Day trading

“ LESS IS MORE “
 Few facts about stock market

 Five fundamental truths:

 Anything can happen.
 You don’t need to know what is going to happen next in order
to make money.
There are no holy grail trading strategy in trading , the only holy
grail strategy is a good risk management system.
There is no certainity in stock market and hence it is highly
advised that you a put stop loss in trading.
Trading is a game of emotions , and hence forth it highly
advised that you start with paper trading first or trade with just a
nominal capital say just rs 10000.
 The power of one

“ pick one thing and take atleast 50 trades , and

make sure to put everything in YOUR TRADING
JOURNAL “
 Difference between Rule based / discretionery trading

Rule based trading Discretionary based trading

Success ratio is 80 percent , Failure rate Success ratio is less than 5 percent
is 20 percent
Here most effort’s are required during This can’t be back tested as it has a lot
bactesting ,and much less thinking of ambiguity , and emotions can be
during live market. traded , and not backtested.
Here success ratio is very good , further High chances of trading mistakes , as
rule based trading involves much lesser discipline is a key requirement in this
trading mistakes. case.
Here the chances of blowing up your Chances of blowing up your account is
account are least very very HIGH.
Chances of over trading are next to Chances of over trading are very very
impossible as you trade what you see HIGH
not what you feel.
Rules based trading is peaceful as it Very stressful , as there are no clear
involves mind , and not feeling. entry , exit point’s.
 TYPES OF TRADING

 BREAKOUT TRADING ( less accuracy , easy to trade ,

and gives big moves ) – “ expect 5 out of 10 trades to be
right
 PULLBACK TRADING / RETEST ( very beginner
friendly , good risk to reward , to be covered in SWING
TRADING ) - Wednesday.
 REVERSAL TRADING – “ Tricky trades as you’re
against the trend , but very high rewarding if traded with
consistency’’
NOTE – “ Key is to pick one , and trade for atleast 50
trades “
Breakout / breakdown
BREAKOUT
BREAKDOWN
Reversal trade ( Power Grid )
Reversal , breakout and Pull back ( Retest )
Bank nifty , hourly TF
 BREAKOUT TRADING

Day trading setup is based on the logic of breakout

trading
The reason we choose breakout trading is because
there is a clear understanding of the winner ( Buyer
or seller ) , which gives you execution conviction
The inherent nature of breakout trading is less
accuracy , however they give really Big Moves and as
a breakout trader , focus on Big profit’s and not high
win rate..
 Again a reminder – “ The power of one ’’

“ pick one thing and take atleast 50 trades , and

make sure to put everything in YOUR TRADING
JOURNAL “
 QUICK TRICK

By the end of the month , you’re going to learn quite a few
things and it may get a little difficult to trade one system
entirely as you may get distracted due to my telegram
alerts , as well as your accountability partner’s opinion
In such cases , the best thing to do is to , Pick one system ,
and trade that in your real account
And whenever there is an urge to trade another system ,
Simply take that out of the syllabus trade in your paper
trading app
By sticking to one system , you will understand yourself
as the system over a period of time inside out..
 As a day trader , what you need to know

What to trade ?
How to trade ?
How much to trade ? ( Already covered )
Where to Exit a trade ? ( Stop loss )
How to cut your losses ?
How to run your profit’s ?
How to re – enter into a winning trade ?
 Types of analysis ?

There are two types of analysis

 End of the day
 Live market analysis
 Three types of trend

There are three types of basic trend’s in the market

Uptrend
Downtrend
Sideway’s
Uptrend
DOWNTREND
Sideways ( Ranging market )
 Location – “ Previous day high / low “

After understanding the types of trend , one thing is

pretty clear , The previous day and high is a reaction
point for any trend.
Therefore this becomes an important area for all the
trader’s.
 PDH / PDL

Previous day high / previous day low is not just a

reaction point , but a watch out area for all the
trader’s
You know why we focus so much on PDH and PDL ?
If you look at the stock prices on newspaper , all it
mentions is open , high , low and close.
During old times ,there were no chart’s people relied
just on PDH / PDL and traded near this important
location.
 Conclusion

When PDH is taken out , we expect the price to move

higher
When PDL is taken out , we expect price to move
lower
PDH / PDL acts as a inflection point
 Pivot’s – “ System based support and resistance”

What are Pivots?

