Stock selection for Day Trading?

I am very new to trading (3 weeks old ). I was a software professional. I found Stock market fascinating (Not the first .. nor the last I guess :cheesy.

I trade in RPL, CAIRN and IFCI for my day trade. The selection is based on price range and high volume. I trade around 400 shares a day. Either make a loss of around 500 rupees or gain of 300 ruppes (Pls do the math of my profit )

Please suggest as to what is the volume and how to do stock selection.

Any article links would be helpful...

Thanks!
WinningTrade

Hi Winning Trade

If you are trading stocks this way, you would probably want to use a volatility indicator/filter to select your stocks - something like the Average True Range (ATR) may suit you. The higher the number, the more volatile the stock. Also, stick to the FTSE 100 stocks (or the equivalent of the market you are trading) because they are more liquid and this is very important for day trading.

It would be interesting to know what sort of analysis you are using to day trade stocks - TA? Level 2 order flow?

If you are using TA, you need to know that for stocks, it doesn't work as well on an intraday level basis as something more liquid and heavily local driven like certain futures markets. Sure, the Daily and Weekly levels are fine but 5, 10, 15, 60 minute levels are pretty insignificant. For this reason, you really need Direct Market Access and Level 2 to watch order flow. Even this is getting tricky now as there are so many algorithmic trading systems which are super fast and hard to read. On top of this, you have commissions to pay (10 to 20 basis points for CFDs depending on the broker).

As far as your losses and gains go, try to run your profits more and make your stops tighter. I know it's easier said than done, but regularly losing more than you win is a sure fire way to go broke and, therefore, you should address this first.

As piece of advice, I would stop day trading stocks and look more long term (to begin with at least). This way you will have more time to plan and react and commissions won't eat into your profits as much. Stocks, after all, are a long term trading instrument and the type of noise trading it sounds like you are doing is a very difficult game to win at. Perfect your long term strategy and then look to see if you can trade the daily noise afterwards.

Best

JD

Thanks JD!
Over the weekend I was analyzing all the last 1 month trading which I have done (which is all the trading I have done in my life!). I checked the charts of the same stocks over 1 month they seem to have gone up and if I had traded it just once I would have booked some profit for certain!

Trend trading seems more predictable and most often the market responds to YoY quartely profit increase positively for the next few days not necessarily the next day! I was expecting only the next day something to happen .. but very few times it did because of other news in the market. The next day when I dint trade it goes up 100 points!

Your mail confirmed my analysis. I would try trend trading and would let you know my progress this week!

Thanks!
WinningTrade