Embarking on a journey into the intricate world of the share market can be both exciting and daunting. In a recent conversation, prominent financial expert Mr. Shubham Agrawal shared invaluable insights into his 21-year career, revealing strategies that could be implemented with a modest capital of Rs. 1 lakh. His vast experience, managing funds that soared to the tune of Rs. 10,000 crores at its peak, sets the stage for a compelling exploration into the basics of share market trading.

In the realm of financial advice and strategies, Mr. Agrawal distinguishes himself by delving into the nuances often left unexplored in conventional discussions. He sheds light on the dynamic nature of the market and the need for continuous learning and adaptation. Unlike generic strategies, Mr. Agrawal emphasizes the importance of staying ahead by evolving with the ever-changing market dynamics.

Reflecting on the evolution of trading strategies, Mr. Agrawal recalls the heydays of technical analysis in the early 2000s when correlations in market data were more pronounced. Technical analysis, with its focus on trends and patterns, thrived during this period. However, as markets matured, the efficacy of traditional technical analysis declined. Today, Mr. Agrawal relies on a fusion of technical analysis, custom indicators, and mathematical models, emphasizing the necessity of smoothening data for accurate analysis.

The conversation unveils Mr. Agrawal’s preference for candlestick patterns, particularly on a daily timeframe, for longer-term positional trades. He elucidates that the raw forms of common indicators are no longer as effective, and traders should consider smoothening techniques and statistical models for a more accurate representation of market trends.

Transitioning from market dynamics to practical steps for beginners, Mr. Agrawal addresses the question of starting with a capital of Rs. 1 crore. Interestingly, he notes that the actual capital may not be as crucial as the knowledge and strategy employed. Even with a starting capital of 2-3 lakhs, traders can initiate buying and selling activities, keeping room for expansion as their expertise grows.

Mr. Agrawal introduces the top-down approach as his preferred strategy for trading. This approach involves analyzing the market from a macro perspective, considering factors such as economic indicators, global trends, and geopolitical events. By understanding the broader landscape, traders can make informed decisions about specific sectors and stocks, enhancing the probability of success.

Navigating the complexities of the share market requires more than just technical analysis; it demands a holistic strategy. In a recent conversation, Mr. Shubham Agrawal, a seasoned financial expert, shared insights into his top-down approach—a methodical way of evaluating market trends, sectoral movements, and the role of interest rates.

Starting with the top-down approach, Mr. Agrawal draws an analogy to driving, emphasizing the need to look ahead instead of focusing solely on the immediate path. This approach begins with an assessment of the global market’s position in comparison to India, providing a broader perspective on the sustainability of trends in indices such as Nifty.

Relative performance becomes a key metric in this strategy. Mr. Agrawal explains that understanding how India’s market performs relative to global markets provides valuable insights. Even during market downturns, if India’s market falls less than the global average, it signifies relative outperformance and the potential for resilience.

Moving on to economic indicators, Mr. Agrawal emphasizes the importance of interest rates—a factor often overlooked by traders. While interest rates may not be crucial for daily trading or those involved in weekly options, they play a significant role in forming a macro view of the market. Understanding the direction of interest rates can provide insights into long-term market movements.

Transitioning to the sectoral aspect of the top-down approach, Mr. Agrawal introduces the concept of velocity. Drawing parallels with a car’s RPM, he explains that identifying the velocity or momentum of a sector is crucial for anticipating its future performance. This is particularly relevant in options trading, where understanding gamma blasts—indicative of increased momentum—can be a game-changer.

Mr. Agrawal clarifies that while the general audience may focus on weekly options and short-term trading, ignoring the impact of interest rates could be detrimental when forming a comprehensive market view. The top-down approach encourages traders to consider the broader economic landscape and sectoral movements over a more extended period, aligning with the goals of institutional investors who actively seek alpha generation.

Furthermore, Mr. Agrawal discloses that his strategy involves monitoring sectoral cycles, which typically last 3 to 4 months. By identifying sectors with increasing momentum early on, traders can position themselves strategically to capitalize on potential market movements.

In a candid discussion about personal interests, Mr. Agrawal admits to a preference for innovation and research over social media or public appearances. While acknowledging the importance of sharing knowledge, he highlights that his focus remains on creating and developing new systems to benefit traders in the long run.

To bring the theory into practical perspective, Mr. Agrawal promises to demonstrate the application of these concepts in the context of stocks, providing traders with a visual representation of how velocity, momentum, and volatility can be utilized to make informed decisions.
Understanding market dynamics is crucial for making informed decisions. Renowned financial expert, Mr. Shubham Agrawal, sheds light on his innovative approach, introducing the concept of Relative Performance Graphs (RPG) inspired by Relative Rotation Graphs (RRG).

Mr. Agrawal takes us through the four quadrants of the RPG, where quadrant A becomes a focal point for identifying potential opportunities. Quadrant A indicates the initiation of increased volatility compared to the market index in a specific sector. Volatility, in this context, refers to the standard deviation or converted volatility, capturing momentum rather than absolute price movements.

Moving clockwise, as the stock enters quadrant B, it signifies an improvement in absolute price performance. This marks the stage where alpha generation becomes apparent, and the stock begins to outperform the broader market. It is at this juncture that traders can seize the opportunity for profitable returns.

Interestingly, Mr. Agrawal emphasizes that the sectoral cycle typically lasts for three to four months. This timeframe becomes crucial for traders looking to capitalize on sectoral movements. However, he points out the necessity of understanding that these cycles have a finite duration and exit strategies are pivotal.

Now, delving into the practical application of this strategy, Mr. Agrawal takes the example of a hypothetical stock, say Reliance. As the stock’s volatility starts to rise in quadrant A, traders identify the emerging activity. The expectation is that this volatility surge will eventually translate into improved price performance.

With this anticipation, traders enter a position early on when the stock is still in quadrant A. As the stock progresses into quadrant B, traders witness the manifestation of absolute price performance, generating substantial returns. Mr. Agrawal underscores the importance of capturing these opportunities early in the sectoral cycle.

However, the discussion takes an intriguing turn as Mr. Agrawal introduces the concept of strategy evolution. He proposes a scenario where, if a trade doesn’t perform as expected within the initial three days, traders can consider converting it into a bull call spread. This strategic pivot allows traders to minimize risk while maintaining exposure to potential gains.

Further evolving the strategy, Mr. Agrawal suggests converting to a butterfly spread as the expiry week approaches. By selling OTM options in a butterfly spread, traders can benefit from sideways movements and capitalize on the decay of options nearing expiration. The risk-reward ratio becomes favorable, potentially offering returns in the range of 1:6 to 1:10.

In emphasizing the importance of strategy evolution, Mr. Agrawal debunks the common misconception that seeking market predictions from friends or experts guarantees success. Instead, he encourages traders to focus on building adaptable strategies that evolve with changing market conditions.

In the bustling world of trading, where excitement often takes center stage, seasoned trader Shubham Agrawal advocates for a different approach – one rooted in discipline, risk management, and the power of math. Drawing on his extensive experience and encounters with mature traders in renowned exchanges like CBOE in Chicago, Agrawal sheds light on the nuances of trading that transcend geographical boundaries.

Agrawal starts by dispelling the myth that forecasting is the key to success in trading. Contrary to popular belief, he asserts that successful traders seldom make their fortunes by predicting market movements. Instead, the real moneymakers are those who focus on evolving mathematical strategies and mastering the art of risk management.

He emphasizes that money is made through discipline, not through forecasting. Agrawal underscores the importance of probability and consistency, asserting that chasing after predictions can be a fool’s errand. To illustrate this point, he introduces a thought-provoking scenario where a trader boasts a 90% strike rate – an impressive feat. However, when risk management is neglected, and half the capital is deployed in each trade, the probability of blowing up the portfolio reaches a staggering 87%.

In a fascinating dialogue with Pushkar Sharma, Agrawal challenges the conventional notion of high strike rates and questions the capital allocation strategies adopted by many traders. He poses a hypothetical scenario where a trader achieves a 90% adjusted strike rate and explores the dire consequences of allocating 50% of the capital in each trade. The math reveals a sobering reality – a high probability of losing the entire portfolio, even with an impressive strike rate.

