2652 THEORY OF DAY TRADING

( THIS IS THE BEST TO EARN AROUND 1000 RS TO 3000 RS IN DAY TRADING FOR A
LIVING )
Different people have different methods and ways of day trading.Some trade using charts , 5 min ,30 min
,10 min some use MA,EMA,RSI,CCI, some also use many equations and formulas like pivot
points,woodies pivot,demark pivot points, camarilla equations, any many more things.
I have been trading the markets with all this and come to conclusion that trading market can be reffered
as gentlemans gambling ,u can earn from it definately provided u trade it with proper knowledge and a
perfect plan and the main thing is that u must go in for small gains for n number of trades ,which also
can be reffered as scalping
THE MOST IMPORTANT THINGS I TRACK IN DAY TRADING
1)Previous days range ( difference in days high and days low) the most important
2)that days high and that days low at 10:15 am after the start of markets
3) Three factor values 0.433, 0.7666, 1.355
Thats all , earlier I used to trade using all the mentioned things like ma,rsi, adx camarilla equations and
all stuff but now I trade in a simple way of using the days range
ILLUSTRATION 1:
in simple words
if or reliance days high on monday id 1245 and days low is 1185
then the values i take for the next day of trading is
1) 0.433* ( high - low)=0.433*60= 25.98
2)0.7666*(high- low)=45.99
3)1.355*(high-low)=81.3
taking this three values i trade the next day at 10.15
if at that time days at 10.15 relance has high of 1205 and low of 1187 , then days range is less than 25.98
points my strategy will be
sell below 1205-25.98=1179.02 profit of just 0.5 percent
buy above 1187+25.98=1212.98 profit of just 0.5 percent
(if high - low is greater then 25.98 and less then 45.99 then u must use 45.99 as the breakout value and if
the days high - low at 10.15 is more than 45.99 and less than 81.3 then u must go for 81.3 as the value)
i put a stop loss of one percent for any of the orders one percent above the sell below or one percent
below the buy above price
now suppose the price goes in a single stroke to 0.5 percent profit then its a net profit ,if stop loss price is
hit i make a loss of one percent .but then again i put my prder back doubling the amount (if i had sold
50,000 shares at sell below ar 1179.02 then i will place a order of 1 lakh shares of sell below 1179.02
and modify my buy order from 0.5 percent to 0.7(may be 0.8) percent down from 1179.02.If suppose u
make net loss of one percent ,then on the next day u must double the value of shares for sell below or
buy using any of the three values given above.
some people keep a stop loss of 0.7 to 0.8 percent or some wait for two minutes after theit sell below or
buy above order is triggered and exit if the profit order is not struck.
its simple, IF NOT TODAY, DEFINATELY TOMORROW.
ILLUSTRATION 2:
if a days range is of 85 points say for say ONGC then it will have three values for the next days for me to
trade (that calculation is done by me based on my studies )
Suppose the values I got are 36,63,92 then with this values I will trade for the next day
Say ONGC next day opens at 785 and by 10.15 am it is at 795 neither open or the present value of the
stock is important to me ,the thing important to me is the high and low of the stock at 10.15.now here
comes three different cases which I will explain u in detail

