Trade Exit: Long Sensex/Nifty, Short Gold; Net 31% in 3 weeks
Both my exit conditions for the Long Sensex/Nifty, Short Gold trade occurred almost on the same day:
Exit the whole position if the Nifty crosses 4600 and/or gold drops below 12000
The US markets jumped almost 3%, Indian markets were up over 2% in the morning, the Nifty crossed 4600 (but gave up most of the gains) and GOLDBEES hit a low of 1206. So, let’s look at the final performance:
- Bought Nifty future @ 3829, sold @ ~ 4600, net +20% profit
- Shorted GoldBeES @ 1361, bought back @ ~1210, net +11% profit (again, this is not executable due to short-sale rules, but you can do the same trade on MCX gold futures instead)
- On July 16, the MCX September GoldM (mini gold) future closed at 13396, today’s low was 12082.
- Spot gold prices in India dropped below 12000 per 10 gms, down to ~ 11850.
By most standards, a 31% gain is good even across a year, let alone in 3 weeks! And more importantly, this involved an index (and hence lower risk), not a small/mid cap stock.
The key to such trades:
- Patience
- Keeping your powder dry (i.e. have enough capital ready, know which instruments to trade, and where/how)
- The willingness to bet large sums once such ‘low frequency, high probability trades’ set up
- Exiting the position as soon as the original (entry) logic ceases to apply
There may be another opportunity available soon - will write about it in the next few days.
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