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Training Material On Intraday Trading
Training Material On Intraday Trading
INTRADAY TRADING
Disclaimer
• Registered Office: Sharekhan Limited, 10th Floor, Beta Building, LodhaiThink Techno Campus, Off. JVLR, Opp.
Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai - 400042, Maharashtra.
• Tel: 022 – 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX – Commodity:
INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst:
INH000006183; MCX Member id – 56125
• For any complaints email at igc@sharekhan.com
• Compliance Officer: Mr. Joby John Meledan; email id: compliance@sharekhan.com; Tel: 022-61150000.
• Disclaimer:
• Investments in securities are subject to market risk. You are requested to read and understand the Risk Disclosure
document, Offer Documents, Information Memoranda, terms and conditions, policies and procedures, and Rights
and obligations carefully before investing. Please verify all scheme related information before investing. You should
be aware that past performance is not necessarily a guide to future performance and value of investments can go
down as well. In the training there may be references to securities, those references do not constitute a
recommendation to buy, sell or hold such securities. The user assumes the entire risk of any use made of this
information. For any reference of any security in the training, you should make such investigations as it deems
necessary to arrive at an independent evaluation of an investment in securities of companies and may consult your
own advisors to determine the merits and risks of such an investment. The investments discussed or views
expressed may not be suitable for all investors and there may be other / better alternatives to the investment
avenues recommended by Sharekhan. This material is for private circulation only and only intended for direct
recipients of this material from authorized sources of Sharekhan Limited. This material should not be reproduced,
copied, circulated or distributed to any other person without approval of Sharekhan Limited. Sharekhan Limited
shall not be responsible for any unauthorized circulation, reproduction or distribution of this material or contents
thereof to any unintended recipient. The charts, graphs and figures displayed are exemplary and not real.
Training Material
•Introduction to Support/Resistance
•Introduction to RSI
• Trading Guidelines I
• Trading Guidelines II
• Money Management
Intraday Trading
Training Material
Time frame for trades – A Intraday trading position should only be taken for a
single trading day
Intraday Trading
Training Material
Introduction to Candlesticks –
Intraday Trading
Training Material
Resistance– It’s an area where sellers are more than buyers and the prices are expected to
go down. So as a trader we should be looking at selling opportunities. Once a Resistance area is
taken out on the up side, prices are expected to target the next Resistance area.
S/R are areas and not Specific levels – There is a common misconception that price tend
to reverse at a prior level where as prices will find buying or selling pressure (Turning points) in
or near an area of Support or Resistance and not an exact level.
Resistance Area Selling
Opportunity
Buying
Support Area Opportunity
Training Material
How to mark Resistance areas – Mark the highest High and the highest close before
the highest candle.
Training Material
Basing Support
Intraday Trading
Training Material
Resistance
2nd time
1st time give Ignore
Importance
Used
Intraday Trading
Training Material
Resistance
Earlier resistance
Now acting as Support
Intraday Trading
Training Material
Intraday Trading
Training Material
Buy on decline to Support area or buy on break of a Resistance area – One could
buy when the price corrects (comes down) to a Support area as it is an area of lot of buying
pressure. One can also buy once the Resistance area is broken on the upside as the same may
start acting like an area of Support going forward. (Role Reversals)
Sell on a rise to Resistance area or sell on break of a Support area – One may sell
when the prices rally (go up) to a prior Resistance area as it is an area of lot of selling pressure.
One can also sell once the Support area is broken as the same may start acting like an area of
Resistance going forward. (Role Reversals)
Intraday Trading
Training Material
Don’t go against the TREND - Trend is our Friend. Don’t go against it. Trade in the
Direction of the trend. In order to understand more about trends, request you to go through the
tutorial on Trading Tool Box– Price Trends.
(Explanation of Price Trends from Page 35)
Intraday Trading
Training Material
Introduction to Oscillators
What are Oscillators – It is an indicator which fluctuates between a preset ranges.
Oscillators can act as an alert to study price action a little more closely. It indicates a momentum
in the price action. If momentum is waning, it may be a signal to watch for a break of
demand/supply areas for a trade entry.
A Technical analysis tool - Oscillators are technical indicators that measure a stock’s
momentum as it oscillates between preset extreme levels and then give a trading set up.
Oscillator is a word derived from the pendulum of a clock which oscillates.
Suitable for non trending markets – As the oscillators fluctuate between extremes,
they can be difficult to use in trending markets. Oscillators may work best when the prices
are not trending. This is very important to note because markets are likely to trend only for
30% of the times, whereas for 70% of the times the markets are usually move sideways.
