How to start investing in Stock Markets?

Prepare yourself I have seen most of the first time investors losing big money in the stock markets and you would come across a number of such investors with terrible experience in stock markets that they hate to even discuss about any shares and feeling very secure with their money being invested in Bank Fixed deposits, traditional insurance plans and Government bonds with a return of about 8 percent a year. They had a sour experience because they had not prepared themselves for investing in stock markets, they simply saw some other fellow making huge money on some news driven stock and next time put a huge sum on his advice or saw an expert on a news channel strongly recommending a stock and the markets turned otherwise. Such people do not dare to take another chance and believe that perhaps they are not made for it and resolve not to even look at it during rest of their lives. The experience might have been different if they would have spent some time researching and had some patience before making a first time entry. Some basic steps for the first time investors are listed hereunder which will be useful to make a successful entry

into the stock markets and for those as well who had a terrible first time experience. Buy stocks while they are moving up; dont try to catch a falling knife. An old saying, but true. The most important thing in trading is to trade with the trend. A stock should be bought while it is in an uptrend and is moving up. A number of investors think that is has already moved so much how far it can go and ignore the stock thinking that they should have bought it a month ago. But actually there are more chances of a momentum stocks climbing higher than those which have yet not started moving up. Last year sugar stocks fell more than 50 percent and a number of investors thought that they have already halved, how far can they fall so it becomes a good buy, but the fundamentals did not suggest buying sugar stocks and now they have went down to as low as a third of what they were a year ago. There are oversold situations in the markets and there is a bottom to every fall, but it is impossible to predict a bottom. We have to wait till the downtrend reverses and the stock starts rebounding, there you have to catch it and ride the momentum. Let the knife fall,

vibrate for some time and then you may pick it up; there are less chances of injuring yourself. 2. Do not lose patience and let the stock come to your target. It happens to most of investors that when they want to sell, the stock does not go up and when they have to buy, the stock does not come down. The fault lies not in the stock but in ourselves that we become impatient and try to initiate a trade without waiting, it is very difficult to sit on cash. When you have chosen a stock for buying, decide a price where you are comfortable and wait for some time, let the stock come to your price and you should not be chasing the stock, and bear it in your mind that if the stock does not come to your target, you do not lose anything. But the same is not true while selling, if you get decent profits, sell the stock, dont expect a fortune from your pick and expect only reasonable returns. Once you have converted into cash some other opportunity will come your way. 3. Invest in blue chips, market leaders and aggressive companies Dont buy a stock just because it is going cheap. Look at the prospects of the company, you

would see that in the long run blue chips and market leaders would not disappoint you though they cannot be expected to be multi baggers but a decent return is always expected. You would see Infosys, Reliance Industries, ICICI Bank, Bharti, Bajaj Auto, Maruti and Unitech in the portfolios of most of the Mutual funds. These stocks are the firsts to recover from any corrections or recessions. These are the first preferences of foreign investors, Mutual Funds and traders therefore they attract a lot of buying interest whenever they fall down to a bargain price. 4. Play both sides of markets. Most of the retail investors are bulls by nature they only buy stocks and do not short the markets or individual stocks. There is an inherent fear in short selling than in going long but truly speaking there are equal chances of markets going up or down so why not pick the trend and go with the trend. When there is panic in the markets or there is any negative news on which the markets are bound to fall, then you must be on the short side, of course with stop losses as in case of going long. Play both sides of the markets if you want to completely enjoy the game. Dont be a batsman or a bowler, be an

all rounder. 5. Opportunities always exist in equity markets. Believe in the fact that opportunities always exist in equity markets and lament not for a missed one, there are ample waiting to be discovered. Have an eye for watch and you will find another gem at a handsome price, you dont need to make all right calls to make money in stock markets, rather you need to keep your senses with you and play intelligently. No one knows the future; he who plays smartly will win the game. 6. Check fundamentals before buying. You must check fundaments and do your own analysis before buying any stock. A street call or an experts call should not be followed blindly. In these markets everyone can be wrong or right, you must satisfy yourself before putting your money. Have tips from everywhere, weigh them well in your own way and decide yourself which stocks to pick and when to pick. 7. Strictly follow stop losses. Everyone knows this, it is taught everywhere but we still get

carried away with our emotions, yes, we tend to fall in love with our stocks, it feels painful to part with them and that is why when it breaches our stop loss we tend to give it one more chance to make a comeback, but it doesnt and keeps going with the trend, deepening our losses. It takes courage to accept losses but it should be part of the game, when you had decided to invest in stock markets you had agreed to accept both profits and losses, didnt you? Now by adhering to your stop losses you are trying to restrict your losses and that is a wise thing to do, so we strictly need to put stop losses to our trades and stand by them to maximize profits. When it comes to make a long term call, I think 9 out of 10 analysts will be right or may be 10 out of 10, and even an experienced investor who reads well, will be able to make a right call but when it comes to making a short term call it becomes an arduous job for the most learnt researchers. There are so many factors which contribute to the movement of prices that it becomes very difficult to predict their trend. However an insight of all major events, news flows, financial information and basics of the company gives us a view whether the price of the stock is

justified or not, is it worth owning the stock at the given price or the stock is already overvalued. It works well if you make a prediction for the long term, but the short term movements are always governed by macroeconomic factors, general trends and Government announcements which are not predictable, therefore it is easy to make a long term call by using fundamental analysis. And that is why most of the mutual funds take long term calls considering them to be safe. For example you find a stock which is going very cheap and fundamentals suggest buying the stock but suddenly some negative factor triggers in US and there is a sell off in Global markets and our markets are also not spared and that stock also could not swim against the stream and is hammered down and a good stock gives you a negative return in the short term in spite of being a value buying. But if you have bought if with a long term view and the company is fundamentally sound the stock will rebound when the crisis is over and will give you a good return in the long term. The whole discussion was to bring home the fact that if you are novice to this market make your first call a long term call, there are more chances of making money. After some experience

you can become a swing trader or a day trader but first be an investor. Economy analysis The first step towards picking stocks is to analyze macro economic factors. After having a look at the macro economic factors you will have a feel about the overall future outlook of the markets. The GDP numbers, inflation, exchange rates, interest rates, Foreign Direct Investments, industrial growth and a forecast given by the Government on expected GDP and industrial growth numbers are to be tracked. A strong GDP growth and industrial numbers indicate a strong economic growth and a growing Foreign Direct Investments shows the potential of companies operating in India. An increase in inflation might trigger the urgency to raise interest rates and increasing interest rates will slow down credit growth and demand in the country and thereby resulting in lower profits by the companies and falling interest rates have an opposite effect and will have a direct impact on the Automobile and real estate companies, lower interest rates will increase profits of these companies. An appreciating currency will attract more foreign investments and

