Almost
everyone finds intra-day (margin) trading fascinating. Most young
and first-time day-traders especially Option traders feels uits
very easy to gain 5-10 per cent each day trading in
Options.
For
instance, if you deposit Rs 20,000 with your broker then he can
allow you to buy or sell shares worth Rs 80,000 (Rs 20,000
multiplied by 4) on a particular day. At the end of the day you
have to sell whatever stocks you have bought irrespective of profit
or loss.
But things
are not all that rosy as they seem to be. You may buy a stock at a
higher price and the stock price of that stock may fall after that.
Before the market closes at 3.30 pm everyday you will have to sell
that stock to square off your trade. That is the most important
rule of day trading. If you sell it at a price lower than your
purchase price then you make a loss. Similarly, if you sell a stock
at a higher price and purchase that stock again on the same day for
a price higher than what you bought for, you again make a
loss.
So
day-trading is a double-edged sword which if not handled with care
can hurt young and first-time day traders. Hence, in depth
knowledge and a lot of insight is needed for intra-day trading. In
fact for a novice, intra day trading can turn out to be a dangerous
affair.
Does
that mean you should completely avoid Intra day
trading?
Well the
answer is NO. However, one needs to be careful while trading and
keep several things in mind before you jump into the choppy sea of
intra-day (margin) trading. While hundreds of books have been
written on tricks of intra-day trading here are 10 thumb rules that
you must remember before you start trading intra day.
1. Never rush into a
trade. Always reach the market at least 15-20 minutes in advance
with your trading list in place.
2. Trade with a calm
mind, maintain a sound balance between personal life and life in
the share market; don’t let the two aspects interfere.
3. Don’t enter a trade
if you are unsure of the trend (if prices will move up or down).
Preferably start trading around 9:30 am (markets begin at 9.15 am
every weekday; weekends are a holiday) to know the clear market
direction.
4. Never risk more
than 10 per cent of your trading capital in a single
trade.
5. Over
trading kills, never do over trading.
6. Remember that no
one can predict the exact highs and exact lows. So never try to
catch them.
7. Always maintain
strict discipline in your trades. Remember to keep a strict stop
loss and booking profits is a must (So that you know how much you
can afford to lose).
8. Booking profits is
very important and booking loss at the right time is even more
important.
9. Never let a profit
turn into a loss; always keep booking profits and raise your stop
loss accordingly.
10. When in doubt the
best thing to do is ‘Get Out’, and don’t ‘Get In’ when in doubt.
Simply put, when in doubt prefer staying at home and enjoy the
company of your loved ones.
in one day. 
