My Top Trading Strategy For 2017

Apurva Sheth

2016 was a flat year for the markets. The Nifty started the year down almost 12% in the first two months, hitting a low of 6,825 on Budget Day. The index then stabilised and rallied smartly for the next six months.

It eventually topped out at a high of 8,968 in September. The ride south wasn't very smooth as the index gave up 50% of its gains from 6,825 to 8,968 in just two months. It hit a low of 7,916 soon after the double whammy of the US elections and demonetisation.

Finally, the Nifty ended the year with gains of just 3%.

It was second year in a row of negligible returns (-4% in 2015). The index ended 2014 at 8,282 and 2016 at 8,185. So over a two-year period, the index has barely changed.

That's not great If you're a buy-and-hold investor. If you weren't invested in the right stocks, your returns were far from optimal, perhaps even negative. And that's why trading should be a part of your investment strategy. Trading not only helps improve your returns but reduces your risk.

Would you like to know how?

Don't worry... I will tell you. But before I do, I will show you how we actually did it last year...

Now, successful trading involves focusing on the three 'M's - Mind, Method, and Money.

Mind is your trading psychology. Method is how you go about finding trades and making entry and exit decisions. Money is how you manage your trading capital for long-term survival and success.

A trader is successful only when he employs all three 'M's.

To gauge your success, I recommend using an equity curve, a graphical representation of your trading account with every passing trade.

You can plot it by adding the net profit or loss of each trade to your starting capital. This is a ready reckoner of your trading: One glance at the equity curve can separate fact from fiction.

An equity curve reflects the state of your mind, the quality of your method, and the prudence of your money management.

If you employ all three 'M's optimally, your equity curve will rise steadily from the left corner of the chart to the right. If you're doing reasonably well, it will move up overall with small tick down with every lapse of judgement.

The ultimate goal of a trader is to have an orderly uptrend in his equity curve. This is preferable to steep uptrends with large drawdowns.

Let's have a look at the 2016 equity curve of our short-term stock recommendation service, Swing Trader.

Swing Trader Equity Curve and Nifty % Return For 2016

The blue line at the top is Swing Trader's 2016 equity curve, and the orange line at the bottom is the Nifty's returns for the year.

Macro worries, especially from China, led to a fall across global markets in the first two months of 2016. The Nifty fell 12% during this period.

At Swing Trader, we recommended loads of trades during the first two months. We had a good mix of winning trades even during this period. But there were losses as well, which pulled the curve down...but kept it just above water.

The Nifty bottomed out on 29 February 2016 (Union Budget day) and began a six-month uptrend. Markets recovered all of their losses from the beginning of the year and even added some gains.

This was a good phase for Swing Trader as well. We had many winning recommendations, and the winners made more money than the losers. This pushed our equity curve higher, ultimately topping out at 14.1% in July 2016.

Then the Nifty started to show signs of exhaustion. It stayed in a very tight range between July and August. It finally reached 8,968 in September, the top for the year, before beginning its southward journey.

By 4 November, it was clear to us that the probability of 500-point drop was very high. So we warned our subscribers in the 5 November weekly video update (requires subscription). Markets dropped more than 500 points within a fortnight.

The swiftness of the fall took us by surprise. Nevertheless, we expected the market to be sluggish-to-negative for a while, so we had very few open recommendations since October. This helped us smoothly sail through this rough period.

Though markets gave up 50% of their March-September gains, we managed to hold on to most of ours. Swing Trader ended the year with gains of 11.47% while the Nifty gained 3%.

Our equity curve rose smoothly and steadily throughout 2016. But let me tell you we are not stopping there. We're aiming higher in 2017. And I have prepared a trading strategy for the year.

Now, If you aren't ready with your 2017 strategy yet, I have a good news for you. At 5pm this Friday, 6 January, I will reveal my 2017 trading strategy in a Free Online Training Session.

This strategy is easy to execute and has the potential to help you identify many exciting trading opportunities in 2017.

The last time I hosted a training session, over 7,000 signed up to attend...I expect even more this time around, so I strongly recommend you to Reserve Your Virtual Seat NOW!

Don't miss out! See you this Friday, 6 January, at 5pm.

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