Is Daytrading dangerous?

Discussion in 'Risk & Money Management' started by pksam, Jan 22, 2006.

  1. pksam

    pksam New Member

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    Day-trading is fraught with risk, no doubt, but can't it serve as a tool for education in trading? The key is to trade in miniscule lots, review the results and iron out wrinkles in strategy and trading personality. That is, to focus on intra-day trading as a learning process and not as a money-spinning venture.

    When I started trading intra-day, I was naive, clueless and irrationally optimistic and lost even over Rs.5000 on a lot of 100 shares in a day. At that time the minimum size of any buy or sell I made was 100 shares. I burned my fingers, scorched my brains and singed my nerves trading intra-day. I hoped and agonised in liberal measure.

    I saw quite a few people start out as day traders, lose money in no small measure, chase the losses, take still greater stakes, opt for F&O as safer bets, and end up washed out. I was often tempted to throw in the towel when day after day, with hours of homework and scant sleep, I would still end up a four-figure loser at the end of the day's trading. Every evening was time for an agonising psychoanalysis of myself.

    The losses made me imbibe the words of legendary traders and etch it in stone within me. I started setting realistic, time-bound targets such as that I would limit my losses to a specified percentage, etc (laugh). And then, months later, I found that I was losing less money. Also I was being less tense while trading.

    Starting October, 2005, after months of trading off the tape, I started trading using intra-day charts. From then till the end of December, 2005, I traded the Capital market and Nifty Futures (Futures for the first time) without carrying over any trade. Trading with intra-day charts for the first time, I was experimenting with tools, timeframes and strategies. I had an unedifying win:loss ratio of 1:4. But on a trading volume of nearly 200 lakhs I ended up with a loss of a little over Rs.100. Above all, I was never on the edge, chewing my nails away ( except when tackling increased volatility in Nifty Futures, something which I have learnt to live with since).

    The reason why I survived was nothing, and nothing but money management and discipline. I took positions ranging from as low as Rs.6000 to over a lakh. I never entered any trade without estimating risk and determining stop-loss levels. I rigorously implemented stop-losses and exits, never hoping and wavering. Sometimes I was guilty of chasing a trade or failing to pull the trigger, though.

    If I had tried to accquire the required discipline using swing or position trading I doubt if I would have lasted given the drawdown that could be quite large (more so if I were to be hooked by the fascination of leverage that F&O holds), much, much more than what one would lose trading small positions intra-day. Also, the higher frequency of trades in day-trading helped. It helped me learn to trade to plan with little anxiety, though at times I would feel discouraged by a string of losses.

    Besides, being a position trader in the kind of bull market that we have had since March, 2003 would have fetched money in generous measure. Many, without the faintest idea about the markets have made potfuls of money in the past two years. Succeeding in such an environment would have lulled one into complacency and a belief of having made it as a trader. But would it be true? Wouldn't losses and disillusionment be just half a major cycle away?

    I write this to suggest that day-trading is not a bad idea if one were to use it as a process to learn, to know the flaws inherent in one's personality and thinking, and to discipline oneself. And to trade small positions till one achieves targets set in the spirit, "... One step enough for me" (Light of Asia). But, using day-trading as a "get quick rich" instrument is the surest way to financial ruin. Rightly used, day-trading can be a wonderful way to learn.

    Tailpiece:

    My target for the next half-year is to try to better my win:loss ratio from 1:4 to 2:3. If I succeed, it would mean a major breakthrough for me, and quite a bit of money too. It seems so near, but could be a long way off, akin to the tale of Tantalus. I may breast the tape or fade out. I'll wait and watch. Meanwhile I am working on strategies for swing trading too (not more than 3 to 4 trades a month) for bread and butter, for now I am reasonably confident that I can plan a trade and trade the plan, all without losing sleep. "Plan your trade and trade your plan" sounds pithy and easy, but is damn difficult to follow. But with persistence, one can definitely learn to.
     
    Last edited: Jan 22, 2006
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  2. vince

    vince Active Member

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    May I add keep it simple. A simple trading system would work wonders in any time frame.
     
  3. rangarajan

    rangarajan Well-Known Member

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    My tips for day trading:
    i had undergone all the agonies elicited by pksam & finally do the following to realize small profits consistently;
    a) trade only in the shares you have.If the position goes against u,give delivery.You can always buy back.
    b) calculate the support & res levels with pivot calculator(available in this forum)
    c) look at the chart & deside yr entry & exit levels seeing the price,vol &pattern
    d)restrict the no of counters to 2-3 max
    e)watch the first 5 min ave price & after one hr see where the mkt has been trading,ie below or above the ave price majority of trades & decide the trend & take position accordingly.ie Long or short
    f)study the previous charts repeatedly to intrepret.It is an art more than science
    g)s/l must.
    All said & done,it is better not to Day trade.Delivery is best.But making one rs in day trade gives more pleasure than 100rs in delivery.Why?
    ranga
     
  4. ashrafchombalan

    ashrafchombalan New Member

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    trade only in the shares you have.If the position goes against u,give delivery.You can always buy back.

    How its become day trading............?

    Day trader must be closed the positions same day itself,,,,otherwise.,,,,,,,,,
    actually he is not ready to take risk, forwading day trading positions,,,,,
    I am sure a person not ready to take lose, he will be big loser for long run...

