Hey Guys. Its good to be back. In this post, we shall some dwell on some guidelines for a novice intraday trader. Here we go,
#1 Control your emotions
Believe me its easy to say it, but not to follow it. Even an experienced trader might fall prey to it. We can find many online articles on how to deal and overcome with the immense stress while making out the trading decisions. Markets can be decisive and easily suck you in a bad trading position at times. We suggest you a simple one, when you feel stressed out while making a decision just take a small break and come back in. Your head will be cleared and you might get a new perspective. Avoid entering or exiting a position in a haste.
#2 Time your entry
We are all well aware of the statement ‘Well begun is half done’. Markets are always cyclical in nature, ups and downs everywhere. Unless driven by any strong sentiment (which doesn’t happen most of the times), the price of the trading instrument will see dips and rises. Say if you are about to enter a long position, just wait for the price to drop down to the nearest pivot point or the VWAP. This would give you a trading edge where you can get a safer SL, much affordable to lose if markets went against you. Believe me, when the stock price ramps up and all of your guts say “Enter Enter, you are going to miss it”, It is going to put you in a difficult position, where it is not going to be easy for you to stay behind and wait for the right opportunity. Well mate, you then need to ask this question to yourself ‘Am I having an edge over others ?’. Entering into a trade driven by ‘herd’ effect will be misleading at times and it would be much safer if one can avoid such trades, because the BIG money always sucks the herd in a bad trading position.
#3 Keep a wider SL
Yep. You have read it correct. Am I gone nuts ?? No. Do you know that the Big guys are out there watching out our orders and exactly know where are our stops placed. Why our stops are caught ? On plain sight, nothing seems to be logical. But here is the catch, stops are orders where people are ready to buy at higher prices (shorts) and sell at lower prices (longs), which might not happen in reality. So, placing a stoploss order which is very much near to the current stock price may end sucidal and you end up on the losing side.
If you are still not convinced and want to be on the safer side, you can have your actual SL marked in the charts and keeping a wider SL on the orders. When the price touches the marked line, you ought to exit irrespective of what happens next. This requires utter discipline. If not, kindly don’t follow this.
#4 Dont trade when the market is silent (sideways)
As said before, market always move in cycles and comprises of multiple trends across different timeframes. Markets will either move up, down or be in neutral sideways mode. Avoid trading stocks trending in sideways. Because, in a sideways trending market, market participants are clueless on the next bigger move and keep lighter open positions. In this way, they ensure that they lose small when markets move against them. Patience is the key here, which one has to master. Trendlines come in handy to detect the trends, so master them and use it wisely.
#5 Align with the Smart Money aka The Big Guys
If you believe that Market is controlled by the Banks and big Mutual funds, then Friend its time to know that you are wrong. Market is driven by the section of big financial institutions which operate anonymously with huge stock positions at their disposal. In short, they control the floating supply according to their needs. Let me explain it with a simple example. Assume when the buy orders are crowded than the sell orders, eventually there would be no one to sell and price tends to move up. On the contrary, when the sell orders are huge, buyers will get exhausted at one point of time and stock will go down. Individual traders like us, don’t have the luxury of getting to know on what these guys are up to. But still, they leave behind a trace which we can detect using VSA concepts.
#6 Practice the principles rather than blindly following it.
When you are new to stock market, you will come across several traders and analysts who have their own version of techniques and statements. Even it is coming from a well known familiar person, try to grasp the inner meaning and don’t get carried away by their statements completely. A classic example will be “Buy when others are selling in panic, Sell when others are buying in greed”. What if a stock at its all time high is undergoing a drastic correction ? What if you have taken a long position near the highs seeing the panic selling. Then you will be stuck in a awkard position, because the stock is being sold by the sellers of different timeframes across days, weeks, months or years. Until it finds new buyers, the stock will remain in the correction phase. So, what is missing here. Let me rephrase the principle, “Buy when others are selling in panic below the core value, Sell when others are buying in greed above the core value”. But how to know the core value ? Here comes the Market Profile tools, with which you can get an abstract view of the value of the underlying asset.
We have reached the end of this post. So, if you have read the whole blog and become interested in learning the VSA and Market Profile join our Combo course where we cover all these techniques.
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