1. Define Your Trading Objectives
- Are you looking for consistent small profits, or are you aiming for bigger gains occasionally?
- Set realistic daily/weekly goals, e.g., targeting 1-2% returns on capital per day while keeping risk within manageable limits.
2. Choose Your Market and Instruments
- Stick to liquid instruments like Nifty, Bank Nifty, or large-cap stocks to avoid slippages.
- Diversify across sectors if you’re trading multiple instruments but don’t overload your watchlist. Keep it manageable (5-10 stocks).
3. Develop a Time Commitment
- Decide when you’ll trade: Some traders prefer the morning volatility (first hour after market opens), while others focus on less volatile mid-day trading.
- Tip: Avoid trading during unpredictable market periods like right before major announcements.
4. Pre-Market Preparation
- News Scan: Check global cues, SGX Nifty, company announcements, and economic data releases.
- Charts Review: Identify key support and resistance levels and mark those zones on your chart.
- Set Watchlists: Focus on stocks showing high volumes, breakouts, or specific patterns during the pre-market.
5. Strategy Development
- Use tested strategies that fit your risk appetite and market knowledge, such as: Breakout Strategy: Trade when the stock price moves out of a defined range.
Pullback Strategy: Enter during a brief counter-trend movement within a larger trend.
Moving Average Crossovers: Watch for momentum shifts based on moving average interactions.
Scalping: Take multiple small trades for quick profits.
6. Risk Management Rules
- Position Sizing: Risk only 1-2% of your capital per trade. Example: If your account is ₹1,00,000, limit the risk per trade to ₹1,000–₹2,000.
- Stop Loss: Always set a stop-loss based on technical analysis (e.g., below support levels) and stick to it.
- Risk-Reward Ratio: Aim for at least 1:2 (risk ₹1 to make ₹2) to ensure profitability over time.
7. Leverage Proper Tools and Indicators
Equip yourself with efficient trading tools like:
- Indicators: RSI, Bollinger Bands, VWAP, or MACD for entry/exit signals.
- Charting Software: Platforms like TradingView or broker-integrated tools.
- Alarms: Set alerts for breakout prices, volume spikes, or trend reversals.
8. Create a Trade Execution Plan
- Entry Rules: Clearly define your entry signal before placing a trade. Avoid impulsive entries.
- Exit Rules: Define your targets and stop-loss points before entering the trade. Partial profit booking can also be an effective technique.
- Monitor Live: Track market sentiment, price action, and volume after executing trades.