I dedicated almost an year on studying stock market practically and later automating it with python using Zerodha API, will refine my ideas here for others to get a jump start.
Here we go ...Broadly there are 2 ways of trading(excluding commodities for simplicity)
1. Equity
Shares are created by companies when they go public via IPO(initial public offering). These prices move mainly based on company performance(Quarterly results), new deals signed , government policies (budget, eg: privatisation of banks ), market sentiment (Carona wave, petrol price), US markets.
Strategies
- Check US market to see the condition of market as US market is ~12 hours behind IST. Expect Indian market to move in unison with USA unless there is no major local market conditions.
- During July many companies have quarterly results, the markets tend to go down.
- Check for earnings release of company Money control earnings and buy if:
1. Previous quarterly earnings was profitable. Yearly earnings is profitable.
2. Market is not a bear market.
Sell when you make 5-10% profit (dont get greedy) as the wave normalizes in 2 days from date of result.
MIS trading
- The intraday trading(MIS) was never profitable except few hits. I made mistakes trading after 12pm while the intraday will close by 3.15 pm. Big mistake. MIS seems lucarative as the trading company(Zerodha in my case) gives around 6 times the leverage (1 day loan) if you are low on funds.
Better strategy for MIS is to Buy stock instead of Sell and combine with CNC normal. As we cant convert the sell position to long CNC) in case the trade goes wrong.
- For picking stocks : -William %R and bollinger band indicator combined with RSI showed good results on back testing (around 8% return per month) . These are good options for short term trading ( 1 week). Also you can consider supertrend which indicates .
2. Futures and options
These are just contracts created by trading agent eg : Zerodha deriving value from the actual stock or indices . For options put and call is used and purchased using premium price, during expiry the profit and loss on the derived stock is considered. Futures they are like equities but are contracts in future based without delivery and they have a monthy expiry. The weekly contracts end on thursday every week, also there are monthly contracts which end last thursday of the month.
- We trade on momentum of the stock derivative
- Super trend indicator is best.
- The Options contract premium near to the derived stock has huge movements (sometimes 100% movement) and are highly risky if you dont know how to do.
Gotchas:
1. Never trade by applying your emotions and with a fickle mind, always be rule and data driven.
2. Dont trade on MIS (margin intra day) after say 1pm. Convert position from MIS to CNC(Normal long) position for buy trades to avoid losses.
3. For Options contract never trade on contract expiring 2 days before. You loose the cushion of time incase the market swings in the opposite direction of your trade.
