Step 7: How to Choose a Strategy

In this article, I’m going to give you the understanding of how to find the best strategy in stock market and future and options as per your personality and as per your time and as per your capital.

So, hello friends, my name is CA Arun Tiwari and you are reading the F & O Shots series in which I will give you the understanding of F&O in a very short way and precise way and this is our 7th Article from total 10 steps.

In this article, I’ll not present you any calculation, rather I’ll explain you the process through which you can find a best suited strategy for you. So, friends there are more then 1000 strategies available in the market but we cannot use all of them. Basically, we need only 1 to 2 or maximum to maximum 3 strategies which we can excel so market generally pay you for your specialization and not for your all-rounder knowledge. So, the first thing is Shortlist. So out of whatever the strategies are available in market, you have to shortlist 5 or 6 strategies which you can take it to next level which is called back testing. So how you will shortlist these 5 to 6 strategies then always initially you should focus knowing your personality, the time available to you and capital available with you. So, as personality for some people are very quick decision maker and some people took time, analyses and then take the decision like me. I take time I cannot make quick decision. Mere intraday, some people get successful. I could not find any person who is successful by doing the intraday but still they might people who are making money from Intraday so these are their personality. SO always look after your personality and not in strategy. So, if you are a person like me who takes time to make decision then the strategy which give you time. For Example, future and options or selling options, hedging strategy which I do, let me tell you that in my strategy, nothing changes overnight. So, always you will get time of at least 15 to 20 days to adjust your strategy so if you like that then you should get more comfortable.

Second important thing is your time availability, if you could not give much time then do not take quick action strategy because in quick action strategy, you have to available all the time.

Third Important point is Capital. So, if you have more capital then you can go for the strategy which require lot of adjustment and if you don’t have such amount of capital then its better you should go for simple strategy where there is either an entry of profit booking and exit or entry and loss booking and exit. So, basically you should choose those strategy which does not require lot of adjustment because adjustment require capital. So according to your personality, time and capital, you should choose 5 to 6 strategies which can be anything like share market or future and options or currency market but then also, it depends upon your knowledge. If you are following me, I only do nifty. Most of the time I do hedging strategy, so you can follow me with that. I can share with you 5 to 6 strategies and then you can choose out of that.

Second important part is shortlisting the strategy is not enough. Out of the 5 to 6 strategies you have to beck test all the strategies to see how is the success ratio and how much is the loss and maximum amount of profit and loss. So, risk return ratio and success ratio you have to check in back testing.

So after back testing, you have to find 2 or 3 strategies in which you are comfortable with. So, after comparing the risk return and success return, you will find out, so any strategy in which you are incurring the loss then you should not choose that. Always look at the losses and not to the profit and after that you should do virtual trading for at least 3 to 4 months. Now, you will ask me that why there is a need of virtual trading after taking the back testing. In virtual trading you will understand what is the current scenario, in back testing there is always a past data so in past the market conditions might be different now the market conditions might be different. So, always even after back testing you should do a virtual trading for at least 3 to 4 months and then you should see whether whatever the strategy you have chosen is working in the real world also and then only you are ready with doing the strategy to put the money on the table.

So that’s all friends for this article. This is very short article and if I summaries then you have to shortlist, then choose 5 to 6 strategies, back test them and then after 3 to 4 months of virtual trading and only after that put actual money by using 3 to 4 strategies. This is a professional way, how people shortlist their strategy and if you choose this way, let me tell you, your straggles will not surprise and you will be more confident when you deal in actual market. In next article, ill give you the understanding of how you can reconcile your books and books means your demat account, your trading account and within how many period you have to reconcile so that you always know that your broker is not doing something wrong or you are not doing something wrong so you always have the control that how much profit or loss you have made and how much money has been went from your bank account to your trading account and how much shares you have in your account.