    With Regrads
    Ashraf
     
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  5. kgsirasangi

    kgsirasangi Active Member

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    I have come across following interesting article on day/futures trading strategy in the following thread

    http://www.profitfromus.com/ForumRead.asp?topic=185&page=2

    quote

    from aryanshare

    Day Trading Strategy


    Despite what some people may lead you to believe trading is not anywhere as difficult as they would like you to think. It really boils down to two key components. FEAR & GREED.Once you have these two emotions under check, everything else falls in place.. I am listing out my views and my system of trading. It has worked 8/10 times for me, which is good enough for me.

    The first and basic step prior to becoming a day trader is “ apprentice period “.

    First and Foremost buy a 292-page book. Select Five stocks, which you would want to trade. I would recommend ONGC, RELIANCE, INFOSYS, TISCO, and SBIN. Divide your notebook into 6. Note down the open, high, low, volume, average traded price, %, closing price studiously everyday. The sixth stock would be Nifty.

    Once a week note down in a different book the weekly high, low, average traded price and average volume of the stocks you trade. Repeat the exercise on a fortnightly and monthly basis.

    In about 3 months time, you would have weekly, fortnightly and monthly data to identify a breakout, either on the upside or downside. It would also give you a hang of the stock, you would start understanding the price pattern. It would also enable you to interpret the stocks based on volume. If a stock is coming down with thin volumes, there is a clear indication of a price reversal and vice versa.

    For Starters those interested in Day trading can make this effort. I am sure you would be able to feel a lot more confident once you start to follow this routine of noting down things. Believe me after few years this data which you would have, would be a virtual goldmine.

    Ninety five percent of everything you hear from everyone about the markets and the markets "reasons" for doing what it did or will do are lies. Neither you, anyone nor me can predict the future. You can only make educated guesses about potentialities.

    There is success to be found in both bullish and bearish views of the market. I believe that the trader who becomes active in both bullish and bearish positions has more fun and finds more opportunities for success.

    If 90% of all traders lose money, they must be following generally accepted trading rules. The 10% who win do not!



    My Futures trading module.

    I pick a Future lot at its monthly support. For ex I got into ONGC at 830 levels. Everyday I sell it and buy it back at a profit of 3-4 rupees. I trade around 4-6 times and I make about 15-20 rupees per share. A lot size of ONGC is 300, hence a daily profit of 5-6 thousand. I buy shares worth 5-6 thousand in cash. ( 6-8 shares ), which are zero cost !!. I repeat this exercise everyday, My concentration is only on ONGC and I study the charts pretty in depth for the stock and watch the market movement and try to sell it a resistance point and buy it a support. In one month of trading in ONGC futures , I have added about 140 shares of ONGC in CASH !!. The investment that took me to buy shares worth 1.25 Lacs in less than a month was 26 k ( span margin for one lot of ONGC ). 400 % returns in a month.


    I shall let you all ponder on this for the next few weeks and hopefully all the interested day traders would have entered 10 days of data in your books.

    Enjoy the Weekend.

    ....I count him braver who overcomes his desires than him who overcomes his enemies, for the hardest victory is victory over self.

    unquote

    note : paragraph in bold is highlighted in bold by me.
     
    Last edited: Jan 29, 2006
  6. hmp

    hmp Well-Known Member

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    hi kgsirasangi,
    i like your strategy on ongc. one thing i want to know that dont u ever use stoploss? what u do when sometime market goes reverse. or what u do to preserve profit.pl. explain.
    regards

    hmp
     
  7. kgsirasangi

    kgsirasangi Active Member

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    I would like to clarify that the article is of "aryanshare" the active guide in the web site

    http://www.profitfromus.com/Forum.asp

    For further details, articles, advice, clarifications, etc please visit the link I have provided.
    It is a free website/forum. Registration is free. You will find all the answers there.
    Regards.
     
  8. Agilent

    Agilent Member

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    Quote
    My Futures trading module.

    I pick a Future lot at its monthly support. For ex I got into ONGC at 830 levels. Everyday I sell it and buy it back at a profit of 3-4 rupees. I trade around 4-6 times and I make about 15-20 rupees per share. A lot size of ONGC is 300, hence a daily profit of 5-6 thousand. I buy shares worth 5-6 thousand in cash. ( 6-8 shares ), which are zero cost !!. I repeat this exercise everyday, My concentration is only on ONGC and I study the charts pretty in depth for the stock and watch the market movement and try to sell it a resistance point and buy it a support. In one month of trading in ONGC futures , I have added about 140 shares of ONGC in CASH !!. The investment that took me to buy shares worth 1.25 Lacs in less than a month was 26 k ( span margin for one lot of ONGC ). 400 % returns in a month.

    Unquote

    KGSirasangi
    Truly impressive record, it must be said. But surely you must be getting a few deals wrong ( i.e loss making). For instance, days when the scrip opened with a gap up and stayed firm throughout the day (closing at the day's high) ....

    Have u shorted (and covered) on such days also ?

    What roughly is your win:loss ratio so far?
     
  9. kgsirasangi

    kgsirasangi Active Member

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    Hi Agilant,

    As I have clarified in my previous posting, the above article is of "aryanshare", the master guide on above web site.

    As for myself, I am yet to learn trading/day trading properly and hence cannot answer your querries authoritatively.
    Hence I can only request you to visit above web site for gettng answers/clarifications direct from the horse's mouth i.e. from "aryanshare".

    I am also visiting above web site for learning and guidance.

    Regards.
     
  10. GlobalGyan

    GlobalGyan Member

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    We should also have the right tools. Like doing day trading/ F&O with ICICIDirect.com is suicidal!
     

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