I have been trading the stocks for quite some time now with the price action techniques and I find it more rewarding than Index trading. The only reason for that is that stocks tend to move more, 5%, 10% or even 20% in a day. With Nifty or Bank Nifty it is not possible at all. For the Index, 2% kind of move is the biggest move for most of the time.
There are only four possibilities when we enter into the trade. 1) Big profit. 2) Big loss. 3) Small profit. 4) Small loss. Now what we try to do is we try to avoid the Big loss in trading. If we are able to do that, we will only have either big profit or small profit or small loss. Small profits will take care of small losses and we will be left with only big profit.
I just kept this basic law of trading in mind and designed the momentum catching stock trading strategy for intraday. This strategy will basically try to capture the morning big move that stocks make.
Now let me discuss this strategy in some detail for your understanding of it.
Basic method to capture short term momentum:
1) Find stocks which break out of some sort of good consolidation in the morning.
2) Find stocks which show good signs of reversal in the morning.
Stocks to screen:
F&O group of cash stocks. Around 150 highly liquid cash stocks.
I have my way of screening these 150 stocks and finding 2 to 3 stocks out of them to trade. There is no AFL or ready-made screener. I depend all on my eyes and mind and my price reading skills.
Brokers normally provide 8 to 12 times leverage for trading the stocks. So with 1 lac of capital or margin, it is possible to take 2 simultaneous trades of 4 to 5 lacs.
Around 0.5% of risk and 1 to 1.5% of reward.
From 9:15 am to 11 am only, less than 2 hours of trading. No need to trade for whole day. It is possible to capture 1% to 2% of moves in this short period. If someone has a luxury of time and want to trade for the whole day, can keep the small quantity of winning trade till the end of day and try to capture the whole day's move.
Who can trade:
Anyone who is willing to learn price action based short term trading. It is suitable for the housewives, students, working professionals or businessmen who can spare couple of hours in morning,
Performance report with real proof:
Now let me share one month results of trading the stocks the same way. Click here for the performance report with real proof of broker's trade book. It was possible to make around Rs. 30K of profit at the end of month with strict discipline. It is a big amount considering only couple of hours of trading.