By: bhagawan on 9/20/2006 11:31:33 AM
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.
2. SATISFY WITH MODERATE RETURNS
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 scrips to a maximum of 3 so that you will be able to monitor them effectively.
4. NO TO STOCK RECOMENDATIONS
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 STOCK
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 TARGETS DAILY
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.
2. SATISFY WITH MODERATE RETURNS
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 scrips to a maximum of 3 so that you will be able to monitor them effectively.
4. NO TO STOCK RECOMENDATIONS
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 STOCK
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 TARGETS DAILY
-Riz
