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Day-trading? How not to lose money

Last updated on: November 15, 2012 07:55 IST

In response to an article posted October 24 -- Want to make money day-trading? 11 tips -- Get Ahead reader Dhananjay Banthia offers seven tips to help day-traders make money. Dhananjay is a NCFM Level 3 Certified Professional.

I learnt the art of winning by knowing how I can lose: Anonymous

This article will help day-traders understand few basics things that can go wrong in day-trading and win over the volatile market (stocks, commodities and currency).

To win over the ping-pong movements in the market, small or big traders (will come with strategy specific to you in my next article) need to keep in mind the points mentioned here, to frame their winning strategy in this market.

1. Define your objective

The universal objective in trading is to make a few quick bucks: Anonymous

Do not fall in love with any stock, commodity or currency; work on specific short-term news you get from various media (business news, newspaper, and financial web sites). Short-term news may be for a minute, hour, day, or a week. Lots of hard work is indeed required to track information flowing from every corner.

Day-trading? How not to lose money

2. Overtrading is a big no

Over-eating and over-trading are equally bad: Anonymous

This is another common mistake most traders make. It is just a matter of few strokes that is enough for you to make big bucks. Wait for the right levels, rather than slogging hard the whole day and going home with a remark from the broker that says: Amount X due to us.

3. Stop loss is a must

Stop loss = Stop losing

This is a must kind of thing. In fact I would say a powerful mantra of defending; ten triggered stop losses are better than being doomed with a position where losses keep on accumulating. This is the basic most people tend to forget or try to avoid with a fear that stop loss may get triggered.

With such kind of mindset I would suggest such traders go against their intuition and take a reverse position and make few bucks... just think.


Day-trading? How not to lose money

4. It's your money

My money, my decision

Don't make buying/selling tips your trading guide.

I guess as a day-trader you do understand a bit of fundamental and technicals of markets. If you don't please do attend training sessions and clear you basics. Then, go by your own thought process and keep an eye for information that is important.

5. Avoid trading on big news days

Big news, bye bye! Big news specific to any scrip, commodity or currency can go anywhere on such days. It's better to avoid trading and wait for next trading session. I know many people who have burnt their figures on big news days.


Day-trading? How not to lose money

6. End of the day...

Pack up and take a break, tomorrow morning come back with fresh legs. Never ever carry your position for the next trading session, be smart enough to book profit and brave enough to book losses for the day. Do remember at the end of the day we trade for the day, not tomorrow.

7. Your source of bread

Trade with opportunity money. This is to do with the emotional part in me. Do trade if you have taken care of all the basic needs and commitments, else go to the broker and close your trading account. Trade only when you have surplus and you do believe this is your opportunity money and do judge your risk appetite; the risk-reward principle is followed everywhere.

To end on a positive note, I do believe that the points mentioned here will make every day-trader in the market end on the winning note. The market does provide profit-making opportunities; the important thing is how does a trader cash on them.