Had been working on some of the investment calculators to work on plan for long term investments. We are talking about Equity investment only here, with time horizon of 5 years.

Have choosen 5 years as time horizon, as that is typical time horizon for investments done by our parents in erstwhile investment instruments like NSC, which in 1990's used to double the money in 5 years.

Having seen parents invest the money in NSC and then forgeting about it and enjoying the good forgoten money showing up with good returns was always welcome.

My long term vision is based on these good memories and hence keeping the time span of 5 years.

Running through the calculators, saw some interesting numbers on the screen, with following return assumptions:

• Low Return : 12%
• Medium Return : 20%
• High Return : 40%
  

For an Investment of Rs. 10000/per month (Total Money Invested: Rs. 6 Lacs over 5 Year)

• Low Return : Rs. 816697 (8 Lacs+)
  
• Medium Return : Rs. 1017582 (10 Lacs+)
  
• High Return : Rs. 1845594 (18 Lacs+)
  

As you can see, with low investment of Rs. 10000/per month, one can almost triple the money in 5 years with average return of 40%.

If you are not an active investor, you can invest via the mutual fund route. The top 5 mutual funds have given average return of 50% + even in the volatile last year.

This is one Golden Rule i've learnt and in process of mastering and applying. Never Ever let your money sit idle.

Typical mistake which i myself do is Sell Stock and let the cash sit idle to catch the next fish. And in process what happens is Stock Sold moves up and I end up missing the movement.

This is not to say that go against the "Stop Loss" Rule of investing. But it is applicable only when you either:

• Decide to Skim the milk aka sell the Profit Stock Or
  
• Sell Stock which has tanked substantially (Either due to Stock Market Crash or not using Stop Loss)

Definetly there is risk of stock you are holding moving downward, but here in either case you are in good shape.

• For profit making stock, you are going to lose part of profit but not the investment.
  
• For tanked stock, it wont make difference as the upmove potential will have more weightage than downside
  

Having lost 50% of my portfolio in the recent sell off, i did post mortem of my portfolio. What i realised is that in case of bearish market, the portfolio risk balancing theory does not hold true, whether you hold momentum stocks or not.

Firstly i decided to sell off my portfolio and convert to cash . Though most of my stocks have moved up 10% since i sold off the portfolio.

My strategy for this market is Swing Trading with aim to first recover my losses. For this i'm going to buy stocks of single company from my entire cash kitty.

Last few months have seen the worst declines in Indian Markets since the last 5 years bull run. The indices are down more than 30% from their life high. Worst hit stocks are midcaps which have come down 50% from their peak in January, 2008.

I had built a portfolio of midcap stocks based on value investment criterion, but even it could not save the portfolio from diminishing to half its value.

After watching for 2 months for my portfolio to move up, my patience finally weared off. The entire portfolio moved maximum of 2% to 5% and then swinging back while the markets recovered 10%.

Powergrid is in right place at right time. Rel Power IPO is making buzz and taking all power stocks up up and up alongwith that buzz. But the damn PowerGrid is sitting like lame duck and refuses to even move leave flying.

After holding this for more than one month, it moved up to 155+ levels, giving me good hopes of atleast making my bare minimum profit target of 10% on my investment.

But lame duck was first one to fall when the midcaps fell in last 2 days.

Strategy: Exit
Target: 155+ levels

Bhagwati Banquets is based out of Gujarat and small hotel player. Initially had brought the stocks after seeing huge purchases by MF's and large volume.

This resulted me in making trade at 52 week high and post trade consolidation. On checking, saw stock being in T2T segment, with wide spreads in bid/ask prices.

Stock moves up/down randomly and there had been no pattern established of movement till date.

Target for this stock as per brokers is 120 levels. This can be reached only when stock will move out of T2T segment.

Strategy: Exit out of this stock but without any loss.
Target: Exit@95+ Levels

DCB is private bank, with sizeable trading in F&O segment. Had brought DCB@147 levels, now trading@153+ levels.

Holding period has been over a month now. DCB alongwith other interest rate sensitive stocks may see rally in coming weeks, post the expected rate cuts by RBI.

This rally is expected to take DCB to 180+ levels.

