Zebu blog

Tag: Stock Liquidity

  • Rules That Every Intraday Trader Should Follow

    By following a few simple rules, an intraday trader who is just starting out can increase their chances of making money and decrease their chances of losing money. Here are some of the rules that you must know.

    Don’t use your full capital:

    Even if you like the excitement of the stock market, it’s not a good idea to put a lot of your money into “intraday trading.” Don’t put in more than you can afford to lose. Don’t put more money into trading than you can afford to lose, even if other traders are doing well.

    Exit at the end of the day:

    Always close out your trades at the end of the day. Do not keep holding onto securities in the vain expectation of making more money or minimising losses the following day. This rule is applicable especially if the general climate of the market indicates volatility.

    Watch the market at all times:

    You can’t have all-day business meetings or long flights when the market is open. You have to be quick and aware to make the deal when the price is right. If you don’t keep track of how your chosen stocks rise and fall, you might miss out on a good selling price.

    Exit as soon as the trend goes against you:

    As soon as you realise that the market has gotten worse, you should get out. If you wait until the stop-loss conditions are met, it may be too late and cause you to lose more money. With experience, you can become a discretionary trader instead of a systematic trader.

    Don’t put money into too many marketplaces at once:

    Based on the quantity of capital you have, choose your market. Most of the time, you need the least amount of money to trade on the currency market, while you need a little more money to trade on the stock market.

    Find the best time for trading during the day and stick to it:

    Develop and use a good intraday trading strategy over time and with more knowledge. Intraday trading is all about finding a method that works for you and using it over and over again to make more money.

    Stocks that are good for intraday trading should have volatility that ranges from moderate to high and be easy to buy and sell. For a beginner, it’s best to start by focusing on just one or two stocks at a time.

  • Things Beginners Should Keep In Mind While Doing Intraday Trading

    Intraday trading is the act of buying and selling stocks and ETFs during regular trading hours within the same day. You can buy or sell shares quickly without having to go through the trouble of getting real share certificates. Intraday trading is based on the idea very short term price movements can be capitalised. Shares are bought for less money and sold for more money. The difference between the two rates is the profit.

    Understand how investing and trading are different.

    Trading and investing are two very different ways to put money to work. Just because you know how long-term value and growth investments work doesn’t mean you’re automatically good at day trading. For day trading, you don’t use the same criteria to choose stocks as you do for long-term investments. Day trading uses market volatility to make money, but long-term investments are made so that they can handle daily market volatility.

    Let’s take a look at the basics of intraday trading in India.

    Choose stocks that are easy to buy and sell:

    Day trading requires you to close out your position before the end of the day. If you buy a stock that doesn’t have enough liquidity, you might not be able to sell it when you want to. One of the most important rules of day trading is to only trade in liquid stocks. When there is enough liquidity, there are no limits on how much can be traded. When there are a lot of buyers and sellers of liquid stocks, the prices fluctuate, which is what day traders need to make money.

    Research:

    Day trading is a sure shot way to lose your capital if you do not do your research. Before you buy or sell any shares, you should do a lot of research on them. Choose stocks in a field you know a lot about. Before you start trading, watch how the prices of the shares you’ve chosen change, as well as other signs like volume and liquidity.

    Choose stocks in the same trend as the broader index:

    Price changes can be caused by many things, but some stocks move in the same way as larger indices. For example, these stocks will go up if the Nifty goes up and down if the Nifty goes down. But a large number of stocks don’t follow a predictable pattern, so you should be careful when dealing with them.

    Recognize the right price:

    If you want to make money on an intraday trade, you must choose the right entry and exit prices. Traders use support and resistance levels in a number of ways to choose the right entry and exit prices. Some traders close out their positions when a trade starts to make money, while others choose to go with the trend. Your approach might be different, but you should always keep your cool and stick to the plan.

    Set up a stop-loss:

    Brokers offer a lot of leverage for intraday trading, which increases both the chance of making money and the chance of losing money. Setting a stop loss is important because day trading can lead to big losses. A stop-loss limit closes your position when the share price goes over a certain level.

    These are some of the must-know tips for beginner traders who are looking to trade in equity in the share market online.

  • The Beginners Guide To Open Interest For Intraday Trading

    Intraday trading is a word that means exactly what it says: trading that takes place during the same day. One thing an intraday trader needs to understand is what is called “open interest.”

    What is open interest?

    In its simplest form, open interest (OI) is the number of active contract numbers at the end of each trading day. These are positions that are still open and haven’t been closed yet. Open interest is a way to measure how busy the futures and options markets are in general. For every new position that a buyer and a seller take, the open interest goes up by one contract. When traders close their positions, the number of open contracts goes down by one. If a seller or buyer transfers their position to another seller or buyer, the open interest doesn’t change.

    If the OI has gone up, it means that the market is getting more money. If the OI is going down, the current trend in prices is about to end. In this way, the OI shows how prices change over time.

    It describes participation

    Traders should also know that open interest and volume are not the same thing. Volume is the number of contracts that are bought and sold in a day. Volume is a measure of how many contracts have been made between the seller and the buyer. This is true whether a new contract was made or an existing contract was changed. The main difference between open interest (OI) and volume is that OI shows how many open and active contracts there are, while volume shows how many were actually executed.

    How prices change and what they do

    Another thing to think about when talking about OI is how the price moves. In trading, price action is the way a graph shows how the price of a security changes over time. It refers to whether the price of a certain security is going up or down.

    Most traders analyse the market based on volume, Open Interest (OI), price, and other market indicators. In general, a market is strong when the price is going up, the volume is going up, and the OI is going up. On the other hand, a market is weak even if the price is going up if the other two indicators are going down.

    Here are a few tips for traders who want to use OI to keep an eye on how the market is doing:

    When the OI goes up and the price goes up at the same time, there is a lot of money coming into the market. It shows that there are buyers, so it’s seen as a good sign for the market.
    – When prices are going up but the OI is going down, money may be leaving the market. This means the market is going down.
    – Even if the OI is sky-high and the price drops sharply, this is still a bearish sign for the market. This is because it looks like people who bought at the peak have lost money. In this case, there is a chance that people will sell out of fear.
    – If prices are going down and the open interest is also going down, it means that holders are feeling pressured to sell their positions. This shows that the market is bearish. It can also mean that the best time to sell is coming up.

    OI is important because it shows how many contracts are open or active in the market. When more contracts are added, OI goes up. When a contract is squared off, the open interest goes down. Volume is another word that is often used with the term “open interest.” The volume shows how many trades were made on a certain day. It doesn’t last into the next day, though. On the other hand, OI is live data because it affects what happens the next day.

    Together, open interest, price, and volume data help intraday traders understand how the market is doing. Using this information, an intraday trader can figure out if the market is going up or down.