an earnings beat.Lots currently held:
9420.95
8544.40
8468.55
8460.85
8399.95
8384.60
Note
I'd have sold the most recently purchased lots for 8398.40 (different price again on Google). That's a meager +0.16% gain in 1 trading day. They were supposed to announce earnings yesterday, but maybe that's messed up because it will be Wed in India when it's Tuesday here, I don't know. Lots currently held:
9420.95
8544.40
8468.55
8460.85
8399.95
Note
I'd have sold the 4 most recent lots at a profit at the close.8544.40 --> 8625.85 = +0.95% in 6 trading days
8468.55 --> 8625.85 = +1.86% in 5 trading days
8460.85 --> 8625.85 = +1.95% in 4 trading days
8399.95 --> 8625.85 = +2.69% in 3 trading days
At this point, the trade overall is now profitable, despite the original lot still being down 8.44% right now. My exposure is currently the same as when I purchased the original lot, as well. So far, so good. Now a nice little 9% run to finish the job would be nice. I don't expect it will go that smoothly, but a guy can hope.
Lots currently held:
9420.95
Note
I 'd have added another lot at the close for 8691.35. Overall, the idea is still profitable despite the stock being down 7.7% since the initial entry, but just barely right now.Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Note
I'd have added another lot at the close at 8506.50. I''m going to stop updating the lots I hold because Tradingview has disabled the ability to copy and paste parts of previous notes, and I'm just not up for that much extra typing on all my ideas. Sorry. I'll include how many lots I have, but just not the lot numbers or prices.Position - 3 lots
Note
I'd have closed Friday's lot for a 0.36% gain in one trading day. The two remaining lots are down 9.4% and 1.8%, respectively, but including the 9 other trades that have now closed profitably, I"m at -0.14% overall return on a stock that's down 9.4% since this idea began. I do have slightly larger exposure than originally, but that 2nd lot is one good day away from becoming profitable itself. It may do that soon, it may not. Today's intraday reversal is a mildly bullish development and could signal at least a temporary bottom. We shall see.Remaining position - 2 lots
Note
I'd have added another lot at the closing price of 8232.35Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11 : 8232.35
Note
I'd have added another lot at the closing price of 7902.90Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 12: 7902.90
Note
Would've added 1 lot at the close for 7714.80 and I suspect the same will be true tomorrow, given the overall market action here today. That can't be good for global markets. Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 12: 7902.90
Lot 13: 7714.80
Note
OK, maybe I was a LITTLE crazy taking this trade, but hindsight is always 20/20. I still firmly believe I'll come out ahead here, it's just going to take a bit longer than anticipated. I'd have added again after yesterday at 7333.30.Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 12: 7902.90
Lot 13: 7714.80
Lot 14: Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 12: 7902.90
Lot 13: 7714.80
Lot 14: 7333.30
Note
Would've sold lot 14 at the close for 7420.30 -- a 1.19% gain in one trading day.Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 12: 7902.90
Lot 13: 7714.80
Note
would've sold lot 13 for 77218.85 at the close for a meager .09% gain in 11 trading days. Lots held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 12: 7902.90
Note
I'd have sold lot 12 at the close for a modest +0.22% gain in 13 trading days.Lots still held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Note
I'd have added 1 lot at 7685.10 at the close.Lots still held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 11: 8232.35
Lot 13: 7685.10
Note
I'd have sold the most recent lot at the close for 7768.85 for a gain of 1.09% in 4 trading days.Note
Sold lot 11 at the close for 8247.50 - +0.18% in 33 trading daysLots still held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Note
I'd have added another lot at 8078.50 at the close.Lots still held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 12: 8078.50
Note
Would have added at the close today at 7836.50Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 12: 8078.50
Lot 13: 7836.50
Note
I'd have sold lot 13 at the close for 7920.50 - a +1.07% return in 1 trading day.Lots still held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Lot 12: 8078.50
Note
I'd have sold the most recent lot at the close for 8102.50 - a 0.30% gain in 10 trading days.Lots still held:
Lot 1: 9420.95
Lot 10 (I think) : 8691.35
Note
Would have sold lot 10 today at the close for 8851.00 - a +1.84% gain in 60 trading days. Only the original lot left now. Overall, +7% right now on a stock that is still down 10% from the original entry price, and have the same risk exposure I had at the original entry. The Nifty 50, by comparison, has risen 2.9% since the beginning of this trade. So it's a total return so far of almost 3x the Nifty 50, while the stock has underperformed the index by almost 13%. This is actually not an atypical result during a downtrend for this system. I shouldn't say that. It's been atypically poor relative to most trades I've done during downtrends recently. This stock didn't provide nearly any upswings to take profits during the entire 1st 2 months of this trade. Then, after a small brief surge, dropped another 20% in a month. That's about the worst case scenario. Normally, as stocks fall, they experience bounces where profit taking opportunities occur. This one didn't really do that, as shown by the fact that the most recent lot was held for 3 months and the original one is going on 6 months, now. I've only had 2 of the over 100 stock trade ideas I've posted on here result in a worse return per day held result than this one. That gives you an idea of how challenging this trade has been.
There could easily still be more of an adventure ahead for this trade. It seems pretty overextended at this point, so a pullback soon would not surprise me in the least. But I know that the method I'm using turns those pullbacks into additional profits (as long as the stock doesn't go to zero quickly), so whatever happens, happens.
Lots still held:
Lot 1: 9420.95
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.