Stock Trade
Useful tips to Small intra day Tradeds:
Many small intra day traders are big dreamers and aim high. But dreams and aims have no place in the markets. It is the calculating mind that is needed to win in the markets.
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.
Satisfy with Moderate Returns:
2. 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 scrip to a maximum of 3 so that you will be able to monitor them effectively.
No to Stock Recomendations:
4. 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 Stocks:
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 Tragets daily:
Aim at a moderate profit of 1 to 2 percent during the intra-day trading. Once you achieve your profit/loss targets during the day, exit from the market that day. Dont hang around and burn out your assured profit in further trades. Be satisfied and feel happy. In case of loss too have the same targets and same stop losses, so that incase you get loss it is minimal.
Take Profile daily:
Take the profits daily and dont invest the profits in stocks. We dont know what happens next day in stock markets. Dont take risk on uncertainties next day.
Ride with the Swing:
Sense the swing in the stocks that you choose to trade. Determine the correct entry and exit levels and trade close to those levels.
Never Buy a Falling Stock:
Dont get tempted to trade in stocks that tumble all of a sudden. It can burn big hole in your pocket if you chose such stocks.
Avoid Temptation:
Dont feel like hero when you gained during the intra-day trading and indulge in further trades. Such temptation often wipes out your gains. Temptation in trading is the worst enemy of trader.
Follow New Events that can Shake the Markers Suddenly:
Since intra-day trading and trading in stocks is news driven many times, keep a close watch on news. A resignation by the Finance Minister, Prime Minister, a terrorist attack, weak global cues, political events that can put oil prices on fire, inflation data etc are to be carefully monitored. In the event of any news that can dampen or lead to crash in the markets emerges, immediately cover all the positions and get out of trading, till the situation stabilizes.
By following these tips you will not end up in losses. You will gain a monthly return of 15-20% in intraday trading during a month. Be your own judge and dont follow what others are doing. Others may not be as well informed and determined as you are. Dont trade merely on luck factor. Luck will some times desert you so follow the principles in intra-day trading and be a gainer always. Another thing is trade in small volumes or limit each trade to 20,000/-.
Never keep overnight positions as it increases your exposure to the markets that are uncertain. Try to square up the positions the same day. You should know more about how not to lose in the markets than how to gain in the markets. Not losing is the first step of gaining. If you are not losing, you will start gaining.
Also realize that most of the analysts go wrong. A good analyst is not a good trader. A good trader is not a good analyst. Base decisions on entry- exit levels on your own judgment and not some recommendations. Follow TV channels for news only and take your own considered judgment each time. There is a saying that if 4 analysts in the pre market analysis predict a market crash the reverse only will happen. Follow the news but ignore the analyst reaction. Have your own considered judgment even if it differs from the analysts.
Finally if you continue to incur losses for more than a month in intra-day trade, quit intra-day trading for ever. It means that the time is not in your favor and it is a risk for you. After all you need to be not only lucky but also especially lucky to be a gainer in intra-day trading.
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