Some key learnings

Over the last few months, learned the following:

1. Long term purchase of stocks on cash segment does not make sense. 
2. Predicting market direction is very difficult and risky. It is possible that we will mistake a minor retracement as a trend change. 
3. To be market neutral & trade medium term, use pair trading in futures.
4. Selection of pairs is tricky but no point researching too much. But, this step is key to success.
5. Apply strict money management practices to save from poor stock pair selections.
6. Simple strategy can be:
1. Look at 1 month and 5 day data.
2. Let's take a 20 day simple moving average as the trend line. Lets take 5 day intraday chart to see if stock is moving in opposite direction. As long as it is above the supports and trend is still intact, we will assume that the stock is just temporarily going in the opposite direction and preparing for another huge move.
3. Diversify. So, select at least 3 and if possible 4 pairs.
4. Enter into all pairs at the same time in one shot. Try to exit in pairs. Else, you wont be market neutral.
5. Exit if profit is 9k or loss is 9k. So max profit or loss is 9 * 8 (assuming 4 pairs) = 72K.
6. Know that sector selection is also important while selecting the pairs. Go long on buzzing sectors and go short on not-so-active ones.
7. Hope to exit all pairs within 2 weeks. 
8. Repeat same on the near month or next month futures.
9. If stock is fluctuating a lot and is not reaching 9k, its ok to exit at the next profit opportunity (of Rs. 500/- after brokerage).
7. Typically, one NSE futuers contract values 3 Lakhs. i.e., 4000 dish tv at 80. Now, to make a 9k loss or profit, it has to move 2.5 points which is reasonable. This is around 3% move. We got the short term direction wrong if it went 3% the other way. This should not happen.
8. Caveats
1. Result days
2. Expiry days
3. Major events like election
9. Be aggressive
1. Don't pick similar pairs - like ICICI / Axis bank, Lupin/DrReddys. This will only eat time and give meaningless small returns. In some cases, we will get losses over long time. No point.
10. One confusing point was: What if we pick 4 pairs and just wait till expiry day and exit all 4 pairs when we get acceptable profit?
1. Some surprise news moves stock violently. You do not exit. You are in trouble.
2. Remember we are going by technicals and not fundamentals. So, trends may change and we may lose our profits that we once made quickly.