Thread by @ProdigalTrader

here is a sensible plan, which i would follow

u were in cash bcz market wasnt supporting delivery trades with long bias. So this is the primary factor u need ur analysis to b based upon.
The best tool to guage the market health is market breadth

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https://twitter.com/ProdigalTrader/status/1333677221400113152

such as advance/decline ratio, % of scrips abv 200 SMA, number of scrips at yearly highs etc. The idea behind it is find out a general condition which held true in the past bullish phases in the market.

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Suppose in the past bull markets, there were >70% scrips abv 200SMA till the bull market finishes. So u can form a thesis that once we have this data coosses abv 70% critical level, u would be able to assess that market is starting a new bull market stage.
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ur first concern of weak market condition is adressed here.
Now move on to next; sector identification.
find the sectors which recovered faster than the market and lead the market in the new improved market health. Find the strongest scrips from these sectors.

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Alternatively, avoiding the sector analysis, one can find strongest scrips irrespctive of the sectors as well.
These will form the sore of the portfolio.

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Find a pool of 8-20 scrips from the identified ones. Analyse them thoroughly and find the elvels of entry and the risk associated with it
This will give exact idea about the position size one could choose with each of the scrips

Analysis part finishes here

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Now, the crucial part in analysis and forming the trade plan is to find 8-20 scrips to trade. Here a bigger pool of scrips helps dissipating the early risk of negative P&L in the account.

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One should always expect around 20% of the scrips to run so fast while around 30% would be non perfomers, rest 50% likely to give steady return in the early part of the portfolio perfomace.
such a portfolio likely to give a steady average return straight away.

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trick here was to completely form the portfolio as early as possible so that the perfomace risk averages out into higher number of scrips
Instead, if u choose to enter in scrips one by one as opportunity comes,

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if u werent be able to pick the top performing scrips first (somehow), it will be emotionally so challenging to go on with the process to complete the portfolio by picking scrips one after the other.

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now, the careful part is the capital allocation.
while u devide it into 8-20 equal parts to diversify the risk and have a reasonable number of scrips in portfolio to dissipate the risk evenly, u must never go with "enter all at once" approach.

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initial entry should be with 1/4th, 1/3rd or 1/2nd quantity first. Later on as the trend develops, make the further scaling ins.
also this approach helps to scale in the winners more and reduce the weightage of non perfomers straight away.

12/13

twice, i have demostrated this style of portfolio formation here successfully, one being so recent, just last month
u can chk the stats here.

https://twitter.com/ProdigalTrader/status/1333666907468099584

https://twitter.com/ProdigalTrader/status/1302508156413648896

this is not the only method out there
may be plenty of ways r there
make urs

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