Intraday Trading or Day Trading in Indian share Market is a big time hobby for different type of people. Various Doctors, Software professionals, Public and Private sector employees and many more trades in Indian stock markets, commodity markets and now also in forex markets. The fast changing prices attracts everyone to make quick money on daily basis. Few of the people has already made this as their full time profession after retirement. Young professional carries intraday trading as a part time business with specified allocation of capital.
While entering the intraday trading, it is important to closely watch market and analyse the trends. Several people follow intraday trading tips, given by their brokers through SMS or flash on trading screen. Several Technical analysts have also started their small time desk and caters to limited clients with their trade calls.
For a Trader, it is important to select the research analyst carefully and follow these tips with a discipline for getting a good returns on the invested capital and receive a payout in their account.
Let us first discuss few pointers on selection of intraday tips provider.
1. Check profile of the Research provider carefully. Now it is mandatory to be registered with SEBI for providing such calls. Apart from this it is always preferable to check for Qualification and Experience in financial markets. Do not go for unregistered mushrooming tips provider as it may be a big hazard for your capital.
2. If your Broker provides research, then it is better to check the accuracy for past calls. Mostly brokers prepares the track record for their calls which will not only give you a snapshot of their performance but also makes you define your way of working with future tips. Do not believe if the track record is extraordinary great….apply your mind.
3. Compare atleast 2-3 research providers and do not pay extra brokerage to your broker. It is always better to pay separately for research as it will have a responsibility attached. Also you will have a chance to try other research providers without changing your broking account.
Generally, I have come across people who shows a great track record of their calls but their clients ledger in losses. The client says that all calls hits the target however whenever we trade on any call, it hits the stoploss. I have also come across few of the funny suggestion where service providers ask their client to trade on each call that they give to get best results, which is neither possible with limited margin, nor feasible. So once you have selected a research analyst who is thorough in his subject, then you as a trader should know how to make use of his research.
Now let us discuss on few techniques that you may use for effective usage such Intraday calls
1. Analyse his call performance and identify his area of excellence. It may be a period or a industry or a particular scrip. Such area of excellence will let you know the Key Result Area of service provider. Trade only on that. Example of such area of excellence could be Nifty 50 stocks only, banking stocks only, penny stocks, intraday calls, weekly calls, etc.
2. Analyse performance only after considering brokerages, taxes and impact cost for trade. For lesser liquid contracts, normally the impact cost will be high.
3. Limit your margin or exposure value to a particular figure. Take position in terms of value and not in terms of number of shares. And your exposure value should be (approx.) same for each call.
4. Trade only if your No. of call in profits is above 70% and Target to stoploss ratio is 1:3. Most of the service provider maintains 1:2 ratio for their convenience or amplify their performance however with impact cost and other cost of trade, your actual losses are bigger and actual profits are smaller.
5. Maintain the discipline even if you are making profits or making losses. Before entering a trading, one should specify the total losses for exit (normally I have seen trader to keep it as 10%-20% ) of their invested capital. So if they have made or lost more than that, it is a time to take a break from intraday trading.
6. Manage your costs by trading through discount brokers. Also it will give you an option to make your choice of research analyst and you may get the lowest brokerage rates. Also see broker comparison
7. Online is better way to trade as it will have a better chance to capture a trade as and when a opportunity strikes. Now most of brokers also offer trading through mobile and tablet, so keep in touch with share market live.
8. Keep your egos and emotions aside. Don’t fight with market or service provider for maintain any position. If you like any particular scrip then invest for longer term and keep it out of intraday trading. Manage your risk well and stick to your trade style.
A trader should understand that he is here to make returns on capital and not for gamble of life. A better logic will give a better understanding and stands a better chance of making money. So if you wish to be a day trader then be a smart trader.