Agrawal advocates for a more conservative approach, advising traders to limit their capital exposure to 10%. He stresses the importance of strategy evolution, urging traders to adapt their approaches based on market conditions. He introduces the concept of converting losing trades into bull call spreads and, as the expiry week approaches, transforming them into bullish butterflies. These strategic evolutions aim to minimize risk while maintaining exposure to potential gains.

Shifting gears, Agrawal addresses the common dilemma faced by traders: how much capital to allocate. He recommends a simple rule – one-tenth of the total capital. This approach ensures that even in the face of consecutive losses, the probability of the portfolio going to zero remains negligible.

In response to a hypothetical scenario about managing a larger capital, Agrawal maintains the importance of the one-tenth rule. He suggests diversifying the remaining capital into uncorrelated strategies or safer instruments like gold ETFs. This diversification not only mitigates risk but also aligns with the wealth preservation goals of seasoned traders.

In the world of stock market trading, the allure of quick gains often leads many individuals to dive into the complexities of financial markets. As a creator in this space, the thrill of providing valuable insights that people crave is undeniable. On the internet, discussions about nuanced topics like risk management and strategy evolution are rare in paid programs. Why? Because these concepts come with experience, not instant gratification.

The common expectation among traders is to make immediate profits, but history shows that a majority end up losing their hard-earned money. It’s essential to understand that the stock market is not a place for overnight success stories. Consistent, long-term performance is the key. As we delve into strategies, it’s crucial to set realistic expectations and allocate a specific budget for entertainment and learning.

Risk-taking is part of the game, but it should be a calculated one. Drawing parallels with the approach of DII (Domestic Institutional Investors), who allocate only 5 percent of their portfolio to risk, emphasizes the need for a balanced and measured strategy. It’s not about chasing the thrill but rather enjoying the learning process and gradually building wealth.

Now, let’s explore a strategy evolution example to illustrate the importance of risk management. Consider initiating a bullish position with a call option on a stock at a certain strike price. If the market doesn’t move as expected, a simple adjustment involves selling a call option at a higher strike price. This move reduces the initial risk. As the expiration date approaches, further adjustments like spreading into a butterfly can be made to minimize potential losses.

The key takeaway here is that risk reduction is in the trader’s control. By consistently adapting strategies and managing risks effectively, even a coin toss can result in profitable outcomes. It’s not about predicting market movements with certainty; it’s about limiting losses and maximizing gains within one’s risk tolerance.

Moving beyond theory, let’s apply this strategy to Nifty options. Initiating a long call position and adjusting it into a debit spread and later a butterfly spread demonstrates a gradual reduction in risk while maintaining profit potential. This visual representation reinforces the idea that risk management is a dynamic process that evolves with market conditions.

For those engaged in naked call option trading, converting to a debit spread after a few days of inactivity can significantly reduce risk exposure. Further adjustments, such as transitioning to a butterfly spread in the last three days before expiry, provide additional protection and potential profit.

The journey from a novice to an adept involves navigating through various complexities. Shubham Agarwal, in a recent conversation, shared insights into the basics of trading, emphasizing the importance of understanding market trends, sector identification, and selecting the right stocks for profitable trades.

Agarwal begins by acknowledging the confusion that newcomers often face when delving into the world of trading. He highlights the significance of starting with the basics before progressing to more intermediate concepts. The underlying message is clear – investing time is essential for profitability.

The conversation pivots to the distinction between basic and advanced concepts. Agarwal acknowledges that while what he discusses might seem basic, the complexity of advanced strategies can be overwhelming for beginners. Nevertheless, he expresses his commitment to teaching advanced concepts if the audience demands it, showcasing his belief in continuous learning.

The discussion touches upon Agarwal’s interaction with the creators of RRG graphs, emphasizing the importance of incorporating volatility to enhance trading strategies. He reflects on his recommendation to include volatility in RRG graphs during an event by the CMT Association, highlighting the potential for strategy amplification.

Agarwal draws attention to the limitations of widely used tools like RRG graphs, particularly their unavailability for retail traders due to high subscription costs. He emphasizes the need for affordable and accessible alternatives, which inspired him to develop strategies using derivative data for trading.

The core of Agarwal’s approach lies in the top-down analysis of sectors and stocks. He advocates for starting with the overall market trend, moving to sector identification, and then selecting specific stocks for potential trades. The conversation then unfolds into a detailed explanation of the “build-up” concept, involving the analysis of long build-up, long unwinding, short build-up, and short covering.