carry trades giving boost to the markets. A combined effect of all the above factors gives us an indication of a strong or weak future outlook. When every thing is going well and the economy is growing there are more chances of stock markets going up and fundamentally strong stocks will rally with the markets. Industry analysis It is necessary to have a look at the industry as whole to which your pick belongs. If the industry or the sector as a whole is in a downtrend then there will be a downward pressure on your pick being in that reeling industry. For example Sugar Industry has been in a downtrend for last one year and the valuations are looking very cheap still the stocks have underperformed if compared with the broad indices, most of the sugar stocks have given negative returns whereas the markets have grown sharply in the last one year, the economy has also been booming. Similarly metal stocks, Tea stocks, Oil stocks, Textile stocks and other sector stocks follow sectoral movements which depends on various factors like international commodity prices, currency prices, crude prices and overall demand and supply situation in that sector. Therefore the whole industry should be

analyzed before picking your favorite stock. Company analysis The last step is to analyze the company you are going to invest in. For this purpose you will need financial statements of the company for past few years and the recent news flows about the company. This information can be taken from any brokerage house website and such information is also available at the websites of stock exchanges. The first thing to watch is the consistency in growth of profits and turnover, the turnover and profits should be growing consistently from quarter to quarter and from year to year, this would ensure that the company you are going to invest in will have growth prospects which should be reflected in its stock price. EPS and PE ratio After having a look at the profitability and its consistency, you have to check whether the current market price of the stock is justified or not. Two basic ratios are used to find a correlation between the market price of the stock and the profitability of the company. EPS or earnings per share are the profit per share of the company.

It can be calculated by dividing the total profits of the company by total number of outstanding shares. For example a company makes a Net profit of Rs. 10, 00, 00,000/- and the total number of shares are 53, 00,000 then the EPS of the company is Rs. 18.86. The PE ratio or the price to earnings ratio is found out by dividing the Market price of the share by the EPS arrived at above. In the above example if the stock price is Rs. 260 then the PE ratio is 13.78. Every industry has different PE ratios and it also varies from stock to stock, the more reputed and large sized companies enjoy larger PE ratios as compared to small companies. These ratios should be compared to the peer group companies, for example two companies are in the same sector and the size is also not very different then the stock with the lower PE ratio is cheaper than the other and has less chances of correcting in a falling market. In my previous article in this series we had learnt to prepare ourselves mentally to get into the markets and learnt some basic exercise before actually jumping into the markets. In this article we shall try to cover practical aspects of investing like opening of various accounts and understanding basic concepts of

trading. Opening a Demate account The first step towards investing in stock markets is to open a Demate account. A Demate account is opened with a depository participant, which may be a stock broker, a Bank or a financial intermediary. To open a Demate account you need to fill up a securities account opening form together with an agreement with the Depository Participant. Following documents should be enclosed with the form. Passport size colors photograph a copy of the PAN card. An address proof (Copy of Passport, Driving License, Ration card, Election identity card, etc) Proof of Bank account (a cancelled cheque or bank statement can be given) A passport size color photograph of the nominee (if appointed) Once these documents are submitted together with duly filled up account opening form, your demat account will be opened in a weeks time and you will receive a booklet containing instruction slips and your beneficiary account number. A DP ID number will also be printed on the delivery instruction booklet which is the unique identity number of your Depository

Participant. These delivery instruction slips are used to transfer shares from your account to another account. You will need these when you sell shares through your broker or when you want to transfer shares to some other person. Charges for opening a Demate account There are two types of charges on your Demate account. One, annual maintenance charges and two, transaction based charges. Annual charges range from Rs. 100 per annum to Rs. 500 per annum for most of the Depository Participants and transaction charges vary from 0.01 percent to 0.05 percent of the transaction value, some Depository Participants, mostly brokers, charge flat transaction charges like Rs. 10 or Rs. 30 per transaction slip irrespective of the value of trade. Some brokers have come out with a lifetime free Demate account where you do not need to pay for annual account maintenance charges. How to choose the right Depository Participant? As far as cost aspect is concerned a Demate account with a broker is much more economical than a Demate account with a bank. For

example, you sell 1000 shares at the rate of Rs. 500 per share then, in case of your account with a broker, the broking house would charge you Rs. 25 for executing your instruction slip and in case of a Bank they may charge you Rs. 200 (i.e.0.04 percent of transaction value of Rs. 5,00,000/-). One more benefit of having a Demate account with your broker is that you may authorize your broker through a Power of Attorney to automatically debit your Demate account with him whenever you sell stocks from your holdings in that account, this saves you from the hassles of filling up and depositing delivery instruction slips with the DP in a very short time. I would recommend having a Demate account with the same broker where you have a trading account. Still, if you feel more secure with a bank to have your Demate account then it should be with a bank which is most convenient when it comes to deposit delivery instruction slips. Choosing a stock broker and opening a trading account The regular traders and experienced investors look at the lowest brokerage and highest margin while choosing a stock broker. But for the first time investors, brokerage rates should

be secondary and they should look at the research and analysis provided by the broker. A good brokerage has a system whereby you get an access to their research team and research reports released by them and a relationship manager is always accessible for your general queries and help. The brokerage should not be a deciding factor as initially your volume will not be very high and once you get expertise in trading, you can shift to a low brokerage broking house. Opening of trading account is almost similar to opening of a Demate account. You will need to fill up an account opening form along with agreement with the Broker together with the following documents. Passport size colors photograph a copy of the PAN card. An address proof (copy of Passport, Driving License, Ration card, Election identity card, etc.) Proof of Bank account (a cancelled cheque or bank statement can be given) Proof of demat account A passport size color photograph of the nominee (if appointed) Internet trading Internet trading is getting popular for the convenience of trading stock markets without going

anywhere. ICICI Direct, Sharekhan and many other brokerages are providing services of internet trading through their websites. In an internet trading account your Bank account, your demat account and your trading account are linked with one another and you can transfer funds from your bank account and buy shares through your online trading account and you can check the status of your holdings online in your demat account and when you sell the shares through your trading account your demat account is debited by the same quantity and the amount realized is shown as a credit balance in your trading account which can be transferred into your bank account or can be used for further buying. However, there are certain disadvantages of having an internet trading account. The online trading companies would not give you any margin and you will have to transfer entire amount before buying any stock whereas in offline trading brokers generally keep only 20 percent margin and rest can be paid when you buy the shares. The brokerage charged by the internet trading websites is generally higher than that charged by the brokers offering offline trading. The biggest

disadvantage is the time lag of prices, you would not get live quotes in an online trading account and in stock markets even seconds would matter, you would want to have the live prices to initiate a trade. It depends on the speed of the ISP you are using and the type of connection and if your connection is slow the time lag could range from 2 to 5 minutes. Now after opening demat and trading accounts you are ready to do your first trade. Do your own research, have a word of advice from your broker and tread forward into the world of financial markets. Happy investing Prepare yourself I have seen most of the first time investors losing big money in the stock markets and you would come across a number of such investors with terrible experience in stock markets that they hate to even discuss about any shares and feeling very secure with their money being invested in Bank Fixed deposits, traditional insurance plans and Government bonds with a return of about 8 percent a year. They had a sour experience because they had not prepared themselves for investing in stock markets, they simply saw some other fellow making huge money on some news driven stock and next time put a huge sum on

his advice or saw an expert on a news channel strongly recommending a stock and the markets turned otherwise. Such people do not dare to take another chance and believe that perhaps they are not made for it and resolve not to even look at it during rest of their lives. The experience might have been different if they would have spent some time researching and had some patience before making a first time entry. Some basic steps for the first time investors are listed hereunder which will be useful to make a successful entry into the stock markets and for those as well who had a terrible first time experience. Get a feel of the stock markets. Before entering the markets its always recommended to spend some time understanding them. When you go for shopping you spend some time visiting shops in the market to have a look at various designs and prices and then decide which merchandise you want to buy, similarly before buying stocks you must visit the stock markets, understand them, have a look at various stocks available and then pick one of your choices. Well its not as easy as writing it or recommending to someone; actually its a tough job even for those who have spent a long time in markets. But I would

still maintain that the research done by you is the best. Spend some time with business newspapers and business news channels. Start reading the daily business papers, particularly the stock market pages and try to correlate the news on companies to the movement in their stock prices. For example, recent news that Suzlon buys control in RE power pulls the price of Suzlon up by more than 7 percent in a day and sound quarterly results and announcement of bonus shares moved the stock price of NIIT Technologies more than 12 percent in a day similarly a poor show of quarterly results by Punjab National Bank saw its stock price fall by more than 4 percent in a day. In a few days your eyes will automatically be able to catch the price sensitive news in the papers. The next stage is to remain updated by watching Business channels as the news you get in newspapers in the morning might have been broken by the channels on the previous day, and in this world of fast moving information you need to get the news as it is broken. It may not be possible for you to watch TV during office hours, and then you may browse through some good websites to keep

yourself updated. Have patience, do not panic to invest. Once you allocate some money for investing in stock markets, it becomes very difficult to control your nerves and sit on cash till you discover a dream stock at a dream price. Your first entry should be after a lot of research and it may take a few months waiting for the right opportunity but your first stock should not let you repent on your decision. Consider all factors, the macro economic factors, the trend of the markets and the overall global scenario, the cycles, the technical of the markets, fundamentals and technical of your target stock to make your first move. Do your own research, dont follow street calls blindly. Try to do your own research before buying a stock. You may take a tip from a friend or an expert, but research yourself before making an investment and if your own research justifies the decision then go for it and if you think otherwise or you feel uncomfortable with the bargain then dont go for it. There is no dearth of opportunities in the markets wait for the next one because in these markets sometimes not making a loss is

also a profit. Create a paper portfolio. Now when you feel ready to kick off, its time to test your skills I know we all hate this, still it is worth being honest with yourself. Make an excel sheet on your PC and create a portfolio based on the knowledge you have gained including well analyzed tips from your friends and experts and see the performance of your portfolio over a period of time. You will be able to realize when you can make a real portfolio. Always invest in stock markets with the surplus money. Last and most important advice is to make investments in stock markets with the surplus money. If you are able to set aside an amount after incurring all routine expenses, paying your installments, premiums for life and health insurance and the EMI of your house, then it can be dedicated to the stock markets. If you have yet not bought a house, I would recommend you to do that first before entering the stock markets. And never take a loan for investing in stock markets, whatever justification your calculations may give.

D0s and Don ts in Stock

Trading
Every trader loses initially. We strongly believe that every investor who comes for trading initially gives losses as he/she is unable to have control over his greed and fear. At times with all the information and luck in his favor, he makes profit, and then because of his new over confidence, trades more which results in his profit gone and also sometimes a portion of his capital gone, This cycle of fear of the losses and greed to earn more makes him initially give losses The trader begins to make no profit no loss Out of the total investors who enter the first stage, 80% of them finish off at the first stage only and after a year or two find that the stock market is not their cup of tea. So in the 2nd stage only the 20% investors try to break even in their trading and quite a lot of them are able to have control over their fear and greed with a result that they stop giving losses. Now these traders are ready for the 3rd stage. The trader starts to make profits This stage where a trader makes consistent profit i.e. he does not give loss cheque to the broker. In fact this is the stage which

everyone wishes to have in the stock market. But we strongly believe that anybody who wishes to come to the 3 rd Stage has to pass through the above 2 stages. * Never risk more than 10% of your trading capital in a single trade. * Always use stop loss orders. (Here you should know your loss you can give in a situation where the trade starts going against you.) * Never do overtrading. * Never let a profit run into a loss. * Don't enter a trade if you are unsure of the trend. * When in doubt, get out, and don't get in when in doubt. * Only trade active markets. * Distribute your risks equally among different markets. * Never limit your orders. Trade at the markets * Extra monies from successful trades should be placed in a separate account. * Never trade to scalp a profit. * Never average a loss. * Never get out of the market because you have lost patience, or get in because you are anxiously waiting. * Avoid taking small profits and large losses.

* Never cancel a stop loss after you have placed it. * Avoid getting in and out of the market too soon. * Be willing to make money from both sides of the market. * Never buy or sell just because the price is low or high. * Never hedge a losing position. * Never change your position without a good reason. * Avoid trading after long periods of success or failure. * Don't try to guess tops or bottoms. * Don't follow a blind man's advice. * Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake. * When you lose don't blame it on luck. Investors come to the stock market and buy and sell the stocks eyeing the future. The future valuations they arrive at by either calculating the Fundamental factors on the basis of technical they take their positions. In the short term it is always the technical factors that are demand and supply of the stock which gives us the directions of the movement of the stock.

Here for the reference of this side, we find that people who come here have a more short term view of the market. They predict the short term movement of the market, technical analyst gives better results hence, and we follow all the standard technical analysis tools. There are two advantages in the following technical firstly; it tells us where the share/market is moving up or down. Secondly, technical are not bothered about the fundamentals or the news (it overrides them). In technical we are only concerned with price charts and volumes. We believe that at any given point of time, a stock price reflects everything.

Day Trding Knowledge

It seemingly looks to be the simplest and the most rewarding. But in intraday trading one has to be very fast and quick and have to be on your toes always, so there are certain rules which one has to keep in mind.
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If index is in positive from yesterday and the share you are holding is in minus then it should be cut and if intraday trend of index is in buy then one

should buy a stock in which is in plus. <!--[

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If index is in minus then one should look to short stocks which are minus and not stocks which are in plus. <!--[endif]--> It is not necessary that a stock which is weak today during intraday trading might be weak tomorrow also, simultaneously if a stock is strong today might not be strong tomorrow <!--[endif]--> If US Markets have gone up overnight, the markets here in all probability will open strong, so one should be quite careful when buying stocks as the general psychology of public is to buy when good news is there. <!--[endif]--> contrarians is important while intraday. <!--[endif]--> Being very trading

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Stop loss is a must while trading intraday. <!--[endif]-->

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Always trade in very liquid

stocks i.e. which have very high volume because as entry and exit can be very fast in such stocks. <!-[endif]--> <!--[if

Do papers trading before you actually start trading so that when you start making paper profits, then shift to actual trading<!--[endif]--> Keep your volume constant e.g.: if you trade in five lots of nifty future then trade in five lots only. This position can be increased only when you are satisfied with your trading for a month. It should not be that one day you buy five lots and next day you trade in ten lots and third day you get a loss and stop trading for two days. <!--[endif]--> Fear and Greed are at maximum levels while trading intraday so always have less position when you are new to intraday trading as otherwise you will be mostly under tension. <!--[endif]-->

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"Intra day trading strategy is defined as an overall trading strategy characterized by the

regular transmission by a customer of a multiple intra day electronic orders to affect both purchase and sale in the same security or securities."

It seemingly looks to be the simplest and the most rewarding. But in intraday trading one has to be very fast and quick and have to be on your toes always, so there are certain rules which one has to keep in mind while doing day trading in Indian stock market or in any stock exchange Most successful day traders are those that have a system or method and stick to it over and over. There is no "magic formula" that will result in fantastic results. Most day traders that I know plan their trades around a theory or method they have faith in and continue this process over and over. Day trading is characterized by multiple intra-day trades executed to take advantage of small price movements in stock. Stocks are generally held for minutes or hours and generally positions are closed out overnight for small profits or losses. In the day trading study, a day trader is described as "an individual who

conducts intra-day trading in a focused and consistent manner with a primary goal of earning a living through the profits derived from trading strategy". ADVANTAGES:

Trading opportunities are more frequent, if you can trade with daily chart, you will see similar trades more often on intraday chart You can cut losses very quickly. There is no overnight risk if a major piece of news hits your market after the close.

DISADVANTAGES:

You miss longer term swings and trends Profit are smaller because intraday swings are shorter Expenses are higher because of more frequent commission or brokerage and slippage.

You must act instantly, if you stop to think you are dead. With daily chart you have a luxury of time but intraday chart demand immediate action. HELPFUL POINTS FOR INTRA DAY TRADING:

Keep your volume constant

e.g.: if you trade in five lots of nifty future then trade in five lots only. Being contrarians is very important while trading intraday. Stop loss is a must while trading intraday. Always trade in very liquid stocks i.e. which have very high volume because as entry and exit can be very fast in such stocks. It is not necessary that a stock which is weak today during intraday trading might be weak tomorrow also, simultaneously if a stock is strong today might not be strong tomorrow With the use of various tool, most of them are based on range breakouts" or "trend following" systems. Others are based on "pivot points" and other advanced calculation.

What you must NOT do 1. Don't panic The market is volatile. Accept that. It will keep fluctuating. Don't panic. If the prices of your shares have plummeted, there is no reason to

want to get rid of them in a hurry. Stay invested if nothing fundamental about your company has changed. Ditto with your mutual fund does the Net Asset Value deep dipping and then rising slightly? Hold on. Don't sell unnecessarily. 2. Don't make huge investments When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages. Keep some money aside and zero in on a few companies you believe in. When the market dips --buy them. When the market dips again, , you can pick up some more. Keep buying the shares periodically. Everyone knows that they should buy when the market has reached its lowest and sell the shares when the market peaks. But the fact remains, no one can time the market. It is impossible for an individual to state when the share price has reached rock bottom. Instead, buy shares over a period of time; this way, you will average your costs. Pick a few stocks and invest in

them gradually. Ditto with mutual fund Invest small amounts gradually via a Systematic Investment Plan Here, you invest a fixed amount every month into your fund and you get units allocated to you. 3. Don't chase performance A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically. Ditto with a mutual fund every fund will show a great return in the current Bull Run. That does not make it a good fund. Track the performance of the fund over a bull and bear market; only then make your choice. 4. Don't ignore expenses When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits especially if you are selling for small gains (where the price of stock has risen by a few rupees). With mutual funds, if you have already paid an entry load, then you most probably won't have to pay an exit load. Entry loads and exit loads are fees levied on the