Intraday Trading
Training Material
Divergences – To diverge means to move apart. The divergence occurs when the prices go
in a particular direction where as the oscillator moves in a different direction. Divergence is
often said to be a leading indicator. Divergence is price action measured in relationship to
various indicators. However, it is very important to note that trading based only on
divergences could be avoided; it can be used with supports and resistance(Demand
& supply) areas. We will be discussing divergences in detail a bit later in this training
material.
Intraday Trading
Training Material
Important Oscillators
Relative Strength Index (RSI) – RSI is referred as the momentum in a particular
financial instrument. This extremely popular indicator was developed by J. Welles Wilder;
which measures the speed and change of price movements. RSI oscillates between 0 (zero) and
100. Traditionally, and according to Wilder, the prices are considered overbought when RSI is
above 70 and oversold when it’s below 30. Signals can also be generated by looking for
divergences.(You can use 60 for OB and 40 for OS as per the Indian Markets as well)
Stochastic – This oscillator is built on an assumption that, in an uptrend the prices tend to
close near the high of the particular candle and in a downtrend it is likely to close near the low of
the candle. Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a
momentum indicator that shows the location of the close relative to the high-low range over a
set number of periods.
Intraday Trading
Training Material
Divergence
Divergences – Divergences occur when the prices move in one direction and the oscillator
either does not move or moves in the opposite direction. Divergences can be –
Price
RSI
Training Material
Divergence
Positive/+ ve Classic(Swing) divergence – This may occur when the price makes a
lower bottom but the oscillator makes a higher or equal bottoms indicating that the downward
price action is losing its momentum and can be a potential reversal signal. (A +ve divergence
occurs even if prices makes equal lows and the oscillator makes a higher low)
Training Material
Divergence
Negative /- ve Classic(Swing) divergence – This usually occurs when the price makes a
higher top but the oscillator makes a lower or equal top indicating that the upward momentum is
losing its steam and can be a potential reversal signal. (A -ve divergence occurs even if prices makes
equal tops and the oscillator makes a lower top)
Intraday Trading
Training Material
Divergence
Candle Divergence – They are exactly similar to swing divergences however, the price
action of 2 consecutive candles is considered instead of comparing the swing lows or swing
highs.
Please see the image on the next page, for a better understanding.
Intraday Trading
Training Material
Positive
Candle Candle
Divergence Divergence
Negative
Candle
Divergence
Intraday Trading
Training Material
Add RSI with default parameters – Use RSI Oscillator with default parameters given in
Sharekhan’s Trade Tiger software. As discussed in the session change RSI regions from 70-30 to
60-40.
Look for Classic Divergences below / above 40/60 RSI – Refer to the video and the
training material of Oscillators.
Intraday Trading
Training Material
Short Trade
After a -ve Classic divergence (in an overbought region), enter Short
Entry only below the immediate area of support.
Intraday Trading
Training Material
Add RSI with default parameters – Use RSI Oscillator with default parameters given in
Sharekhan’s Trade Tiger software. As discussed in the session change RSI regions from 70-30 to
60-40.
Look for Candle Divergences below / above 40/60 RSI – Refer to the video and the
training material of Oscillators.
Intraday Trading
Training Material
Short Trade
After a –ve candle divergence (in an overbought region), enter short
Entry only below the low of the last candle.
Intraday Trading
Training Material
Example
If your risk is of Rs.5 the reward should of Rs.10 (Risk: Reward – 5:10 –
1:2). With a risk reward of 1:2, the trading activity will be profitable in spite of
being wrong 50% of the time.
Out of 10 trades, if 5 are stopped out and 5 achieve targets, there would be net
profit of Rs.5 with a risk reward of 1:2 {(Profit = Rs.2 * 5 profitable trades = 10 )
- (Loss = Rs.1 * 5 loss making trades = 5)}
Intraday Trading
Training Material
Intraday Trading
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Calculated risks – Position sizing enables us to take calculated risks. One can do an
efficient Position sizing in following manner.
•Capital Risk – While taking any trading position, we have to limit our loss to the
maximum of 1% of your capital.
•Use of Capital – Along with a per trade maximum loss limit, one has to limit his
exposure for any single trade to a maximum of 15% of the entire capital.
•Please refer to the excel file attached with the mail for executing your trade.
Intraday Trading
Training Material
a) If the trend is up then look at buying opportunities & if the trend is down
then look at selling opportunities.
b) For trend Identification you can use higher tops & higher bottoms (Up
Trend), Lower tops & lower bottoms (Down Trend), Super Trend, etc
c) Trend should be for last 5-10 candles on daily & 5 Days for hourly.
Intraday Trading
Training Material
2. Check Daily Support/Resistance – If the stock is trading at or near to Support on daily chart
then look at Positive Divergence and if it’s trading at or near to Resistance then look at
Negative Divergence.
