How to scan stocks for swing trading

Technical Analysis
1

Hello everyone,

I am new to technical analysis (but not to the markets, I have been more of an investor) and have been going through the modules on technical analysis on Zerodha. I want some insights from you guys on how you go about choosing which stocks to trade? I have added Nifty 50 to my watchlist on Pi, but even in this universe, its hard to quickly identify stocks to trade. Since I am starting new, I am looking at swing trading and not intra day trading. Any insights from fellow members on how to scan for stocks would be appreciated!

Cheers!

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2

For Swing trading your favorite technical indicator is RSI. It tell whether stock is oversold or overbought.

For long you need to but at oversold level. Short not recommended for swing trading .

But rsi alone can’t give correct picture. You need to look for other indicators as well. Also you should know why the stock went to that level in the last two weeks.

Once you identify the stocks track them for few days before entering trade.

Applying fundamentals also will improve profitability.

I do swing trading based on fundamental analysis.

I keep same watch list and track the stocks continuously. This way we learn how the stock behaves for various market conditions.

Look at the below. On 30 Mar 2017 end of day.

Screenshot_2017-03-31-07-43-11.png1080×1920 115 KB

And the same on 31 Mar 2017.

Screenshot_2017-03-31-18-07-45.png1080×1920 107 KB

Screenshot_2017-03-31-18-07-21.png1080×1920 114 KB

The theme is Buy on dips and sell on rallies.
Never chase the stocks.

When we are tracking the stocks on fundamentals no need to worry about fall in stocks. We can average or short next month future or do covered call writing.

Note : I don’t set stop loss limit.

3

Best way to swing trade is to identify stocks which are trading at support or resistance levels.
See below example for Kotak bank,how beautifully stocks are respecting suport and resistance.There are other ways also like breakout from resistance level but i feel breakout as risky because more than 50% came out as fake breakouts and big loss might be suffered.

image.png1122×599 14.4 KB

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@haribabu

Sir, If i may ask , how much is your trading capital for swing trading using futures??

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Capital depends on number simultaneous positions held.

My capital is 12.5 Lakhs.

I use 30-40% for Futures and another 30%% for equities. Remaining is maintained as cash.

I don’t use MIS orders. I Don’t take leveraged product.

Cash position is based on VIX level. If VIX goes above 14 I will reduce Number of positions.

I also do intraday of three four trades some times.

Tracking stocks is more important for swing trading.

2 Likes
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Hi Raj,

Thanks for the insight. If I may, how do you find stocks that are trading at support or resistance levels? What I am struggling is grasp is how to identify such trends from the vast opportunity space.

Thanks!

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Hi haribabu,

How did you choose your portfolio of stocks to follow? Is that based on fundamental analysis?

Thanks!

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Yes. Based on fundamental analysis I select stocks for watch list.

When we are bullish on a stock we hold them for a year right, the same can be done with futures also. Need more capital but less than Equity capital.

Learning fundamentals is a must if you want long term benefits.

In my view pure technical trading is Like Daily Wager Job. It will not add any thing to your knowledge in the long run.

9

hi,

open 15 min charts, trade on only zerodha margin stocks,…

https://zerodha.com/margin-calculator/Futures/

do trade on equity only. i felt so easy after understanding trading on 15 min chart.

in PI tool, run scanner, rsi(close,14)<30. and buy stocks @support level.

good luck.

3 Likes
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@haribabu

Sir, how do you manage risk if you do not place stoploss. In short what is your risk management strategy?

And secondly, you said that do not use leveraged positions. Isn’t futures a leveraged product and if it goes against you , it may cause a lot of damage to your account.

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Futures is leveraged product, but people are using it for MIS orders and using Full account value with out any cash balance.
this is bad Money management.

If you have seen in my posting above I have given two days positions how they turned. I was negative 44000. still it turned out to be positive. We need to stick to select few stocks and track them daily. then stop loss not required.

Advantage with positional trading is you book less losses and less number orders mean less STT and Stamp Duty.

if you trade intraday using technical analysis then it is laborious job. My positions turned positive after two three days.
so very rarely book losses. that too during rollover or averaging.

if you see in my trading given above MARUTI is in negative 9675 on 30th March.
Next day I made profit. I always exit with profit.

Now I have Heromotoco three lots avg price at 3264. I will exit with profit in next week. never need to book loss in long positions.

Since we are tracking those stocks daily basis we know what will happen to them mostly.

Last Month I took Amarajabat at 911. it went to 825. now it is at 894. still I hold that position. in between I rollover it.

Like we keep equities holdings for one year same method we follow here. but need more capital for emergency.

4 Likes
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Thank You Sir…

1 Like
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@haribabu

Usually how you do fundamental analysis for short term trading.
Usually for long term fundamental analysis is done by top down approach like looking into sector , comparsion of peers in that sector , finally doing DCF calculating intrinsic value of stocks and then applying margin of safety right.

But I think this big analysis is not needed for short term right like 1 -4 months.
I need your view how you do fundamental analysis for short term trading for swing trading and futures .

14

If you are holding for three to four months then quarterly results will fall in to that period. So that will affect stock performance. Once you identify the stock you need to track it’s events like results, bonus, dividend, or any court cases, example ADANI power, coalindia,.

Also need to look at financials of previous quarters. Doing so much exercise for short term looks unnecessary. But inevitable. Even if we are holding for one day we need to be careful. Yesterday 26/04/2017. ADANI ENT fell 20%.

If the stock is performing well you can extend holding period. Even to one year and get benefitted of Tax free gains and dividend.

Another thing is just before dividend stocks usually go up. This also you can utilize and exit before ex date.

Technicals also should be followed. Look at ONGC it is falling for two months and INFRATEL moving between 200 - 300 for same news of stake sale.

Looking at recent events of stock manipulation short term holding looks difficult for small caps stocks. IDEA fell raised 20% and fell 20% intraday due to selective release of news by media on the day of announcement of deal with Vodafone. When the news first came IDEA went up from 70 to 125 and after actual event it fell to 85.

How we tackle these things is a big question.

For short term charts also play crucial role because traders follow them. If RSI is reached above 70 usually uninformed traders books profits.

Last week I lost 100 k in HERO MOTORS, AMARARAJA, ONGC, COALINDIA ASIANPAINT, was holding for more than three weeks. Exited at bottom and they are flying now. We need to look how week we are if any such event happens.

Hero Motors was in consolidation for 16 days. WIPRO posted good results but stock fell.

I am seeing more operators manipulation after DEMO.

We should be strong to withstand these events else intraday is better.

There are sites who give fundamental analysis. That can be followed. Example tradingview. Even paid sites are available these days for fundamental analysis info. You can look at full service brokers like ICICI DIRECT. They give research reports. Some traders are opening account with them but majority of trading being done at discount brokers. Only to get those reports.

Hope this helps.

1 Like
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Hi @haribabu how well this strategy has performed for you? What percentage returns it gave to you? Thank you.

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It is working fine I am able to earn easily 100k but need to improve. At present I reduced positions to develop kite API trading system. Concentrating on that now.

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So 100k in a month on 12.5 k capital? its nearly 8% a month. Very impressive. :+1: I think i need to give it a try for this strategy. Thank you so much…:blush:

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Let go for coffee someday for this tip! My Treat! #WonderfulTipForSwingTrading - To the point…

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