Understand Day Trading Before You Regret-Strategies And Tips-2018 Update

Day Trading is the best way to loose your entire capital quickly in the stock markets.

Dreaming of getting larger capital gains is not a wrong thing.

But thinking to make that gain within a short period of time could erode your entire capital.

So should you do day trading or not ??

The answer is-Why do you want to day trade ??

This might sound like an irrelevant answer.

But think for a second.

Figure out the reason behind why u want to do day trading.

This will provide you an answer to whether you should day trade or not.

I am writing two major reasons below.

This is what i feel why stock market beginners want to day trade.

1.First reason would be-Make quick money

Yes majority of stock market beginner’s want to make quick money.

I have been trading and investing from past 15 years.

Quick money is not related term to stock markets.

First as a beginner you should look to learn.

Know how the stock market works.

Best traders and investors are best readers also.

This does not mean they are best book readers.

But they read market and sentiments(Human emotions) very well.

So you need good experience and guidance to reach that level.

2.Thinking its easy money on the table

Is making money this easy in stock markets ??

In that case every trader and investor would be a billionaire.

Anyone would come and invest.

All of a sudden they will be quick billionaires.

Stock market investment is not a cake walk.

In depth analysis you have to do.

You need extreme discipline and patience.

The Ultimate Cheat Sheet On Day Trading

Lets not talk about just stock markets.

Think like this-You started a new business.

But you don’t know any thing about it.

What do you think will happen with your business ??

Its bad to hear the truth.

But truth is it will not become successful immediately at the start.

You have to learn about the business.

Than only it will become successful.

This same logic applies to stock markets.

Day trading is a style of trading in stock market.

Quick basics of day trading for stock market beginners

Its a style of trading.

You buy or sell securities for a day.

And this means you don’t hold your positions for the next day.

You will either make profits.

Or you will book losses.

On same trading day you will realize your profits or loss.

Lets look at two examples below.

Example 1-You buy a stock worth Rs 100

You sell it at Rs 102

So you made a profit of 2 Rs in a single share.

But instead of buying single share lets assume you bought 1000 shares.

Now if you look at the profit it is 1000 *2= Rs 2000

So you made Rs 2000 day trading on stocks.

Is that not really cool ??

It would have been if this happened every single time you trade.

Now lets look below at second example.

Example 2-Lets assume you bought same stock at Rs 100

But this time it went upto Rs 95.

So with 1000 shares our loss will be-1000 *5=Rs 5000

This time you made a loss of Rs 5000 on a single trading day.

You have seen both above mentioned examples now.

How do you feel now about day trading now ??

Risky….

Lets discuss about how we can reduce our risk now.

Strictly use stop loss while day trading

Remember the above mentioned example ??

Where the losses went Upto Rs 5000.

That’s example 2.

Exiting your trades is in your hand.

You don’t have to wait till your loss becomes big.

Simple you can exit your position when stock price reached 98.

That means you could have reduced your Rs 5000 loss to Rs 2000

This saved you Rs 3000.

You can use this amount as stop loss for next trade.

Stop loss is a term used to define your maximum loss in a trade or investment.

You can use bracket orders.

Bracket orders are advanced orders.

It gives you additional features.

You can place stop loss,target and entry price in a single order at same time.

Look at below image showing various options of bracket order.

 

day trading stop loss

 

Now as you are aware of how to use stop loss for day trading,lets look at another important topic.

Always use minimum 1:3 Risk to reward ratio for every trades in day trading

This is huge for your day trading success.

In day trading if you should follow minimum 1:3 risk reward ratio.

If your risk to reward ratio is less than 1:3 than you need more than 50 % accuracy in a strategy.

So to be in overall profit, out of 10 trades or investment decisions you should at least make profits in 6 trades.

But with above mentioned risk to rewards ratio of 1:3 you just need 3 trades in your favor out of 10.

Look at below example.

Lets say your risk in a trade is 2 Rs.

Number of share are 1000.

You can loose Rs 2000 in a trade.

Now as per our 1:3 risk to reward ratio,your target per trade should be minimum Rs 6000.

So if you loose 7 trades you will make a loss of 7*2000=Rs 14000

Now profit on your remaining trades are 3 *6000=Rs 18000

So your net profit is Rs 18000-Rs 14000=Rs 4000

This is the reason why I suggest minimum 1:3 risk to reward ratio.

Till now you should be aware of two most important terms in stock markets i.e. stop loss and risk to reward ratio.

Now lets move on to third important topic i.e. Day trading strategies

Lets assume that you are day trading from India.

Your main exchanges to trade are BSE and NSE.

I prefer NSE for long term investments.

For day trading in INDIA you can choose either NSE or BSE.

It really does not matter.

There are plenty of day trading strategies available in market.

But I have picked up few which i like to use.

Below we are going to discuss how to use these day trading strategies.

Before you invest huge capital of yours in day trading first try with small amount.

Only once you succeed in day trading with small amount than you can try with big capital.

Below mentioned are best intraday strategies according to me.

So now lets begin with day trading strategies.

1.Reversal Candle-Day Trading Strategies India

This is the easiest day trading strategy i have come across.

You can use candlestick reversal pattern.

Look at below image.

 

day trading reversal

 

You can see how prices fell down after reaching this high.

This pattern occurs often in markets.

Now look down at an example from where stock prices came up.

