Zebu blog

Category: Trading

  • The top 9 most popular intraday trading strategies and when to use them

    Intraday trading, also known as day trading, is a popular trading strategy that involves buying and selling securities within the same day. This type of trading can be a lucrative way to make money if you have the knowledge and skills to do it successfully. In this article, we will take a look at the top 10 most popular intraday trading strategies and when to use them.

    Breakout trading: This strategy involves buying or selling a security when it breaks out of a pre-determined price range. For example, if a stock has been trading between $50 and $55 per share for a while, a breakout trader might buy the stock if it breaks above $55 or sell it if it falls below $50. This strategy can be useful when a stock is showing signs of a strong trend in either direction.

    Momentum trading: This strategy involves buying stocks that are showing strong momentum, or a rapid increase in price. Momentum traders look for stocks that are making big gains and then buy them in the hopes that the upward trend will continue. This strategy can be useful when there is a lot of excitement and optimism in the market.

    Trend following: This strategy involves buying stocks that are trending upwards and selling stocks that are trending downwards. Trend followers try to capitalize on the momentum of a stock by buying it when it is moving up and selling it when it is moving down. This strategy can be useful when the market is in a clear uptrend or downtrend.

    Range trading: This strategy involves buying stocks that are at the low end of their price range and selling them when they reach the high end of their range. Range traders try to capitalize on the natural fluctuations in a stock’s price by buying when the price is low and selling when it is high. This strategy can be useful when a stock is showing little or no trend and is trading within a well-defined range.

    Scalping: This strategy involves making many small trades throughout the day in an attempt to profit from small price movements. Scalpers try to capitalize on the volatility of the market by buying and selling stocks quickly and often. This strategy can be useful when the market is particularly volatile and there are many opportunities to profit from small price movements.

    News trading: This strategy involves buying or selling a stock based on the news. News traders try to capitalize on the impact that news events can have on a stock’s price. This strategy can be useful when there is a major news event that is expected to affect the market.

    Reversal trading: This strategy involves buying or selling a stock when it is reversing its trend. Reversal traders try to capitalize on the natural ebb and flow of the market by buying a stock when it is starting to trend upwards and selling it when it is starting to trend downwards. This strategy can be useful when a stock is showing signs of a reversal in its trend.

    Arbitrage trading: This strategy involves buying and selling a security simultaneously in two different markets in order to profit from the difference in price. Arbitrage traders try to capitalize on price differences in different markets in order to make a profit. This strategy can be useful when there are pricing inefficiencies in the market.

    Pair trading: This strategy involves buying one stock and selling another stock that is related to it in some way. Pair traders try to capitalize on the relationship between the two stocks by buying one when it is undervalued and selling the other when it is overvalued. This strategy can be useful when there is a clear relationship between two stocks and one of them is undervalued compared to the other.

    In conclusion, intraday trading can be a profitable way to make money if you have the knowledge and skills to do it successfully. The top 10 most popular intraday trading strategies are breakout trading, momentum trading, trend following, range trading, scalping, news trading, reversal trading, arbitrage trading, pair trading, and swing trading. Each of these strategies has its own advantages and disadvantages, and the best strategy to use will depend on the current market conditions and your own personal trading style.

  • The three biggest mistakes to avoid as an intraday trader

    Intraday trading can be a challenging and rewarding pursuit, but it’s not without its risks and pitfalls. In this article, we will discuss five of the biggest mistakes to avoid as an intraday trader, as well as a few additional points to consider. By understanding and avoiding these common mistakes, you can improve your chances of success and maximize your profits.

    Lack of discipline: One of the biggest mistakes that intraday traders make is a lack of discipline. Trading without a plan or system, chasing after every opportunity, and making impulsive decisions can all lead to poor results and losses. To avoid this mistake, it’s essential to develop a trading plan and stick to it, with clear rules for entry, exit, and risk management. This will help you stay focused and disciplined, and improve your chances of success.

    Over-trading: Another common mistake among intraday traders is over-trading, which refers to taking too many trades or holding onto positions for too long. Over-trading can lead to excessive risk and losses, as well as missed opportunities and a lack of focus. To avoid this mistake, it’s important to manage your position size and trade frequency, and to only take trades that meet your criteria and offer a good risk-reward ratio.

