Day Trading- Tips For Small Individual Traders

[fast_rizwaan]

By: bhagawan on 9/20/2006 11:31:33 AM

In the emerging markets, due to slide in interest rates on savings/term deposits, and lack of avenues for attractive returns in other sectors, and availability of online trading facility, many middle class people without deeper pockets are entering into intra-day trading activity that is making share brokers richer due to higher turnover but resulting in heavy losses to the small intra-day traders. But despite the losses, many small investors continue intra-day trading and further piling up losses. Their efforts to recover the losses by more trading only result in further losses. As a general rule, most of the intraday traders lose and only few gain. It should be clearly understood that there are more losers in intraday trading than gainers. Since these small traders/investors lack financial muscle to keep over night positions in most cases, they end up covering their positions with losses.

But there is no reason for despair only if each small intra-day trader keeps in mind the following principles.

1. STOP-LOSS
When ever you trade in a scrip, be clear about entry and exit levels. Always utilize stop loss principle so that your losses are minimized when the going is bad. Always take care of losses. Many small intra-day traders dont utilize the stop loss facility and remain optimistic that some miracle will happen and they will get into profit. This is a fatal mistake. Never commit that mistake. Losing a few hundreds is better than losing a few thousands. Losing a few thousands is better than losing a few lakhs.

2. SATISFY WITH MODERATE RETURNS
Be specific about entry and exit levels whether you are on long side or short side. Satisfy with moderate gains and book your profits always. Dont wait. Many times the scrip goes up and comes down. You have to catch the right timing for entry and exit levels whether it is profit or loss.

3. LIMIT YOUR TRADES
Dont enter into too many trades at a time. Limit your trades or scrips to a maximum of 3 so that you will be able to monitor them effectively.

4. NO TO STOCK RECOMENDATIONS
Dont go by stock recommendations. Select a few stocks for trading and trade in those stocks only. By doing so you will be able to realize the levels of that stock and movements in that stock. If you go by stock recommendations without knowing the scrip movements, you may end up in losses.

5. LESS VOLATILE STOCKS
Dont choose highly volatile stocks for trading. It is very risky since you will not be able to judge the movement in the stock.

6. CHOOSE HIGH VOLUME STOCKS ONLY
In intra day trading only choose active stocks with good volumes so that your entry and exit will not be a problem. Low volume or less active stocks are a big risk as you may not get exit or entry levels that you desire.

7. RE-ENTRY INTO THE SAME STOCK
Once you book profit or loss in a scrip, never re-enter the same scrip again during the day. You will be normally lucky once only.

8. FIX YOUR PROFIT AND LOSS TARGETS DAILY

hope these tips benefits newbies like me..
-Riz

 

[vish111]

thanx for giving guidance but could u tell me how to select the stocks for the intraday trading or guide line to select stock for intraday. thanx

 

[fast_rizwaan]

thanx for giving guidance but could u tell me how to select the stocks for the intraday trading or guide line to select stock for intraday. thanx

choose based on fundamentals. buy stocks which are profitable this quarter.

don't buy tech and sugar stocks this year! sugar stocks are a big trap.

here's how i do my choosing:

1. it should be nifty or junior nifty or best midcap stock (market cap should be in 100 crores)
2. it should be profitable this year
3. it should be around 52weeks average (52weeks high + 52weeks low /2)
4. it should trade above 52weeks average.
5. the volume should be above 1 crore traded shares
6. the price should be under 150
7. observe the stock's trading range for a week (open, high, close - trading range)
8. see historical price movement using daily and weekly charts (www.aptistock.com or using nseindia.com)
9. actually observe the open-low difference and open-high difference daily..

10. you can get the stoploss with open-low difference and resistance using open-high difference.
11. price also governs the high low, a small stock of 20 rs will move around 30ps - 50ps either ways, 50 rs, 50ps-1re, 100rs stock - 1re-3re, 150 stock-3rs-5rs.
12. observe the weekly trend, if it is moving up then then buy and hold (if you prefer taking delivery)
13. if going long - buying then selling, buy only positive + stocks whose today's open and current price is above previous close.
14. if going short - selling then covering, seel only - stocks whose today's open and current is lower than previous close and trending downwards.
15. small price stocks say 40-60 rupees stock, behave differently than 100 or 200rs stock.
16. banned stocks in f&o provides range where you can be comfortable. see nseindia.com for banned stocks.
17. and finally use pivots for intraday trades.
18. try to enter on day's low or previous close. and put a stop loss a percent down.

good luck.

 

[beginner_av]

choose based on fundamentals. buy stocks which are profitable this quarter.

don't buy tech and sugar stocks this year! sugar stocks are a big trap.

trap for a day? why do you talk from an investor's mindset in day trading? sugar stocks can give you big return in day trades.

