2011 JITENDRARKV STOCK ADVISERY ONLINE CENTURE BY- Er. JITENDRA KUMAR VERMA E-mail-id- jitendra.smt@gmail.com Log on to- www.jitendrarkv.webs.com Take profits and do multiple trades The successful strategy for day trading is to take small profits and do multiple trades.
Take small profits and do multiple trades The successful strategy for day trading is to take small profits and do multiple trades. Basically it has been observed that many times traders especially day traders loose money due lack of knowledge. For example - Suppose if day trader s buying price is at Rs.200 then he waits till the price goes to minimum Rs.204 or Rs.205 and then they will plan to book profit, which is highly impossible on very frequent basis in single trade or in single move. If you are expecting Rs.4 to Rs.5 as profit on share price of Rs.200 in single move then you are expecting 2% profit in single trade. So do you think it is convincing you? We feel this doesn t sound practical and this is the reason why traders loose money after waiting for long time. Your intention is to earn money in a day, so just concentrate on small profits and do multiple trades instead of wishing to get huge profit in just single trade. Markets are always right so to avoid the further risk it is always recommended that day traders should keep booking profit wherever applicable. Take small profits and do multiple trades This will assure you to that you do profits, and all the profits that you do through out the day, will add up to good amount and this is what you want, right? So please have a look on following example about taking small profits and doing multiple trades and how it will provide you a good amount at the end of the day. Following few things about day trading brokerage and taxes calculation - The current maximum intraday brokerage offered is 0.05% for buying and 0.05% for selling (you may even have less brokerage and if you are paying more brokerage then you should either negotiate or change your broker) - The service tax is of 12.36% only on brokerage. - The STT (Security Transaction Tax) is of 0.025% only selling amount. - The stamp duty on total turnover for a day which is 0.002%. - and finally you have to pay Regulatory charges on total turnover for a day which is 0.004% Don t worry these all taxes will add up to very small amount at the end of the day compared to your profits in thousands. Now let s see how to take small profit which will add up to big amount at the end of the day by doing multiple (more then one) trades. Example - Buy KotakBank at Rs.315, quantity - 100 i.e. Rs.315 x 100 = Rs.31500. So if you have Rs.10, 000 in your trading account you can do day trading because you get margin on your available amount for day trading. Some brokers provide 3 or 4 times or even higher margin amount. So you bought Kotakbank at Rs.315, Qty - 100 i.e. Rs.315x100 = 31500 and sold it at Rs.316. You took only Rs.1 as profit for Rs.315 share price and you sold 100 shares so your profit is
Rs.100. So you get Rs.100 as profit in single trade. Now lets calculate how much you have to pay as brokerage and taxes and finally how much you will get as your net profit behind this single trade. Your buying amount is = Rs.31500 (Rs.315x100 Qty shares) = 0.05% as brokerage (we took it maximum brokerage but you may have even less) on 31500 which comes to Rs.15.75 = you have to pay service tax of 12.36% only on brokerage = so 12.36% on Rs.15.75 comes to Rs 1.92 The total brokerage + service tax on buying is Rs.15.75 + Rs.1.92 = Rs.17.67 Now let s calculate the brokerage and taxes on selling amount = you sold KotakBank shares at Rs.316, Qty - 100 so the amount comes to Rs.31600 (Rs.316 x 100 Qty shares) = 0.05% brokerage on 31600, comes to Rs.15.8 = service tax 12.36% on brokerage comes to Rs.1.93 You have to pay STT (Service Transaction Tax) of 0.025% on selling amount which comes to Rs.6.32. So total brokerage + taxes you have to pay for selling is = Rs.15.8 + Rs.1.93 + Rs.6.32 = Rs.24.05. Total amount you have to pay on buying and selling is = Rs.17.67 (buying) + Rs.24.05 (selling) = Rs.41.72. You also have to pay stamp duty and regulatory charges on total turnover. Your total turn over is calculated by adding the buying amount and selling amount. Buying amount is 31500 and selling amount is 31600 which adds up to Rs. 61300 Stamp duty - 0.002% and Regulatory charges - 0.004% adds up to 0.006% On total turnover amount (Rs. 61300) the taxes comes to Rs 3.8. So the total amount you have to pay including brokerage and taxes is only Rs 41.72 + 3.8 = 45.52 So now the conclusion is you are paying Rs.45.52 while you earned the profit of Rs.100. So don t you think more then 50% profit in single trade is quite enough to do thousands per day. If you continue doing such small trades with such small profits then it will end up with big amount at the end of the day. Suppose if you do 10 trades in a day which is quite possible to add up to Rs.500 per day (Rs.50 per trade as per above example).
