Daytrading

Hi,

"Daytrading is a gamble"..... "Will loose mostly in it"...... "If you wish to make it in the

stock market then beware of daytrading"...... Popular opinion on day trading goes somewhat in these lines.

However, if operated systematically, I am sure you can see profits in day trading too. I will definitely not say that you will always profit...but that you anyways dont in stock market...right? What I wish to state is you can definitely optimise and maximise your profits.

I have enlisted some of the important points to be borne in mind for successful daytrading.

1. Very first step or requisite is that, you must have access to live market and live tick charts. Day trading without these two is absurdity, as you will have no clue to whats happening out there. So ensure that you have an online connection or account with your broker.

2. You must have some basic knowledge of few technical indicators like moving averages,Stochastics,RSI,etc..Must know how to read charts.This is to begin with. You can get into better indicators with time.Neverthless for beginners the above would suffice.( I prefer to keep things simple, simple indicators work better at times )

3. You will have to identify stocks, with spreads more than enough to cover your brokerages and get you profits.Meaning, you must first set up an excel worksheet with brokerage calculations.With this you will have a clear idea of what is the spread to look for.

4. Next is to identify stocks. Consider stocks which are traded in good volumes and also have your required spread.

5. Please bear in mind that short selling is allowed only on some stocks. So if you wish to trade both long and short.. pick on these stocks. I have enclosed a file with the list of short sell stocks. (Please note this list is open to changes)

6. To have an idea of the next days trend of your stock...do some EOD chart analysis. Candlesticks are helpful here. (However knowing the likely trend is not neccesary).

7. Keep the number of stocks to two, maximum three. Two is ideal. This way monitoring the intra price movements is easier. Otherwise by the time you move from one to the other you will loose time and crucial levels.

7. Now comes the most important step. PIVOT TABLE. For successful day trading PIVOT TABLE is a must. PIVOT is the crux for day trading.

This table gives you the Pivot alongwith R1,R2,R3 and S1,S2,S3. The calculation is based on the previous day's High,Low and Close.
R1 -R3 are the resistance levels for the next day and S1-S3 are the supports.

The formula for Pivot Calculation is :

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

So load the previous days EOD into the excel sheet. With the above formula you must first calculate the Pivot. With the pivot the other figures are arrived at. The Excel Sheet should have

S3,S2,S1,PIVOT,R1,R2,R3. This is the order.

8. With the above I adopt this strategy.

If the market opens above Pivot..presumption is that you can go long. Wait for about 5 min and then buy around the Pivot (with S1 or low of the day..whichever is higher as the Stop Loss) your first target being R1. Square up 50% of your trade at R1 and if the price moves beyond R1 then sell the remaining at the higher price (Use your judice prudence for this). Anyways square up all open position by 3pm.

If the stock opens below the Pivot then it is a day for short. So go short below the pivot with S1 as first target.(Stop Loss here will be R1 or high of the day whichever is lower.) Once S1 hit,square up 50% of your trade. If price falls below S1, wait and buy the balance at a lower price. Use your judice prudence.

PLEASE NOTE *********STOP LOSS********* is of utmost importance in day trading. It is not something that REUDCES your LOSSES but OPTIMISES your PROFITS in the long run.
Also it is VERY IMPORTANT TO SQUARE UP OPEN POSITIONS BY 3p.m. PLease do no wait till the last minute, esp if you have gone short.

9. For everyone who has never indulged in day trading..what I suggest is,paper trade on the above basis. Meaning apply all the above steps and just watch movement of few stocks. Do this for a few days before you actually trade. This will boost your confidence.

10. Patience is of utmost importance in Day trading. So watch the price movements, before jumping in. Never be in a hurry. If the price hits R1 or S1 immediately on opening, dont rush or panic, that you missed to enter ur trades. Just wait and watch. Allow the market to settle. It is better not to trade when the stock is very very volatile.

11. http://nseindia.com
http://bseindia.com
http://in.finance.**********
are the three sites that provide almost all the information on Indian stocks.

I have made this post keeping in mind absolute new traders. Request other senior members to provide further tips if possible.

Happy Trading
Shri.

Attached Files

shortsell.txt (6.4 KB, 631 views)

That was some insight into Day Trading... and I could not have started anywhere but with your post...

Now I am a beginner and Have no clue for trading at all...

Can you help me give me more insights into how I can start of with the basics?

RK

Yery systematic and comprehensive post. As a sequel, some for insight on the use of basic indicators like RSI, Stochastics would be better.

In India, since historical intra-day data is absent, this provides an excellent insight. I wonder how much difference does that make apart from the obvious ones of being able to spot resistances and supports better with the historical data.

One shld be careful about the stop losses. Pivot literature abounds in saying that if scrip crosses r1 keep r2 as target and pivot as stop loss and so on and so forth. It is actually too wide a stop loss. Somebody told me yesterday only that these are theoretical pivots; any price during the day around which there is a lot of activity becomes the pivot for that day.

This would serve as a very good guideline for beginners

Hi,

I found few analysts giving pivot points with support and resistances, that does not match with the figures calculated by above formulae. Is there any other method available for calculating it?

nice tips

Shrees,

Thanks for sharing your valuable insights. The Pivot calculation was too good - did you develop it yourself?


Thanks again,

very good article be shrees on Day trading.it appears that he is a
professional day trader.It will be appreciated by all if he continue his
writing on day trading and share his live experience of trading with
attached charts and data,type of software to be used,sample of data
feed in excel sheet etc.Day trading is an art and lot of practical
experience is needed in this trade.One should have knowledge to read
the trend of market within next 15 minutes of its opening and one has
to do his business according to trend."TREND IS YOUR FRIEND" is tobe
followed at all time.Day trading is more suitable for futures market than
the cash market as you can short sell the shares according to your
requirement.

hi friends
is there any one who can explain more about pivot table. where can we get pivot table during trading.
1. is it really wise to trde in volume scrip
2. in day trading wat percent of stop loss is good

all senior member who are expert in day trading plz guide me regarding this basic query.

regard
mukesh singh

i found one pivot calculator here :

http://www.deltat1.com/Education/tools/pivot-calculator/index.htm

Is this of any help?

Yet another pivot point system was developed by Tom DeMark, a famous technical analyst and president of Market Studies, Inc. This system uses the following rules:

Condition: Today's Close < Today's Open
Calculation : Today's High + Today's Low + Today's Close + Today's Low = X
Tomorrow's Projections : High = X/2 - Todays' Low and Low = X/2 - Today's High

Condition: Today's Close > Today's Open
Calculation : Today's High + Today's Low + Today's Close + Today's High = X
Tomorrow's Projections : High = X/2 - Todays' Low and Low = X/2 - Today's High

Condition: Today's Close = Today's Open
Calculation : Today's High + Today's Low + Today's Close + Today's Close = X
Tomorrow's Projections : High = X/2 - Todays' Low and Low = X/2 - Today's High

Hello!
Very informative!
Thanks for the efforts you have taken.
Roneeth