"What I dream of is an art of balance.”

- Henri Matisse

The word ‘tarazu’ in the Indian language means balance; thus ‘Trade Tarazu’ translates to balanced trading. We believe that balance is not only the key to a happy life, but also the key to a profitable portfolio. We endeavour to strike a balance in three crucial aspects of trading and investing:

Research Process i.e. Fundamental Analysis & Technical Analysis
Portfolio Design i.e. short-term trading & long-term investing
Execution Mindset i.e. greed & fear

PHILOSOPHY

RESEARCH PROCESS

The core research process strikes a balance between Financial Analysis & Technical Analysis, and integrates the best aspects of both disciplines to deliver superior returns

For example, in order to build our Investment Portfolio, we first use Fundamental tools like Financial Statement Analysis, SWOT, Efficiency Analysis, etc to create our investible universe of companies that have good intrinsic values and promising futures. Then we use Technical tools like Trend and Momentum Analysis to identify which of these fundamentally sanctioned companies are ripe for investment.

A purely Fundamental approach can help identify great undervalued companies but it doesn’t provide much guidance on entry and exit. We can tie up precious capital in an intrinsically great company for years before it receives the volume and sentiment support needed for exponential growth. Similarly, using a purely Technical approach we may end up investing in companies that are just artificially propped up and don’t have the intrinsic substance to sustain their growth. By fusing both disciplines, we can identify the right companies and correctly time the entry and exit of the transaction so that our capital is always actively and efficiently employed.

PORTFOLIO DESIGN

There is a popular belief that one can either be a trader and look at short-term timeframes or be an investor and look at long-term timeframes. However, we do not believe that we need to choose; our capital is appropriately balanced between long-term investments and short-term trades. We recognize that not everyone has the luxury of investing in a stock and waiting for 3-5 years before seeing any profits on their investment. The majority of us have limited capital and a need for regular cashflows to pay our bills. Thus, in addition to running a traditional, passive, value-driven Investment Portfolio we also run an active, short-term Trading Portfolio.

The other advantage of divvying our capital between trades and investments is that we are then able to short-sell indices and stocks during a market downtrend. This adds another layer of diversification, and fortifies our returns. While traditionalists look down on short-term trading, we look at it as an additional source of income that complements our investments and allows us to make money even if the market is down!

TRADE EXECUTION

It is said that to get success in the securities market, a person’s Emotional Quotient (EQ) is more important than their Intelligence Quotient (IQ). Two primary emotions drive the market – greed and gear. Greed dominates the market during a boom and fear prevails following a bust. It is our goal to always maintain a good balance between greed and fear and not let either overpower us.

To inculcate this coveted emotional balance is us, we prepare comprehensive trading plans with precise entry and exit prices and stop-loss for every transaction. We believe that if one “creates a plan to trade and then trades that plan” then emotions and impulses are kept in check. Additionally, we practice early-booking of losses and staggered booking of profits. The idea is to cut losses sooner rather than later and to let the winners run. Readers can access our blog articles which delve deeper into the behavioural aspect of trading and investing and provide tips and tricks on how to avoid emotional traps.