Free Reports

The VMS System for Trading Success

Nov 21, 2016

In this issue:
» What's stopping India from becoming the factory of the world
» GDP expected to take a hit from demonetization
» The unintended consequences of cash clean up drive
» Market roundup
» ...and more!
00:00
Richa Agarwal, Research analyst

Most of our readers are already familiar with Asad Dossani. As part of Equitymaster's Daily Profit Hunter team since 2010, Asad has been sharing his best ideas on short term trading strategies with our readers, for a while.

Last Saturday, we shared with you Asad's three ingredients for a successful trading strategy. And we told you how he and his team have been working on a new strategy for months.

Well, Asad is finally ready to talk more about the key secrets of his latest strategy! Over to Asad....

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  • 28Dear readers

    I have been sharing with you how you can achieve financial freedom. And how trading is a great secondary source of income. I also gave you the three ingredients for a successful trading strategy. And I told you how I have been working on one such strategy myself.

    And now I'm ready to bring it to you.

    But first, let's dig a little deeper into these ingredients. The first was profitability without taking undue risk. This strategy has risk management at its core. It's designed to protect your capital first, and generate profits on top of that. Now that doesn't mean there's no risk involved. And you should never trade with money you aren't willing to lose. But as long you're willing to take a bit of managed risk, you've got the potential for solid returns.

    The second was that it should make sense. This trading strategy has been thoroughly researched and back tested. It's got a good track record in the live market. It uses a proprietary three indicator system: I call it the VMS system. V is for volatility, M is for momentum, and S is for spread. We use a unique combination of these indicators to recommend profitable trades. I don't want to give too much away. But when the time comes, you'll know exactly how and why our strategy works.

    The third was it should be easy to execute. This strategy requires just five minutes of your time each morning. The night before a trade is to be made, you'll get an alert. In the morning, you logon and place you trade. Then you can forget about it until the next day. Just five minutes in the morning. It really is that easy.

    You must be wondering; how do I get access to this? At 5pm today, a big announcement is coming. Stay tuned.

So, over the next few days, Asad will reveal more details on this new trading strategy with his readers on Profit Hunter - Asad's free-for-life e-newsletter. So, if you're interested to know more, you can just sign up for The Profit Hunter and get full details right in your inbox.

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02:00 Chart of the Day

It's been over two years since 'Make in India' campaign was launched. The markets were optimistic about the theme. And it did help various participants spice up India's growth story along with that of the company they were trying to sell.

But has India really delivered on the big promise?

Our meetings with the managements do not suggest so. Whenever we ask the managements if they really see Make in India drive making a difference, the response usually is: "We have been hearing about it in the media, but yet to see its impact on the business."

Unfortunately, historical statistics suggest the same. As per the World Trade Organization data for International Trade, India's share in total exports of manufactures stands at just 1.6%, compared to 18.6% for China. Japan and US account for 4.7% and 8.7% respectively.

Post 1991, integration with global economy has raised the share of manufactured exports. Yet, the share of manufacturing in GDP has remained constant since 1980. In fact, value added share in Indian manufacturing is declining. As suggested in the article in Livemint, ironically, higher integration has also led to higher imports of processed industrial supplies. So, we are importing more from the world than exporting to it.

So how can India rise to its true potential?

The answer lies in looking beyond the hype of low wages and demographic dividend and put them to use by improving the investment climate and in the country. At a time when the world is progressing more towards protectionism, India needs holistic reforms rather than jingoistic rhetoric to become the factory of the world.

Make in India: A Distant Dream?


03:10

On November 8, PM Modi sent shockwaves through the country with the demonetization move. A lot of cash stopped being the currency. Thirteen days on, the queues at banks are still long. Most of the ATMs are out of cash by afternoon.