 Pivots - Nothing but support/Resistance, calculated
based on the average price of high/low/close of previous
day.
 Pivots act like a magnet on a chart , it is believed that
prices are most likely going to come towards pivot.
 The best part about pivot’s is that they remain stagnant
on chart
 One of the advantages of using pivot points is that it is
objective, so it’s very easy to test how price reacted to
them.
Pivot point’s – “ horizontal lines ’’
 Zone

we’re going to use a indicator , Leega Indicator

The indicator plots , previous day high / previous
day low automatically...
We will need R1 / S1 pivot to make it have a zone on
the chart, so we unclick everything else as of now..
Zone , and not a line
 How to enter ?

We’re going to use 5 minutes timeframe for day

trading.
The instrument should open within previous day
range , PDH / PDL
Our entry trigger shall be , once the zone is taken out
on a 5 minute candle closing basis
Please dont jump as and when the breakout is done ,
always wait for a closing candle
 Where to put the stop loss ?

There are two ways to put a stop loss , but one must always respect
the risk to reward in order to make the best of trading decision’s.
 Support and resistance ( Logic – as and when your view goes
wrong ), I prefer this one.
 Below / above the candlestick. ( however at times candlestick may
be way too long , then we may have to adjust)
 Retracement as a SL ( Safe SL )
 Target – “ we will take this in position sizing and risk management
, but yeah as a beginner trader , prefer R2R of atleast a 1:1 for your
first 50 trades “
 Note – “ Continue with the coin toss exercise , until and unless you
get a hang of punching different types of order ’’
Stop loss
 SL for Zone breakout

The stop loss part is pretty simple in this case

We will keep the stop loss below or above the breakout
or breakdown zone
Always keep some buffer above or below the zone
Use the tool to calculate proper position sizing as per the
stop loss
If you’re new to the market , you can also place a SLM
order to get that extra minute to calculate proper
position sizing
Limit your stop loss to 1 percent for day trading in stocks
Easy to execute
Good momentum in morning
PIRAMAL ENTERPRISE
Zone 1 and zone 3 are high probable
Fake breakout’s are going to happen.
PDH / PDL are strong rejection areas
 SIDEWAYS

Usually in a sideways market , you’ll find a lot of

stocks showing rejection at PDH / PDL
Henceforth if you understand the market structure
well ( sideways / trending ) , you’ll be easily able to
identify what to trade ( Breakout / reversals ) , in
which stocks depending upon their Market structure...
However i have to admit , it takes time to understand
the market structure , as prediction is always
emotional , however following is always pre
determined..
BANK NIFTY ( 25th may to 15th august )
Bank nifty ( 16th march to 12th april )
 Nature of reversal’s

Reversal trades are little tricky to trade as they’re not

objective or rules based
So train your eyes to spot then in live market to
understand it well
More of it will be discussed in the upcoming index
sessions
 How to Exit a trade ?

The most critical

 risk to reward ( Fixed Risk to reward of say 1:1 )
 Nearest support and resistance ( one can use pivot
points )
 Partial profit booking ( Book half at 1:1 and run the
remaining qty )
 Running profit’s
NOTE – “ If you’re a beginner , follow a simple rule of
booking 70 percent at 1:1 , and the remaining , you should
capture for higher rewards for your first 20 trades ( I
personally go with booking all at once )
 Running profit’s

Running the profit’s simple means that you stay in the

trade until unless the price has strong momentum
The psychology in running profit’s is to capture a big profit
when market moves in your favor
The advantage to running profit is that your winning trades
are going to big enough to take your losing trades easily
The con of running profit is that , your hit rate is going to
be less.
Further , in order to catch a big move , one has to also give
back some profit’s to the market , as no one can predict the
trend of the market.
How do we run profit’s ?
 Exponential moving average

 Use of 15 day exponential moving average

1. You’re going to stay in the trade , until unless the price stay’s above /
below the moving average
2. As and when price closes below / above the moving average , you’ll
exit your trade
3. The advantage is that , one fine day you’ll get a windfall gain and
you’ll catch the biggest whale in the town.

