Day trading

“ LESS IS MORE “
 Few facts about stock market

 Five fundamental truths:

 Anything can happen.
 You don’t need to know what is going to happen next in order
to make money.
There are no holy grail trading strategy in trading , the only holy
grail strategy is a good risk management system.
There is no certainity in stock market and hence it is highly
advised that you a put stop loss in trading.
Trading is a game of emotions , and hence forth it highly
advised that you start with paper trading first or trade with just a
nominal capital say just rs 10000.
 The power of one

“ pick one thing and take atleast 50 trades , and

make sure to put everything in YOUR TRADING
JOURNAL “
 Difference between Rule based / discretionery trading

Rule based trading Discretionary based trading

Success ratio is 80 percent , Failure rate Success ratio is less than 5 percent
is 20 percent
Here most effort’s are required during This can’t be back tested as it has a lot
bactesting ,and much less thinking of ambiguity , and emotions can be
during live market. traded , and not backtested.
Here success ratio is very good , further High chances of trading mistakes , as
rule based trading involves much lesser discipline is a key requirement in this
trading mistakes. case.
Here the chances of blowing up your Chances of blowing up your account is
account are least very very HIGH.
Chances of over trading are next to Chances of over trading are very very
impossible as you trade what you see HIGH
not what you feel.
Rules based trading is peaceful as it Very stressful , as there are no clear
involves mind , and not feeling. entry , exit point’s.
 TYPES OF TRADING

 BREAKOUT TRADING ( less accuracy , easy to trade ,

and gives big moves ) – “ expect 5 out of 10 trades to be
right
 PULLBACK TRADING / RETEST ( very beginner
friendly , good risk to reward , to be covered in SWING
TRADING ) - Wednesday.
 REVERSAL TRADING – “ Tricky trades as you’re
against the trend , but very high rewarding if traded with
consistency’’
NOTE – “ Key is to pick one , and trade for atleast 50
trades “
Breakout / breakdown
BREAKOUT
BREAKDOWN
Reversal trade ( Power Grid )
Reversal , breakout and Pull back ( Retest )
Bank nifty , hourly TF
 BREAKOUT TRADING

Day trading setup is based on the logic of breakout

trading
The reason we choose breakout trading is because
there is a clear understanding of the winner ( Buyer
or seller )
The inherent nature of breakout is less accuracy
 Again a reminder – “ The power of one ’’

“ pick one thing and take atleast 50 trades , and

make sure to put everything in YOUR TRADING
JOURNAL “
 As a day trader , what you need to know

What to trade ?
How to trade ?
How much to trade ? ( Already covered )
Where to Exit a trade ? ( Stop loss )
How to cut your losses ?
How to run your profit’s ?
How to re – enter into a winning trade ?
 Types of analysis ?

There are two types of analysis

 End of the day
 Live market analysis
 What to trade ?

Now we know that , every tight range

( consolidation ) , leads to range expansion
and as a breakout trader , we need capture the
expansion in a range
so one should look for , stocks that are consolidating
in a tight range , and are expected to give a breakout
These stocks are likely to continue it’s momentum
Range contraction and range expansion
 Types of range

To be frank , it’s silly to name a range breakout setup as

range can be of any type on the chart ( we will see it on the
live chart )
Range simple means contraction in volatility leading to
prices narrowing down to a tight range
Such tight range represents balance in the market , where
both buyer’s and seller’s are comfortable.
However once the range is taken out , one of them is
trapped which leads to one sided ( Panic / euphoria ) move.
The more time the market spends in a range , higher are
the chances for the market to give a strong breakout.
Other types of range
 TIME FRAME ( To identify range )

You can analyse the chart on a daily time frame or 60 minutes

timeframe to find stock that are likely to give a good move
If you’re a beginner , you’ll feel much comfortable in finding a
tight range on a 60 minutes timeframe
60 minutes chart will give you enough data to undertstand the
price action in a simple manner
And as you get some experience , you can start engaging with
daily time frame , as this would also be applicable for swing
trades
I personally engage with daily timeframe as I prefer swing
trading for stocks
Uptrend and consolidation
Consolidation for 3 days
When both buyer’s and seller’s are fighting
Longer consolidation
 ALERTS

Alert’s are the best way to ensure that we don’t

engage with the charts unnecessarily
It also ensures that we don’t take random trades
You just have to place the alerts , and then wait for
the notification to enter into a trade
This will surely reduce your screen time
You can either use tradingview alert’s or you can
simply use zerodha’s sentinel which gives akerts
through mail
 Which stocks to Trade ?