The opinion is still divided on if the demonetization will curb the demon of black money and punish the real culprits; since most of the black money has already been invested in assets like real estate. But common man is indeed suffering. The cash crunch has hit him hard. The commerce has been brought to a halt. The impact on vehicle sales, mobile sales, small businesses, logistics, rural economy and daily workers has been obvious. Whether the move is effective in the long term is something only time will tell. But in the near term, some rude shocks are expected. India's GDP growth is likely to take a beating. Reasons - India has a high cash usage as compared to the other countries. Most importantly, one of the worst victims of this decision has been the informal sector, that accounts for 48% of India's total output and 80% of the employment. It will take a long time and solid infrastructure to make this informal sector a part of formal economy. And in the meantime, there could be many permanent casualties.

04:10

As the plug has been pulled on cash, the economy seems to be languishing. Yet, there is one sector working like never before. Banks have never been so busy. Since the historical announcement on 8th, banks have received deposits worth Rs 5 trillion. As per Modi, these deposits will not lie idle. He has recently announced that loans will be offered at cheaper interest rates that will benefit the poor and the middle class.

Vivek Kaul has an interesting take on how this situation may play out. This is what he has to say:

  • In the last one year, retail lending has formed a little more than 45 per cent of the total lending carried out by banks. Anything beyond this, isn't a healthy trend.

If the money thus deposited goes to corporates, banks will need to be extremely cautious in lending practices else the bad debt menace will swell further.

Cheaper credit following demonetization is perceived positive. Yet, it ignores some basics. A large segment of population, over 50% remains 'unbanked', and hence will get crowded out and not benefit from the move.

A counter argument could be this will be a good incentive for a large segment of population to be a part of the formal economy. But that's easier said than done. For one, nothing has happened to address the reasons for financial exclusion in the first place. Second, the banking infrastructure might not be enough to tackle the issue.

But that's just the part of the problem. Amid all the optimism from the black money drive, the poor fixed depositor has been ignored. While the cut in lending rates is much hyped, no one is bothered about the cut in the deposit rates. As Vivek Kaul suggests:

  • Actually, a fall in deposit rates hurts two sets of people. One is the section of the population which uses fixed deposits to build a corpus for future expenses like education and marriages of children. A fall in interest rates means that a greater amount of money needs to be saved if future expenses are to be met. It also hurts those who use fixed deposits to meet their regular monthly expenses, especially the senior citizens. If interest rates fall, they need to cut down on their expenses. Hence, a fall in interest rates on deposits can actually also have a negative impact on consumption in many cases, in contrast to what professional economists tell us.

You see, professional economists and the media are unlikely to tell you about what the fight against black money will mean for you and your money. To know more about its wide reaching implications, claim your special report authored by Vivek Kaul - Demonetisation : The Good. The Bad. The Ugly..

04:40

After opening the day on a weak note, the Indian share markets registered further losses and continued to trade in the red. The sectoral indices are trading on a negative note with stocks from the realty sector and the banking sector witnessing maximum selling pressure. The BSE Sensex is trading down 325 points (down 1.2%) and the NSE Nifty is trading down 122 points (down 1.5%). Meanwhile, the BSE Mid Cap index is trading down by 2.4%, while the BSE Small Cap index is trading down 2.8%.

04:55

"It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction." - Warren Buffett

This edition of The 5 Minute WrapUp is authored by Richa Agarwal (Research Analyst).

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3 Responses to "The VMS System for Trading Success"

Rajesh Sutaria

Nov 22, 2016

I can not understand tha argument that unaccounted money has already been invested in other asset class like real estate & gold so it is gone. Cash still remains in the system, it does not disappear. The man who sells the real estate after collecting unaccounted money does not destroy the cash received. Pl give a thought before you make such statement

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BIREN SON TIMUNG

Nov 21, 2016

Didn't receive the mail in my inbox, so could not attend it....

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S K LIMAYE

Nov 21, 2016

In my opinion the biggest hurdle in 'Making India the factory of the world ' is the poor quality of goods produced by us , especially the small scale and micro industries.Compare any thing in this sector with similar product from China and we fing a huge gap in quality/durability/specification.Quality control is virtually absent in these sectors.Unless this problem is tackled we can never compete with Chinese goods.

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Equitymaster requests your view! Post a comment on "The VMS System for Trading Success". Click here!
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