INTRADAYTIPS COM 'S 11 GOLDEN SUGGESTIONS 1) DO NOT OVER TRADE & NOT MAKE HURRY TO BOOK PROFIT. If your trading capacity is Rs.1,00,000 -Trade only for Rs.50,000- Do not trade for Rs.2,00,000.- do not over trade. We advise not hurry to book profit when market is in your favour - wait for the right time. 2) Trade IN DIFFERENT SECTORS. Do not put your all capital in one sector divide your capital in different sector. Trade in 2 to 4 Stocks at a time with strict Stop Loss. 3)TRADE WITH TREND Do not be afraid to buy at high prices and sell at low prices. Do not buy just because it is a low price & do not sell because it is high. Buy when there is bad news and Sell when there is good news. 4)DO NOT EXPECT PROFIT ON EVERY DAY. If you consider you are a smart trader who can make profit on every trade, you are 100% wrong. Always be flexible and accept the fact as soon as you realize that you are on wrong side of the trade. Simply get out of the trade without changing your strategy during the market; it may cause you double losses. 5)WITHDRAW PORTION OF YOUR PROFIT. it is must that trader must take a portion of the profit and put it in separate account. This is absolutely must for long term stability in the market. 6)AVOID TRADING IF YOU ARE NOT CLEAR NSE & BSE will never close, every morning at 9.00 a.m. ( 5 days in a week) it will open. So do not try to be a millionaire in a day. It is next to impossible to earn money every day in stock market. 7)IF YOU WILL AVOID STOP -LOSS, NEXT DAY MARKET WILL AVOID YOU. (FOR TRADING WITHOUT CAPITAL) Do not average out in our share tips when market is not in favour. Limit your losses by keeping a stop loss order - Never cancel a stop loss order after you have placed it, otherwise you may loose more. 8) TRADE ONLY IN HIGH VOLUME STOCK ( FNO STOCKS) In low volume stocks the volatility is too high and chance of Stop Loss limit getting failed is too high as there would be no Buyer or seller at your Stop Loss Level. 9)SELL SHORT AS OFTEN AS YOU LONG. Remember that if you are caught in a SHORT SELL POSITION, high chances are
that it will give back in less than a month. But if you are caught in a LONG POSITION it takes much more time to build (Sometimes we have to wait for 2-3 years for our buying prices.)if you consider 10 different reasons affecting the market (nse & bse)- on an average, 7 reasons are for bearish trend & only 3 reasons for bullish trend. Hence be cautious in taking a long position. 10)RUMOURS CAN RUIN YOU PLEASE DON'T FOLLOW THEM. RUMOURS CAN RUIN YOU PLEASE DON'T FOLLOW THEM or Rumors is part of your strategy. Believe in Charts, act on Charts. There is no second best option. 11)DO NOT FORGET TO ADJUST DAILY EXPENSES. Do not forget expenses like Brokerage, telephone & Mobile bills, Internet charges, computer maintenance, etc. in the profits. ADVANTAGE OF INTRADAY Trading (Day Trading) 1) You will have to pay less Brokerage. 2) Everyday you can do fresh trading according to the market trend because everyday market trend is different. 3) After stock market closing, no body can predict next day's market opening. 4) There is no need to pay any carry forward margin. 5) In intraday you can trade good volume with low risk. Hence chances of earning more are higher. Intraday Trading Do's & Don't Intraday trading, often called simply "day trading," is the practice of buying and selling a financial product on the same day. It is often mentioned in reference to the stock market, but you can also day trade many other types of financial vehicles. They hope to catch quick price moves in the stocks that they trade. Intraday traders rarely, if ever, hold a position in a stock overnight. Rather, they make sure to sell all of their open positions before the close of trading. Many legitimate intraday trading strategies are available to day traders.it is a high-energy field that carries substantial risks but also offers considerable profit opportunities. Successful day traders can earn a good and consistent living. If market rises from yesterday and the share you are holding is in negative then it should be cut and if intraday trend of index is in buying state then one should buy a stock in which is in positive. If index is in negative then one should look to short stocks which are negative and not stocks which are in postive.
