Thursday, 12 July 2018

Intra Day Trading Strategies


Rakesh Jhunjhunwala, Porinju Veliyath, Dolly Khanna are known for their smart long term picks. Investors closely follow the stock portfolios of these noted equity investing stalwarts. While it is their long term stock picks which makes them famous, it is intra day trading profits which gives them ammo to buy value picks for the long term.

There are several people who have quit their day jobs & are wholly living off intra day trading profits. We spoke to one such individual who does not wish to be named.

Here are some tips & tricks to make some money off intra day trading

1) Broker: To make the maximum of your intra day trade, open an account with a brokerage which charges you a fixed amount of money instead of a % of your traded value. Zerodha is a better option than Angel Broking, when it comes to intra day trading.

2) Pick 4-5 stocks: One needs to have a good judgement when it comes to intra day trading. The best way to develop a judgement for stocks is to religiously study 4-5 stocks for a few weeks. For the intital few weeks just observe the highs & the lows the stock touches.

For the next two weeks play with imaginary money. Make a note of the price at which you intend to buy. After selling your stocks make a note of the price at which you sold your stocks. This will tell you the profit/loss calculation. If you are making decent profits off your bets after two weeks you can try your luck with real money. If not, then you need to wait & get better, before you start playing with real money.

3) Scalping: The most common strategy to make money of intra day trades is scalping. The modus operandi is simple. For example If you buy 1000 shares of HUL at 1000, you sell it as soon as the stock reaches 1004-5. This money just about gives you a small profit after paying for brokerage & other taxes.

People make the mistake of not taking brokerage & taxes into account, before using this strategy. This results in them being under the false assumption that they have made a decent profit, while actually they have been making losses.

4) Results/ Bonus Shares/Dividend: When it comes to stock trading, information is the key. Prior information of profits, bonus shares announcement or good dividends can be advantageous in placing intra day bets. Rakesh Jhunjhunwala, Porinju Veliyath, Dolly Khanna etc all have research teams who give them the much needed info on various companies.

 One way to get information is to rely on the information passed on by friends who work for listed companies. While insider trading is a criminal offence, you can get an idea of what direction the company is taking by just asking your friend "How Is Work?". If he/she says that there is a lot of pressure owing to declining profits, it is a good idea to short stocks of that company on results day.

5) Bet On Your Company: The best way to make money is to bet on the company that you are or were a part of. While bets placed on information based on access to confidential reports can put you behind bars, you can place bets based on your experiences within the company based on the mood on the floor.

6) Follow the currency rates & commodity prices: Fluctuations in currency rates vis-a'-vis the US$ is a good way to predict whether the markets will close high or low. If the company you are betting on relies heavily on US exports, then one should bet on the stock going higher. If the company relies on domestic trade & imports heavily from abroad one should short stocks of that company. The same holds true for commodity prices as well.

7) Stop Loss: Never trade without a stop loss. Trading without a stop loss is very harmful to your financial health. You can see profits accumulated over several days or months being wiped out thanks to a few bad trades. Ensure that you don't have to sell of stocks you are holding for the long term to pay off your losses accumulated in intra day trades.

One should have a profit margin in mind as well. Holding on to your stock for too long in intra day trades too can prove to be detrimental.

These steps will help you in making a decent profit. But in order to be in the league of  stock market bulls, one needs to do loads of research & be very lucky. We have all heard stories of people going broke dealing in stocks. What people don't realize is that it is intra day trading which makes people go bankrupt. Investing on the other hand is a fairly less risky proposition.

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