You only make money if someone else loses it. If you are not
fully committed — you will lose money, and someone else will take it away!
Trading is a serious business. You will need (1) a good trading method and (2) good money
management policies. You will also need four important weapons: Confidence, Discipline,
Focus and Patience. We will explain these requirements in detail.
But, before that, lets get some basics right. As an intraday trader, what are your objectives
for the day? To make profits. As much as possible. Whether the market is going up or down. Bull
or Bear, you want your daily profits.
Very Good. Now, let us look a little more closely. In real terms, right at the beginning,
you should be doing these:
How much to invest?
How much do you earn per day?
Start with a fixed investment. How much? Answer: the amount you are ready to lose in the stock market.
If you suddenly lose the whole of this amount, your normal life-style should not be disrupted.
This amount can be as low as Rs. 5,000/- to begin with. 15k is a fair amount to start with. If you
are new to intraday trading, or you are here to "try your hand" at day-trading, start with 5k.
Anything below 5K is not worth it. For this discussion, we will assume you have started with an
investment of 15K.
This means, with the (minimum) 4-times margins that on-line brokers allow, you can buy stocks worth
Rs. 60,000/- for intraday trading.
How many stocks to buy?
Now, if you had taken this 15K on interest from the open (unsecured) market, you would be paying
about 5%-7% interest per month. That is, 700-1000 per month. In the stock market, you have to earn at
least 5 times that amount: 3500-5000 per month.
So, set yourself a target: You have to earn Rs. 300/- per day. With an average of 20
working days per month, this means 6000. There is a little margin here to take care of the
'rainy' day, commissions and taxes.
300 is the daily figure. You should now forget about your monthly targets. Simply
concentrate on your daily 300.
How to play?
Suppose you have been suggested a scrip whose price is around 600 each. Total purchase price
cannot exceed 60K. So, you buy 100 shares.
Here we've made a very important statement: once your budget is fixed, you will not get
disturbed by the price of the share you are trading today. If price is around 600 each,
you buy 100 shares, so that total purchase price does not exceed 60K. If the price is 1000 each
you buy 60. If the price is 70 each, you buy 800 shares.
The example given here is on going LONG. Same points that are made here also apply if you are
going SHORT. If the market is going up, look to go LONG. If the market is
falling, look for SHORTING opportunities.
When to STOP?
Once the number of shares has been fixed, you will need to calculate how many points increase
or decrease will be required to meet your target. On a LONG example, if you've taken 60 of 1000
each you will need an increase of 6 each to meet your daily requirement (60 x 6 = 360). The extra
is to take care of brokerage, etc.
In this example, you've taken a position on 100 shares. Since your daily target is a profit of 300,
you should be looking to sell and square up this trade when price reaches 603 (3 x 100 = 300).
Similarly, if you look to buy a scrip worth 95 each, buy 600 shares and look for a profit of about
0.50p per share. (600 x 0.5 = 300)
If you can make more than the required 300 from your first trade of the day, very good and well
played! But do not get carried away. Most importantly, never ever risk away today's
income. You MUST take home today's 300 first.
Do not try to insulate yourself in advance for a possible bad day tomorrow. Tomorrow will be a new
day, with new possibilities, which may be even better than today. We'll see about all that tomorrow.
Today you take your 300 and go home.
You might get another opportunity with another stock later in the same day. What is to be done in
this situation? Depends on your position at that point of time, with respect to your total earning
in the earlier part of the day.
Never look at your monthly figure. Only consider today's position. If you have made 400 earlier,
you can take a risk with the extra 100 you've earned. Or, if you have only made 100 in the first
trade, look to make another 200 with this opportunity.
But, if you have actually made that 400 in the first trade today, it is strongly advised that you
call it quits. Keep the extra profit. Don't let someone else take away this money. Take the rest of
the day off. Enjoy!
If your investment is different from the 15K in this example, all the calculated figures will
change proportionately. Examples are given for taking LONG positions. Same will apply in the
opposite direction when you go SHORT, daily target remaining the same.
Just consider this: on an investment of 15K, you stand to make 4K+ per month. You double your money
in less than 4 months. And it looks pretty easy! Increase of 3 for a stock of 600 value is not a
big deal at all. A rise of 0.50p for a stock with value of 95 each is also commonplace. Even in
the worst of days.
So, where is the catch? Why do people lose money at the stock market? The catch is not in the
WHY?, or the HOW?, but in the WHERE?
There is also a WHEN?
Finding the right stock that will rise from 600 to 603, or from 97 to 97.50 on that particular
is the challenge. Finding that one amongst the 1000+ available at NSE is where most people
falter. People put their money at the wrong places only to see losses.
Here you can depend on IntradayTrade dot Net
. Since the time we've come online we've given
you names that have fulfilled your requirement everyday. Look at our past results.
Like we've said at the beginning, Intraday Trading is a serious business. And after you know
which stock to invest in
, this 'When?' is a vital point in that serious business. This mainly
deals with your entry and exit points.
As mentioned earlier, to control these points you will need (1) a good trading method and (2) good
money management policies. You will also need four important weapons: Confidence, Discipline, Focus
We will explain these requirements in detail in the next part: