Stock Market has witnessed major corrections often, eroding investors wealth.
Nifty has crashed more than -55% in 2008, corrected again in 2015, and even in 2020 due to Corona Virus market went down around -30%.Investors can follow this rule to avoid getting trapped in such crashes.
Rules:
Find High and Low of January month every year.
Buy Nifty when monthly close is above Jan high.
Exit Nifty when monthly close is below Jan Low or else Exit by December.
Example:
JAN 2017.
High was 8672 , Low was 8133.
In the month of February 2017, Nifty closed at 8880 which is above the January High of 8672. Hence, we buy with a stop loss of Jan low. Exited by December end at 10531. More than 1000 points trade in one trade.
With this strategy, we completely avoided the biggest crash of year 2008 and 2020. No trades triggered with our rules,as market did not move above January high in these years.
Tested it with 25 years of Historical data. only 5 years were negative, rest all years were positive. This strategy generated 15% average returns every year with least risk.
Here’s the yearly returns of this strategy
whereas the normal buy and hold strategy with Nifty would have generated less than 12% yearly average returns only and that too year like 2008 has given negative returns of more than -50%.
You can apply the same rules with your Mutual funds investments, where when Nifty breaks Jan high, buy mutual funds and if Nifty breaks Jan low, you can exit from your mutual fun holdings and wait until it goes above Jan high levels.
You can test this strategy by yourself and checkout the results.
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it is astonishing to find such a strategy. But why Jan as benchmark. pls explain
May be first month of year gives signal for entire year
Many day traders look at opening price on 1 st of the month or opening price on Monday
Market is emotion based .. no logic for everything 😀😀😀
Very simple. FIIs after spending Christmas Holidays (with Profits from previous year) return in January and take Fresh Trades. So, in later months if NIFTY is not crossing Jan High, means FIIs are not not doing fresh purchases. So, only way is to go down
If I would have bought 1 Nifty assuming it like a share which costs me 992 in Feb-96 then the value of 1 Nifty would be 12168 in Dec-19. I think with this strategy you would be around 8072 in Dec-19. Am I missing somethinfg here!
The returns are lesser compared to buy and hold, but drawdown is very high with buy and hold, as you can lose more than 55% of your capital, if you simply buy and hold. With this strategy, drawdown is lot lesser
If we compound on given PnL %, CAGR comes to be around ~12% and not 15%
Very simple strategy. instead of F&O, one should trade in NIFTY BEES. However, this strategy failed to earn Big in 2020 fall. 2020-Jan Low:11929 hit in Feb and in 2020-Nov stop Loss hit with a loss of 1040 Points. And a fresh Buy in Nov close(Broke Jan High) and Exit by Dec end gave Profit of 1013 Points. Net for 2020: -27 ( loss of 27 Pints). Request Mr. Rajendran to cover this aspect also.