Can you become rich by day trading as a beginner?
The shortest answer is yes. But 95% of people have failed and lost money in day trading. But why?
Again, the answer is simple. It is not as easy as it seems. So I am going to guide you on how to make consistent profits in intraday trading in this tutorial.
Before making any day trading strategies, you must import stock data into Excel. By doing this, you will have many options to make trading decisions. In India, you can import share market data directly from NSE. There are also alternative options such as getting data from Microsoft, Yahoo Finance, and Google Finance, as well as some paid tools that you can integrate with your broker. There is no point in trading without having your data in an Excel sheet, and you will not make consistent profit without this step.
Once you've completed the first step, you must clean the data and ensure that you have only the data you need for trading. I will outline the specific data you need in Excel. 1. company name, 2. open, 3. Day high, 4. Day low, 5. Last price, 6.Previous close, 7. Total traded volume, 8. Total traded value, 9.Last updated time, 10. ATP(this can be done by dividing total traded value by total traded volume)
The trading mindset is the most important aspect of intraday trading. You must understand that the market will not behave the same every day. You cannot trade the same stock every day, and perfect trading opportunities may not arise daily. Therefore, even if you spend several hours, your time may be wasted if you don't have a proper trading opportunity. Thus, you should not worry about anything and trust the process.
Operators, also known as corporate traders, play a major role in intraday trading. Statistics show that more than 90% of their traders end up in loss in the share market.
Whether it is investing or trading, people often fail. The reason behind this failure is that corporate companies typically have the upper hand.
In day trading, operators often make profits while retail investors suffer losses. Therefore, before trading, you must determine if any operators are trading in the same company as you have chosen.
If they are, then all basic strategies or textbook trading guidelines may not work on that chart. Operators typically trade with millions of dollars, giving them full control over the chart for a particular period.
Now that we know operators are the ones making the profits, if we can identify and practice trading alongside them, we can also make profits.
However, finding an operator is not an easy task and requires effort. I am going to provide you with some tips to identify operators in intraday trading.
You must log in at 9:15 am when the market starts. In your Excel sheet (the one with stock data), create another sheet and note all the volumes after 5 minutes, i.e., at 9:20 am. For every 5 minutes, record the volume data, such as at 9:25 am, 9:30 am, and so on. Operators typically enter the market with large sums, such as 10 crores or more. Therefore, if they buy or sell with such significant amounts at the market rate, you will notice a very high volume during a particular 5-minute interval. This method can help you identify the arrival of operators.
Operators typically focus on F&O stocks and Nifty 200 stocks, as these are widely traded by many people. Once they enter the market with a significant volume, you may observe sudden price movements, such as a break in the day’s high if they buy or a drop to the day’s low if they sell
If a stock experiences an unusually high volume and unexpected price action, it’s a signal that an operator has entered that particular stock and will likely control it for a period of time. With proficient Excel skills, you can create signals using these tips to identify the arrival of operators.
When it comes to who has millions of money, it’s not only the operators. Corporate entities such as Foreign Investment Institutions (FIIs) and Domestic Investment Institutions (DIIs) also possess substantial funds. If they buy a stock, it can trigger unusual volume and price action as well. So, how do we differentiate between operators and institutional investors? Operators are typically intraday traders, meaning they must sell the stocks before the end of the day. With this logic, we can conclude that operators typically enter the market in the morning, especially in the first hour of trading. If you notice significant volume and price action after 10:30 am, it’s more likely to be attributed to institutional investors.
Step 1
First, you must determine how the market is moving. To do this, you should check the index fund and observe the price at the start of the day and the current price. By comparing these prices, you can determine whether the market is bearish or bullish.
Step 2
If you follow the above steps properly and practice, you will be able to identify 5-6 operators each day. You should then analyze those charts to observe how the operators acted. It's important to select charts where operators went against the index. For example, if the market is bullish but the operator sold, causing the stock to drop to the day's low, that is the chart you should focus on.
Step 3
You must wait until the stock reaches its day low and the trend starts to change. To identify this, you should note the Average Trading Price (ATP) in the Excel sheet. Similar to volume, create another sheet and record ATP data every 5 minutes. If the operators stop selling, you can observe the trend change in ATP even before it's visible on the chart. For example, if ATP was consistently dropping while the operator was selling, but once the operator finishes, you'll notice that ATP loses its downward momentum and slowly starts to rebound. This is your signal to make a trade.
Step 4
You should remember that once operators have sold all the stocks, they must buy them back before the end of the day. So, if the ATP slows down, you should be prepared for the trade. Look for some small green candles after a massive fall, along with ATP starting to rebound and increase consistently. This is your signal to enter the trade.
Step 5
Once you've made an entry, the day low will serve as your stop loss. Remember, you should not place a stop loss order. Instead, use a normal intraday order and mentally mark your stop loss. Placing a stop loss order gives operators additional access, allowing them to manipulate the market and trigger all the stop losses, including yours.
Step 6
When it comes to profit, you should be aware that trading involves significant potential risk, and you should not be greedy. It's advisable to take profit anywhere between 0.5% to 1.25%. If you believe you entered the stock at the correct timing, you can aim for a 1% profit. However, if you think your entry was slightly late, consider taking around a 0.5% profit. If you realize you made a wrong move, it's better to sell at cost and incur a loss of 0.1% to 0.2%. Avoid taking too much risk.
Step 7
This method will likely work on all stock markets across the world, but it may not be as effective in the crypto market. Remember, practice makes perfect. Before entering the real trading world, practice with an Excel sheet for at least 3 months. Modify your Excel sheet and adjust your strategies as needed. Be responsible while trading.
When you decide to create trading strategies and aim for consistent profits in day trading, you should consider the points mentioned below.
If you don't know how to import share market data to Excel, there are hundreds of YouTube videos and tutorials available that you can use as a reference to create your own Excel sheets.
The volume indicator is useful for comparing the volume of the previous candle with the current one. Additionally, indicators such as EMA and RSI can help identify trend reversals. Therefore, consider using these indicators in your trading strategy.
Remember, the trend is our true friend. Avoid trading against the trend; this is the most basic rule in day trading. Additionally, draw quick support and resistance lines, which will assist you in identifying profit booking points.
Day trading is not as easy as it may seem. It requires a great deal of knowledge, skills, and emotional control to be successful. Remember, making a wrong trade can result in financial loss. Personally, I believe that long-term investment is often a better option than trading. However, if you aspire to pursue a career in intraday trading, it’s essential to acquire adequate knowledge and practice diligently.
Location : Chennai, Tamil Nadu India
Email id : author@thefundamentaltimes.com
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This Post Has 6 Comments
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