It is not necessary that a stock which is weak today during intraday trading might be weak tomorrow also, simultaneously if a stock is strong today might not be strong tomorrow.so trade carefully If Indian Share Markets have gone up overnight, the markets here in all probability will open strong, so one should be quite careful when buying stocks as the general psychology of public is to buy when good news is there. Being a contrarians is very important while trading intraday. Stop loss is a must while trading intraday. Always trade in very liquid stocks i.e. which have very high volume because as entry and exit can be very fast in such stocks. Do paper trading before you actually start trading so that when you start making paper profits, then shift to actual trading. Keep your volume constant e.g.: if you trade in five lots of nifty future then trade in five lots only. This position can be increased only when you are satisfied with your trading for a month. It should not be that one day you buy five lots and next day you trade in ten lots and third day you get a loss and stop trading for two days. Fear and Greed are at maximum levels while trading intraday so always have less position when you are new to intraday trading as otherwise you will be mostly under tension. Stock Market Futures A stock future is a contract to buy or sell a specific amount of stock for a certain price on a set future date. Its a financial contracts where the underlying asset is an individual stock. Stock Future contract is an agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller. The contracts have standardized specifications like market lot, expiry day, and unit of price quotation, tick size and method of settlement Stock futures offer a variety of usage to the investors. Some of the key usages are mentioned below: Investors can take long term view on the underlying stock using stock futures. Stock futures offer high leverage. This means that one can take large position with less capital. For example, paying 20% initial margin one can take positionfor 100 i.e. 5 times the cash outflow. Futures may look overpriced or under priced compared to the spot and can offer opportunities to arbitrage or earn risk-less profit. Single stock futures offer arbitrage opportunity between stock futures and the underlying cash market. It also provides arbitrage opportunity between synthetic futures (created through options) and single stock futures.
When used efficiently, single-stock futures can be an effective risk management tool. For instance, an investor with position in cash segment can minimize either market risk or price risk of the underlying stock by taking reverse position in an appropriate futures contract Presently, Stock futures are settled in cash. The final settlement price is the closing price of the underlying stock. Why Futures are popular There is no delivery. When you buy in the cash segment (where investors buy and sell any number of shares and hold them in demat accounts), the shares are delivered to you and sent to your demat account. Over here, there is no delivery so you do not need a demat account. Lower brokerage The brokerage in Futures is much lower. It will be around 0.03% to 0.05% of the transaction. These are the rates given to regular investors. An occasional investor may end up paying up to 0.1% as brokerage. In the cash segment, the brokerage will be around 0.25% to 0.75%. Margin payment When you buy shares in the cash segment, you have to make the entire payment to your broker. Within two days, you will have to make the full payment to your broker. In Futures, you just pay the margin, not the entire amount. Can effectively short sell When you sell shares without owning them, it is known as short selling. You would do so if you believe that the price of the stock is going to drop. This way, you sell it at a higher rate and buy it at a lower rate later. With Futures, you do not have to square your transaction at the end of the day. You can square the transaction whenever you want or wait till it expires on the last Thursday of the month. But, in the cash segment, you have to square your transaction by the end of the day, so you can short sell just for a day
Glossary Arbitrage» Action of buying in one exchange and selling in another to take advantage of difference in price Auction» Stock Exchange mechanism to fulfill its obligation to the buyer of a security. It is done when the seller is unable to deliver the scrips sold by him. The security in question is offered by a member who has ready possession of the scrips. Bear» An operator who expects the share price to fall Bear Market» A market where everyone is selling.its a weak and falling market where buyers are absent Blue Chips» Good Shares of financially sound, well established companies with a track record of good growth and regular payment of dividends. Bonus Shares» Shares allotted to the existing shareholders by capitalising the reserves into additional capital. Book Closure» Book closure defines a period during which A company closes its register of members for updating the records to facilitate payment of dividends or issue of rights of bonus shares and during which deliveries are not effected in the clearing house. Bourse» A Stock Exchange Bull» An operator who expects the share price to rise and takes position in the market to sell at a later date. Bull Market» A rising market where when there are more numbers of buyers than sellers Call Option» An option where the buyer gets the right to buy the underlying security at a specified future date. Carry Forward» Settlement where positions are carried forward from one settlement to another settlement. Cash Settlement» Payment for transactions done in one settlement on the due date. Circuit Breaker» A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour.normally applied when everyone is selling. Clearing House» It is a legal counter party to both legs of every trade. The netted purchase and
