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http://www.investopedia.com/university/introduction-stock-trader-types/intraday-traders.asp
Check out this comprehensive guide:
Intraday Trading-Formulas and Rules (Part 1) :
Intraday Trading is an alluring idea for traders to make quick money in stock markets. After all, who would not be interested in making some quick bucks in a matter of minutes or hours. That is the reason of its popularity in a section of traders.
Intraday trading or day trading, as the name is explanatory, is the process of taking long or short position in markets and squaring off (exiting) that position before the close of the market on the same day. Intraday traders take the advantage of the movement in the price of the stock or the index during the trading session. Movement can be small or significant. Trade can be for minutes or hours.
Intraday traders have to take position in large quantities of a stock so that a small movement in the stock provides big gains. Consequently, the risk is also equally big in the event of adverse movement.
Taking position in large quantity of a stock and squaring off the position immediately after the stock takes a small move in the favourable direction, is called Scalping. Scalpers take several trades during the day so that at the end of the day, the profits are significant. Online share trading has made Intraday Trading easy for day traders.
Now, what is the formula or technique for Intraday Trading?
Of course, there are some formulae which are popular among the intraday traders like Pivot Point Formula or Fraction Theory. But intraday trading is not all about using formulas. When you are there in the middle, it is a totally different ball game altogether.
We shall explain here the above said formulas but the other things which are very important and need to be taken care of are –
- Having a proper Mind-set and Psychology – Share Trading for fun or hobby can be dangerous. Your approach should be very professional. You should be aware that you are risking your hard earned money and the risk starts the moment you enter the trade. Take trading as a business.
- Control over the Emotions – Emotions like Greed and Fear are the biggest enemies of a trader. Markets don’t stand at a place. They keep on moving, up or down. So, don’t let the fear take you for ride if markets move in the opposite direction of what you were anticipating. You should be aware of your exit point in such case. On the other hand, if trade starts turning profitable, exit the trade at your target price level. Stick to Stop loss and Targets to avoid Emotions in trading.
- Having a Plan – Having a proper trading plan is an important part of trading in stock markets. You should be clear of the entry level, target level and stop loss of the particular stock which you are trading in. These levels are determined on the basis of Technical Analysis and the formulas. You need to stick to your plan to be a successful trader. Writing the plan on a paper is a good idea so that you stick to your Plan and don’t get swayed away by the market moves when you are in. Without any of these, it is going to be very tough.
Intraday Trading-Formulas and Rules (Part 2) :
Intraday Trading Formula
Before going for Intraday Trading Formula, you should be aware of a real fact that more than 80% of the people lose money in trading. It means that no formula is perfect, otherwise that figure would had been other way around.
It is advisable to use these formula after testing by paper trading or virtual trading to see which formula is best for you. Personally, I prefer Pivot Points as it gives best result when applied after identifying the trend in a stock.
Pivot Point Theory: - Taking previous day’s trading prices of a stock, we can calculate the support and resistance levels for that stock for the next day. Support and Resistance terms are self-explanatory. A stock which is moving higher, may stop at resistance level and come back. Similarly, a stock moving lower, may stop at support level and reverse its move. After crossing first support or resistance level, stock is expected to move to next support or resistance level.
Coming to the Pivot Point Formula, we select a stock for Intraday Trading. For that stock, we need its previous day trading data- Intraday high price it touched (H), intraday low price it touched (L) and the previous day closing price (C) for that stock.
Add theses three values- H+L+C=X.
Divide the total value by 3 (P) = X/3.
Multiply it by 2: - X/3*2=Y
This value P is called the Pivot Point. Stock sustaining above Pivot Point is likely to move higher towards first resistance level and above that towards second resistance level. If stock continues to trade below the Pivot Point, it is likely to drift lower towards first support level and after that towards second support level.
Let’s calculate resistance and support levels.
First resistance level (R1) = It is the difference between the {Pivot Point X 2} or Y and the Intraday Low price.
R1= Y-L
R2=P+(H-L)
First support level (S1) = it is the difference between Y and the Intraday High price.
S1= Y-H
S2= P-(H-L).
Fraction Theory: - This theory is also based on previous day price movements of a stock.