    Poor risk management: A third mistake that intraday traders often make is poor risk management. This can include things like not using stop-loss orders, not setting clear risk limits, or taking on too much leverage. Poor risk management can lead to catastrophic losses and can quickly wipe out your trading account. To avoid this mistake, it’s essential to have a clear understanding of your risk tolerance and to manage your risk carefully, using stop-loss orders and other risk management tools.

    Not staying up-to-date: Another mistake that intraday traders can make is not staying up-to-date with market news and developments. This can be especially important in fast-moving markets, where news events and economic releases can have a significant impact on prices. To avoid this mistake, it’s important to keep an eye on the news and to be prepared to adjust your strategy as needed.

    Not learning from your mistakes: Finally, a mistake that many intraday traders make is not learning from their mistakes. Instead of analyzing their trades and looking for ways to improve, they may simply blame external factors or make excuses for their losses. To avoid this mistake, it’s important to be honest with yourself and to look for ways to improve your performance. This can include keeping a trading journal, reviewing your trades, and seeking feedback from other traders.

    In conclusion, avoiding these mistakes can help you improve your chances of success as an intraday trader. With the right mindset and approach, you can succeed as an intraday trader.

  • The seven best books for mastering intraday trading strategies

    Intraday trading can be a challenging and rewarding pursuit, and learning from the experiences and insights of others can be a valuable way to improve your skills and strategies. In this article, we will discuss seven of the best books for mastering intraday trading strategies. Whether you’re a beginner looking to get started or an experienced trader looking to hone your skills, these books offer valuable insights and practical advice for traders at all levels.

    “Technical Analysis of the Financial Markets” by John J. Murphy: This comprehensive guide to technical analysis is a classic text that has been helping traders understand and apply charting and other technical tools for decades. Murphy covers a wide range of topics, from basic chart patterns and indicators to more advanced techniques such as Elliott Wave analysis and intermarket relationships.

    “The Disciplined Trader” by Mark Douglas: This bestselling book offers a unique perspective on the psychology of trading, exploring the mental and emotional challenges that traders face and providing practical strategies for overcoming them. Douglas focuses on the importance of discipline and consistency in trading, and offers valuable insights on how to develop a winning mindset.

    “Day Trading and Swing Trading the Currency Market” by Kathy Lien: This comprehensive guide to trading the currency market is written by a highly respected forex analyst and trader. Lien covers a wide range of topics, from basic concepts and technical analysis to advanced trading strategies and risk management. She also provides valuable insights on global economic trends and the factors that drive currency movements.

    “How to Make Money in Stocks” by William J. O’Neil: This classic text by the founder of Investor’s Business Daily offers a unique approach to stock trading based on the principles of supply and demand. O’Neil provides a step-by-step guide to identifying and trading the best stocks, and offers valuable insights on how to manage risk and maximize profits.

    “Trade Your Way to Financial Freedom” by Van K. Tharp: This comprehensive guide to trading psychology and money management is written by a leading expert in the field. Tharp covers a wide range of topics, from the mental and emotional aspects of trading to risk management and position sizing. He also offers valuable insights on how to develop a winning trading system and stick to it.

    “The Complete Guide to Day Trading” by Markus Heitkoetter: This comprehensive guide to day trading is written by an experienced trader and CEO of a leading trading education company. Heitkoetter covers a wide range of topics, from basic concepts and technical analysis to more advanced trading strategies and risk management. He also provides valuable insights on how to develop a trading plan and stick to it.

    “The Little Book of Trading” by Michael W. Covel: This concise guide to trend following is written by a leading expert in the field. Covel covers the basics of trend following, including how to identify trends, manage risk, and maximize profits. He also offers valuable insights on the psychology of trading and the importance of discipline in achieving long-term success.

    In conclusion, these seven books offer valuable insights and practical advice for mastering intraday trading strategies. Whether you’re just starting out or looking to improve your skills, these books can provide valuable guidance and inspiration for traders at all levels.

  • The top five essential tools for intraday trading success

    Large Cap vs Mid Cap vs Small Cap: Key Differences That Actually Matter

    The world of intraday trading can be complex and fast-paced, and having the right tools at your disposal is essential for success. From technical analysis software to real-time news feeds, there are many different tools that can help Indian traders make informed decisions and execute trades quickly and effectively. In this article, we will discuss five essential tools that every Indian intraday trader should have in their toolkit.