Net Asset Value (price of a unit of a fund). Entry load is levied when you buy units and an exit load when you sell them. If you sell your shares of equity funds within a year of buying, you end up paying a short-term capital gains tax of 10% on your profit. If you sell after a year, you pay no tax (long-term capital gains tax is nil). What you MUST do 1. Get rid of the junk Any shares you bought but no longer want to keep? If they are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilize the money elsewhere if you no longer believe in them. Similarly with a dud fund; sell the units and deploy the money in a more fruitful investment. 2. Diversify Don't just buy stocks in one sector. Make sure you are invested in stocks of various sectors. Also, when you look at your total equity investments, don't just look

at stocks. Look at equity funds as well. To balance your equity investments, put a portion of your investments in fixed income instruments like the Public Provident Fund, post office deposits, bonds and National Savings Certificates. If you have none of these or very little investment in these, consider a balanced fund or a debt fund. 3. Believe in your investment Don't invest in shares based on a tip, no matter who gives it to you. Tread cautiously. Invest in stocks you truly believe in. Look at the fundamentals. Analyze the company and ask yourself if you want to be part of it. Are you happy with the way a particular fund manager manages his fund and the objective of the fund? If yes, consider investing in it. 4. Stick to your strategy If you decided you only want 60% of all your investments in equity, don't over-exceed that limit because the stock market

has been delivering great returns. Stick to your allocation. General Market Advice: 1. Never chase a stock. 2. Buy when markets are in the grip of panic. 3. Only buy fundamentally strong stocks, which are undervalued. 4. Buy stocks grown in top line and bottom line over the past years. 5. Invest in companies with proven management. 6. Avoid loss-making companies. 7. PE Ratio and Growth in earnings per share is the key. 8. Look for the dividend paying record. 9. Invest in stocks for sure returns. 10. Stocks have been the high yielding asset class over the past. 11. Stocks are an asset class. 12. The basic property of any asset class is to grow. 13. Buy when everyone is selling and sell when everyone buys. 14. Invest a fixed amount each month.

The Stock Trading Plan:

1. Establish a plan and define specific risk and profit objectives

before trading. Maintain the necessary discipline to follow that plan through both good and bad times. Successful traders will agree that discipline contributed more to their success than their trading philosophy itself. Remember that the key to any plan is how well it holds over time.

2. There is no "sure thing", and there is no trading system that is 100% accurate. Your goal, as a trader, is to use the tools available and try to develop an edge. Base your trades on sound fundamental and technical reasoning, rather than on hunches and long shots. If you can develop an edge, however small, over time you will be successful.

3. A trader must be able to admit they have made a mistake. Do not become emotionally or financially committed to a losing trade. Avoid the pitfall of becoming emotionally involved with any trade.

4. An investing edge is only part of the equation. A trader should diversify sufficiently so that the

growth in equity can be consistent and the likelihood of a catastrophic loss can be diminished. The lower the percentage of a traders account dedicated to any one trade the greater the chance of the trader being successful. Even if the trader has a perceived investing edge, it is unwise to run the risk of ruin, and bet it alone one trade. The goal is not only to make money, but also to be able to continue to make money consistently for an extended period of time. A trader must learn the basic concepts and the importance of money management.

5. Lack of experience in the market causes many traders to make the mistake of taking small profits and letting losses run. Fundamental trading wisdom dictates the exact opposite. When in a winning trade, be patient and fully capitalize on the success. The trading axiom is, "cut your losses short and let your profits run".

6. A trading system does not have to be difficult, time consuming, complicated and stressful in order

to be profitable. In trading systems, as in many other things in life, simple can be better

7. As a trader, be cautious, and never let greed take control of a winning position.

8. Be aware that declining volume usually indicates the market is not accepting higher or lower prices, and this could indicate a market turn.

9. Learn from your trading mistakes. Never make a trading mistake without asking yourself why.

10. Do not make trading decision based solely on margin requirements, and always trade within your capabilities. Remain true to your trading plan and follow the trading style that works best for you.

11. Do not trade markets that you dont understand. Trade with confidence and conviction Trade

only with risk capital, and be aware of the risk of losing. Divide your capital into 6 equal parts and never risk more than one-tenth of your capital on any one trade.

12. After a long period of success or a period of profitable trades, try to avoid the natural tendency toward increasing your trading activity. Conversely, use selfdiscipline when a trade goes against your position. Take your loss and wait for another opportunity. Never increase your trading after a loss.

13. Avoid getting into the market because you are anxious from waiting and/or out of the market because you have lost your patience. Never over trade and adhere to your risk management rules

14. Do not make a trading decision to buy just because the price of the stock is low or sell just because the price is high. Never change your position in the market without a good reason that is based on a fundamental or technical rule indicating a change

in trend.

15. Trade the most active stocks and refrain from trading the slow moving markets. Trade "at the market" whenever possible and try to avoid a fixed buying and selling price.

16. When the market is moving with your position and you are using a stop loss order, and then raise your stop loss so as to lock in your profit. Protect yourself against the possibility of turning a profit into a loss.

17. The "trend is your friend," and never buy and sell if you are insecure of the trend according to your fundamentals and technical rules. If you are in doubt, then exit the market. Only trade when you feel confident with your trading strategies.

18. Trade in five or six different stocks at a time, so as to avoid tying up all of your capital in any single stock.

19. A trader should establish a "surplus account" after a series of successful or winning trades. The goal is to retain the "surplus account" for times of emergency or panic

20. It is difficult to try and guess where the top and bottom of the market is, instead let the market prove its top and bottom.

Successful Traders Use Successful Trading Techniques

What are the successful trading characteristics of today's successful traders? Some people are very comfortable doing stock analysis and some are not. And just because you feel confident and comfortable trading stocks, it doesn't necessarily mean you will be good at it. There are no hard and fast rules on what makes a successful stock trader, yet there are several characteristics that those who make the most amount of money in the least amount of

time all have in common. 1. To be successful, a trader must be patient. A successful trader lets winning positions run, but is able to swallow his pride and close the trade when it isn't working. Patience means knowing how to be resilient, courageous, and disciplined when the markets go against you. 2. The exploration of stocks is a key ingredient to becoming a successful trader. Developing skill in both fundamental and technical analysis is suggested. 3. The successful trader is passionate and has a biting desire to succeed. The biting desire to succeed can make all the difference in educating yourself about what you want to know and sticking to your strategy when the going gets rough. 4. As they practice stock trading, potential embarrassment is not a concern with successful traders. They expect to have losses and know when to cut them as soon as they are recognized. 5. Successful traders are highly disciplined. Extremely disciplined a successful trader does what needs to be done, even if he isn't in the mood. Discipline also means sticking to your strategy,

not suddenly buying or selling on a whim, or because of a" hot tip". 6. Successful traders know that mistakes are going to happen. They realize and appreciate that the ability to make their own mistakes is a necessary part of the learning process. 7. A winning trader knows the difference between defensive and offensive behavior, and when to use each - protect your money first, profit later. 8. Successful traders balance their lives. Stock trading can be addicting, a successful trader can break away 'at will' before putting too much at risk. 9. Successful traders are risk adverse. They don't like losing money and control themselves before losing a large quantity, even if they have to admit they made a mistake. 10. Getting emotionally involved or placing trades based on hunches or rumors are not characteristics of successful traders. To be victorious you have to be able to resist the urge to prove you are right and be ready to make mistakes. Greed and fear should not affect your decisions. Setting stop losses on every trade is something that

promotes success in trading. This means that on more than one occasion, you will have to admit that you are wrong. By using stop loss strategies correctly, your ego and your portfolio will survive and you may be able to get back into your "pet" position again when trends tell you it is the appropriate time to do so. You will have to learn to disregard any emotional ties you have to your stock and make quick stock trends your master. Although you might miss the lowest entry points and the top selling points, you will be able to sleep at night and look at yourself in the mirror in the morning. Learning to get out of a stock position before your profits turn to losses becomes a necessity. Learn solid stock investing concepts.

