The Biggest Intraday Trading Myths and Realities
Intraday Traders are losers
Okay..let me mend this statement a bit. "The Indisciplined Intraday Traders Are Losers"..now it seems correct. Not just in trading but in any field of life, if one is not disciplined he will be a loser. Then why such hate for day trading..well !! we live in a free country and everyone has a right to speech and expression. But don't get misguided by the false notions. It just needs learning, Time and Practice-- the LTP if you may allow me to call it. One needs time to learn and practice before the latter two make you perfect or good enough. One does not need Lakhs to enter into the trading business. A handful of money would work. It's just that with very lesser funds it would take more time to build up the money-base large enough to take trades which can yield a fair amount of profits.
Avoid first 15-30min and last 15-30min
Open any chart and you see big moves during the above mentioned time only. The basis here should not be -- when to avoid, but when not to avoid. Many a time the chart patterns are formed in the last few candles of the day, in intraday charts. Due to time constraint and overnight uncertainties, the traders do not want to take a risk and leave it for the next day. So the first few minutes provide an opportunity window in those cases. Of course, we would not trade any random pick in the morning..right?? But if it is well researched..just do it.
Always place stop-loss orders
Rather I would say, "NEVER PLACE HARD STOPS". This helps in avoiding those ones to two flash trades which take the stops, especially when the stop is too tight. It's not that someone is watching your stop order to be placed and he will sell off just to have 'your' shares. Its because the stop might be too small to handle stock volatility. It's better to watch the chart instead and concentrate on candle closings for deciding stops in 'mind'. Hope we can do that much as our hard earned money is involved..right?? If a trade seems too risky..just reduce the quantity. If you feel very uncomfortable without stop orders in place, have stock's daily range in mind.
Volatility kills
Will you buy a stock which does not move at all? I hope you would say NO unless you want to practice how to place buy, sell and stop orders. Volatility is the traders' friend. The stock should move in either direction insufficient magnitude to make potential buy or sell trades in it. Unless the stock can't rush Adrenaline in your brain, it's not volatile. I suggest drinking plenty of water and do stress relieving Yoga to trade intraday volatility :D
Avoid less liquid stocks
Once the trader has a grip over reading charts and tape, he can take up less liquid stocks. I don't say trade any Tom, Dick, and Harry category of stock; but traders' favorite. Normally highly volatile stocks are traders favorite and there is much less liquid stock which is highly volatile. Just keep in mind to trade with LIMIT orders and not MARKET orders in these stocks. Reason being the Bid-Ask spread is sometimes too wide in these stock so in order to avoid loss trade these stocks at your KEY price.
Do not Reenter after a loss..its revenge trading
The stopped out situation is bad for a trader and the inability to enter a good setup in the same stock due to fear is the worst. The only psychological condition to avoid is the revenge attitude..that's right. If one can take every trade as a fresh trade forgetting losses made in the past, without fear, then one may not miss many good setups. Many a time the worst looking trade may come out to be the best trade of the day.
Do hit like and share your thoughts in the comment section.
Trade safe, be healthy
Intraday Traders are losers
Okay..let me mend this statement a bit. "The Indisciplined Intraday Traders Are Losers"..now it seems correct. Not just in trading but in any field of life, if one is not disciplined he will be a loser. Then why such hate for day trading..well !! we live in a free country and everyone has a right to speech and expression. But don't get misguided by the false notions. It just needs learning, Time and Practice-- the LTP if you may allow me to call it. One needs time to learn and practice before the latter two make you perfect or good enough. One does not need Lakhs to enter into the trading business. A handful of money would work. It's just that with very lesser funds it would take more time to build up the money-base large enough to take trades which can yield a fair amount of profits.
Avoid first 15-30min and last 15-30min
Open any chart and you see big moves during the above mentioned time only. The basis here should not be -- when to avoid, but when not to avoid. Many a time the chart patterns are formed in the last few candles of the day, in intraday charts. Due to time constraint and overnight uncertainties, the traders do not want to take a risk and leave it for the next day. So the first few minutes provide an opportunity window in those cases. Of course, we would not trade any random pick in the morning..right?? But if it is well researched..just do it.
Always place stop-loss orders
Rather I would say, "NEVER PLACE HARD STOPS". This helps in avoiding those ones to two flash trades which take the stops, especially when the stop is too tight. It's not that someone is watching your stop order to be placed and he will sell off just to have 'your' shares. Its because the stop might be too small to handle stock volatility. It's better to watch the chart instead and concentrate on candle closings for deciding stops in 'mind'. Hope we can do that much as our hard earned money is involved..right?? If a trade seems too risky..just reduce the quantity. If you feel very uncomfortable without stop orders in place, have stock's daily range in mind.
Volatility kills
Will you buy a stock which does not move at all? I hope you would say NO unless you want to practice how to place buy, sell and stop orders. Volatility is the traders' friend. The stock should move in either direction insufficient magnitude to make potential buy or sell trades in it. Unless the stock can't rush Adrenaline in your brain, it's not volatile. I suggest drinking plenty of water and do stress relieving Yoga to trade intraday volatility :D
Avoid less liquid stocks
Once the trader has a grip over reading charts and tape, he can take up less liquid stocks. I don't say trade any Tom, Dick, and Harry category of stock; but traders' favorite. Normally highly volatile stocks are traders favorite and there is much less liquid stock which is highly volatile. Just keep in mind to trade with LIMIT orders and not MARKET orders in these stocks. Reason being the Bid-Ask spread is sometimes too wide in these stock so in order to avoid loss trade these stocks at your KEY price.
Do not Reenter after a loss..its revenge trading
The stopped out situation is bad for a trader and the inability to enter a good setup in the same stock due to fear is the worst. The only psychological condition to avoid is the revenge attitude..that's right. If one can take every trade as a fresh trade forgetting losses made in the past, without fear, then one may not miss many good setups. Many a time the worst looking trade may come out to be the best trade of the day.
Do hit like and share your thoughts in the comment section.
Trade safe, be healthy
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