Many new traders ask me if the market is random or not. My answer is yes, of course, the stock market is random if you mean that anything can happen at any moment. A subsequent, and understandable, question from many of them is, “How then can we make money in such a market?”
Intraday Trading requires intermediate to advanced level of knowledge of how intraday charts, technical indicators , market sentiment works together.
Some people think that it is the best way to get rich real quick, which is not true, and in the end these people blow up their account funds and then blame the markets but they don’t remember that earning without learning is not possible.
TOP 10 PRINCIPALS TO BECOME A SUCCESSFUL INTRADAY TRADER
- USE FEW RULES , DON’T MAKE IT COMPLICATED
- ALWAYS TRADE STOCKS WITH GOOD LIQUIDITY – I PREFER TO TRADE STOCKS WITHIN NSE 500 INDEX ONLY
- HAVE REALISTIC EXPECTATION – LIKE SOME NEWBORN TRADERS EXPECT 5-10% RETURNS PER TRADING SESSION WHICH IS TOTALLY UN-REALISTIC
- ENTER TRADE ONLY WITH BALANCED RISK AND REWARD REWARD – MANY TRADERS TAKES POSITION JUST BECAUSE THEIR BROKER IS OFFERING LESS BROKERAGE SO THEY CAN TAKE TRADE FOR 5-10 POINTS BUT IN THE END ALL THESE TRADERS CAN’T SUSTAIN IN THE MARKET
- DON’T TRADE WITHOUT A TRADING SYSTEM
- START SMALL AND GROW BIG SLOWLY SLOWLY
- BUILD A SYSTEM WITH DEFINED ENTRY AND EXIT LEVELS
- TEST YOUR STRATEGY/SETUPS ON AT LEAST 200 PAPER TRADES
- BUILD A PROPER RISK MANAGEMENT POLICIES
- AVOID SOME PSYCHOLOGICAL PRESSURES WHILE TRADING
TOP 7 MISTAKES TO AVOID WHILE INTRADAY TRADING
- STRUGGLING TO IDENTIFYING THE DIRECTION OF THE MARKET
- NOT TAKING PROFITS – GREED
- NOT USING STOP LOSSES – FEAR
- TRADING AGAINST THE TREND
- LACK OF TRADING STRATEGY
- EXCESSIVE TRADING
- NO CONTROL OF EMOTIONS
TOP 3 INTRADAY TRADING STRATEGIES IN INDIA
Intraday Trading requires dedication , hard work , patience and immense market analysis to become a successful intraday trader. Intraday trading is all about 80% timing the entry , 10% execution , 10% controlling emotions during the position. It requires a lot of time to gain expertise in intraday trading and hone your trading skills. Selection of your broker is also crucial in your trading journey. Broker can make you rich or loose your wealth.
Following are the top 3 intraday trading strategies which is widely used and implemented by most traders. Their success is subjective and may vary from traders to traders.
STRATEGY 1#- BULL FLAG MOMENTUM STRATEGY
In Intraday trading bull flag pattern is a momentum strategy which usually works when the volume is high in a particular stock.
This pattern, shown above in Figure 1, is named Bull Flag because it resembles a flag on a pole. In Bull Flag, you have several large candles going up (like a pole), and you also have a series of small candles moving sideways (like a flag), or, as we intraday traders say, “consolidating”. Consolidation means that the traders who bought stocks at a lower price are now selling and taking their profits. Although that is happening, the price does not decrease sharply because the bulls are still entering and the bears are not yet in control of the price. Many traders who missed buying the stock before the Bull Flag started, will now be looking for an opportunity to take a trade.
As you can see in the above figure Gujarat Alkalies had a significant spurt in volume which is very unusual and never happens in normal session. This volume in spurt is spotted in my Motilal Oswal Orion Lite Event Tracker ( a custom stock screener tool of Motilal Oswal desktop trading platform ) . At 9:45 AM 18th Dec GujaratAlkalies sees sudden spurt in volume and in the span of 10 minutes stock made a high of 361 from a low of 348.
Now what happens is those who have bought it at lower levels have started booking profits and buyers are still waiting for some fall to buy it again which leads to move stock into sideways or consolidation. At 12:10 stock finally gives a breakout of its consolidation after almost half and hour which proves the bull and flag pattern and traders looking for trading opportunities can finally now initiates long position with the stop loss of low of the breakout candle and targets of almost equal to size of the pole.
Bull and flag pattern can be formed multiple times during the trading session. Like in Gujarat Alkalaies it is formed twice during the day so the traders who have missed the first opportunity can take another chance.
To summarize trading strategy :
- Whenever there is spurt in volume never try to jump into the trade unless the breakout is confirmed because you may get trapped into consolidation or during consolidation bears might take full control.
- As soon as prices are moving over the high of the consolidation candlesticks,Initiate long trade with top loss is the break below the consolidation periods.
- Sell half of your position and take a profit on the way up. And bring your stop loss from the low of the consolidation to your entry price (breakeven)
- Sell your remaining positions as soon as your target hits or you get a sense that the price is losing momentum ( you can use ADX indicator ) and the bears are gaining control of the price action.