Strategies for day trading

Basic Rules: - Select liquid stocks only. - Select a few stocks only. - If you are already holding the stock wait for the peak or the bottom - Watch the general sentiment (Index

Support/Resistance) - Don't be over enthusiastic. - Never challenge the market. - Place stop loss orders in a highly volatile market after long or short trades Strategies: Trade on unknown trends: When the market opens trade on a stock based on the previous days movements. Partially or fully cover the trade within half an hour Trade on known trends: When the market is about to close (half an hour before) trade on a stock based on the day's movements Trade on resting stocks: Stocks which have risen/fallen substantially will take rest for some time. Watch it and trade Trade when trends are known: In a bull market raising stocks will raise further. Wait for correction and buy. In a bear market falling stocks will fall further.

Wait for up move and sell. Trade on news: The general philosophy is to buy on rumors and sell on news. When the news is favorable and the stock has risen considerably go short. When the news is unfavorable and the stock has fallen considerably go long. Trade on appetite: If you think that you have made enough profit/loss stop trading. Trade after trails: Start with small lots and go for volumes after enough study. Trade on previous trend: Instead of buying a stock with previous days declining trend, it will be prudent to buy a stock with previous days uptrend on declines. Instead of selling a stock with previous days up trend, it will be prudent to sell a stock with previous days downtrend on up move. Trade on dates: Stocks rise/fall prior to announcement of results. Have knowledge on this date which will help in making

decisions. Trade on volumes: Rising/Falling Stocks which shrink in volume indicate that the run is nearing final state. Watch for change in trend.

Tricks of the Successful Trader

For all of its numbers, charts and ratios, trading is more art than science. And just as in artistic endeavors, there is talent involved, but talent will only take you so far. The best traders hone their skills through practice and discipline. They perform self analysis to see what drives their trades and learn how to keep fear and greed out of the equation. In this article we'll look at nine steps a novice trader can use to perfect his or her craft; for the experts out there, you might just find some tips that will help you make smarter, more profitable trades, too. Step1. Define your goals and then choose a style of trading that is compatible with those goals. Be sure your personality is a match for the style of trading you choose. Before you set out on any journey, it is imperative that you have some idea of where your destination is and how you will get there. Consequently, it is imperative that you have clear goals in mind as to what you would like to achieve; you then have to be sure that your trading method is capable of achieving these goals. Each type of

trading style requires a different approach and each style has a different risk profile, which requires a different attitude and approach to trade successfully. For example, if you cannot stomach going to sleep with an open position in the market then you might consider day trading. On the other hand, if you have funds that you think will benefit from the appreciation of a trade over a period of some months, then a position trader is what you want to consider becoming. But no matter what style of trading you choose, be sure that your personality fits the style of trading you undertake. A personality mismatch will lead to stress and certain losses. Step2. Choose a broker with whom you feel comfortable but also one who offers a trading platform that is appropriate for your style of trading. It is important to choose a broker who offers a trading platform that will allow you to do the analysis you require. Choosing a reputable broker is of paramount importance and spending time researching the differences between brokers will be very helpful. You must know each broker's policies and how he or she goes about making a market. For example, trading in the over-the-counter market or spot market is different from trading the exchange-driven markets. In choosing a broker, it is important to read the broker documentation. Know your broker's policies. Also make sure that your broker's trading platform is suitable for the analysis you want to do. For example, if you like to trade off of Fibonacci numbers, be sure the broker's platform can draw Fibonacci lines. A good broker with a poor platform, or a good platform with a poor broker, can be a problem. Make sure you get the best of both. Step3. Choose a methodology and then be consistent in its application.

Before you enter any market as a trader, you need to have some idea of how you will make decisions to execute your trades. You must know what information you will need in order to make the appropriate decision about whether to enter or exit a trade. Some people choose to look at the underlying fundamentals of the company or economy, and then use a chart to determine the best time to execute the trade. Others use technical analysis; as a result they will only use charts to time a trade. Remember that fundamentals drive the trend in the long term, whereas chart patterns may offer trading opportunities in the short term. Whichever methodology you choose, remember to be consistent. And be sure your methodology is adaptive. Your system should keep up with the changing dynamics of a market. Step4. Choose a longer time frame for direction analysis and a shorter time frame to time entry or exit. Many traders get confused because of conflicting information that occurs when looking at charts in different time frames. What shows up as a buying opportunity on a weekly chart could, in fact, show up as a sell signal on an intraday chart, Therefore, if you are taking your basic trading direction from a weekly chart and using a daily chart to time entry, be sure to synchronize the two. In other words, if the weekly chart is giving you a buy signal, wait until the daily chart also confirms a buy signal. Keep your timing in sync. Step5. Calculate your expectancy. Expectancy is the formula you use to determine how reliable your system is. You should go back in time and measure all your trades that were winners, versus all your trades that were losers. Then