    Technical analysis software: One of the key tasks of an intraday trader is analyzing market data and identifying opportunities for buying and selling. Technical analysis software can help you do this by providing a wide range of tools and features for studying charts, identifying patterns, and generating trading signals. Some popular options for technical analysis software in India include Zebu platform’s tools.

    Real-time news feeds: In the fast-paced world of intraday trading, staying up-to-date with the latest news and market developments is crucial. Real-time news feeds can help you stay informed and react quickly to any events that may affect the markets. Many brokers offer real-time news feeds as part of their trading platform, or you can use dedicated news feeds such as Bloomberg or Reuters.

    Trading calculator: Intraday trading involves a lot of quick calculations, from determining your position size and risk to calculating your profit and loss. A trading calculator can help you do this quickly and accurately, saving you time and reducing the risk of errors. Many trading platforms include a built-in calculator, or you can use a standalone tool such as the Zebu Margin Calculator.

    Alerts and notifications: As an intraday trader, you may not be able to constantly monitor the markets, so it’s important to set up alerts and notifications to keep you informed of any important events or developments. This could include alerts for price movements, news events, or technical signals. Many trading platforms and technical analysis tools offer alerts and notifications as a built-in feature, or you can use a dedicated alerting service.

    Mobile trading app: Intraday trading often requires you to be able to access your trading account and execute trades quickly and easily, whether you are at your desk or on the go. A mobile trading app can provide you with the flexibility and convenience you need to trade from anywhere. Most brokers in India offer a mobile trading app that allows you to access your account, view charts, and execute trades using your smartphone or tablet.

    In conclusion, having the right tools is essential for success as an Indian intraday trader. Technical analysis software, real-time news feeds, a trading calculator, alerts and notifications, and a mobile trading app are all essential tools that can help you make informed decisions, execute trades quickly, and stay on top of the markets. With the right tools in your toolkit, you can maximize your chances of success as an intraday trader in India.

  • Share Market Myths Vs Reality

    When someone enters the share market as an investor or trader, they will come in after listening to several myths about the share market. Here, we bust a few myths about trading and investing.

    Myth 1: Buying stocks is the same as gambling.
    People often think that trading is like betting, where you either win or lose.

    Myth Shot Down

    Investing is more like a science than an art because it requires thorough research into the technical and fundamental aspects of the assets, as well as the market’s current trends and the company’s growth potential.

    Myth 2: Past results show what will happen in the future
    When making an investment decision, investors look at how the stock has done in the past or how it has been rated.

    Myth Shot Down

    Investing decisions are made based on the company’s future, not just on what has happened in the past. Some of the most important macroeconomic factors that affect the performance of stocks are the interest rate, GDP, exchange rate, etc. Investors must also look at the company’s quarterly results, how much competition there is, how much it costs to make a product, if a new product is coming out, if there are changes in the top management, etc.

    Myth 3: Stocks that go down will go back up, or vice versa.
    Most people think that a stock that is going down will go up again at some point. In a similar way, they don’t buy stocks that are at all-time highs because they think the price will drop quickly.

    Myth Shot Down

    Investors should look into why a stock is going down. Is the collapse just because of the mood of the market, which could change, or is it because of something big that could hurt the company’s finances? Also, a stock’s recent rapid rise does not always mean that it can’t go up more.

    Myth 4: To be successful, you have to spend a lot of money.

    Myth Shot Down

    In reality, all the investors need to do is be disciplined and do thorough research. The power of compounding can be unlocked by making small investments over a long period of time. This can turn regular investors into millionaires.

    Myth 5: You have to trade a lot in order to be successful.
    A second thing that keeps people from investing is the idea that they will have to trade a lot to make good money.

    Myth Shot Down

    In reality, quality trades do better than lots of trades. If you don’t do your research, you might make a lot of trades but not get the results you want. On the other hand, you may make good money if you invest wisely and make good trades.

    Myth 6: Trading stocks with low P/E (Price-to-Earnings) ratios is smart and safe.
    The price-to-earnings ratio (P/E) can be used to tell if a stock is overvalued or undervalued. Most people think that the better the deal, the lower the price is compared to the earnings (P/E ratio).

