NSE/BSE Day Trading Tips
Intraday or day trading is when you buy and sell a stock on the same day. It's like taking a bet on where the share price is going in the next few hours, minutes or seconds. If a day trader thinks the price of a stock is going up he will buy it, hoping to sell it later for a profit. If he thinks the price is going down he will sell it, hoping to buy it back later at a lower price.
Because many brokers offer the option to trade on margin (using borrowed money) and charge much lower fees for day trades, day trading has become more and more popular in India, particularly among young retail investors. It is however a very high risk pursuit. The use of margin trading and the speed at which trades can be made means that for a day trader massive losses are a real possibility. The flip-side of this, that massive profits are also a possibility, is probably the why it is so popular.
One intraday trading strategy has an extremely short term kind of focus. This occurs when there is multiple buying and selling of the same stock for smaller profits. However, a more popular strategy is when a trader 'takes a position' on a stock which means holding it for a longer period without multiple buying selling.
Another strategy is termed as "event trading" or often called "trading the news". This is when there is a movement in price based on certain news that may have recently broken about a company that is publicly listed. For example, if Reliance petroleum has recently discovered a whole new oil field, this could affect the price of the stock to rise. In this kind of a scenario, Event traders will try to predict how much the news will affect the markets, for how long and then trade accordingly.
One of the more basic day trading strategies is simply riding the trend curve. In this kind of a trading technique, the trader will just assume that the historic movements of the price, if they have been following one consistent trend for a period of time, Eg: moving up constantly, will continue. The trader will then purchase the stock and ride the upward movement until he feels the need to sell it.
Then there are traders called "Swing traders".These people will try and time the market based on the 'swing' that they expect to happen to the prices. They will attempt to predict the point where a stock that is on the rise is about to start falling, where they will sell it, and the other way around as well.
When a trader assumes that the price of a stock will keep fluctuating within a certain price range, this is called trading a range. This upper and lower limit also known as support and resistance lines are often based on recent prices that have been seen. A trader trading a range will buy a stock when its at the lower limit and sell it at the upper limit.
Short selling or shorting a stock is a practice which may be used in combination with any of the other strategies and allows a trader to profit from a price decline by selling a stock that they don't own. The trader borrows the shares from his broker and sells them immediately, hoping that the price will fall so that he can buy them back at a lower price and return them to his broker. The practice of short selling a stock is considered quite controversial and its use by retail investor although permitted by SEBI is still restricted.
Article Source: FxTradingStock.com
About the Author
Moneyvidya.com is an innovative approach to stock recommendations, where you can find stock tips by proven experts with a transparent track record. Moneyvidya has been integrated to both BSE and NSE, so you can find NSE tips as well as BSE trading tips here.
by: Chaitanya Kumar
Total views: 103
Word Count: 626
Date: Thu, 29 Jul 2010
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