(3 minute read)
Are you an intraday trader? or thinking to do day trading?
If answer is 'Yes' then read on my experience of day trading and see if it suits you...
I started trading as a swing trader. Holding on trades for few days or sometimes weeks.
I am trend follower and hence used to trade only when trend picked with use of some indicators. It is a known fact that market trends only 30% times and remains trendless 70% times.
So I used to remain out of the market when there was no trend and there were days and weeks where I was not making any trade.
I used to trade on 4 hour timeframe and make 2-3 trades in a month and used to earn 40-50% return on capital on annual basis but it was also true that I was making less number of trades.
Then I thought to try my hands on intraday trading. The logic was it will increase my number of trades and return on investment. I applied same trading system on smaller timeframe (5 Min/10 Min).
I started to make 1-2 trades in a day and I did it for few months. I think 6-7 months. My net profit was somewhere between 25-30% during that 6 months which can be considered as good.
Although it increased my trading frequency but honestly speaking I could not trade daily. There was some work assignment, meeting, family function, emergency etc. Intraday trading requires you be in front of the screen most of the times. You need to manage and take decisions very quickly and you can not afford to miss any trading opportunity because you never know when your BEST trade will come. There will be one good trade which will take care of all the small losses you make.
So that was first difficulty for me. I was not able to watch the market all the time.
Second thing I observed was my gross profit in this six months was 40-45% but net profit was 25-30%. Almost 15-20% of my profit was eaten by brokerage, taxes, STT, turnover tax, stamp duty, DP charges etc.
Third thing was the time commitment. I had to devote 6-7 hours in front of screen every day which I used to spend in a week previously.
And lastly, the lesser is the time frame, more will be price fluctuation, more is the possibility to break the rules, more emotions and more pressure.
So I learnt that intraday can give me 10-15 % higher return than swing trading, it increases trading frequency, cost of trading, time commitment and pressure.
Now does that mean day trading is bad and should not be done?
You must be wondering; did I stop doing intraday trading? The answer is no. I still do it.
I am not going to give any diplomatic answer and keep my readers confused and guessing. At Trading With Abhijeet, I have vowed that I will give concrete solution/action plan to my traders and keep them away from guess work.
Here is what I recommend:
1. You should do intraday trading only if:
a) You have made at least 100 trades in market, kept record and analyzed the trades. You can not trade in first 1 year of trading.
b) You have ample time to devote in front of screen during market hours.
c) You have a complete trading plan that will tell you when to enter, exit, quantities to buy, assets to buy etc.
d) You should be very stable emotionally and be disciplined. An indiscipline in even a single trade can wipe out months of profits in a day.
Conversely, you should not do intraday if:
1) You are beginner (less than 1 year in trading)
2) You do job/business/are student because it will terribly affect your job, business and academic performance. You will be glued to your screen ignoring many job, academic or business commitment.
3) You are not an emotionally stable person
So, I hope you have got answer to the question whether to do intraday or not.
I still do intraday and out of following disadvantages of intraday trading, I have eliminated first four through an intraday strategy which gives monthly 4-5 % return having lower drawdowns and smooth equity curve and guess what; you can start trading with as low as Rs. 10000 capital.
1) Higher time commitment
2) Higher emotions
3) Higher trading cost
4) More analysis
5) High Trading frequency
6) More turnover