    Myth Shot Down

    There may be a good reason why the stock is so cheap. Considerations must be made for the company’s growth prospects, operating revenue, product launch (if any), debt structure, peer comparison, management, etc.

  • How The Price Structure Of The Share Market Works

    Stock prices on the market are affected by how much demand there is and how much supply there is. The market capitalization of a company affects part of its share price. This is the sum of the stock price times the number of outstanding shares. The most recent sale price is used to set the current asking price on the market. Let’s say that the last closing price of 100 shares of company XYZ was Rs 50, and you want to buy them. The fair market value of the share is (50 x 100), or Rs. 5,000.

    The discounted cash flow method is another way to figure out what the fair price is. The fair price, according to the hypothesis, is equal to the sum of all future dividend payments discounted to the present value.

    The stock market is a network of exchanges, brokerage firms, and brokers that connects businesses and investors. IPOs, which stand for “Initial Public Offerings,” is how companies get listed on the market before investors can buy their shares. An initial public offering (IPO) can tell what a company’s market capitalization is, and investors can choose shares from separate lists of large-cap, middle-cap, and small-cap companies on the stock markets.

    Indexes are also used by stock exchanges. The Indian exchanges NSE and BSE use two different indices: Nifty and Sensex. These indices are made up of the best large-cap firms based on their market size and how popular their shares are. Most investors use these indicators to figure out where the market is going.

    The bid-ask spread is another important term to know when you want to talk about how the stock market works. “Bid” is the amount that buyers are willing to pay for an underlying, which is often less than the “ask” price set by the seller. This difference in prices is called the bid-ask spread. For a deal to happen, the seller must lower the price they want and the buyer must raise the price they are willing to pay.

    How to invest on the Indian Stock Exchange

    Companies send SEBI a draught offer document that has information about the company. After getting approval, the company does an initial public offering (IPO) on the primary market to sell investors’ shares. The Company offers and gives shares to some or all of the investors who bid during the IPO. The shares are then listed on the secondary market, or the stock market, so that they can be bought and sold. After getting orders from their clients, brokers put those orders on the market. When a buyer and a seller are found, the trade goes well.

  • The Fundamental Concepts Of Equity Trading

    When looking for money, a business needs to think about two main sources. It can raise money through equity, which means selling shares, or through debt, which means borrowing money from lenders through debentures and other debt instruments. In this case, the company gives investors a piece of the company in exchange for their money. There are different kinds of shares, such as preferred shares and equity shares. This article is meant to help you learn more about equity shares, including how they work, what their pros and cons are, and how they can be used.

    How do shares work?

    Equity shares are a type of long-term financing that businesses that need money can use. Each equity share is a small piece of ownership in the business. People can invest in equity shares, which are also called common stock or common shares.

    Investing is riskier than saving, but it can give you higher returns and help you reach your financial goals faster if you do it right. Equity shares are seen as a long-term way for businesses to get money to run their businesses. People who own preference shares can make use of a number of benefits and advantages.

    Voting rights: One of the best things about having equity shares is that you can vote for general managers and other company officials and have a say in how the business is run. This is because the way a company runs has a direct effect on the returns it gives to equity shareholders. If you own a large number of equity shares, you also have a large number of voting rights.

    Attending meetings: People who own equity shares are allowed to sit in on all annual and/or general body meetings of the company and have a say in how the family business is run through their voting rights.

    Dividends: They can also be paid to people who own equity shares. In this area, though, the benefits for people who own common stock are different from those for people who own preferred shares. Dividend payments to equity owners are not set in stone. They can change depending on how well the company does and whether or not certain goals are met. So, people who own equity stocks have a right to dividend payments, even though these payments are not promised. Dividends are set, though, for people who own preference stock.

    Equity shares cannot be redeemed, which means that investors will not get their money back as long as the company is in business. When the company goes out of business, equity shareholders will either get this money based on the value of their equity shares at that time, or they can sell their equity shares to get it back.

    There are a lot of companies that only give out common stocks, and more common stocks are traded on stock exchanges than preferred stocks. Common investors, on the other hand, have the least chance of getting any of their money back if a company goes bankrupt. Paying back the people who loaned money to the business comes first. If there is still money left over after creditors are paid, it goes to the people who own preferred stocks. There is a limit to how much of this you can get. Common investors only get their money back if there is still money left over.