Our intention – “ Our intention here is to catch a big move . That’s

why we want to stick to those stock’s that move fast like a bullet train.
So how do we know which are the fast moving stock’s.
Well , NSE has a index named “High beta stock’s”.
High beta stocks are those stock’s that tend to move much faster than
the index.
If the beta of a stock is 1.5 , it means that if the index moves by 1
percent , this high beta stock would move by 1.5 percent.
Our probability of winning increases much more than other’s.
Like I said I always believe in having a fixed watchlist rather than
going chasing some stock’s.
You may go to NSE and choose your top 10 favourite liquid high beta
stock’s.
 My recommendation of high beta stock’s

Bajaj Finance
Tata motor’s
Indus Ind Bank
State bank of INDIA
Tata steel
Zeel
Icici bank
Apollo hospital’s
Reliance
Maruti suzuki
Asian paints
 Suggestion

Stocks – “ Swing Trading “

Index – “ Day Trading “
 Three types of trend

There are three types of basic trend’s in the market

Uptrend
Downtrend
Sideway’s
Uptrend
DOWNTREND
Sideways ( Ranging market )
 Location – “ Previous day high / low “

After understanding the types of trend , one thing is

pretty clear , The previous day and high is a reaction
point for any trend.
Therefore this becomes an important area for all the
trader’s.
 PDH / PDL

Previous day high / previous day low is not just a

reaction point , but a watch out area for all the
trader’s
You know why we focus so much on PDH and PDL ?
If you look at the stock prices on newspaper , all it
mentions is open , high , low and close.
During old times ,there were no chart’s people relied
just on PDH / PDL and traded near this important
location.
 Conclusion

When PDH is taken out , we expect the price to move

higher
When PDL is taken out , we expect price to move
lower
PDH / PDL acts as a inflection point
 Pivot’s – “ System based support and resistance”

What are Pivots?

 Pivots - Nothing but support/Resistance, calculated
based on the average price of high/low/close of previous
day.
 Pivots act like a magnet on a chart , it is believed that
prices are most likely going to come towards pivot.
 The best part about pivot’s is that they remain stagnant
on chart
 One of the advantages of using pivot points is that it is
objective, so it’s very easy to test how price reacted to
them.
Pivot point’s – “ horizontal lines ’’
 Zone

we’re going to use a indicator , Leega Indicator

The indicator plots , previous day high / previous
day low
We will need R1 / S1 pivot to make it have a zone on
the chart, so we unclick everything else
Zone , and not a line
 How to enter ?

We’re going to use 5 minutes timeframe for day

trading
Our entry trigger shall be , once the zone is taken out
on a 5 minute candle closing basis
The instrument should open with previous day range
, PDH / PDL
Please dont jump as and when the breakout is done ,
always wait for a closing candle
 Where to put the stop loss ?

There are two ways to put a stop loss , but one must always
respect the risk to reward in order to make the best of trading
decision’s.
 Support and resistance ( Logic – as and when your view goes
wrong ), I prefer this one.
 Below / above the candlestick. ( however at times candlestick
may be way too long , then we may have to adjust)
 Retracement as a SL ( Safe SL )
 Target – “ we will take this in position sizing and risk
management , but yeah as a beginner trader , prefer R2R ,
atleast a 1:1 for your first 50 trades “
 Note – “ Continue with the coin toss exercise , until and unless
Stop loss
 SL for Zone breakout

The stop loss part is pretty simple in this case

We will keep the stop loss below or above the zone
If the distance area of the zone is more than .75
percent , then simply take only 1/4th of your usual
quantity.
Use the tool to calculate proper position sizing as per
the stop loss
If you’re new to the market , you can also place a
SLM order to get that extra minute to calculate
proper position sizing
Avoid big quantity with big SL
Easy to execute
Good momentum in morning
Zone 1 and zone 3 are high probable
Fake breakout’s are going to happen.
PDH / PDL are strong rejection areas
 Nature of reversal’s

Reversal trades are little tricky to trade as they’re not

objective or rules based
So train your eyes to spot then in live market to
understand it well
 How to Exit a trade ?

