Philosophy
What we do.
Chilika Capital operates in Trading Systems and Alternative Investment Fund space. At the moment it is active in Commodity Derivatives, Stocks Derivatives and Currency Derivatives(geography: India). It's mission is to generate absolute (non-correlated) positive returns. It seeks to exploit inefficiencies in the freely tradeable financial markets. It does so by capturing trends in the markets which slowly happen over time.
What is our belief.
Chilika Capital believes nobody can predict future. Future is uncertain. No matter how technological advanced we can be, predicting future is and will be always a futile exercise. We acknowledge this and we know that so called financial experts when try to give an opinion about financial markets, they basically throw darts in dark hoping to hit the bull’s eye. When enough experts have given their opinion, jut out of pure random luck one of them is going to hit the bull’s eye and the public immediately loves him or her. Next time when the time comes to predict another event, the same expert will be either utterly wrong or at least be playing safe this time by avoiding to indulge in this game all together.
We instead of trying to predict in next month or year were the stock or commodity will be we simply follow the current trend. Our systems will keep us in long if the stock is rising and it will keep us in short if it is falling. Looks simple but it keeps us from the vortex of prediction. This also ensures that we are not depending on random luck to make us rich.
Why it works.
Market prices, rather than market fundamentals, are the key aggregation of information needed to make investment decisions. The markets are people’s expectations, and these expectations manifest themselves as price trends. We live in an uncertain world. One cannot predict the future of anything. In an uncertain world, identifying and following trends may be the only reasonable investment approach over the long term. We think it’s because markets react to news, but ultimately major change takes place over time. Trends develop because there's an accumulating consensus on future prices, consequently there's an evolution to the believed true price value over time. Because investors are human and they make mistakes, they're never 100 percent sure of their vision and whether or not their view is correct. So price adjustments take time as they fluctuate and a new consensus is formed in the face of changing market conditions and new facts. For some changes, this consensus is easy to reach, but there are other events that take time to formulate a market view. It's those events that take time that form the basis of our profits." "We don't believe that we are the only firm who cannot predict future prices. No one consistently can predict anything, especially investors. Prices, not investors, predict the future. Despite this, investors hope or believe that they can predict the future, or someone else can. A lot of them look to you to predict what the next macroeconomic cycle will be. We rely on the fact that other investors are convinced that they can predict the future, and we believe that's where our profits come from.
How it works.
We employ rigorous systems which have been tested over a long period of time and which have been working on various markets. The systems demand self-discipline to follow precise rules (no guessing or wild emotions). It involves a risk management system that uses current market price, the equity level in your account and current market volatility. We use an initial risk rule that determines position size at the time of entry. This means we know exactly how much to buy or sell based on how much money we have. Changes in price may lead to a gradual reduction or increase of your initial trade. On the other hand, adverse price movements may lead to an exit for our entire trade. Historically, A our average profit per trade is significantly higher than the average loss per trade.
At the outset we are aware that we are in a risk business and we don’t see ourselves as in stock and commodity investors. This ensures that we are always on our toes and any unwanted risk is curtailed immediately through our risk management tools. Risk management with addition to money management prevents us from large losses. This in long run allows us to make outsized profit.
Compounding is the Key.
“Compound interest is the eighth wonder of the world. He, who understands it, earns it ... he who doesn't ... pays it.” -Albert Einstein.
We at Chilika Capital are a big believer in compounding. We don’t try to make big profit by taking big risk. Because risk if taken carefully it will pay. When these payouts are made over few years albeit moderately, compounding will ensure that it will make us rich. Did you know Warren Buffet made his wealth by growing it at an average rate of only 20% annually over 40 years!
For further details on our approach and what we generally do, check our presentation available in the Download section.
