Can 10point Nifty profit a day with 1 lac become 1 crore, a 100 times, in a year?

Power of Ploughing Back - how a trickle can become a stream...
Making 1 crore from 1 lac in 1 year

Is it possible to make, on an average, 10 points of Nifty a trading day?

On an average a 10 points a day can come out of, for eg.
Day before the profit may have been 30 points.
Yesterday one may have lost 15 points.
Today one may have gained 25 points.
This would make an average of 55 points Gain [less] 15 points loss, giving a net of 40 points.
If we deduct 2 point expense per lot, for 3 days each day 1 lot, will make a total expense of 6 points.
This would leave a 34 points over 3 days, or about 11 points a day average.
So, is it feasible?
Does 10 point sound like jujubee or bubble-gum amount ... too small, but can make ... ?
If yes, then

Lets see what a scalping of 10 point on Nifty per day can do over a year ...

This post is written on a mathematical basis, to highlight the Power of Scalp and Plough Back ... the little drops that form that white water gush!

Is it feasible to trade 4 lots of Nifty?

(The amount needed would be about 10% Margin on the total cost of Nifty Future.
Each Nifty Future lot size is 50.
Lets assume we start this when the closing price is at 5000 ... :
Therefore the value of the lot is 5000 x 50 = Rs.2,50,000.
The Margin needed to trade this would be about 10%, that is Rs.25,000.
For 4 lots the margin amount needed would be Rs.1,00,000.

Let us workout on a spreadsheet of possibilities based on scaling up the trading amount by ploughing in the profits to the trading capital.

Growth in a Month or 20 trading days of 10 points gain

We see on first day the gain is (on average) Rs.2000. This pattern continues till about 14th day, when (we assume here the profits are kept accumulated for increasing the trading base) the net balance increases to a level that a margin amount for trading one more lot is created. Here on the trading lots is increased from 4 to 5. This pattern continues till the month ends. In our assumption it ends on 20th day.

We started with Rs.1,00,000 on the first day.
On 20th day we reach a net balance of Rs.1,43,500.
The trading amount has increased by almost a half portion.
Or, the capital has appreciated to 144% over a month.

The base condition is on an average the profit after expense should be 10 points a day, and trade is initiated with 4 lots.

Now, let us try to drill down and see some more ...

If the 10points average profit a day with 4 lots can accumulate to 144% in 20 trading days, how much growth may be possible applying the same principle for a year.

Growth in a Year or 240 trading days of 10 points gain.

Extending it over a year of about 240 days (365 days [less] 52weeks x saturday sunday [less] about 15 holidays).

mmm ... Power of Ploughing Back makes Rs.1,00,000 in Nifty 4 lots with 10 points take home to become a Rs.1,02,41,000. That is 1 Crore.
And in percentage terms it is 10241%
And, the number of lots that can be traded has increased from 4 lots to more than 400 lots.

The aim of this article is to bring out this mathematical potential in financials

- similar to the Compounding Power, Savings, etc.
Will someday make a post on those other topics too.
For now get to know this feasibility.

Now lets have a look at the extract of the data tables and the charts given below:

The chart visualizing the growth is given above:
The Horizontal scale shows the number of days.
Vertical scale shows the Growth of Trading amount,
in Percentage in the left chart
and
in amount in the right chart.

Trade Day	Margin Rs per lot	Gain pt per day after exp	Number of Lots traded	Trading Capital Rs	Returns per day Rs	Balance at EOD	% Growth of Initial Capital
1	25,000	10	4	1,00,000	2,000	1,02,000	102%
2	25,000	10	4	1,02,000	2,000	1,04,000	104%
3	25,000	10	4	1,04,000	2,000	1,06,000	106%
4	25,000	10	4	1,06,000	2,000	1,08,000	108%
5	25,000	10	4	1,08,000	2,000	1,10,000	110%
6	25,000	10	4	1,10,000	2,000	1,12,000	112%
7	25,000	10	4	1,12,000	2,000	1,14,000	114%
8	25,000	10	4	1,14,000	2,000	1,16,000	116%
9	25,000	10	4	1,16,000	2,000	1,18,000	118%
10	25,000	10	4	1,18,000	2,000	1,20,000	120%
11	25,000	10	4	1,20,000	2,000	1,22,000	122%
12	25,000	10	4	1,22,000	2,000	1,24,000	124%
13	25,000	10	4	1,24,000	2,000	1,26,000	126%
14	25,000	10	5	1,26,000	2,500	1,28,500	129%
15	25,000	10	5	1,28,500	2,500	1,31,000	131%
16	25,000	10	5	1,31,000	2,500	1,33,500	134%
17	25,000	10	5	1,33,500	2,500	1,36,000	136%
18	25,000	10	5	1,36,000	2,500	1,38,500	139%
19	25,000	10	5	1,38,500	2,500	1,41,000	141%
20	25,000	10	5	1,41,000	2,500	1,43,500	144%
Trade Day	Margin Rs per lot	Gain pt per day after exp	Number of Lots traded	Trading Capital Rs	Returns per day Rs	Balance at EOD	% Growth of Initial Capital
1	25,000	10	4	1,00,000	2,000	1,02,000	102%
20	25,000	10	5	1,41,000	2,500	1,43,500	144%
40	25,000	10	8	2,03,000	4,000	2,07,000	207%
60	25,000	10	11	2,95,500	5,500	3,01,000	301%
80	25,000	10	17	4,34,000	8,500	4,42,500	443%
100	25,000	10	25	6,39,500	12,500	6,52,000	652%
120	25,000	10	37	9,44,500	18,500	9,63,000	963%
140	25,000	10	55	13,96,500	27,500	14,24,000	1424%
160	25,000	10	82	20,69,500	41,000	21,10,500	2111%
180	25,000	10	122	30,69,000	61,000	31,30,000	3130%
200	25,000	10	182	45,54,000	91,000	46,45,000	4645%
220	25,000	10	270	67,61,500	1,35,000	68,96,500	6897%
240	25,000	10	401	1,00,40,500	2,00,500	1,02,41,000	10241%

How about starting a serious systematic paper-trade that makes you pick up the art of scalping one 10 point each day and closing the terminal ...
I would suggest this very much to find flaws and correct actions in the simulated virtuals before jumping into real times hard money trade.
It always helps in a big way.

All this depends on that steady 10 point profit ...,
the bricks that go into the building,
the tiny drops that form that great lake...

Leave your emotions and sentiments off.
get to the trading desk with no fear or greed.
Cut the noise, sit focussed.
Make your 10 points and call it a day.
No over trading.

This post is about what can be done in cumulation concept.
While the 10 points scalping is the entry criteria for this concept,
this post is not about how to make the 10 points.

---

Nuts & Bolts:
Only profit upto 10 points after expense is taken as a factor (neither loss nor profit more than 10 points is considered for this article.
Never trade your entire capital. Trading capital should be part of an investment that has provisions for drawdowns, contingencies, expenses, taxes, sundries of known and unknown, expected and unforeseen types as in any other business.
Try to aim for making this 10 points consistently, only then the essence of this article helps.

About the amount to be kept for trading 1 lot, some view atleast a sum equal to the margin amount should be kept as buffer for meeting drawdowns on positional Derivative trading, some others opine an amount equal to the value of the lot itself should be there as buffer amount. Both reasons are valid in its own reasoning, though here we discuss a daytrade.
Trades should always be with a plan on entry, exit target as well stoploss exit.
About the risks and consequences of Derivatives trading refer articles.
These caution notes are given to create awareness. It is beyond the scope of a small post of educational nature to brief all nuances.
Refer related articles for indepth knowhows and knowledge of Derivative Trading.
Derivative and leveraged trading requires good basic knowledge, and/ or professional advice. Consult your financial advisor always.

When you succeed with the formula, make a trip to a nearby orphanage and get the children whatever will make their life better with 2% of what you made ...

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Before signing off, lets see two variations of this:
Both the following conditions also give the same starting returns of Rs.2000 profit a day, before cumulation commences. But the effect can be seen in the progression and at the end of the cumulation.
1.. What if profit per day is 20 points, and starting trade amount is 50000.
2.. What if profit per day is 5 points, and starting trade amount is 2 lac.

1 year, 20 points a day, Rs.50,000 starting amount

Trade Day	Margin Rs per lot	Gain pt per day after exp	Number of Lots traded	Trading Capital Rs	Returns per day Rs	Balance at EOD	% Growth of Initial Capital
1	25,000	20	2	50,000	2,000	52,000	104%
20	25,000	20	3	94,000	3,000	97,000	194%
40	25,000	20	7	1,91,000	7,000	1,98,000	396%
60	25,000	20	16	4,02,000	16,000	4,18,000	836%
80	25,000	20	34	8,67,000	34,000	9,01,000	1802%
100	25,000	20	75	18,87,000	75,000	19,62,000	3924%
120	25,000	20	164	41,20,000	1,64,000	42,84,000	8568%
140	25,000	20	360	90,14,000	3,60,000	93,74,000	18748%
160	25,000	20	789	1,97,31,000	7,89,000	2,05,20,000	41040%
180	25,000	20	1,728	4,32,19,000	17,28,000	4,49,47,000	89894%
200	25,000	20	3,787	9,46,84,000	37,87,000	9,84,71,000	196942%
220	25,000	20	8,298	20,74,52,000	82,98,000	21,57,50,000	431500%
240	25,000	20	18,181	45,45,42,000	1,81,81,000	47,27,23,000	945446%