determine how profitable your winning trades were versus how much your losing trades lost. Take a look at your last 10 trades. If you haven't made actual trades yet, go back on your chart to where your system would have indicated that you should enter and exit a trade. Determine if you would have made a profit or a loss. Write these results down. Total all your winning trades and divide the answer by the number of winning trades you made. Here is the formula: E= [1+ (W/L)] x P 1 where: W = Average Winning Trade L = Average Losing Trade P = Percentage Win Ratio Example: If you made 10 trades and six of them were winning trades and four were losing trades, your percentage win ratio would be 6/10 or 60%. If your six trades made Rs2, 400, then your average win would be Rs2, 400/6 = Rs400. If your losses were Rs1, 200, then your average loss would be Rs1, 200/4 = Rs300. Apply these results to the formula and you get; E= [1+ (400/300)] x 0.6 - 1 = 0.40 or 40%. A positive 40% expectancy Step6 Focus on your trades and learn to love small losses. Once you have funded your account, the most important thing to remember is that your money is at risk. Therefore, your money should not be needed for living or to pay bills etc. Consider your trading money as if it were vacation money. Once the vacation is over your money is spent. Have the same attitude toward trading. This will psychologically prepare you to accept small losses, which is key to managing your risk. By focusing on your trades and accepting small losses rather than constantly counting your equity, you will be much more successful. Secondly, only leverage your trades to a

maximum risk of 2% of your total funds. In other words, if you have Rs10, 000 in your trading account, never let any trade lose more than 2% of the account value, or Rs200. If your stops are farther away than 2% of your account, trade shorter time frames or decrease the leverage. Step7. Build positive feedback loops. A positive feedback loop is created as a result of a well-executed trade in accordance with your plan. When you plan a trade and then execute it well, you form a positive feedback pattern. Success breeds success, which in turn breeds confidence - especially if the trade is profitable. Even if you take a small loss but do so in accordance with a planned trade, then you will be building a positive feedback loop. Step8. Perform weekend analysis. It is always good to prepare in advance. On the weekend, when the markets are closed, study weekly charts to look for patterns or news that could affect your trade. Perhaps a pattern is making a double top and the pundits and the news is suggesting a market reversal. This is a kind of reflexivity where the pattern could be prompting the pundits while the pundits are reinforcing the pattern. Or the pundits may be telling you that the market is about to explode. Perhaps these are pundits hoping to lure you into the market so that they can sell their positions on increased liquidity. These are the kinds of actions to look for to help you formulate your upcoming trading week. In the cool light of objectivity, you will make your best plans. Wait for your setups and learn to be patient. If the market does not reach your point of entry, learn to sit on your hands. You might have to wait for the opportunity longer than you anticipated. If you miss a trade, remember that there will always

be another. If you have patience and discipline you can become a good trader. Step9. Keep a printed record. Keeping a printed record is one of the best learning tools a trader can have. Print out a chart and list all the reasons for the trade, including the fundamentals that sway your decisions. Mark the chart with your entry and your exit points. Make any relevant comments on the chart. File this record so you can refer to it over and over again. Note the emotional reasons for taking action. Did you panic? Were you too greedy? Were you full of anxiety? Note all these feelings on your record. It is only when you can objectify your trades that you will develop the mental control and discipline to execute according to your system instead of your habits.

Bottom Line
The steps above will lead you to a structured approach to trading and in return should help you become a more refined trader. Trading is an art and the only way to become increasingly proficient is through consistent and disciplined practice. Remember the expression: the harder you practice the luckier you'll get.

Momentum Trading:
Momentum trading seems to have many followers and equally many skeptics and cynics but we must first define exactly what momentum trading is and its advantages and disadvantages in order to form an educated

opinion. Momentum trading merely says every year there are a small number of stocks that go on to gain 500% - 1000%+ moves in the stock market. This can easily be seen by going to one of the many free stock screeners and typing in the parameter that displays stocks that have gained at least 500% over the year. Depending on the state of the overall stock market will depend how many stocks show up in this search. Even during the worse bear market I can recall (2000 2001) there are still dozens of small cap, unknown stocks, and going on to make 500% + moves. Lets go right back to some good old common sense. Lets say every year there are 30 stocks that go onto make a 700% move in the stock market. What if we can jump on these stocks when they have put in a 400% move for the year? So to jump on board a momentum stock simply identify which stocks have already put in a sterling performance for the year. Buy into them and hope they keep powering on. Some will and some will not. Simply cut your losses quickly on the losers and ride the winners for as long as they keep heading in the right direction. For many they will look at a

stock, which has already gained 400%, and say it has gone too far. They would rather get in at the bottom and ride the stock from 0 to 400%. They have been taught buy stock guru" to buy low and sell high. This sounds great but in practice it is a losing strategy. Why? You have no way of knowing which stocks the market will or will not fall in love with. All the fundamentals in the world cannot give you a better chance than flipping a coin. You can pick two equally great looking stocks. Both with fantastic earnings and prospects One will languish the other will go no to make stellar returns. Are you willing to take this risk? Trying to pick a bottom is greed. You are not happy with making a 200,300%+ gain but you want more. You want it all. Greed and fear are the emotions that always have and always will destroy your stock market profits. Another advantage with momentum trading and one severely overlooked is the speed at which profits are made. Its all very well making an 800% return on a stock you made but its that great a return if it took six years to make it. Did you know the fastest movement in a trend is in the last quarter? You do now. Trends start slowly and gather

momentum as they continue. A stock, which rises from Rs 10 to Rs 300, will see its fastest move from about Rs 70 onwards. The movement from Rs 70 to Rs 300 will be in about 1/10 of the time it took for the stock to go from Rs 10 to Rs 70. Think about this. It is much better to jump into the tale end of a large trend than catch the smaller, slower moving start of trends and this is exactly what momentum stock trading is all about.

Pivot Point Trading

You are going to love this lesson. Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations. The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance

levels calculated from that are collectively known as pivot levels. Every day the market you are following has an open, high, low and a close for the day as this information basically contains all the data you need to use pivot points. The reason pivot points are so popular is that they are predictive as opposed to lagging. You use the information of the previous day to calculate potential turning points for the day you are about to trade (present day). Because so many traders follow pivot points you will often find that the market reacts at these levels. This gives you an opportunity to trade. If you would rather work the pivot points out by yourself, the formula I use is below: Resistance 3 = High + 2*(Pivot Low) Resistance 2 = Pivot + (R1 - S1) Resistance 1 = 2 * Pivot - Low Pivot Point = ( High + Close + Low )/3 Support 1 = 2 * Pivot - High Support 2 = Pivot - (R1 - S1) Support 3 = Low - 2*(High - Pivot) As you can see from the above formula, just by having the

previous days high, low and close you eventually finish up with 7 points, 3 resistance levels, 3 support levels and the actual pivot point. If the market opens above the pivot point then the bias for the day is long trades. If the market opens below the pivot point then the bias for the day is for short trades. The three most important pivot points are R1, S1 and the actual pivot point. The general idea behind trading pivot points is to look for a reversal or break of R1 or S1. By the time the market reaches R2, R3 or S2, S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries. A perfect set would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position. Are You a Newbie Trader? Day trading online is not an easy profession. You might be stuck in

one of the common pitfalls that often devour newbie day traders. Find out if you are still a newbie trader.
8. The Gut Trading Indicator:

When you are day trading, you use your gut feeling instead of calmly assessing trading market conditions using technical indicators and trading software and selecting high probability day trades.
7. The Gold Rush: You think

day trading means that you can make a lot of money in a short amount time.
6. Day Trading the News:You

are glued to CNBC for your next day trading stock tip. CNBC has a very specific job: To provide enough entertainment to viewers so they tune in and watch. With a lot of people watching, they make more money from the commercials. It's as simple as that. CNBC is fun to watch, and when things get serious; they do a great job reporting. You cannot make a living "trading the news" off of any financial news channel. By the time it appears on television, it is way too late to react.