1)when the difference between high and low ( range ) at 10.15 is less than the first value that is 36
Suppose ONGC has high of 801 and alow of 779 with a range of 22 points <36
Then if the price goes bellows 801 -36= 765 it will definitely go down 0.5 percent more down to 761.2
and this will be my gains
In simple words sell stop loss order at 765 with a buy order at 761.2
Now at 10.15 if the price is at 795 it can go up also so if it goes then I have to take in account of low at
10.15 .so if the rice goes above 779+36=815 then it will deinately go up 0.5 percent up to 819.05
In simple words stop loss buy at 815 and sell at 819.05
If have both ur orders placed then the most important thing is that u must keep a watch on low and high
of the stock.suppose at 10.35 its at a low of 770 then u must modify ur stop loss buy order to
770+36=806 from 815 and sell order to 810 from 819.05.in this case ur one order will be the same as the
days high will be the same that is 801.
If suppose at 10.35 the stock is at high of 805 then u must modify ur stop loss sell order to 805-36=769
from 765 and buy at 765.2 from 761.2 down 0.5 percent .the second order of urs will be the same as the
low will be the same at 779.
If u have any one side of ur order executed with a profit then u must cancel the other two orders .suppose
u have stop loss sell and a buy order triggered then u must cancel the other order of stop loss buy and sell
order .
2)when the difference between the high and the low at 10.15 is more than 36 and less than 63
Suppose ONGC is at high of 825 and low of 770 at 10.15
Then sell below 825-63=762 and buy at 758.2 down 0.5 percent
Buy at 770+63=833 and sell at 837.15 up 0.5 percent
Here also its important to keep a watch on the days high and low after 10.15 and as per the above
example modify ur orders if needed . If u have any one side of ur order executed with a profit then u
must cancel the other two orders .suppose u have stop loss sell and a buy order triggered then u must
cancel the other order of stop loss buy and sell order.
3)when the difference between high and low at 10.15 if more than 63 and less than 92
Suppose ONGC is at high of 840 and a low of 768 at 10.15 am
Sell below 840-92 = 748 and buy at 744.3 down 0.5 percent
Buy above 768+92= 860 and sell at 864.3 up 0.5 percent .
Same conditions apply as above methods .
OBSERVATIONS AND CONCLUSIONS
If I take in around 100 stocks then out of hundred only three to four stocks are that will not follow the
above theory in day trading .
Around 95 stocks when hit the stop loss sell or stop loss buy order go down or up by 0.5 percent
respectively . The five stocks which have behaved opposite to the theory will defina tely will follow this
theory the next day and also for more consecutive days .This factor u must use to minimize ur losses u
made on that particular day when the stock behaved the opposite way.This ia explained in cash
management and stop losses.
Around 70 to 80 stocks go up or down 0.7 to 1.2 percent after hitting the stop loss buy or stop loss sell
orders.( here there is a risk that the price may not go in a single stroke down or up but It will go.)
You must trade in those stocks which have a turnover of around 4 to 5 crores or above daily in trading
and having short selling
You must be expert in execution of orders and accurate in ur calculations
You should not panic at any time
CASH MANAGEMENT AND STOP LOSS
How I trade and put my stop losses
I take in 20 stocks for trading . I sell or buy one lakh worth of shares of a particular comp.(initial amount
which I double as per the requirement )

Now suppose for a stock say ONGC I have my orders as below

Sell below price A and buy at B
Buy above price C and sell at D
NOW HERE ARISES THREE DIFFERENT CONDITIONS
1) when the sell below A order is hit , I put a stop loss of 1 percent above the hit price A for stop loss buy
.If my buy at B is hit without hitting the stop loss then I will make a profit of 0.5 percent .this is the best
fitted condition for the above theory.
The same condition is applicable to buy above price C and sell at price D
2)When the sell below A order is hit , I put a stop loss of 1 percent above the hit price A for a stop loss
buy.If instead of going at price B the price hits the stop loss then I make a loss of 1 percent(rs 1000 for
one lakh wirth of shares) .But at this point I again put order sell below A and modify buy at a price 0.8
percent down of price A ( not at price B which is 0.5 percent down of price A ).
Now here the value of stocks ur selling is important .If u have sold shares of one lakh value and booked
a loss of one percent then u must sell at the same price two lakh worth of shares ( that is double the value
) but modify buy order at 0.8 percent down from the sell price instead of 0.5 percent down.now when
buy order is hit u will profit 1600 rs as compared to a loss of 1000 rs (after ur brokerage charges u still
are in profit).This is one of the rare cases in the above theory but u must be prepared to it. The same
condition is applicable to buy above price C and sell at price D.
3)when the sell below price A is hit.I put a stop loss 1 percent above the hit price A for a stop loss buy.If
instead of going down to price B , stop loss is triggered then I make a loss of one percent . Then I be
ready placing another stop loss sell order (but the value of the shares is double)at price A ,and modify my
buy order from 0.5 percent down from price to 0.8 percent. But if suppose the price never comes to hit
stop loss buy , then for the day I will make a loss of one percent on one lakh worth of shares.
Now to minimize my losses on that day for a particular stock I will double my value of shares to sell or
buy the next day (reason if the theory fails for one day then for next 100 percent it will struck and will do
for more consecutive days for that particular stock).Here I make up for the loss made by me on the first
day on that stock.for e.g on 23/2 I make a loss of one thousand rs (one percent of one lakh) short selling
a particular stock .The next day I will sell or buy (as per the above conditions) double the value on the
previous day for a profit margin of 0.5 percent only . Here for that day my earning is rs 1000 on the two
lakh worth of shares.which will minimize my loss by done by me on the previous day.
I take in 20 stocks of which I get around 12 stocks with hit the price .If number three condition arises for
any of these 12 stocks then I have a loss of rs 1000 for that stock but I earn rs 11*500 for other stocks
that is 5500.
So me net profit will be 5500-1000 =4500
It may be that in those some(one or two) of 11 stocks ,number two condition arise this may reduce my
profit.
For the stock whih made a net loss ,the next day plan will make it less by half adding to the next day
profit.
Sometime I start a trade by selling or buying shares worth 50,000 and then double my amount to one
lakh as per condition number 2 or 3 .
This is a theory just to earn a leaving ,a sure method of trading market.
TIMING, FACTOR-ADJUSTMENT & ORDER MODIFICATIONS:
suppose we are trading with nfty only
previus days high - low = 100 points suppose
0.4333 range factor 1f = 43 points
0.7666 range factor 2f= 76
1.35 range factor 3f = 135
this i sit and calculate on previous day .
Now on trading day
market opens at 9.55