  • The Art Of Placing The Perfect Stoploss

    Stop loss is like a gauge that tells you how much you could lose on a trade. It’s important to set your stop loss ahead of time so you can be ready if a trade goes in a different direction. A stop-loss order is used to cut down on the loss if the price of a stock doesn’t move as expected and makes the traders lose money.

    A day trader sets her stop loss level before she makes her trade. When the cost hits the predetermined stop loss level, the trade ends automatically. The trader can keep the rest of the money she has put in. One can start making a plan for getting the lost money back. By putting in a stop-loss order, a losing trade doesn’t lose any more money.

    How does Stop Loss work?

    Let’s look at an example to see how a stop loss would show up on a trade. You must now decide where to put your stop loss. For example, if you want to buy a stock that is selling for 105 right now, you must decide where to put your stop loss. Keeping the stop loss below 100, at 99, is a great goal. This means you are willing to lose Rs 6 on this particular trade.

    You should also set your target at 1.5 times the percentage of the stop loss. In this case, the stop loss was set at Rs 6, which you were willing to lose. So, you should try to get at least 9 points, which would bring you to 105 + 9 = 114.

    Where should your stop loss be?

    Most new traders have a hard time figuring out where to put their stop loss settings. If the stop loss level is set too high and the stock moves against you, you could lose a lot of money. Instead, traders who put their stop loss level too close to the purchase price lose money because their trades are closed out too quickly.

    There are different ways to figure out how much each trade’s stop loss should be. From these strategies, you can figure out three ways to choose where to put your stop loss:

    How does Stop Loss work?

    Intraday traders often use the percentage method to figure out where their stop losses are. With the percentage approach, all a trader has to do is say what percentage of the stock price they are willing to lose before they close the position.

    Think about the case where you don’t mind if your stock loses 10% of its value before you sell it. And let’s say that one share of your stock is currently worth 50 cents. So, your stop loss would be Rs 60 x 10%, or Rs 6, less than what the stock is worth on the market right now.

    Determine Stop Loss Using the Method of Support

    Using the support method to figure out stop loss is a little harder for intraday traders than using the percentage method. But it is often used by intraday traders who know what they are doing. For this strategy to work, you need to know what your stock’s last support level was.

    Zones of support and resistance are places where the stock price often stops going up or down. Once you’ve found the support level, you only need to set your stop loss price point below that level. Let’s say you own stock that is now selling for Rs 500 per share, and the most recent support level you can find is Rs 490. It is recommended that you put your stop loss just under 490.

    Most of the time, the levels of support and resistance are not exact. Before quitting a trade, it’s smart to give your stock a chance to fall and then bounce back from the support level. Set the bar just a little bit below the support level to give your stock some room to move before you decide to close the deal.

    Using the Moving Averages Method to Figure Out the Stop Loss

    Compared to the support method, the moving average method makes it easier for intraday traders to decide where to put their stop loss. A moving average has to be put on the stock chart first. A longer-term moving average is better because it keeps you from putting your stop loss too close to the stock price and getting out of your trade too soon. Once you’ve put in the moving average, set your stop loss a little below it so it has more room to move in either direction.

  • How Does Short Selling Work In The Indian Share Market?

    When an investor sells shares he does not own, this is called “short selling.” In a short sale, a trader borrows shares from the owner with the help of a brokerage. The trader then sells the shares at market value, hoping that prices will go down. The person who sells short buys the shares at a loss and makes money when the prices go down. It’s important to know that short selling is done by experienced traders and investors who think that the price of shares will go down before they are returned to the owner. Short selling has a high risk-to-reward ratio because you could make or lose a lot of money.

    Information about short sales:

    1. In a short sale, the seller does not own the stock that is being sold. They are borrowed from someone else.

    2. Both individual investors and large groups of investors can do short sales.

    3. Short selling is based on guessing what will happen.

    4. The seller bets that the price will go down by using short selling. If prices go up, the seller will lose money.

    5. Traders have to do what they have to do and give the shares back to the owner when the trade is settled.

    6. It’s important for investors to know that the deal is a short sale.

    7. Most of the time, short selling happens when the market is down and the price drop is big.

    On the stock market, a short sale is done when people want to make money quickly. Some people say it’s like holding on to stocks for a long time. Long-term investors buy stocks with the hope that their prices will go up in the future. Short-sellers, on the other hand, watch the market and profit when prices go down.