 

[fast_rizwaan]

trap for a day? why do you talk from an investor's mindset in day trading? sugar stocks can give you big return in day trades.

yes, my bad. actually i do swing trading and day trading. got messed up

yes for day trading, any stock will do.. but a "no" stop means generous contribution to the market

 

[deepak1986]

thanks bro....

 

[mukundranjan]

Dear rizwaan,

Thanks for your great tips. It will really help me.
I am new here.. Can you tell me how to use Stop Loss with an example.
If you can pick IFCI for your referene then it will great.. Please provide 2 example one in long (buy then sell) another in short (sell then buy)


I have booked a big loss yesterday. I am not using stop loss. don't know how to use..

Thanks and regards,
Mukund Ranjan

 

[fast_rizwaan]

Dear rizwaan,

Thanks for your great tips. It will really help me.
I am new here.. Can you tell me how to use Stop Loss with an example.
If you can pick IFCI for your referene then it will great.. Please provide 2 example one in long (buy then sell) another in short (sell then buy)


I have booked a big loss yesterday. I am not using stop loss. don't know how to use..

Thanks and regards,
Mukund Ranjan

Dear Mukund,

First of all, be brave my friend, losses are part of trading. My prayers for you. And we enter any trade to profit from it, not just to do the trading. it is entertainment for many but for traders it's just serious business. Trade for profit only.. Protect your money, now! get profits later!

always, decide in advance before doing the trade:

1. What is my entry point? (day open, pervious close, day's high?) (i would say, previous close or pivot support1 as entry)
2. What's my Exit point? (Day high, or any thing above buy_price+brokerage? i.e., breakeven or 0.5% or 1%)
3. what's the worst loss i am willing to take to save my money? that's your stop loss. (0.5%, 1%, 1.5%, 2%, 2.5% or 3% or more?)

see it as if you have 100 rupees, and a bandit has caught you, how much bribe will you give to to save your money 100 - (minus) bribe ;-) 1% 2% 3% or more? (2% is more than enough)

it would be prudent to use pivot point support2 as your stoploss, as soon as the trade moves into your favor say, breakeven price, then modify your stoploss to the breakeven price.


How to put a stoploss?, I use reliancemony, so, i don't know about others..

Stoploss Orders are of 2 types
1. Stoploss Sell order - when you have sell positoin open (you're bought)
2. Stoploss Buy order - when you have buy position open (you've shorted)

1.Stoploss Sell - when you are long (bought and want to sell out in advese move)

1. enter scripname [ ifcieq ]
2. enter ordertype - [stoploss]
3. enter produce - [margin] (or delivery or atst/btst)
4. enter limit price - the price for squareoff

Example with ifci:

Ifci has 10-12rs volatility. so normally you can have 11rs stoploss to save your money.

ifci open: 98 (on 20 december 2007)
ifci high: 98
ifci low: 71

if i were to trade into ifci, i would

1. observe, the trend of ifci,
2. are the buy qty increasing or decreasing
3. general sensex and nse movement up or down
4. normally ifci would rise/fall 10-12 rupees from open
5. even if i go long in ifci at 98-10 = 88 ( cause it is negative today)
6. i would place stop at 85 (2.5% more room from the normal 12 rupee movement)


+1000@88 = 88000 (bought)
-1000@85 = 85000 (got stoploss triggered)
= -3000 loss but still saved many thousands.

it is better not to get the order filled up, than to lose money afterwards due to a bad entry point.

Okay, to put the stoploss sell order at 85, we would do:

1. Scrip name: ifcieq
2. Product: margin
3. Quantity: 1000
4. Ordertype: stoploss
5. Order: Sell
6. Trigger price: 85 (as soon as it reaches 85, the next line's order is sent to nse/bse exchange)
5. Limit price: 84 (you can set trigger and limit both to 85)
6. click ok.

we should put the stoploss order first, to save ourselves from high volatility. then enter the buy order.

and suppose, your stoploss is not triggered, and price reaches 90 just go to orderbook and modify it with 89, at least you'll get out with negligible loss or breakeven.

don't use sell order to squareoff, but slowly, slowly increase your trailing stop (stoploss when in profit is called trailing stop)

practice it with just 1 quantity. till you become comfortable with stoplosses.

Good luck and best wishes!

 

[mukundranjan]

@Sumit, Thanks buddy..

@Rizwan.. I have no words to say you thanks... You are awesome man..
you are a master.. Thanks for such a detailed explanation..

Even though I am loosing my money daily.. But I am sure I will be a good trader on day..

 

[SriVijay]

Rizwan is great trader