1 year, 5 points a day, Rs.2,00,000 starting amount

Trade Day	Margin Rs per lot	Gain pt per day after exp	Number of Lots traded	Trading Capital Rs	Returns per day Rs	Balance at EOD	% Growth of Initial Capital
1	25,000	5	8	2,00,000	2,000	2,02,000	101%
20	25,000	5	9	2,39,500	2,250	2,41,750	121%
40	25,000	5	11	2,89,500	2,750	2,92,250	146%
60	25,000	5	14	3,50,250	3,500	3,53,750	177%
80	25,000	5	16	4,24,750	4,000	4,28,750	214%
100	25,000	5	20	5,15,750	5,000	5,20,750	260%
120	25,000	5	25	6,26,500	6,250	6,32,750	316%
140	25,000	5	30	7,62,000	7,500	7,69,500	385%
160	25,000	5	37	9,27,000	9,250	9,36,250	468%
180	25,000	5	45	11,28,250	11,250	11,39,500	570%
200	25,000	5	54	13,73,750	13,500	13,87,250	694%
220	25,000	5	66	16,73,500	16,500	16,90,000	845%
240	25,000	5	81	20,39,000	20,250	20,59,250	1030%

1.. Growth is 9400x times with 20 points, and starting trade amount is 50,000.
2.. Growth is 10x times with 5 points, and starting trade amount is 2,00,000.
while both returned the same 2000 at the start. And all three methods with fixed trading amount and the mentioned points earned would have continued to yield the same constant 2000, while the pooling back to scale up trade brought in the other dimension.

What is the range of Nifty normally ?

During the year of 2011 Except one day Nifty High - Low span was more than 25 points. Specific frequency table of which points range occurred on how many days is given in the table below:
Note: This is Nifty data, though tradeable is Nifty Future only. And, by the way, a smaller Nifty derivative lot is Mini Nifty with 20 lot size.

Range of Nifty	Number of Days
upto 25	1 day	| 1
26 to 50	29 days	||||||||||||||||||||||||||||| 29
51 to 75	67 days	|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| 67
76 to 100	67 days	|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| 67
101 to 125	44 days	|||||||||||||||||||||||||||||||||||||||||||| 44
126 to 150	19 days	||||||||||||||||||| 19
151 to 175	12 days	|||||||||||| 12
176 to 200	7 days	||||||| 7
201 to 225	1 day	| 1

The table above shows that the range on many days in a year is good and wide to accomodate the 10 point aimed at.
What if a particular day looks not worth looking at from a trading parameter ?
Forget it, dont trade, you can always do with one day lesser, does not matter at all.

What if you feel you should make your initial capital safe?
Withdraw it when you have doubled it. From then on the trade would run free of capital from you mathematically. That frees the mind too.
Withdraw one more initial capital equivalent out later, and the return on capital would have been made at 100%
All probabilities are possible. We will look at it in a future article, and try to look from a different perspective.

Step 1 ... Start doing Paper Trade and tune the art of scalping that one 10 point once a day.
Step 2 ... Practice it again and make it repeatable, till it does.
:)

A dozen thoughts that would lead to comfort zone ...

1. Why should one trade each day ? Not necessary. If a particular day looks unsure, shaky, risky, not viable, don't trade.
2. Keep off on a day when something does not look ok. Sit on that hand that goes to the keyboard in a nervous compulsive twitch to make a trade ...
3. There is no worry on DrawDowns, Gaps up or down, Square offs, Nail biting overnight, Watching US mkt or SGX or even premarket.
4. There is no compulsion, No one tells you to trade. There is no position on the book. Its all squared off yesterday by EOD at 3:25pm maximum. And there is no entry made yet, till you decide to.
5. Balance on the book is very much there as withdrawable amount in the trading account.
6. Can have simultaneously couple of or more counters, and do the particular counter that appeals for the day to be trade-worthy.
7. Only thing that matters is that you keep a separate account sheet for each counter and maintain it precisely and perfectly so that you will know if things go by plan.
8. You can have a Lag Count, that is, keeping a tab on No. of Market Days, and No. of Traded Days. This will give the comparative tradeability of counter +  trader, returns in real terms of running days against traded days.
9. Try to have a watch on if that 10 point becomes elusive, that your anxious clicks rather make you do it at the end of the swing turn. If so, analyse what makes you do that, and mend it.
10. If 10 points sound slightly out of reach, why not try the 5 point for a starter (ofcourse, after papertrades) ...And if 4 lots feel too many, try with one lot, ofcourse after simulated trades to finetune your tact.
11. See if stops get hit before the targets hit. If instead of a 10 pt target, a stoploss gets hit repeatedly, then you need to stop everything on track and get to paper trade to see why, where and how to hem those loose edges from where the warp and weft are parting ways instead of tightening up to increase counts.
12. Be critical of own self. Be hard on wrong moves, decisions, instincts so that they correct themselves. Hiding behind hype and afraid of criticism may make you find it difficult to find that chink, the weak-spot.

Have a great weekend ... !

A weekend article, a thought stimulator.
We shall continue to further levels in the coming weeks ..... My thanks to assortZ for catalyzing thoughts. A good follow up variation to this concept is given in
RM's Options 5 points a day idea
AssortZ's Crude Oil 5 points a day idea
posted separately. Click the link to get there.

Feasibility of taking 10 points a day

: The following links take us to the posts where we look at the possibilities ...

• Using ORB to trade

In this post we have seen what can be done with 10 points net profit from Nifty Future. This post is not about how to get the 10 points.