From Conventional To Extraordinary: Afzal Lokhandwala's Triumph In Swing Trading
The stock market attracts a wide range of individuals, each with their own preferred trading methods. From the patient long-term investors to the lightning-fast day traders executing rapid trades, and the risk-takers navigating the world of options, the market is a melting pot of strategies. However, amid the frenzy influenced by social media, a distinctive approach has emerged, capturing our attention.
Enter AfzalLokhandwala, a trader who defies convention with his unconventional style: swing trading.
In this article, we explore Afzal’s unique trading style, which sets him apart from the crowd. He is a practitioner of swing trading, offering a fresh perspective on navigating the stock market.
Born and raised in a joint family in the small city of Morbi, AfzalLokhandwala pursued Chartered Accountancy but found his true calling in the stock market.
Afzal's dedication and passion for trading propelled him to new heights, and he achieved remarkable success by winning the United States Investing Championship in 2022. With a staggering 447% return in a sideways market, he demonstrated the effectiveness of his swing trading system and cemented his position as the first Indian to win the prestigious championship since its inception in 1983.
The championship victory transformed Afzal's life and portfolio, garnering him recognition both locally and internationally. Afzal attributes the cornerstones of his successful trades and portfolio to his strong trading system.
Afzal’s swing trading methodology revolves around buying stocks for one to four weeks to capture 10% to 30% gains. His system involves scanning the market during the last hour of trading and seeking out explosive stocks that large investors are actively pursuing.
However, Afzal emphasizes that timing is crucial in swing trading. Merely identifying stocks under accumulation is not enough; one must assess whether the risk and reward ratio is in their favour. He looks for stocks that have the potential to reach his desired targets without experiencing significant declines from his purchase levels.
Interestingly, Afzal acknowledges that his trading style involves a significant number of losing trades. Contrary to the misconception that high win rates are necessary for success in the stock market, he emphasizes the relevance of the risk-reward ratio along with the win rate.
Afzal elucidates this with an example,“If one is risking 5% in a trade and making 15% in return, he needs to be right in just 25% of his trades to break even. A win rate above 25% would ensure profitability. This is because he is operating with the risk-reward ratio of 3.”
Comparing swing trading to other popular trading styles, Afzal asserts that swing trading has several advantages. Intraday trading, for instance, is characterized by high trade volume, increased trading costs, and psychological challenges. Constant market monitoring and rapid decision-making can be mentally exhausting. In contrast, swing trading offers a relaxed approach, allowing traders to hold positions for weeks and capitalize on price fluctuations.
Furthermore, Afzal compares swing trading with long-term investing. Unlike long-term investing, which involves holding positions for multiple years, swing trading capitalizes on shorter-term price movements, enabling traders to execute a greater number of trades and seize various market opportunities. Additionally, the faster compounding of returns sets swing trading apart, as traders can capture profits more frequently, reinvest them into new trades, and accelerate the growth of their returns.
Lastly, Afzal advises caution against unreliable social media influencers promoting options trading. He firmly believes that swing trading in stocks surpasses options trading in multiple aspects, such as time commitment, stress levels, risk management, and the expertise required.
He asserts that options trading is not well-suited for ordinary traders, supported by a recent SEBI report indicating that nine out of ten traders experience losses in options trading. He urges individuals to carefully evaluate trainers' track records and learn trading from reliable sources.
