Myth:
Day-trading is like gambling. It is pure chance. Very
very risky. Nobody ever made money on day-trading.
Fact: Sure,
day-trading or intraday trading started as a pure
speculation in 1998/99 when e-trading was introduced.
People in offices, works, homes could now hook-up with
their e-brokers and take a call (or rather, place a bet)
on a scrip going up or going down by buying or selling
the scrip.
It was then instinct for some, insider news for others,
end-of-the-earlier-day chart analysis by few and pure
expectation by whole lot of the rest.
But then things have changed. With technical analysis
software ad websites providing live intraday data and
analysis, day-trading need not be speculation and matter
of chance anymore.
So if you know how to analyse, you can trade relatively
safely with reasonable chance of getting it right.
Unfortunately, most of the technical analysis developed
at a time when there were no intraday trading, most of
the conventional analysis fails when it comes to
intraday trading. In conventional positioning training,
you have time on your side. The price may move to your
advantage over a period of time. But in intraday
trading, you have no time to play with. Either the price
moves to your desired direction in the next few hours or
you have lost money.
So using the right analysis is so very important in
intraday trading.
Myth: Always trade with stop-loss
When I started saying just the opposite - Don't use
stop-loss in this market - both at my training classes
and on my website, people thought I was mad.
After all, every single expert coming on TV or writing
in business papers are advising using stop-loss.
My theory was: in a secular bull market with prices
going only one direction - UP - you don't need stop-loss
on long position. If your price fell today, chances were
it will go up within a few days. So if you could hold a
position, don't take loss. You will get your price.
In last 6 months, that position has changed cause we
have now entered a bear market. Market will be volatile
and unpredictable in the beginning part of the market
reversal. So now, you need to trade with stop-loss. But
my system is also different for setting stop-loss also.
As my system gives both Buy and Sell signals; the moment
a Buy call is threatened by sudden selling pressure, the
system will indicate to you the threat and you can
exit the moment the selling pressure increases to the
point of reversing the market; when the system will
issue the sell signal also.
The beauty of the process is, you can exit a losing
trade the moment it goes bad. You need not use stop-loss
level which is normally at least 1%-1.5% lower than your
buy price. On a Rs 1500 scrip, that's a Rs 15 loss at
least. In my system, you probably took a Rs 2/3 hit.
That's my point: why wait for price to decline Rs 15
whereas I can get out with a loss of only Rs 3? You can,
if you follow the Buy and Sell signals properly.
Myth: Let profits run
Speculators
rarely get their trade right. Only once in a while they
will hit a profitable trade. Naturally, they have to
extract maximum profit from this one trade to pay for
the losses incurred in so many bad and losing trades. So
maximising profits from a profitable trade is of utmost
importance.
But in an immature bear market as of now, volatility
will be so much that rarely you would find price moving
up and up. Most of the time, Nifty will be correcting
very strongly every now and then and this will affect
the price of the scrips also. So my advise at this point
is: some money in hand is worth more than having no
money at all. Say take profits frequently and enter
trade again if it shows strength.
Myth: Support & Resistance
I have mentioned about it elsewhere.
Please see here.
Buy
or Sell on tips from experts coming on TV
Nothing is more dangerous. Some analysts can be fronting
for companies or brokers and maybe even themselves and
may misguide you into buying or selling particular
scrips for ulterior motives. If you don't understand
stock market and have no inclination to learn, stay
away. |
|
|
|
|
