Stock Market Quote
For a long time retail investors in Indian stock markets were interested only in delivery based buying, but the changing scenario in this field has brought a new class of market players called the Day Traders in to the picture today. Day Trading is all about minimizing the risk of exposure in the market to a single day or at times only to minutes or hours and at the same time make most from the market. The population of this class has been growing steadily over the last few years and this class remains to be the most disappointed compared to the rest, as they are ones who often loose money in the market in huge lots. The limitation in the period of exposure in the markets sometimes turns against the day traders.
Statistics reveal that only one out of ten day traders make money in Indian Markets, while the rest fail. Have you ever wondered why the odds are heavily stacked up against the day traders Well, I have gone through the days when I made only losses in day trading but today have matured enough to make nothing but profit in day trading and would like to share my experience with you in order to help the class that I belong too.
First Lesson on day trading:
Dont be instinctive - Think twice before taking trading decisions. Do not blindly do what your broker tells you because it will never help you. (In a bull market like todays most of the brokers recommendations work out but day trading is not only trading in bull market it is about trading in any kind of market)
Second Lesson:
Do some homework Day trading is not an easy job, if you could do your homework right, then you can make money out of it or else you are bound to fail. What kind of homework are we talking about
We are taking about tracking forward stocks (in which day trading is done on a daily basis). First start off by tracking some 25 stocks, keep a track of their movement every day and always check for the gainers and losers among the stocks that you are tracking on a daily basis. (Check the facilities available in sites like www.nseindia.com like the graphs of individual stocks, order book status etc., that could help you to improve your understanding on a stock)
By listing down the gainers and losers and tracking their order book, chart pattern, etc., you can get an idea of what to do with that stock the next day. I am talking about taking long or short positions on the stock.
Third Lesson:
Be aware of the direction of markets An order book can clearly indicate the direction in which the stock is heading. Many traders that I have met are not aware of how to check the order book. The best way to do is to visit www.nseindia.com or www.bseindia.com and you can check the order status of any stock .If you are an online investor almost all online brokerages have the facility of checking the order book. Also get some first hand information on the relation between individual stocks with that of the indices (this is technically called the Beta Value, but you dont have to get in to the technicalities to find this out). This helps you to identify right stocks in the right kind of markets. A strong stock in a weak market is neither going to fall or go up and a weak stock in a strong market have the vice versa effect. So findings the strengths of stocks on daily basis increases your chances of making money through day trading.
Fourth Lesson:
Information is wealth Get to know as much as possible about the markets every day. Please list down details on information that could influence the market, like quarterly/half yearly/ annual results, government policies on FDI limits, RBI guidelines and interest rate hikes, economic growth forecasts released by Ministry of Finance and RBI, etc.,
I would like to give an example of my friend who went Long on Ranbaxy at the start of the trading; a day after Ranbaxy lost a case in US on a drug patent to its competitor. He never knew anything about this news and was excited to see Ranbaxy down by 5% and went long on it, but ultimately Ranbaxy went down by over 10% at the end of the day and my friend lost a lot of money in it. If he had known this piece of information he could have rather gone short and made profit, but lack of information had led to his downfall. This is the case with many of the day traders today.
Have you ever wondered where to get these informations Well every business sites in the net and business dailies carry these informations and all you have to do is to update yourselves with these information on a day-to-day basis.
Fifth Lesson:
Always trade with trailing stop losses Never ever be greedy in day-trading, always move your stop loss forward when you make profit, you may lose on your profit margins by doing so, but nine out of ten times you are not going to make a loss when you trade so. This will help you to overcome volatility in extremely volatile markets.
Sixth Lesson:
Dont get carried away in day trading I have seen many of my friends putting back the money they had made out of day trading once again in the markets and ultimately losing everything. Develop a habit of pulling out some percentage of your profits out of the markets and secure it by investing it in Mutual Funds or Fixed Deposits.
The Final lesson:
Never quit Perseverance is the key to success. There is nothing that you cannot achieve when you persevere. I have seen many day traders quitting day trading, since they have made losses over a period of time. But people have to understand that the more time you play in the markets, the more you are going to get from it. Every day is a learning experience, it is hard to take on losses and I have been through this, but this feeling makes you grow stronger and stronger. It is easy to quit and never come back, losing a wonderful opportunity for making money, but the success stories in market is of those people, who did not give up easily and continued to work over their adversities to emerge as winners finally.
This article may seem odd and it is not like the one written by a professional broker who would use technicalities to explain their stance. I just want to share what I have learned through my experiences as a day trader in the market, with you, after all Information is Wealth.
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