Secrets of successful Intraday Trading
Intraday trading means buying and selling in the same day. It may be either buying first or short
selling. Normally intraday traders book
profit in small margins. People are
making profit by repeated trades or by trading large quantities. One thing to
be mentioned here is intraday trading is
high risk involved.
How to make profit from Intraday trade?
The Golden rule of intraday trade is ride with the trend.
Hence the first step to make profit in intraday trade is to identify the stock.
Intraday charts are the best way to identify stocks for trading intraday. Also one should make a good home work before
entering in intraday trade.
Home work
means, study the historical charts and find out the upward or downward moving
stocks. Then see the previous days intraday chart. Find out the support and resistance levels. The
better strategy will be buy at previous days support level and short at
previous days resistance levels. Also shorting below support level and buying above
resistance level are good ideas.
Keeping Stop loss
Keeping stop loss is very important for intraday trade. Otherwise
one will loose heavily. Where to keep stop loss is a very important question. Again
previous days intraday charts will help. If one shorted in a stock, keep stop
loss at previous days high or days high. Also if bought, keep stop loss at
previous days lows, or days lows. Another thing to remember is keep trailing
stop loss and revise stop loss when one is in profit. Instead of booking profit,
one can keep stop loss for profit and can revise according to upward movement. Normally this will help a lot in intraday
trade.
Panic and Greedy
The two things to avoid in stock market and particularly
in intraday trade is panic and greedy. When
one enters in a trade and goes in opposite direction, don’t be panic. Wait some
time, keep strict stop loss. If stop
loss triggers, don’t enter again. Wait
some time and relax, watch the market trend and enter in some other stocks. Another thing to avoid is greediness. Some people will not book profit and wait for
more and more profit. But such people will end up in loss only. In intraday trade book profit in every highs.
Wait for a dip and enter again if trend sustains.
Timing is important for successful Intraday trade
The best time to enter for intraday trade is after 20 to 30
minutes when the market opens. Some people will jump in the market at the
opening bell itself. It is risky always. Watch the market in the early trades
and find out the trend. First enter in some small quantity, say 25% of the
quantity one is intended to buy. Then
buy more in the next 10 to 15 minutes. The trend observed is intraday trading
is stocks will shoot up till after 45 to 1 hour when the market opens. This is the best time to book profit. Once
booked profit in a particular stock, better wait some time and watch the next
movement and enter accordingly.
The Rules of Trading
1. Never, under any circumstance add to a losing position....
ever! Nothing more need be said; to do otherwise will eventually and absolutely
lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the
winning side and be willing to change sides readily when one side has gained
the upper hand.
3. Capital comes in two varieties: Mental and that which
is in your pocket or account. Of the two types of capital, the mental is the
more important and expensive of the two. Holding to losing positions costs
measurable sums of actual capital, but it costs immeasurable sums of mental
capital.
4. The objective is not to buy low and sell high, but to
buy high and to sell higher. We can never know what price is "low." Nor
can we know what price is "high." Always remember that sugar once
fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along
the way.
5. In bull markets we can only be long or neutral, and in
bear markets we can only be short or neutral. That may seem self-evident; it is
not, and it is a lesson learned too late by far too many.
6. "Markets can remain illogical longer than you or
I can remain solvent," Illogic often reigns and markets are enormously
inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy
those that show the greatest strength. Metaphorically, when bearish, throw your
rocks into the wettest paper sack, for they break most readily. In bull markets,
we need to ride upon the strongest winds... they shall carry us higher than
shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually
indicate violent new action. We have come to respect "gaps" in our
nearly thirty years of watching markets; when they happen (especially in stocks)
they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade
large and aggressively when trading well; trade small and modestly when trading
poorly. In "good times," even errors are profitable; in "bad
times" even the most well researched trades go awry. This is the nature of
trading; accept it.
10. To trade successfully, think like a fundamentalist; trade
like a technician. It is imperative that we understand the fundamentals driving
a trade, but also that we understand the market's technical’s. When we do, then,
and only then, can we or should we, trade.
11. Respect "outside reversals" after extended
bull or bear runs. Reversal days on the charts signal the final exhaustion of
the bullish or bearish forces that drove the market previously. Respect them, and
respect even more "weekly" and "monthly," reversals.
12. Keep your technical systems simple. Complicated
systems breed confusion; simplicity breeds elegance.
13. Respect and embrace the very normal 50-62%
retracements that take prices back to major trends. If a trade is missed, wait
patiently for the market to retrace. Far more often than not, retracements
happen... just as we are about to give up hope that they shall not.
14. An understanding of mass psychology is often more
important than an understanding of economics. Markets are driven by human
beings making human errors and also making super-human insights.
15. Establish initial positions on strength in bull
markets and on weakness in bear markets. The first "addition" should
also be added on strength as the market shows the trend to be working. Henceforth,
subsequent additions are to be added on retracements.
16. Bear markets are more violent than are bull markets
and so also are their retracements.
17. Be patient with winning trades; be enormously
impatient with losing trades. Remember it is quite possible to make large sums
trading/investing if we are "right" only 30% of the time, as long as
our losses are small and our profits are large.
18. The market is the sum total of the wisdom ... and the
ignorance...of all of those who deal in it; and we dare not argue with the
market's wisdom. If we learn nothing more than this we've learned much indeed.
19. Do more of that which is working and less of that
which is not: If a market is strong, buy more; if a market is weak, sell more. New
highs are to be bought; new lows sold.
20. The hard trade is the right trade: If it is easy to
sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do
and that which the crowd finds objectionable..
22. All rules are meant to be broken: The trick is
knowing when... and how infrequently this rule may be invoked!
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