Trading floors have already heard the news and by the time it makes it to the public they are closing their positions, ideally to suckers who just saw the headlines, the news does not provide day trading tips.
5. Trading Market Chaser: You

continue to chase the trading market. If a certain trading price is going up and the puts are in a long position. Suddenly the trading price pulls back, you start to get nervous and get out of the day trade with a 20 pip loss. All of a sudden, the trading price resumes it seems like an uptrend. You think, "Wait a minute this is easy, I was right all along." You add in a second long position to try and make up for the 20 pip loss. You are hoping to make a profit. Well, guess what, the price doesn't up, it pulls back, and ends at a 25 pip loss. Your day trading P&L for the day: -45 pips.
4. Day Trading Slacker: You

do not do you homework before the next day trading session begins. You do not examine the charts from all time frames; you do not understand the direction of the overall market trend.

You have no idea if employment numbers are about to be released or any other announcements so that you may prepare to handle the trading market correctly.
3. The Player: You have

indicator commitment issues. You jump from one trading indicator to another. Sure you know little about them all, but you don't know a lot about any specific indicator. Therefore you have no idea which indicator fits your personality and day trading style the best.
2. Day Trading Overachiever:

You day trade way too much. You trade multiple lots and you think that it will result in a big pay off at the end of the day.
1. Day Trading Cowboy: You

continue to think that you can learn by day trading by yourself, you will find the secret code, crack this system, become a billionaire and fly away to Tahiti. Trading is a profession. Most successful traders learn from a day trading mentor, someone who is already a professional and a

successful day trader, usually with years of experience. If I wanted to be a doctor, I couldn't just watch an operation on TV and expect to succeed when I tried my next angioplasty. Why should trading be any different from any other profession

Day Trading Money Management

Day trading as a business can be very profitable. It is probably the safest form of investing, as you are focusing on a small number of positions, you are not holding any positions overnight and you are able to enter and exit trades with pinpoint accuracy. However, many day traders find themselves losing due to poor day trading money management. How Much Should You Risk The size of your trading position is in direct proportion to the value of your portfolio. The key to day trading success is to avoid big losers. I can not tell you how many times early in my trading career, that I would be up huge over a 5-day period, only to have a big loser wipe out 50% of my gains. So, to avoid this bad habit,

you should only risk a total of 1% of your portfolio on any one trade. Most traders take this rule of thumb, and just put a 1% stop loss out there and when that is hit, they just take the loss. If you have put on around 1,000 day trades or more, you know all too well that a 1% loss can happen. So, in order to avoid taking constant hits, you should allow yourself to take a 2% hit on your position, where the dollar loss from this trade will only represent 1% of your overall account value. Now that I have confused both of us, let me try to say that a little easier. You simply want the total dollar amount invested per position, to equate to 12.5% of your total margin able equity. So, if your account value is Rs100, 000 you will have Rs400, 000 dollars in margin buying power, and should use Rs50, 000 for each trade. Remember, this Rs50, 000 you use only represents 12.5% of your margin able equity. This way if you take a 2% hit, it will only be 1% of your total account value. Stops are not meant to be hit It really upsets me when I hear so called professionals advice new traders to set stop loss amounts. Doesn't that seem like a general rule? Trading is a game of precision, and does not operate in the realm of gray. Yes, you need a

stop loss order for every trade, but it is a fail safe. In this article we have discussed the power of a 2% stop rule and overall day trading money management. But do you think you should let every losing trade hit your stop? Of course not now I am not suggesting that we all become rogue traders and trade without stops. The minute you see that the trade is wrong, get out with small hit. Because in the end, the goal here is to see a small number of .25% or .5% losses, while your winners are in the range of 1%-3%. This is how you will win the game. Again, the 2% stop loss is for the unexpected sharp counter move, and it is not your goal to have this stop hit. You should know well before your stop is hit if you are in a bad trade.

Operate in Cash
Day trading is a cash business. The only loan you should be using is with your day trading margin buying power. Do not start or continue to day trade, if you have to take out loans, credit, or use part of your retirement to get in the game. Traders that operate with a positive cash flow and utilize day trading money management rules, have a much higher success rate and utilize day trading money management rules, have a much higher success rate than traders that start out

in the red.

What are Breakouts?

When you think of day trading breakouts, what comes to mind? Stocks making daily highs, two-day highs, weekly highs, all-time highs as you see, breakout means a lot of things to a lot of people. So, why do so many people lose money day trading breakouts? Why are traders constantly buying stocks when they hit intraday highs, only to have them rollover within minutes. How many times have you shorted a stock on a breakdown through a critical support level, go get coffee, come back and see the stock has bounced and you just bought a five-thousand dollar no foam, soy latte? Well, in this article I will give you the "secret" that so many breakout day trading professionals use everyday to take themselves from ordinary to extraordinary. Biggest Misconception about Day Trading Breakouts If I buy a breakout or sell a breakdown, I will make money, right? If you believe this statement, immediately contact your broker, withdraw your funds and put them in a savings account. If you follow this system, you will lose money. Often times professional floor traders and the like will wait for stocks to break new lows, look for large buy orders in the tape and then start scooping up every share in sight. This will leave you the novice trader, looking at your screen scratching your head. Asking yourself the question, how did this happen? My technical indicators were in alignment. The stock has been below its simple moving average the last 10 bars. The last 15 bars have been down, now when I put on my short position, the stock has the bounce of its life. If you are ready to end your streak of tough trading days, continue reading.