Please do not go by the title! This ain’t a scam to make big money and I am not an employee of this Bank. This is just to tell you how discipline and system trading can enable you to create wealth.
Reasons for choosing SBI!
1) Largest Bank of India in almost all parameters!
2) Strong Balance Sheet and huge pile of cash
3) Heavy volumes of trading
Now period considered here is 1 year. April 2012 to April 2013
Here is the graph for that period.
Now the Indicator that we are using is MACD.
(As this is just an introduction explanation of MACD can be omitted. It is an indicator to give you signals when to buy and when to sell, as simple as that)
Now we can have a combined photograph of the Graph of SBI and the MACD signals that followed.
Now the catch here is:
1) Whenever the Blue line crosses the red line(crossover) you have to buy
2) Whenever the red line crosses the Blue line you have to sell.
To put things in a nutshell, Buy when Blue goes over red and sell when red goes over blue.
Now Lets put some figures corresponding to the cross over and lets see how much we gain or lose!
We have 2267 for 1 share for 1 year.
Now provided you have a margin account and 5 lakhs of rupees(I am taking leverage to be “one”)
Average price of this can be taken to be 2000.
So 5,00,000/2000 = 250.
So here we are dealing with 250 shares. 2267*250= 5,66,750!
A whopping 5.6 lakhs with no leverage.
If I assume leverage to be decent 2 you still get 11.2 lakhs per year! How about that…
This does not guarantee Profits every time. 2 loss trades. But you can see it follows a market philosophy
Losses are cut short, you then ride your profits!
Doubts that you might have-
1) Short is selling and long is buying.
2) Futures allow people to short sell. That means even if you have no contracts, you can sell at higher price and buy at lower. Earn profit when the price is going down! Amazing concept.
3)Leverage is when you can Trade for more number of shares even though you might not have the required amount of money in your account(a double edged sword believe me)
P.S- 1) This is just an illustration to show that Trading is all about discipline and systematic approach.
2) I am sorry if it sounds vague and difficult! If you have any doubts, please feel free to ask!
Regards,
Tejas
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