How to win intraday trades in Indian Stock Market?
First, there is no point betting on stocks randomly. Just some good news came for a company on television and you bought intraday or sold intraday with bad news of the company. This may or may not work, because if the sentiment of the market is negative, the stock price may not rise even if it is good news, and sometimes even if it's bad news, the stock price may not fall because it might be that all the negative news already factored in the price, and you are unaware of that. So this is what I mean when I said don't randomly bet on just any stock based on news because you are not aware of those stocks and don't regularly track them.
First, it is important to make a list of stocks you regularly track and you have to make a strict rule that you will trade only in those stocks. This rule is important because you better know the support and resistance of a stock if you are tracking it regularly. Just like your pet is with you for past many years and you exactly know how it behaves in different situations.
Another important thing is to select only those stocks which have high trading volumes and which move fast (up or down) with the strong movement of Nifty and Sensex. Like I have in my list a stock called Jain Irrigation which I am tracking for past 6-7 months and it never moved below Rs.60 and above Rs.75 during that period because the company never came out with good quarterly results and its price never went below Rs.60 because of the valuations and good fundamentals of the company (its 12 June 2015 when I am writing this).
The stock price of Jain Irrigation only used to move according to where nifty and Sensex prices were moving. If Nifty will go up, Jain Irrigation will move up and vice versa. So I gave you one example of the stock selection procedure. Likewise, you need to select your stocks first even before you start trading. You need to spend at least a week to find such stocks which are only trading in a range with high volumes and heavily affected by the movement of nifty or Sensex. I won't tell my full list. Make a list of at least 30-40 of such stocks and track them regularly. For intraday selling, best stocks are those which have high debt in their books, or the company shares are pledged, as those kinds of stocks fall most when nifty goes down. These are also called high beta stocks.
I mentioned above the support and resistance of Jain Irrigation as Rs.60 and Rs.75 but that doesn't mean I will only buy near support or sell near resistance. That is also possible if you are a swing trader (keeping positions for few days is swing trading) but for intraday trading this may not work. Also don't bet on the stocks you selected during times when quarterly results are going to be declared by the company, because at that time the sentiment of the stock may turn against the sentiment of nifty or Sensex. And you can't take chances with the results as you never know if results of the company are going to be good or bad. Support and resistance may change for the stocks you selected after quarterly results are declared, so you need to adjust for that.
But sometimes the fundamental of the company go so bad then such a stock only moves downward and settle at very low prices and volume also dies. You need to remove such stocks from your list if that happens. The stocks that best work for intraday trading are those which are fundamentally strong but the prices are still not appreciating due to temporary problems in the company and so the stock price is moving in a range.
Now comes the important part which is the actual trading. We trade intraday only during times when there is a sudden breakout of nifty on upside or downside. Remember you won't buy or sell any stock in your list unless there is a sudden breakout of nifty on upside or downside. I am talking about breakout here and not just if nifty becomes green or red or nifty is consolidating in a range. As soon as you see breakout, say downside, short any stock in your list which you think is high beta and very prone to move downward.
This would certainly work great and just get out of the trade within 1-2 minutes as soon as you see profits or keep trailing stop losses so that you can maximize your profit. Also, keep a stop loss in case the trade goes against you. But don't short any stock in your list which recently got some positive news and buyers are waiting to buy at lower levels. Short only that stock in your list which no one wants to buy because of weak fundamentals. This is a tough part to select the stock to short and it will come from practice. Usually, you select the weak stocks during offline hours when the market is closed. Just surf the message boards on moneycontrol website and check which companies are in trouble with the fundamentals and then add them to your list to trade on shorter side.
But there are also times when the nifty takes a breakout on the upside but stocks don't move in the same direction as nifty. This is because there could be a false breakout on the upside when short covering happens in the market but traders are not actually buying nifty. Suppose most of the traders sold the nifty at 8400 after some negative sentiment and the nifty went below to test 8000. But then most of the traders booked profit at 8000 levels (short covering), and in that case also, nifty will take breakout on the upside but this is not a convincing move in the northern direction as the sentiment is still very negative and people are still afraid to buy. So you should avoid trading during short covering.
Most important thing to trade intraday is the sentiment of the market. You need to understand what the sentiment of the market is. Nifty may take breakout on the upside but people will again start shorting it if the sentiment is negative and sentiment may remain same for months. The sentiment of the market will depend on many things like the various events happening on the national and international level. To give you an example, there was an important event coming on 2 June, 2015 where RBI would decide whether there will be an interest rate cut or not. All over the media this was flashing and 70% of people believed that there will be an interest rate cut by 25 basis point by RBI governor.
This was a positive sentiment for the market, and one week before this event, people started buying nifty and equities as the market are always forward thinking, so start doing things in advance. So here the sentiment of the market is clear and now when you see the nifty taking breakout on the upside it's quite easy to assume most of the stocks will also move up. So it becomes also easy for you to take intraday trades with confidence on the upside. You need to keep track of future events which are coming.
Another important thing is whether foreign investors are buying in India or not. If they are continuously selling (net sellers) for the past many months then you can easily assume that it will be hard for Indian stock markets to rise, other than if some positive developments, happening on the ground level, lifts the sentiment of the market. So keeping an eye on media is very important to know about the sentiment of the market. I would recommend listening to Anuj Singhal and Lata Venkatesh on CNBC TV18 channel at 8 am in the morning and following them to know the sentiment and mood of the market. But this is not as important as following the breakout of nifty.
I keep track of lot of things like crude oil, dollar index, euro, rupee, politics, government reforms, FII inflows, interest rates in India and USA, monsoon, budget etc and really you learn all these things quickly as you become more experienced and that really helps to know the sentiment of the market.
If the market is continuously falling for past many weeks and months and the sentiment is extremely negative, then even if the market rebounds on the upside, many people still sell who are stuck at higher levels. But I never trade much during uncertainties. You should trade during times when some important events are coming and sentiment of the market is in a particular direction like RBI meeting, FED meeting, budget session, positive news etc.
Suppose the market has gone up a lot and all the individual stocks are mostly in overbought zone, and now if the market sentiment suddenly changes due to some negative news, then this is the best shorting opportunity intraday (after nifty takes a breakout in northern direction) and you make maximum money during such times and vice versa. A Little bit of common sense also works like if the market has sharply fallen continuously for 3 days then there is a chance that it will rebound the 4th day. Remain in trade for longer time during sharp falls or sharp rise in nifty as in that case you can make more money.
Instead of nifty sometimes you can also track bank nifty and trade in "state bank of India"(SBI) stock as this is the best stock to trade as its prices move fast during times when bank nifty or nifty takes a breakout. You can make lots of money by trading in SBI but keep a chart of bank nifty with you to trade in SBI. Keep concentrating on Nifty or bank nifty charts or snap quote window and try to assume where the breakout will be and then take immediate action before anyone else does, to maximize your profits. In case, if your favorite stock already ran up before the nifty breakout then check other stocks in your list and trade in anyone of them. That is also the reason we need a long list of stocks to trade.
I never knew this trick of intraday trading and I learned from a person called G. Bharadwaj who is making more than INR 1 lac per month from intraday trading. You can read how he is doing this on zerodha website.
If you want to trade with zero brokerage fee you should open an account with zerodha. Just check their brokerage calculator. I myself have an account with them and its 100% safe brokerage firm to get free brokerage on equity trades only but not intraday trades. They make money on the interest they earn from millions of rupees of deposits from traders who trade with them. Just check the Alexa rank of zerodha.com website and you can see it ranks around 7000 in the world which means there are millions of traders trading at zerodha and that is the reason it is considered as cheapest and safest brokerage firm.
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