 Disadvantage
1. You have to actively watch the market.
2. The M2M swings can really disturb your peace of mind.
3. Not knowing pre defined target is little difficult to handle
psychologically
 Exit plan ( Beginner’s )

Exit 70 percent at 1:1

Exit the remaining as per your preferable exit
strategy ( pivots or EMA ) – once you have taken 20
trades
 Re – entry trigger

Once you have entered into a trade as per zone breakout

And lets say your SL is triggered and you have exited the trade
Many a times , a stock retraces just to shake out trader’s and
then moves ahead with momentum , and one may miss a big
trend
In such cases , if you have exited the trade as per your exit
criteria , then...
 you can re – enter once day high / day low is taken out again.
 The accuracy is much higher in the case of re – entry ( 75
percent in the case of bank nifty )
Re – entry Trigger
Re entry short side
 Bank nifty

The same system works beautifully in bank nifty as

bank nifty is a high beta index
However , the same wouldn’t work in nifty as nifty is
a low beta index
Backtest the system in a raw form , and analyse the
setup as per instructions given in the manu bhatia
video shared with you
 Stock selection

The most tricky part about stock trading is stock

selection , as there are too many options available ,
and well options certainly lead to indecision at times
We’re going to discuss two ways to select stocks for
day trading..
1. Based on End of the Day analysis
2. Based on Rule based Stock Selection
 Contraction Analysis..

Now we know that , every tight range

( consolidation ) , leads to range expansion
and as a breakout trader , we need capture the
expansion in a range
so one should look for , stocks that are consolidating
in a tight range , and are expected to give a breakout
These stocks are likely to Give a strong momentum
Range contraction and range expansion
 Types of range

To be frank , it’s silly to name a range breakout setup as

range can be of any type on the chart ( we will see it on the
live chart )
Range simple means contraction in volatility leading to
prices narrowing down to a tight range
Such tight range represents balance in the market , where
both buyer’s and seller’s are comfortable.
However once the range is taken out , one of them is
trapped which leads to one sided ( Panic / euphoria ) move.
The more time the market spends in a range , higher are
the chances for the market to give a strong breakout.
Other types of range
 TIME FRAME ( To identify range )

You can analyse the chart on a daily time frame or 60 minutes

timeframe to find stock that are likely to give a good move
If you’re a beginner , you’ll feel much comfortable in finding a
tight range on a 60 minutes timeframe
60 minutes chart will give you enough data to undertstand the
price action in a simple manner
And as you get some experience , you can start engaging with
daily time frame , as this would also be applicable for swing
trades
I personally engage with daily timeframe as I prefer swing
trading for stocks
Uptrend and consolidation
When both buyer’s and seller’s are fighting
Consolidation for 3 days
Longer consolidation
 ALERTS

Alert’s are the best way to ensure that we don’t

engage with the charts unnecessarily
It also ensures that we don’t take random trades
You just have to place the alerts , and then wait for
the notification to enter into a trade
This will surely reduce your screen time
You can either use tradingview alert’s or you can
simply use zerodha’s sentinel which gives alerts
through mail
What is the problem ?
 Pro’s /cons

let us discuss the problems of stock selection based on End of

the day analysis..
1. It is not objective , and hence it involves emotions even though
it is process driven.
2. It requires end of the day efforts to look for stocks with a good
structure
3. Another problem is “ Hopping from one stocks to another
PRO’S
 The accuracy is pretty good if you get a hang of drawing a
proper structure.
 Focusing on just one type of structure can give you a superb
edge leading to consistent results.
 OBJECTIVE WAY OF STOCK SELECTION USING CPR

The CPR ( Central Pivot range ) consists of three

components –
Pivot
Bottom Central Pivot (BC)
Top Central Pivot (TC)
These are derived out of the underlying’s High, Low, and
Close calculations –
Pivot = (High + Low + Close)/3
Bottom CPR = (High + Low)/ 2
Top CPR = (Pivot – BC) + Pivot
Source – “ zerodha varsity “
CPR ( acts as a zone )
Pivot point ( a single line )
CPR , it’s size and interpretation.
 A note on CPR

Whenever the CPR is wide , it is highly expected that

the market is going to be sideway’s
Whenever the CPR is narrow , it is expected that
market is likely to be trending.
Trending day’s are easy to trade as you got just ride
the trend.
Sideway’s market’s are usually a Stop loss hunting
day , further it leads to very small profit’s.
Hence forth as we trade with trade , we will always
make sure that the CPR is narrow.
 The biggest advantage