Add up high (H), low(L) and closing (C) price of previous day of the stock and multiply it by 0.67 (ratio of 2:3 as in pivot theory and it is constant)
(H+L+C) * 0.67=Y
Resistance (R1) = Y-L
Support (S1) = Y-H
Possible Buy (P.B.) = Y-C
Above possible buy (P.B.), buy the stock for resistance levels.
Intraday Trading-Formulas and Rules (Part 3) :
Intraday Trading Formula
2652 Theory of intraday Trading: - 2652 Theory is based on previous day and present day High and Low prices of a stock. This theory has its own disadvantage that it makes you trade for gain of 0.5% while keeping your stop loss 1% lower. Your risk is double of your profit and using such strategy in day trading doesn’t make sense where probability of going wrong remains high.
You should also use technical analysis based on short-term charts for stock to know the trend and other indicators of technical analysis. Buy stock which show uptrend while look to short which are down trending.
The Intraday Chart with 15 Minute interval remains best for effective Intraday trade, though you may use any interval like 1 Minute,5 Minute or 10 Minute. Prefer to use trend on Intraday Charts to take buy or sell call on your trade.5 Minute Bar Chart can be a good method to use trend lines for Intraday Trading.
Trading Rules for Intraday Trading to keep your Risk to the Minimum
1. Use surplus money – Trading should be done only with the spare money, the money you don’t need and can afford to lose. Trading, although very profitable, is associated with substantial risk.
2. Do proper research – Before taking trade, proper research should be done about the stock or the index, using charts based technical analysis. It helps in determining important levels of the stock, strength and trend of the stock.
3. Use of Stop loss – This is very important part of any kind of trading. Most of the traders don’t use it, knowingly or unknowingly and end up taking huge losses. Stop loss helps cutting short the losses and keeping emotions out of trading thereby protecting capital. Remember, capital protection is more important than earning profits. Profit earning opportunities keep on arising in the markets which you can use if keep your capital protected.
4. Don’t over trade – Over trading is suicidal. More trades become difficult to manage. So trade only that quantity you are comfortable with. Keep number of trades limited to 2-3. If one trade gave you sufficient profit, better close the system and do some other work or relax. Choose your trades on the basis of Risk Reward Ratio.
5. Be disciplined – This is the major quality of the successful traders. Avoiding over trading, not fighting against the trend and cutting short losses and keeping fear and greed emotions out of the trading are some important steps.
6. Follow the Trend – To have a higher success rate in Intraday Trading, always remember ‘Trend is your Friend’. So, always follow the trend and trade in that direction only. In up trending markets, select stocks which are strong on charts and have long positions. In down trending markets, select the weaker stocks and short them. Never trade against the trend. The advantage of trading with the trend is that even if you take a wrong call, you will not suffer big losses.
7. Liquidity – Always try to trade in highly liquid shares. Liquidity is the volume of shares traded. In liquid stocks, it is easy to enter and exit the trade and you enter or exit the trade near the last traded price.
8. Profit taking – Exit Strategy is really important. Take your profits and get out of the market when your target is achieved. Letting the profits run beyond targets leads to greed which is dangerous for trading. You never know when the market will turn around and throw you in losses after eating all the profit.
Cutting losses is also important part of successful trading. Exit your position if market is not going the way you anticipated. Don’t be stubborn and let the market do what it wants to do.
Intraday trading deals with buying and selling of stocks on the same day, during the trading hours that are stipulated by the exchange. Stocks are bought and sold in large numbers strategically with the intention of booking profits in a day.
Intraday trading involves buying and selling of stocks within the same trading day. Here stocks are purchased, not with an intention to invest, but for the purpose of earning profits by harnessing the movement of stock indices. Thus, the fluctuations in the prices of the stocks are harnessed to earn profits from the trading of stocks.
An online trading account is used for the purpose of intraday trading. While doing intraday trading, you need to specify that the orders are specific to intraday trading. As the orders are squared off before the end of the trading day, it is also called as Intraday Trading.
Intraday trading is riskier than investing in the regular stock market. It is important, especially for beginners, to understand the basics of such trading to avoid losses. Individuals are advised to invest only the amount they can afford to lose without facing financial difficulties. A few intraday trading tips and intraday stock tips will help you learn the art of trading.
when after ; i sell TCS ; i want to know who was/is the buyer of my shares !
how can i get any information on the same ?
You cannot get this info.
Just curious, what will you do by knowing the buyer ?