 

day trading strategy

 

This is an buy setup-reversal pattern.

Reversal candle sell setup

Now to use this strategy just sell at closing of the reversal candle.

Place your stop loss at the high of this candle.

Always keep target as 3 times of your stop loss.

If your stop loss is 2 Rs keep target as 6 Rs.

2.Double Candle Reversal Day Trading Strategy

You take two candle into consideration when using this strategy.

Look at below example to get an idea.

 

day trading strategies

 

First we saw one candle making a high.

Than second candle breaking this previous candle high.

But this candle looks like very bullish candle.

So we can wait for another  bearish candle breaking this high.

We got a bearish candle next to this bullish candle breaking the previous high.

That’s when you can enter a selling order.

Keeping second candles high as stop loss you can sell it.

Remember second candle high should be highest high among other candles.

Avoid this day trading strategy-when stock has moved by 2 % in same direction.

This means if any stock is 2 % positive or negative,don’t use this strategy.

Look below to see a buy setup example using this strategy.

Decrease in volume at high or low is a good indication for reversal.

You can see how prices reversed with decrease in volume in below image.

3.Fibonacci Pullback Day Trading Strategy

In this strategy we will look for a strong bullish candle.

We can than draw fibonacci retracement lines by clicking low and top of that candle.

61.8 % fib levels is where we have to enter our trade.

Once price touch 61.8 % fib levels and close above this we can enter buying position.

See below chart to know how an fibonacci pullback buy setup looks like.

day trading fibonacci strategy

 

 

Keep the stop loss 10 ticks below the low of entry candle.

 

day trading strategy fibonacci stop loss

 

To execute an sell entry look for a big red candle in first 15 min.

This strategy works well with 15 min time frame.

Apply fibonacci retracement tool from high to low this time.

Enter short when candle touches 61.8 % level and closes below that.

Always make sure that you enter sell only when candle closes below 61.8 % after touching it.

4.One Minute trend day trading strategy

Trend trading strategy in 1 minute time frame needs very fast execution.

When you see stock prices breaking swing high or swing low you can enter your positions.

Look at below diagram to understand quickly how to spot trends.

If you are looking to buy a stock,look for uptrend breakout confirmation.

Below image illustrates you how previous swing high is broken,conforming an uptrend.

Keep entire swing low as stop loss.

Same way as mentioned above use swing low breakout to confirm downtrend.

Keep swing high as stop loss when entering a sell position during downtrend.

Look for below images to see day trading sell setup using downtrend swing low breakout.

5.Five minute pivot day trading system

This is the easiest of all other day trading strategies.

All major trading platforms these days have pivot point study.

Simply select 5 min time frame in charts.

Apply daily pivot point levels in it.

I trade from India and I use famous sharekhan platform-TRADE TIGER.

If you are using sharekhan’s trading platform,you can press “s” in your keyboard.

This will show you add study window.

Select pivot point in it.

Apply daily pivot points.

Look below for step by step instructions through images for setting up pivot point day trading system using sharekhan.

 

DAY-TRADING-add study-.png

 

DAY-TRADING-pivot-point-indicator-.png

 

Once you apply the pivot point study follow the following steps.

To buy,wait for a 5 min candle to close over any pivot points,support,resistance or center pivot point.

Once it closes above any pivot line,you can initiate buy in that particular stock.

Keep stop loss as previous candle low.

If current candle which closes above pivot line has lower low than previous candle low, than use that as stop loss.

Stop loss should be the lowest low among both candles.

Look for below example image.

 

day trading pivot point setup

 

We have taken previous candle low as stop loss.

But some times you will find low of the candle which closes above the pivot line having lower low.

Refer below example.

 

day trading strategies

 

Now we have selected this entry candle low as our stop loss.

For sell setup it is just the opposite.

Execute sell order when 5 min candle crosses below any pivot line.

Keep previous candle high as stop loss.

If current candle has higher high,than consider that high as the stop loss.

Till now you have learned 5 day trading strategies.

Now lets discuss 6th one.

If you like using indicators,than you will like this one.

6.Supertrend 7 Minute Day Trading Strategy

I use 7 minute time frame for this strategy.

Reason behind using 7 minute time frame is its not too late or two fast to identify a trend.

So when you combine 7 minute timeframe candlestick with supertrend indicator chances of your success can increase.

Of course you don’t want to enter late in a trend.

Neither you want to enter early.

As entering early can make you trade false breakouts.

Just wait for a 7 min candle to close above supertrend indicator line.

As candle closes above supertrend line enter a buy position.

Keep previous candle low as stop loss initial stop loss.

As your stock makes high use supertrend line as trailing stop loss.

When candle closes below supertrend line exit your position.

 

day trading supertrend strategies

 

Use below mentioned supertrend parameters for intraday.

Keep ATR PERIOD as 10 and MULTIPLIER as 2.

Look below image to see exactly when to enter buy trade.

Same way to take an sell position just enter sell when candle closes below supertrend line.

Place stop loss at the high of previous candle.

If current candle has higher high than previous candle than use current candle high as stop loss.

Conclusion:

So you have till now seen

1.Stop loss in day trading

2.Risk to reward management in day trading

3.Six best day trading strategies

So now its on you how you are going to try your hands on day trading.

Whatever strategy you use,do not forget the stop loss and risk to reward management.

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