    How does the short sale process work?

    Pros of short-selling:

    Financial experts have had a lot to say about the benefits of short selling. Even though this approach has been criticised, market watchdogs all over the world support it because it helps fix irrational overpricing of any stock, provides liquidity, stops bad stocks from rising quickly, and makes sure promoters can’t change prices.

    Short-selling disadvantages

    Short-selling is an illegal practice that market manipulators often use to raise stock prices artificially. Because of this, there is a higher chance of market instability and more volatility. The planned drop in stock prices could hurt the company’s confidence and make it harder for them to raise money.

    A “naked short sell” when a trader sells shares without borrowing them or making plans to borrow them. If the trader doesn’t borrow the shares before the clearing time, he or she can’t give them to the buyer. The trade is said to have “failed to deliver” if the trader doesn’t close the position or borrow the stock. Since it goes against the laws of supply and demand, naked short selling is illegal in most countries. If a large number of naked short sales are made, the market can become unstable.

    Short selling is not a good idea for new traders and gamblers who don’t understand the risks. Short selling should only be done by people who know a lot about how the market works.

  • The Different Types Of Day Traders

    There are primarily two categories of intraday traders: independent traders and traders employed by institutions. The majority of day traders who make their living through intraday trading are part of larger institutions. As a result, they receive some of the institute’s advantages, including a direct line, trading desk, solid cash, and analytical tools. They look for ways to make money quickly, and their resources also let them take advantage of trading opportunities that are safer.

    Individual traders can either use their own money to trade or help other people manage their money. They often work with a brokerage and have access to more information.

    Intraday traders need to have access to some high-end financial services and tools. Those are:

    Trading desk:

    Traders who work for large institutions and are in charge of a lot of money are usually the only ones who can use a trading desk. A trading desk enables intraday traders to immediately execute orders, which is essential when there are quick price changes.

    Multiple news sources:

    News is an important tool for intraday traders because it gives them the best chance of making money. So, you will have more chances to use something important if you find out about it as soon as it happens. They might have a type pf high-end scanner that captures real-time news about companies and use them to go long or short in a stock.

    Both trading software and analytical software will give you an edge over your rivals. Some traders rely less on news and more on things that can be seen on the market. Automatic pattern recognition is a type of software that traders use to look at data. Back testing and applications based on genes and neurons are also used.

    What makes someone a successful intraday trader?

    Know-how and experience: Technical analysis and being able to read charts are useful skills, but you need to understand the market in order to make sense of the information you find through analysis. Spend some time getting to know the details of the product you’re trading in.

    Enough money to trade with: As a day trader, you should only invest the money you can afford to lose. By putting limits on yourself in this way, you can protect yourself from a financial disaster and avoid making decisions based on how you feel.

    When doing intraday trading, you often need a lot of money if you want to take advantage of changes in the market. If you have access to a margin account, it could be helpful because sudden changes can cause margin calls without giving you enough time to prepare.

    Traders need to have a strategy that gives them an edge over the market. You can use different strategies, some of which are talked about in the next section. Work on and improve these strategies until you find one that works for you.

    Discipline: A lot of traders lose money because they don’t stick to their own rules when making trading decisions. The unpredictable nature of the market has a big effect on day-to-day trading. If the price of a stock changes a lot during the day, traders may want to buy it.

    Day traders also choose highly liquid stocks because they can change their positions quickly without affecting the price of the stock. When the price of a stock goes up, traders often take a position to buy. If the price goes down, you might decide to short sell it so that you can make money from the drop.

    Types of intraday traders:

    Scalping: It is an attempt to make a lot of small profits from daily price changes.
    Range trading: In range trading, support and resistance levels are used to decide whether to buy or sell.
    Trading based on news: This strategy quickly takes advantage of the volatility that happens when breaking news happens to trade in a way that makes money.
    High-frequency trading (HFT) is a strategy that uses complex algorithms to take advantage of brief drops in the market’s efficiency.

    Conclusion

    Intraday trading has so many benefits that it’s not surprising that so many people want to try it. The market needs active and effective intraday traders. You could also do well as an intraday trader if you have the right tools and are willing to learn what you need to know.