Dear Friends,
I am explaining the method being currently adopted by me to do intraday trading. The method which I explain may NOT suite everybody’s style of trading, kindly re-adjust as per your style.
Before we begin, Few words of caution, for the benefit of New Traders :-
(Experienced Traders may go to the sub-title – “Zones of Camarilla”, by skipping other paragraphs)
It is highly risky to do intraday trading, no method can be 100 % perfect, If so, the market may not exist, Because, only when someone feels like selling the other can buy and vice-versa.
Kindly, trade equal value ALWAYS.
Why ??? In my initial days I used to trade 4 lots Nifty (and sometimes CALL and PUT - Options) on each trade and keep winning almost 70 % of the trades, till 20th of each month, then I become over-confident and trade 10 or 20 Lots (most of the times, by seeing Lower premiums on the options, I used to get tempted), and that is HOW, I had been loosing money pretty consistently, This is called IN-DISCIPLINE, hence the caution to trade equal value ALWAYS.
Calculate Risk/Reward, ratio, before you initiate a Trade :- For every trade we say Target and Stop-loss, before you initiate the trade, kindly, check whether the loss incurred, IF and When, the Stop-loss is hit, is AFFORDABLE to you. Usually, any loss of more than 10 % of your Capital, in any ONE trade is considered Dangerous. I set my ideal limit, less than 5 % and on very few occasions, between 5 to 10 %. If the Stop-loss trigger is likely to give more than 10 % loss on my capital, I do NOT trade that call, even if I am confident on the system and on that particular trade. Please, remember this sentence, “To recover 50 % of Loss you made, you need to make 100 % profit using the remaining capital”.
“Get Down from the Train, when you reach the destination” : - When your Target is reached please book profit, the stock may go further, and you may re-enter the stock ONCE AGAIN, after considering the Risk/Reward once again.
Wait for Opportunity:
Market will not go away, do not be in a hurry to enter or exit a trade. Have patience and once entered stick to your SL and target.
Zones of Camarilla :
The zone between R1 and S1 is known as “Trend-forming Zone”, This zone is most of the times very volatile and difficult to trade, hence Avoid making any New Trade Entry while the stock is trading in this ZONE.
Trend Reversal Zone : The Zone between R1 and R2 and the Zone between S1 and S2 are known as trend reversal Zones. Any stock opens in this Zone above R1 and goes towards R2 (especially when the market trend is bearish), will get resisted at R2 and commence bearish run towards S2 and further below till Break-Down and S5 and sometimes even below. The vice-versa is also applicable especially when the market trend is bullish and the stock is trying to test S2, will get support and proceed towards R2, Break-out and R5 and even above.