Day Trading Rules and Setups

This is the summary of the one of the chapter from a book called 'How to Money Trading Derivatives' by Ashwani Gujral

1. do your Homework
The trader should study the specific stocks and dericvatives and their relation to the overall market atleast for one hour other than market hours.

2 Stick to the Schedule
Before the market opens the trader should have list of potential stocks based ont the previous day homework.
He should review how these stocks behaved day before and draw conclusion based on the study.

3. Learn how to manage your Loss
If the market is not acting to your expectation, just get out. Big losses always start from small losses.

In a day trading scenerio, and unless there is some unexpected news, eight out of 10 times the market forms a range in the first couple of hours by establlishing high and low, and then towards the end of the day breaks out or down from the range and establishes a direction.

4. Maximum shares per Trade
In choppy sideways market you should also reduce your volume. When the markets are slow, reduce the exposure size

5. Number od Trades per Day
the maximum nuber of trades should be five per day. This is also justified when trader is trading more than one stock per day.

6. Avoid Trading during the slow period of the day
Trades are consistently more successful before 11 am and the after 2 pm. This is because before 11 am you tend to catch the highs or lows of the day and after 2 pm you catch the breakout.

7. A very simple technique to reduce the risk in day trading, and even in swing trading situation, is to buy oversold and sell overbought.

Cont......

Europe a big concern?

This is an attempt to bring out the essence of the Krugman's column about Europe on 17th March "THE HINDU". I am a great fan of Krugman and once again he gave an interesting article. In this he has compared the response of the US and the Europe to the global financial meltdown. 

Europe has failed in implementing effective fiscal and monetory policies.  On the Fiscal side we can see that  the economists beleive that the Obama's stimulus plan itself is very less and if we compare it with Europe, we can observe that the Europe's efforts are miniscule. When we take the Monetory policy the European Central Bank has been very slow to react and has sheid away from any strong measures to unfreeze credit markets.

 

The question is Why is Europe falling short?

The answer is simple. European Union doesnt have the kind of continentwide instituitions needed to deal with a continentwide crisis. There is no single Government to take the responsibility for the European economy as a whole. Does all these mean that Europe was wrong to let itself become so tightly integrated? Does it also mean that the creation of Euro was a blunder?. It may not be. Because still if the Politicians in Europe start showing more leadership, the entire scene can change.

Would that happen ? We have to wait and watch!!!!!!! Look out for more :)