The biggest advantage of CPR is that , you know in

advance what could likely be tomorrow’s move in the
market in MOST cases ( side ways or
As CPR is based on yesterday’s price action , you will
get tomorrow’s marking before the market opens.
This helps you in selecting a stock in a objective
manner without drawing any patterns
Thing logically , what really CPR does ?
But then there’s another problem ? – guess it ?
 STOCK SELECTION

Instead of using any scanner to identify stocks that are having a narrow
range CPR
A better approach is to have a fixed watch of 5 stocks that are in a
Trending structure ( Not in a side ways market )
Once you get some experience you can always increase your watchlist
to max 10 stocks..
A trending stock tends to give bigger moves as the average movement
of such a stock is bigger compared to any other stock which is in a
range..
In order to identify a set of stocks that are trending , you can refer the
charts of the sector on a daily timeframe and filter out trending sector’s
The watch list of stocks along with sector has already been shared on
the group
 Using CPR , to filter stocks

You can use CPR to filter stocks objectively

Simply look at the stocks at EOD , and see among your watch list of 8 to
10 stocks , which stocks are having narrow CPR among your watchlist
And then shortlist maximum 3 stocks to trade tomorrow that have the
narrowest CPR
This way you have a objective way of selecting stocks , and it won’t be
tiring as well to draw structures for small day trading gains.
The good thing about having a few stocks in the watchlist is that you will
gradually understand the nature of the stock to take even Reversal trades
Further having a few stocks in the watchlist ensures that you are able to
catch those big moves that happen in a stock
And here you’re not predicting , you’re just reacting which makes things
even more simpler to Follow..
 PRO TIP

• Sectoral analysis
• The cleaner the chart the better
 Alert’s
SLM – order ( Beginner friendly , position sizing
benefits )
Backtest the system on Bank Nifty
Trading journal
One trade a day and kill switch feature zerodha
Rising tide
 Index

NIFTY BANK
NIFTY AUTO
NIFTY FIN SERVICE
NIFTY FMCG
NIFTY IT
NIFTY MEDIA
NIFTY METAL
NIFTY PHARMA
NIFTY PSU BANK
NIFTY PVT BANK
NIFTY REALTY
Why clean chart over cluttered chart ?
obstacles
 Again , Stock selection

 There are two simple ways of selecting stocks

I. Look for consolidation among the stocks shared
with you on a Hour / Daily Timeframe , OR
II. Use of CPR to select stocks objectively. ( Max 3
stocks for tomorrow )
 Nutshell

IDEA - " Proper consolidation and Breakout "

LOGIC - " Consolidation can lead to a gove move “ –
 ( Strucure / CPR )
RULES
1) Select Stock Through CPR Trick or Structure
2)Next day , the stock must open between PDH / PDL
3) wait for a clear breakout from the ZONE
4)ENTRY TRIGGER - " Put a Buy order at candle Closing HIGH /
LOW “
5) Stop loss – “ below the zone ’’
5) EXIT - " Risk to reward , Pivot or EMA “ - * Exiting a trade is
dependent on your trading psychology *
BACKTESTING
 BACKTESTING

Find a sector which has given a good breakout

Then Find a Stock in that sector
And then back test the same on one stock , and move
to another stock.
In your backtesting data , have an exit column for 1:1
trade , 1:2 and use of EMA.
Note - * A video on back testing will be shared soon *
 Conclusion

Watchlist preparation – EOD HIGH BETA

Entry Trigger – 5 Minute candle closing above the
zone
Stop loss – below the zone ( Limit to . 75 percent SL )
Exit trigger – risk to reward , Trailing stop loss or
pivot points
Re – entry trigger
Pro tip – “ If you’re a beginner , take first 20 trades
with a Risk to reward of 1:1 for 70 percent qty , and
run the remaining as per EMA ’’
 Should i start trading from tomorrow ?

Absolutely no
First priority is the exercise , that has been given to
get habitual to taking systematic trades , and
maintaining a trading journal
Once you learn a strategy , your mind will trick you
to be want to be right
So as of now focus on trading exercise 