sale positions of the trading Members are settled through the Clearing House. Company Objection» The letter sent by the Company is known as Company Objection. Cum Bonus» A share is described as cum bonus when the purchaser is entitled for current bonus Cum Dividend» A shares is described as cum dividend when the purchaser is entitled for current dividend Cum Rights» A share is described as cum rights when the purchaser is entitled for current rights Day Order» Untraded quantity that remains and is not cancelled until the end of the day. Dealer» Who works on behalf of the Trading Member is a Dealer Delivery Based Trading» When a share is bought or sold for the purpose of receiving or effecting deliveries. Dematerialisation» Process of converting a security from physical form to electronic form Derivatives» A financial contract between two or more parties and it is derived from the future value of an underlying asset. Disclosed Quantity» An order entered in the system wherein only a fraction of the order quantity is disclosed to the market. Dividend» Cash payment made to the shareholders from the profit Ex Bonus» A share is described as Ex Bonus when the buyer is not entitled for the Bonus. The seller remains the beneficiary. Ex Dividend» A share is described as Ex Dividend when the buyer is not entitled for the Dividend. The seller remains the beneficiary. Ex Rights» A share is described as Ex Rights when the buyer is not entitled for the Rights. The seller remains the beneficiary. Expiry Date» The date and time after which a writer of an option cannot exercise his rights. Exposure Limit» The limit allowed to the Broker by the Exchange or to the customer by broker. It is the total value upto which one is allowed to hold open positions at any point of time.
Futures Contract» An agreement between parties for a specified asset for performance on a fixed date in future. Hedging» It is protecting an existing asset position from an adverse future position. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market. Insider Trading» Trading carried out by people who have access to non public price sensitive information. Limit Order» A buy or sell order where price is specified at the time of order entry Long Position» A bull position in a security Margin» An upfront payment made by the customer to take position in the market. His exposure limit is fixed based on the margin money brought in by him. Mark To Market» A notional profit or loss of a long or short position as compared to the current market price. Market Order» An order where no price specification is mentioned at the time of placement NSCCL» National Securities Clearing Corporation Limited. The Clearing Corporation of the National Stock Exchange. NSE» National Stock Exchange Offer» The price at which a share is available in the market Offer Price» The price at which a company offers its shares to the public through issue of a prospectus Order Cancellation» A facility available in the trading system where one is allowed to cancel the
order placed earlier. Order Modification» A facility available in the trading system where one is allowed to modify an earlier order. Pay In» The designated day on which the members pay securities and funds to the clearing house Pay Out» The designated day on which the Clearing House effects payment and deliveries to the members Price Band» It sets up the upper and lower limits for a share's movement on any given day. It is based on the previous trading day's closing price. The system will not accept the orders that are out of bound. Price Rigging» A process where persons collude to artificially increase or decrease the price of a security Put Option» An option where the buyer gets the right to sell the underlying security at a specified future date. Quote» Prices at which a share can be bought or sold Record Date» The date on which the beneficial owner of the Corporate Benefits is determined. Rematerialisation» Process of converting the shares from electronic form to physical form Rights Issue» Issue of new share to the existing shareholders at a price which is normally lower than the current market price of the old shares. It is issued in a fixed ratio to the those shares which are already held. SEBI» The Securities Exchange Board of India, the regulatory body controlling the functioning of Stock Exchanges in India.
Stop Loss Order» An order placed with a 'trigger price'. It is placed to minimise the losses and the order can be either for a purchase or a sale. Volume» The total number of shares that are transacted in a scrip. It helps in analyzing and understanding the reasons behind price Abbreviations Maximum Buying Price» MBP Current Market Price» CMP Target» TGT Stop Loss» SL Intraday» IND Buy Today Sell Tomorrow» BTST Purchase Today Sell Tomorrow» PTST Long Term» LT Short Term» ST Futures» Fut Options» Opt Equity» EQ Book Partial Profit» BPP Book full profit» BFP Sell Today Purchase Tomorrow» STPT