Comment about your profitable trade using bull and flag pattern in the comment section below.
STRATEGY 2#- VWAP TRADING STRATEGIES
Volume Weighted Average Price, or VWAP, is the most important technical indicator for intraday traders. Definitions of VWAP can be found in both Wikipedia and many other online resources. I will skip explaining it in detail for the sake of keeping this guide short, but essentially, VWAP is a moving average that takes into account the volumes of the shares being traded at any price. Other moving averages are calculated based only on the price of the stock on the chart, but VWAP also considers the number of shares in that stock that are being traded on every price. Your trading platform should have VWAP built into it and you can use it without changing any of its default settings.
Trading based on VWAP can be very easy for new traders to master because so many traders study the VWAP and make decisions based on it.Therefore, a new trader can easily be on the right side of the trade. When a stock tries to break the VWAP but cannot, you can short the stock because you can safely assume that the other traders that are watching will also begin to short. A trading strategy based on VWAP is a simple and easy strategy to follow.I usually short stocks when traders try but fail to break the VWAP on 5-minute charts.
Let us have a look at Figure 2.1 below of L&T Technologies at 5 min time frame on 17th Dec.
LTTS opened above the VWAP line and it was taking support on VWAP as we can see in the chart. It is a simple strategy if a stock is above VWAP you should initiates a long position and if the stock is below VWAP you should initiates a short position.
So in the case above LTTS opened above VWAP but the volume is quite low so one should wait for volume ( this indicates a increased participation and stock moves in trend ) at 10:45 AM there is spurt in volume and this is the right time to initiates a long position and maintain a SL of below VWAP and maintain your position with trailing SL of VWAP and booked profit as per your risk appetite or when stock enters into consolidation phase or when stock breaches VWAP.
RBLBANK opened below the VWAP line and it was taking resistance on VWAP as we can see in the chart. It is a simple strategy if a stock is below VWAP you should initiates a short position.
So in the case above RBLBANK opened below VWAP with increasing volume at 9:35AM stock faced resistance thrice and this is a time to initiates a short position with SL above VWAP and target as per momentum in the stock.
To summarize trading strategy :
- When I make my watchlist for the day, I monitor the price action around VWAP at the Open. If a stock shows respect toward VWAP, then I wait until a confirmation of the VWAP break (for short selling) or VWAP support (for going long).
- One should usually buy as close as possible to VWAP to minimize his/her risk. His/her stop will be a break and a close 5-minute close below VWAP. For short selling, One should short near VWAP with a stop loss of a close above the VWAP.
- One should keep the trade until he/she hit his/her profit target or until it reaches a new support or resistance level.
- Please Note: VWAP won’t work in a sideways or choppy market. VWAP works only in trending market.
STRATEGY 3#- MOVING AVERAGE STRATEGIES
Some traders use moving averages as potential entry and exit points for intraday trading. Traders can benefit from the behavior of stocks and ride the trend along the moving average (on top of the moving average for going long or below the moving average for short selling).
One of the most used Moving Average combination are 9 and 21 Exponential Moving Average . I am not going into the details of what is moving average your google it out or can contact us for detailed explanation.
Let’s take a look at the chart below, marked as Figure 3.1, Varun Beverages Ltd to see how one can trade based on 9 EMA and 21 EMA on a 5-minute chart.
As you can see, at 11:00 PM . I noticed VBL 9 EMA has crossed below 21 EMA . One can clearly see that in the next minute stock faced resistance this is the perfect time to create a short position. with SL above the crossing point of both moving averages, and one can easily trail their SL at 9 EMA and can book profit as per his/her target or when 9 EMA crosses above 21 EMA or when stocks is moving into consolidation.
Moving Average Trends can happen in any intraday time frame. I monitor prices on both 1-minute and 5-minute charts and make my trades based only on these two time frames.
To summarize trading strategy :
- When one is monitoring a Stock in Play and notice a trend is establishing around a moving average (usually 9 EMA), One should consider trend trading. One should quickly look at the previous days’ trading data (on a 1-minute or 5-minute chart) to see if the stock is responding to these moving averages.
- Once you learn which moving average is more suitable to the behavior of the trade, You should buy the stock after confirmation of moving averages as a support, and I prefer to buy as close as possible to the moving average line (in order to have a small stop). My stop will usually be .5 to .10 below the moving average line or, if a candlestick, close below the moving average (for long positions). For short positions, a close above moving average is an signal to exit your position.
- If the stock is moving really high away from the moving average, offering you an equally really nice unrealized profit, One should take some profit, usually at half-position. I do not always wait until the break of moving average for my exit.
Multiple strategies are available to be used by the intraday traders, but the use of the correct strategy at the correct time is the key. And no one can tell you the correct strategy it is just how much practice you do, backtesting the particular strategy etc can only make a profitable strategy for you.
There are only 1% of the intraday traders who end up successful and those are the ones who not only understand and implement the intraday trading strategies but do it at the right time, with sheer dedication and resilience.
In case, you are looking to perform intraday trading but do not know how to start, just fill in your details in the contact form by clicking on this link our team will assist you in the same.
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