Taking an example of the capital goods sector, Agarwal demonstrates how to identify potential trades by examining the combination of green and blue data points. He stresses the importance of data analysis duration, advising different time frames based on trading preferences – short-term or longer-term.

The discussion seamlessly transitions to a practical example, focusing on the Bharat Heavy Electricals Limited (BHEL) stock. Agarwal explains the process of identifying a strong trend in BHEL through the build-up data and subsequently making informed trading decisions. The strategy involves initiating a long call option, adapting to market movements through spread adjustments, and potentially converting to a butterfly strategy for risk minimization.

Agarwal addresses the critical aspect of managing trades, advocating for a patient approach while letting options expire in certain scenarios. He shares his perspective on stop-loss, emphasizing its relevance based on individual risk tolerance and margin constraints.

In the dynamic world of stock trading, staying ahead of the curve requires a deep understanding of advanced strategies. Shubham Agarwal, an expert in the field, recently shared his insights on advanced option trading strategies, providing a glimpse into a realm beyond the basics.

Shubham begins by emphasizing the importance of relative performance in trading. The key, he suggests, is to consistently outperform a chosen benchmark, such as the Nifty index. This forms the foundation of his trading approach, as he utilizes a relative performance graph to identify potential opportunities.

To put this concept into action, Shubham recommends creating a basket of preferred stocks or sectors. By adding selected stocks to the basket, traders can closely monitor their relative performance against the benchmark. For instance, if the focus is on the capital goods sector, all relevant stocks in that category can be included in the basket.

The crux of Shubham’s strategy lies in comparing the relative performance of these stocks with the Nifty index. This involves utilizing a unique chart plotting method, where transitions from red to blue signal potential buying opportunities, while shifts from green to yellow suggest potential selling opportunities.

Delving into a practical example using Mahindra & Mahindra (M&M), Shubham explains the significance of these transitions. The chart depicts the movement over the last five days, with the transition from red to blue serving as the trigger for initiating a trade. This is likened to the RPM of a car, where an increase indicates a forthcoming movement.

Shubham’s preferred default strategy involves initiating a bull call spread when transitioning from red to blue. This entails buying a call one strike up and simultaneously selling a call two to three strikes up. The rationale behind this is to leverage upward market movements while minimizing risk.

Intriguingly, Shubham shares his preference for credit spreads, particularly bull put spreads. He highlights the advantage of theta, the option’s time decay, in his favor when opting for credit spreads. This allows for the gradual melting of the option premium, contributing to profits.

Examining a real-life trade example with Reliance Industries, Shubham demonstrates the implementation of the bull call spread. On December 5th, as Reliance exhibited a transition from red to blue, a call option was bought at ₹24.60, while a call option at a higher strike (₹25.60) was sold, resulting in a net outflow of ₹24. The subsequent reward-to-risk ratio, with a spread value reaching ₹94, underscores the potential profitability.

Importantly, Shubham advises traders to be mindful of the maximum capitalization possible in a spread. Understanding that the profit potential is limited to the initial difference in strike prices, traders can strategically shift and re-initiate the spread to capitalize on market rallies.

Shifting focus to Tata Consumer, another stock that exhibited a promising signal on December 5th, Shubham emphasizes the simplicity of the intraday strategy. The transition from red to blue prompts the initiation of a long call strategy, providing a straightforward yet effective approach for intraday trading.

Towards the conclusion of the discussion, Shubham touches upon the upcoming annual event, Option Symposium. Positioned as India’s premier options event, it offers traders a unique opportunity to learn from 20 expert speakers who manage substantial portfolios. While emphasizing that the event is not suitable for beginners, Shubham highlights its potential to provide valuable insights into diverse trading strategies.

In essence, Shubham Agarwal’s advanced option trading strategies unveil a world of opportunities beyond conventional trading techniques. By integrating relative performance analysis, strategic spread deployment, and real-life trade examples, he offers traders a comprehensive approach to navigating the complexities of the stock market. As traders delve into the nuances of these advanced strategies, the potential for informed decision-making and enhanced profitability becomes apparent.