3. Check the broader Market trend – If Nifty/ Sensex is up then look at those stocks which are
down for Positive Divergence & If the Index is down then look at those stocks which are up
for Negative Divergence. (Price Trends are explained from page 31)
4. Higher the time frames the Better – If there is a buy alert on 5mins & Sell alert on 15mins
then prefer 15mins trade & also check the previous trend of that Asset.
5. Limit you daily loss(as per your pre-decided risk appetite), (For Example 1000rs). If the
limit is touched then don’t trade for the day.
Intraday Trading
Training Material
Who is in control – Trend tells us the broader psychology of the price action. It tells us
who is in control of the price, buyers or sellers, so that we can be on the winning side.
Intraday Trading
Training Material
Types of Trend
Uptrend – It is an upward movement in the price. However, an upward movement can only
be confirmed as an uptrend when there are series of higher highs and higher lows (higher tops
and higher bottoms). A trader should be looking at buying opportunities in an uptrend.
Sideways Trend – It’s an area of no direction. In a sideways trend buyers and sellers are
equally strong and are not able to take the control of the price, as a result price trades in a
sideways manner. As a trader it’s advisable to wait and trade only when there is a
breakout/breakdown of the consolidation area.
Intraday Trading
Training Material
Trendlines
Trend identification tool – Trendline is a trend identification tool. It enables us to
identify the price direction. Trend lines are important as they are also capable of spotting
comparatively early trend changing signals.
Intraday Trading
Training Material
Downward slopping – This trendline identifies a downtrend in the price action. In order
to draw a downward trendline, we have to join the 1st two lower tops (highs) and then extend
the same. A downward trendline is only confirmed when the prices rally near the trendline and
start coming down on the 3rd time. That is a time to initiate a sell (short) trade, advisably
when the prices are also trading near Resistance areas or they break the area of Support which
points out to bearishness. When the prices close above a downward trendline it is
considered to be a trend changing signal, prices then can enter in to an uptrend
or a sideways.
Intraday Trading
Training Material
Volumes – Force behind the trend – Volumes are the yellow bars we can see at the bottom
of any price chart. It refers to the no. shares traded for the respective time period. It is also
referred as the momentum. It is said to be the force behind the price as it indicates the strength
of a particular price action. Any price move, either up/down, should happen with increasing
volumes which indicates that the movement is happening with an increasing participation. An
upward or a downward price movement with low or decreasing volumes, suggest that the
movement may not be sustainable. However, it is very important to note that volumes should
be used as a supporting factor while taking a trade. The decision to take a trade should depend
on the important factors like Support and Resistance areas, price trends, Trendlines, etc.
Intraday Trading
Training Material
2. Check for stocks following the broader market trend – Selection of stocks for
trading should depend upon its liquidity and volatility. The stocks should very
liquid (volumes more than 2-5 lakh shares per day) and should be reasonably
volatile (at least 5% average daily movement).
Intraday Trading
Training Material
Plan of Action
Basing / Consolidation / Sideways trend – It’s advisable not to trade in
the basing area and wait for a breakout on either side. If one wants to
trade the range – DON’T OVERTRADE.
Intraday Trading
Thank You
&
All the Best!
Disclaimer
• Registered Office: Sharekhan Limited, 10th Floor, Beta Building, LodhaiThink Techno Campus, Off. JVLR, Opp.
Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai - 400042, Maharashtra.
• Tel: 022 – 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX – Commodity:
INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst:
INH000006183; MCX Member id – 56125
• For any complaints email at igc@sharekhan.com
• Compliance Officer: Mr. Joby John Meledan; email id: compliance@sharekhan.com; Tel: 022-61150000.
• Disclaimer:
• Investments in securities are subject to market risk. You are requested to read and understand the Risk Disclosure
document, Offer Documents, Information Memoranda, terms and conditions, policies and procedures, and Rights
and obligations carefully before investing. Please verify all scheme related information before investing. You should
be aware that past performance is not necessarily a guide to future performance and value of investments can go
down as well. In the training there may be references to securities, those references do not constitute a
recommendation to buy, sell or hold such securities. The user assumes the entire risk of any use made of this
information. For any reference of any security in the training, you should make such investigations as it deems
necessary to arrive at an independent evaluation of an investment in securities of companies and may consult your
own advisors to determine the merits and risks of such an investment. The investments discussed or views
expressed may not be suitable for all investors and there may be other / better alternatives to the investment
avenues recommended by Sharekhan. This material is for private circulation only and only intended for direct
recipients of this material from authorized sources of Sharekhan Limited. This material should not be reproduced,
copied, circulated or distributed to any other person without approval of Sharekhan Limited. Sharekhan Limited
shall not be responsible for any unauthorized circulation, reproduction or distribution of this material or contents
thereof to any unintended recipient. The charts, graphs and figures displayed are exemplary and not real.