Starting Intraday Trading and that too with smaller capital is a challenge that many new traders face. But if you plan your path strategically then you can begin with relatively smaller capital. All you need is a strategy upon which you can rely on! Well, in this article we will talk about such a strategy which has a profit accuracy of over 80%. Why? Not that this strategy is extremely technical, but this strategy is built on the very basic principles on which the market navigates.
This strategy has such basic elements that, let alone the market, even if you relate it to the business of even a shopkeeper you will find this strategy sensible.
In today’s intraday trading strategy, we will learn about intraday equity trading strategy. In this strategy, we will use the counseling method for various indicators to triangulate our prediction about the market. Indicators that we are going to use in today’s strategy are Moving Average, Bollinger Bands, and VWAP.
Importance & Relevance of Using These Indicators
We will use the moving average indicator to identify the average price of a premium that is ideal to buy. Then comes our Bollinger Band, which we will use to identify whether the trade has the potential to take an upward leap or not! Lastly, we will use the Volume Profile to analyze the outlook of bulls and bears presently active in the market.
The principle behind choosing these indicators is pretty simple, our aim is to enter into trade at a point where it can grant us profit. The best point to enter a trade is when you buy it at or below the average price so that you have enough room to make a profit from it.
This is even one of the basic tendencies of several good traders that they deploy to gain maximum profit.
Also, Bollinger Band help us to determine the position and outlook of big bulls whether they are interested in that particular trade or not. Because if they are interested then it means one simple thing the trade is going to shoot up! And we do not want to miss that opportunity! This will further help you to create your entry plan!
Well, when you see all these indicators meeting at the same point then that is considered as the bottom of the stock, which means it is the best time to enter a trade!
Now using this method you can trade in Positional Trading, Swing Trading, and Intraday Trading!
Crafting A Powerful Intraday Trading Best Strategy
Having said that, we will supply the above-explained concept with the Price Action and Breakout zone.
Now to triangulate the stock for Positional Trading, we would first analyze the monthly technical chart of the given stock. On the monthly technical chart if you observe these 3 indicators meeting at one point, thus making the bottom of the stock, consider this as the bottom of the stock. This is the point where we can start our positional trading till it touches its all-time high! (We will discuss all these things on a technical chart with examples in the below section)
Now, identifying this point is extremely crucial since this will also be our indicator that from here on we will start doing swing trading and intraday trading. Why? Because now we know the general trend that this stock will keep in the coming months.
Thus, you can do positional trading, swing trading, and intraday trading on a single stock.
Well, basically our intent is to go with the institutional traders, not the retailers. How we will do that I will explain to you in a bit.
Taking our Trading Strategy to the Chart.
Here we have taken AGRITECH to analyze the stock using the strategy mentioned above!
As you will notice in the above image, we have used Moving Average, Bollinger Band, and VWAP in our chart. The point which is marked by the circle is the point where all these points are meeting and as you notice after this the stock is in rise continuously. This point is somewhere in May 2021!
Moreover, if you observe you will notice that after this point there are big candles coming up which is a signal that institutional players are in action. Additionally, you will notice that all the candles are above the VWAP indicator while before the point it wasn’t the same case.
Best Strategy For Swing Trading
If you want to do swing trading on the same chart, then once identify this bottom on the monthly chart, you need to shift to the 1D chart. Follow the same process on the daily chart. Once you identify this zone where all three indicators are meeting, then apply the price action. After applying the price action, if you see a breakout happening, then that would be the best time to enter the trade for the swing traders.
One other thing to keep in mind is that for intraday trading and swing trading, the best timing is when the market opens or the evening schedule when the market is about to close. These are the slots when the market makes most of the action which is quite suitable for intraday traders and swing traders.
Bottom Line
We saw how with just one stock we can diverse our trading portfolio. However it is important to note that, all the indicators and strategies do contain risk associated with the market volatility so before directly jumping into the trading, the best practice is to analyze your new strategy on the chart, even you can do paper trade to test out your strategy.
Furthermore, all the indicators including the one we discussed in this blog section are only the indicators which means that these only indicate the movement not the exact parameters. Here, along with the technical knowledge you need to apply psychological tactics to understand the market.
FAQs
Q. Why should I use Moving Averages in my trading strategy?
- Moving Averages help smooth out price data to identify the trend direction. They indicate the average price over a specific period, which can signal when a stock is undervalued or overvalued.
Q. How do Bollinger Bands assist in trading?
- Bollinger Bands help determine the volatility of a stock. They consist of a middle band (a Moving Average) and two outer bands that represent standard deviations. When the price touches the lower band, it may indicate a buying opportunity, while the upper band may suggest a selling point.
Q. What is the Volume Profile, and why is it important?
- The Volume Profile shows the amount of trading activity at different price levels. It helps traders understand the market’s support and resistance levels and the areas where bulls (buyers) and bears (sellers) are most active.
Q. How can I identify the best entry point using these indicators?
- Look for points where the Moving Average, Bollinger Bands, and Volume Profile converge. This convergence typically indicates a potential bottom, suggesting it’s an optimal time to enter a trade.
Q. What should I do if the indicators give conflicting signals?
- When indicators conflict, it’s best to wait for clearer signals or use additional indicators to confirm your analysis. Patience and caution are key in such situations.
Q. How do I apply the strategy to swing trading?
- After identifying the bottom on the monthly chart, switch to the daily chart and look for the same convergence of indicators. Apply price action analysis and enter the trade when you see a breakout.
Q. When is the best time to trade intraday or swing trades?
- The most active market times, such as the opening and closing hours, are usually the best for intraday and swing trading due to higher volatility and volume.
Q. What common mistakes should I avoid with this strategy?
- Avoid entering trades too early before all indicators align. Don’t rely solely on one indicator; use a combination to confirm signals. Also, manage your risk by setting stop-loss orders to protect against significant losses.
Q. Can I use this strategy for any stock?
- While the strategy can be applied to many stocks, it’s essential to consider the specific characteristics of each stock and adjust your approach accordingly. Some stocks may react differently to indicators based on their market behavior.
Q. How do I know if institutional traders are interested in a trade?
- Large price movements and increased trading volume often indicate institutional activity. Observing these signs along with your indicators can help confirm institutional interest.
Q. How often should I review and adjust my strategy?
- Regularly review your strategy’s performance and make adjustments as needed based on market conditions and your trading experience. Continuous learning and adaptation are crucial for long-term success.