Target: Rs. 180
Timeframe: End. Jan.

Strategy: Exit@ 180 levels

Mirc Electornics or better known as ONIDA is another momentum stock, which i had purchased about month back for Rs. 32.

Brought it after news article on potential Private Equity placement in the company, with target of Rs. 45 short term (2 months) and Rs. 70 in long term (6 months).

It had jumped to Rs. 40+ levels in last couple of sessions, after which it started its backward journey of hitting continuous lower circuits.


Learning: Failure to implement Rule#1 : Skim the Milk.
Result: Back to square 1, No profit no Loss

Strategy: Has resistance at Rs. 40 levels. Will Sell at Rs. 40+.

• Skim the Milk: Book Profit when:

• Price increases > 10% : Single Day
• Price increases > 20 to 30% : Within 1 Week
• Price increases > 40 to 50% : Within 1 Month

• Buy High, Sell Higher: Always buy stocks that have risen up more than 5% in single day (with great volumes)
  
• Never buy stock on "Sources News" on CNBC: Typically stock rises but not in same week. Add to Watch List and Look for volume breakout and then enter
  

Skim The Milk

Making money from Momentum Investing is similar to Skimming the Milk. When you heat the milk for first time, the butter/malai skimmed is maximum. To make more malai, you need to boil the milk much longer.

Similarly in Stock Market, When your stock moves up 30-40%, book profits aka skim the milk. The same stock may go up another 10-20%, or go back down 40-50%. If you skimmed the milk, you would retain the profits, and will be able to capitalize when stock moves down.

Key to this strategy is defining your set of rules for skimming. If you do not have defined rules, you will end up taking the ride up, then the ride down and then sitting duck as long investor expecting the stock to move up.

Fine example is myself, who brough Parsvnath on 4th Jan for Rs. 476, saw the stock move up to Rs. 576 in 3 days, failed to book profit (Got busy couldnt give time to skimming) and saw the stock plummet back to Rs. 505 on 10 Jan.

Had i skimmed the milk, i would have made cool profit of Rs. 7000 and still be riding the bull by purchasing the stock again at lower levels.

Rectifying the mistake by defining the Rules i'm going to follow from now on in the My Investing Rules Post.

Pennisula Land is trading at 4x average volume. IT is in bullish pattern and can give returns of 10% or more in next couple of days.

Actually this is trade which i made on 2nd Jan. based on news on Parsvnath.

Parsvnath is Real Estate player, somewhat in midcap/smallcap category, focussed on Northern India.

Economic times Reported that Parvnath is close to inking Deal with Mariott on 2nd Jan, 2008.

Purchace Price: Rs. 476

Profit Expectation:

• 10% : Rs. 47
• 20%: Rs. 94

Profit as on 4 Jan, 2008: 4%

As we all know, requirements are a must for any project to succeed. So, i'll start off by stating my goals:

• Average Monthly Return: Minimum: 10%, Maximum : No Limit ( Target: 30-40%)
  
• Maximum Trades: 2 per Week: Total : 8 / per month
• Win/Loss Ratio: Start with Ratio of 6/4, and improve it to 8/2
• Stop Loss: Play with Stop Loss of 5% Maximum

Capital Investment: Will not be disclosing the initial capital i'm investing, but will be recording each trade in the blog with assumption of trade value to be 1 Lakh to simplify computations.

This is yet another trading blog, but not written by financial whizkid but by a techie. Yes, i'm a techie working in India with the same routine job like hundreds/thousands of techies.

Every second person i see around in my company or rather companies i know friends working in is seen investing in stock market. Like rest of world, some make money, rest lose money:)

One thing is common: We techies are the real common man of stock market, who uses internet to invest in stocks, rely on CNBC or tips given to us by brokers and most are risk averse investing in large caps and mid caps, mostly playing long.

Having played the long strategy, i've felt like i've been missing something... feels like i'm on a paddleboat while stock market and folks are on speedboats... making 20% in week's time.....

Seeing this i'm embarking on journey to momentum investing and documenting it via this blog.

This blog is about momentum investing and not day trading. Day trading refers to buy/sell on same day, whilst momentum investing is about making money in couple of days.

Day trading is not possible with full time job as techie.