Greetings to all investors and traders! Perhaps you are doing and choosing your investments wisely. In this video, I am going to reveal one of my favourite mutual fund investing strategies that can enable you to make 20 to 40 percent returns through positional trading - without the usual hassle or risk - This sounds unbelievable? Read on for the details, with case studies and a simple, step by step breakdown.
In this blog, I am going to teach you what is positional trading, a risk free positional trading strategy with real life calculation.
Just be relaxed, keep pen and paper handy and read till the end of this blog if you are a very low risk trader and want to create steady wealth with this simple trading strategy.
So before diving into positional trading strategy, let’s understand what is positional trading actually -
What is Positional Trading -
Positional trading is a long term investment strategy that involves the buying and holding of a security for a lengthy period of time. The concept is to try and make gains over a period of time from large swings or variations in the market which can take weeks, months or even years.
Many traders buy any stocks while taking positional trades, but we will only focus on fundamentally strong stocks. Why? Because the best positional trading strategy comes with minimal risk and decent profit.
Why This Positional Trading Strategy Works
People often get confused that undervalued stocks are good choices for positional trading,but both types of stocks are different. Undervalued stocks I have covered separately but to begin with positional trade, there is no need to go out on a limb and start buying stocks blindly. On the contrary, we emphasise investing in stocks with strong fundamentals. In particular, we turn our attention to the Nifty 50, which comprises the fifty largest companies in India. To be especially prudent, we focus on the top twenty-five companies. Why? Because historical evidence suggests that, even in the worst case scenarios (other than exceptional events like COVID-19), these stocks are very unlikely to go extinct permanently.
What is our Positional Trading Strategy -
This strategy must be utilised by purchasing stocks at the correct intervals. This is what I call “the system.”
Step -1 - Search for a Nifty Stock in a Downtrend: Out of Nifty 50 stocks find one that is 9% lower than its last peak. This is your opening period.
Step -2- Gradual Investment: Instead of investing all at once, we buy shares in increments. For example, in case you are looking to purchase Reliance Industries stock.
Let’s say the high was ,2640 and one fell to 2399, it is a drop of more than 9%.
Buy your first 100 shares at 2394: Additional shares will be purchased at intervals of 50 points below the previous buy price to reduce the average rate.
In this manner, shares should be bought so long as their prices keep falling and after some time, if price gets stable, you will get benefit of averaging out.
Real-Life Example: Reliance Industries
Let’s break down this positional trading strategy-
-
Initial Buy: Rs.2,394 (100 shares)
-
Second Buy: Rs.2,344 (100 shares)
-
Third Buy: Rs.2,294 (100 shares)
-
Fourth Buy : Rs.2,244 (100 shares)
By averaging down your buying price, you minimise risk and set yourself up for strong gains when the stock rebounds. Let’s say the market price climbs back to ?2,960. With an average buying price of ?2,319, your 400 shares could yield substantial profit. Even after accounting for market fluctuations, this setup typically gives you an impressive return of around 28% within a few months.
Why This Works So Well
This strategy is applicable for:
Busy professionals and business owners: You don’t have to constantly keep checking the market. All you have to do is set your buy intervals and hold.
Investors with low risk appetites: Risk is kept to a minimum as you are concentrated on the best of the best companies. Unless there is a cataclysmic event, the odds of these stocks suffering a terminal decline are rather slender.
Also, rather than running after ‘multi-bagger’ stocks which are immensely risky, this strategy is good because it depends on slow and steady wins the race type of returns. After all, patience is the finest virtue one ought to have!
Other Chances
What’s the best part about this? This does not revolve around only stock. Different types of opportunities are consistently available in different sectors. Just look at the examples of the tech service industry companies such as Infosys and TCS who have provided such outlets after big dips. When IT shares declined, those who followed this strategy early on Wise earned decent profits as the market bounced back eventually.
Last Summary
If you are thus fatigued of countless looses emanating from high risk trades or the need to constantly monitor the market, try this strategy. They promise investing with ease and guaranteeing profits. Lower the number of shares as per your ability. Doesn’t matter if you buy 1 or even 100 shares. One can easily adapt the heart of this approach with ease.
If you found this guide useful, why not help other investors and share it with friends on social networks? It helps to invest properly as a good strategy should be shared. Of course, a reasonable strategy.
Let us spoil the market! The last suggestion, give some attention to this technique. Happy trading!
