Strategy Frameworks¶
Different approaches to trading based on risk tolerance.
Conservative Strategies¶
Low Risk Approaches
- Invest in Tech ETF
- Invest in ETFs which might grow in certain domains like:
- Semiconductors
- Cyber security
- AI
Aggressive Strategies¶
High Risk Approaches
- Pick one stock which you believe will grow and YOLO
- Pick the top performer in a highly growing ETF
- Pick two to five performers in a domain which you know will for sure increase in market cap. For example:
- Cyber security
- Semiconductors
- AI
The Most Important Things¶
Core Questions
- What to buy
- When to buy
Strategy Consistency¶
No Strategy Hopping
One guy suggests that one should not do strategy hopping. Just stick to one strategy. And log your winners and losers and deeply understand why you won in your winners and try to repeat them.
KK's Advice¶
Develop Your Own Strategy
KK says in his FAQ: The only way to make good money is to develop your own strategy for which one needs to just look at the stock market for a very very long time. Look at the graphs and data and find a pattern yourself.
AMD Stock Decision Analysis (January 2024)¶
The Insider Information¶
The Intel
As of January 2024, I got insider information from Anirudh who is working at ZT Systems in USA that they got a big order from AMD for manufacturing GPUs and other computing. He predicts that the market cap in consumer GPUs for Nvidia is going to reduce from 95% to 65% and AMD is going to capture that market.
So the stock price of AMD is definitely going to increase. I was really tempted to take this thought and implement it and invest something like $25,000 into AMD stock - basically go all in.
The Analysis¶
Let's say I go all in on AMD stock which is at $170 as of January 2024 and my logic is that it will grow at least until $350 which is like half the price of Nvidia now. Let's assume I am ready to invest $10,000.
| Scenario | Outcome |
|---|---|
| Best Case | If this logic stands then I can effectively double the investment within 1 to 2 years |
| Medium Case | If I invest the same amount in an ETF growing at 15% a year then I will get double the amount in 5 years |
| Worst Case | If this doesn't happen in 2 years and I lose 20% of the value, panic, remove money and invest in ETF growing at 15% after 2 years → On remaining $8,000 I will make $4,000 profit in next 3 years → Total $2,000 profit = 20% profit for 5 years |
Timing Problem
Currently the NASDAQ 100 index, S&P 500 index and the tech stocks are at an all-time high. Maybe my logic of buying AMD is right but the time is definitely not right because I will be buying them at a high. AMD is at its 52-week high already at $170.
Mean Reversion Trading (Nishant Pant)¶
Background¶
About Nishant Pant
Siddhu told me about this guy and I checked out his website, Twitter account and his YouTube channel. I also read the reviews for his book on Amazon and I looked into the one star and two star rated reviews. They say that the book basically has very basic principles in options trading and one guy commented that the parameter which he uses could be like finding a needle in the haystack.
The 25K Challenge¶
He has a book titled "25K Challenge". Basically he went from $2.5K to $25K within 1 year in 2019 using his method of mean reversion trading. I don't know if he got lucky because of that year before the pandemic where the market was bullish - I don't know or maybe his technique actually works. But he charges like $150 or $100 per month for all the insights on which stocks to buy and what to do with them etc.
His Journey¶
Apparently he studied all the option trading strategies in his early years. He did mistakes. Then he later realized that he should just stick to the simple methods.
How Mean Reversion Works¶
The Concept
Mean reversion trading basically says that a stock will always revert back to its mean:
- If it's having a positive standard deviation → You bet that it will come down to the mean
- If it's having a negative standard deviation → You bet that it will go back to the mean
That's basically the crux of it. But for this you may need a model which predicts how the stock will behave. That is basically the crux. So I don't know if he has a random walk model or ARIMA model or something like that, trained on the stocks on which he gives opinion to people - what to do, how to use the spread and so on.
Friend's Experience¶
He explained to me how mean reversion trading works and how Nishant makes money. I found the concept really interesting. Apparently he lost money because he entered into the market at the wrong time and he exited at the wrong time. Even other friends in the US incurred losses in the first few months.