note the high at 10.15 suppose high = 2856

low = 2821
here range is 35 points at 10.15
here 1f =43 is not broken
so my buy will be 2821+43= 2864
my sell will be 2856- 43 = 2813
now suppose a new high is made at 10.20 of 2860
then as my rule u should change the sell order at that time
sell order will be 2860- 43 = 2817 ( which was 2813 earlier )
but this is possible only if ur tracking a single stock .if u have five stocks , then doing calculations ,
placing orders take time so if ur tracking more than one stock , place ur buy , sell orders , before 10.35
and then just look for any high or low is made in ur stocks so that u can modify ur orders .
But here we are tracking only nifty so at 10.20 high 2860, low 2821
buy will be at 2864
sell at 2860- 43 =2817
now suppose at 11.30( this can be at 12.00 or 1.30 or 2.00 , do not go beyond 3.15 ) buy order triggers
buy at 2864
goes at high of 2875 and is trading at 2860 presently
now here 43 range is broken , but no profit is made nor stop loss is hit . The trade from here can earn a
profit or hit a stop loss
now here ur sell will be new high 2875 -43 = 2832
as our buy order is already triggered so we do not have to change our buy order .
Now from 2860 levels if nifty hits profit target then we must cancel oders or other side ( sell side , as the
day is in profit after first trade )
now if suppose fron 2860 stop loss hits at 2836 ( buy was at 2864 - 28 , which is on percent around ) and
is trading at 2835 levels
now here our highs and lows are the same 2875 and 2821
our sell order is modified to 2832 ( which was earlier 2813 starting at 10.15 ).
Now as for buyorders stop is hit we must put a buy orders again at 2864 ( low of 2821+43) as there are
chances of nifty going up again.
But as stop loss is hit in first trade we must enhance our profit target to 0.8 percent both on sell side and
on buy side
at this time sell will be at 2832 target 2809 levels around
buy again will be at the same price of 2864 but target will be at 2887 levels around
Why i choose time from 10.15 to 10.35
at 10.15 there is some settlement in volatility of prices
i took the range from 10.15 to 10.35 , because it gives me time for my calculations of my lists of stocks
for trading , suppose i finish my orders for 5 stocks at 10.25 then have a look at the highs and lows at
that time for any modified orders .
The range is same for the day till it gives u profit for the day .
This is applicable to for other two factor ranges aslo.
70 percent chances are there 0.433 range is not broken in first 15 minutes .

Its best thing u start with small amount for a particular share so that u can easily double it .
take around twenty stocks like reliance, rel cap. ongc, tata mot, tata power, tata steel, dlf, abb,
infys,wipro,hdfc, hdfc bank,icici bank, itc,bhel, LnT ,
which have good volume and best for trading
new members can use this sohans website for finding the buy and sell values

(http://intraday.weebly.com )
dhiraj

Rules update as per our discussion session on 28th March 2009.

1. On the F&O Expiry day, whichever month's range is in similar to or little variation with the
spot range, that month's high / low value will be considered for the next day trade.

2. At 10:15 hrs, if the cmp is more than our calculated buy value or less than our calculated sell
value and then it hits the target before our entry, will be treated as target hit day and NO Trade
day for us.

3. At 10:15 hrs, if F1 not broken with our profit %, then F1 will be taken as that day's factor.