The aam aadmi stays away from trading and even more so intra-day trading because of movies and neighbourhood gossip involving Mr Sharma who lost a fortune and ended up being poor because he lost his fortune on the stock market. However, given the right set of tools, you can intra-trade your way to a fortune instead. Here are some key pointers on how to navigate your way to profits in intra-day trading.
Research thoroughly: It is imperative that you adopt a step-by-step approach to research before you make any moves.
- Step 1: Conduct extensive research on the stocks you plan to purchase to identify if they are trade-worthy. Cherry pick only a handful of stocks that are highly liquid, or in other words, stocks that are traded in larger volumes. You must also follow the companies linked to these stocks – if they are planning a merger for instance, you must know.
- Step 2: Make sure you are keeping an eye on trends related to the stocks that you intend to buy. It cannot be emphasised enough that when you are day trading, you must pick only as many stocks as you can manage to watch constantly.
- Step 3: Since day trading involves buying and selling stocks on the same day, it is crucial to sell at the right time and you can only achieve this when you use the right technical charts based on minutes or hours.
What is a trade-worthy stock?
Besides being liquid, a stock’s graph must dance about in the day for intra-day trading to make any money. In technical terms, it must have medium to high volatility. A flat graph looks very safe but is of no use to an intra-day trader.
Develop and ace a strategy:
Have a clear strategy. As an intra-day trader, decide whether you prefer to follow a market trends and buy/sell in the same direction of the graph assuming it will keep moving in that direction, or whether you would like to be contrarian and make a bold move in the reverse direction of the graph (although this is not advisable for a beginner)? Perhaps you would rather follow the way stock prices react to news instead. Or, are you and trader who stalks a stock like Akshay Kumar’s character stalked Bhumi Pednekar’s character in Toilet – Ek Prem Katha watching where it rises until before it begins to fall for a few cycles and then bets based on its range?
There are a ton of strategies out there. Choose one that works for you and stick with it so that you learn to use it to your best advantage. Your stocks and your strategy must match. If you are going with stocks that show medium to high volatility but show no clear, identifiable cycles it is best to go with a trend following strategy. Stocks where you can confidently spot a cycle and therefore speculate upon correctly, will work for a ranging strategy.
For a newbie intra-day trader and for a more certain win, it is advisable to follow the graphs rather than move against them. In other words, follow the graph.
Get a mobile app, such as the Angel Broking Trading App. Check on at least two indicators and play them like Shreya played Rohan in Student of the Year 2. Let’s take the simplest and most important ones, Bollinger Bands and Moving Averages, both of which can be found on the Angel Broking Trading App. For example, if you see a stock price sliding below the Bollinger band, a must-follow indicator when intra-day trading, it is a good time to buy and vice versa.
Another reliable indicator is when short-term averages race ahead of long-term averages – this is a good time to buy.
Set goals. No cheating!
In order to prevent greed and emotions from skewing your judgement, set a maximum buy price and profits target at the start of trading. Once you are able to sell to achieve that target, book your profits and bow out. Similarly set a stop loss order in advance with a trusted broker, such as Angel Broking, in order to limit any potential losses. Better safe than sorry. Your stop loss must once again be set based on research. For example if you are using the Moving Averages indicator, and decide to buy, set your stop loss at the long-term average.
Conclusion: Making profits in intra-day trading means that you need to keep a constant check on what is happening in the market. There are no short-cuts or expert tips that can help you profit tremendously without your constant involvement. This is where the term “calculated decision” comes from.