The most critical

 risk to reward ( Fixed Risk to reward of say 1:1 )
 Nearest support and resistance ( one can use pivot
points )
 Partial profit booking ( Book half at 1:1 and run the
remaining qty )
 Running profit’s
 Running profit’s

Running the profit’s simple means that you stay in

the trade until unless the price has strong
momentum
The psychology in running profit’s is to capture a big
profit when market moves in your favor
The advantage to running profit is that your winning
trades are going to big enough to take your losing
trades easily
The con of running profit is that , your hit rate is
going to be less...
How do we run profit’s ?
 Exponential moving average

 Use of 15 day exponential moving average

1. You’re going to stay in the trade , until unless the price stay’s above /
below the moving average
2. As and when price moves below / above the moving average , you’ll
exit your trade
3. The advantage is that , one fine day you’ll get a windfall gain and
you’ll catch the biggest whale in the town.

 Disadvantage
1. You have to actively watch the market.
2. The M2M swings can really disturb your peace of mind.
3. Not knowing pre defined target is little difficult to handle
psychologically
 Exit plan ( Beginner’s )

Exit all at 1:1

Exit the remaining as per your preferable exit
strategy ( pivots or EMA ) – once you have taken 20
trades
 Re – entry trigger

Once you have entered into a trade as per zone breakout

And lets say your SL is triggered and you have exited the trade
Many a times , a stock retraces just to shake out trader’s and
then moves ahead with momentum , and one may miss a big
trend
In such cases , if you have exited the trade as per your exit
criteria , then...
 you can re – enter once day high / day low is taken out again.
 The accuracy is much higher in the case of re – entry ( 75
percent in the case of bank nifty )
Re – entry Trigger
Re entry short side
 Bank nifty

The same system works beautifully in bank nifty as

bank nifty is a high beta index
However , the same wouldn’t work in nifty as nifty is
a low beta index
Backtest the system in a raw form , and analyse the
setup as per instructions given in the manu bhatia
video shared with you
 Trading zone

There are 3 trading zones –

 Zone 1 – ( 9:20 to 10:30) – Good for office goer’s . You’ll
be done with the day in an hour or so in most cases ,
however the first hour is also very Volatile causing a lot of
Stop’s.
 Zone 2 – ( 10:30 to 12:30) – Shanti Wala Market.
 Zone 3 – ( 12:30 and later on ) – for breakout trading ,
relatively easy to trade as you get time to prepare
yourself , and also it is easier to run profit’s with EMA.
 Note – “ Make use of alerts to trade this , to ensure less
screen time and less mistakes “
Rising tide
 Index

NIFTY BANK
NIFTY AUTO
NIFTY FIN SERVICE
NIFTY FMCG
NIFTY IT
NIFTY MEDIA
NIFTY METAL
NIFTY PHARMA
NIFTY PSU BANK
NIFTY PVT BANK
NIFTY REALTY
Why clean chart over cluttered chart ?
obstacles
 Again , Stock selection

 There are two simple ways of selecting stocks

1. On a hourly timeframe , start looking at the stocks
which are giving a good consolidation
2. Look for a stock , which has come out of
consolidation on a daily timeframe , and look for
trading opportunity , in favour of the breakout
only.
 Trade opportunities

Zone breakout’s ( In line with trend )

Zone reversal’s ( In line with the trend )
TATA MOTOR’S
PEL
APOLLO HOSPITAL
BAJ FINANCE
BAJ FINANCE
INDUSIND BANK
 Again , A focused list is suggested for a beginner.

Bajaj Finance
Tata motor’s
Indus Ind Bank
State bank of INDIA
Tata steel
Zeel
Icici bank
Apollo hospital’s
Reliance
Maruti suzuki
Asian paints
 LIST OF HIGH BETA STOCKS

https://
www.niftyindices.com/indices/equity/strategy-indic
es/nifty-high-beta-50
Avoid stocks trading below 200 for you
 PRO TIP

• Sectoral analysis
• The cleaner the chart the better
 Alert’s
SLM – order ( Beginner friendly , position sizing
benefits )
Backtest the system on Bank Nifty
Trading journal
One trade a day and kill switch feature zerodha
BACKTESTING
 Conclusion

Watchlist preparation – EOD HIGH BETA

Entry Trigger – 5 Minute candle closing above the
zone
Stop loss – below the zone ( Limit to . 75 percent SL )
Exit trigger – risk to reward , Trailing stop loss or
pivot points
Re – entry trigger
Pro tip – “ If you’re a beginner , take first 20 trades
with a Risk to reward of 1:1 for 70 percent qty , and
run the remaining as per EMA ’’
 Should i start trading from tomorrow ?

Absolutely no
First priority is the exercise , that has been given to
get habitual to taking systematic trades , and
maintaining a trading journal
Once you learn a strategy , your mind will trick you
to be want to be right
So as of now focus on trading exercise 