9 Dec 2017

A simple technique of Intraday trading

         
Photo: Tyler Easton(Unsplash)

          Do you know what a coin, our lives and the stock market has in common?  They all have two sides. Like life with all the ups and downs, there are rallies and pitfalls in the market. How we face both is what makes all the difference.Long term investors use fall in stock prices as an opportunity to buy more. On the other hand, these are the days when traders hit the jackpot. Prices rise slowly and fall fast. During such commotion, things are comparatively easy for the traders.Although there are many techniques used in such situations, I would like to share this one method with you.
          How the indices begin when the market opens on that particular day, is very important. Traders should compare the open price of index like NIfty to previous day close price.Higher the open price,there will be a positive outlook for intraday.Lower the open price means negative market sentiment.Next step is to look at the movement of various sector indices. If Nifty is down, select one or two sectors whose indices are down by the most points. If a sectoral index is facing bigger selling pressure than the general index,it's outlook will be negative for that day. In such scenario,active traders select a stock whose price has decreased the most with an expectation of further downfall. They short sell that stock to gain from the expected gap of price fall.
       When the market is falling, selling a stock first and then buying it back at a lower price is called short selling. The price difference in the transactions becomes trader's profit. And that’s how a day trader can exploit falling stock prices. Buying Put options are also similar to this method.Often,bearish market may move faster than bull market due to the pressure of panic selling.An active trader try to utilise such kind of fast movements by understanding the prevailing trend.When there is a continuous market rally for a period, general index and heavyweight stocks will show strong movement.Picking up the most active and positive stock from a bullish sectoral index can give us an opportunity. Traders buy top gainers with huge volume in a bullish day or they look for buying call options. Here,the expectation is further rise.
         Gain comes from estimating future move,eventhough it is riskier than swing trading or positional trading.An active trader should have a market view  about the day,considering above factors.     This is a pretty simple and popular technique among professional traders. Along with this, looking at the stock’s chart for the particular day’s trend also helps to identify the movement of price and volume. Higher volume than average traded volume of the past  denotes momentum and chance of gain.
          It is observed that the stocks that rise when their sector index falls, may subsequently fall in the afternoon. It follow the common market sentiment in most of the cases.Means,movement of a stock is closely related to outlook of it's sector and general index.If both indices are negative,trend of the stock may be bearish by following common outlook.Accuracy of a trade increase only when the general index, sectoral index and the stock price move in the same direction.

Disclaimer: Trading is a high risky activity and which may result capital loss in adverse market scenario.

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