Intraday Trading-Formulas and Rules

Intraday Trading is an alluring idea for traders to make quick money in stock markets. After all,who would not be interested in making some quick bucks in a matter of minutes or hours.That is the reason of its popularity in a section of traders.

Intraday trading or daytrading, as the name is self-explanatory, is the process of taking long or short position in markets and squaring off (exiting)  that position before the close of the market on the same day.

Day traders take the advantage of the movement in the price of the stock or the index during the trading session.Movement can be small or significant.Trade can be for minutes or hours.

Intraday traders have to take position in large quantities of a stock so that a small movement in the stock provides big gains.Consequently,the risk is also equally big in the event of adverse movement.

Taking position in  large quantity of a stock and squaring off the position immediately after the stock takes a small move in the favourable direction,is called Scalping.Scalpers take several trades during the day so that at the end of the day,the profits are significant.Online share trading has made Intraday Trading easy for day traders .

What is the formula for Intraday Trading?

Of course,there are some formulae which  are popular among the intraday traders like Pivot Point Formula or Fraction Theory.But intraday trading is not all about using formulas.When you are there in the middle,it is a totally different ball game altogether.

We shall discuss here the above said formulas but the other things which are very important and need to be taken care of are –

Having a proper Mind-set and Psychology – Share Trading  for fun or hobby can be dangerous.Your approach should be very professional.You should be aware that you are risking your hard earned money. The risk starts the moment you enter the trade.Take trading as a business.

Control over the Emotions – Emotions like Greed and Fear are the biggest enemies of a trader.Markets don’t stand at a place.They keep on moving,up or down.So,don’t let the fear take you for ride if markets move in the opposite direction of what you were anticipating.

You should be aware of your exit point in such case.On the other hand if trade starts turning profitable,exit the trade at your target price level.Stick to Stop loss and Targets to avoid Emotions in trading.

Having a Plan – Having a proper trading plan is an important part of trading in stock markets.You should be clear of the entry level,target level and stop loss of the particular stock which you are trading in.These levels are determined on the basis of Technical Analysis and the formulas.Intraday trading formula

You need to stick to your plan to be a successful trader (You may like  my an other article How to be a Successful Trader).

Writing the plan on a paper is a good idea so that you stick to your Plan.  It also ensures that you don’t get swayed away by the market moves when you are in.Without any of these,it is going to be very tough.

Intraday Trading Formulae

Before we move on to the various formulae useful for intraday trading, stock picking for trading is equally important. You need to learn how to pick intraday trading stocks.

An other equally important hard fact is that more than 80% of the traders loose money in trading.It means that no formula is perfect,otherwise that figure would had been other way around.

But that does not mean that these formulae are useless. These are the most popular and commonly used formulae for day trading.

It is advisable to use these formulae after testing by paper trading or virtual trading to see which formula is best for you.Personally,I prefer Pivot Points as it gives best results when applied after identifying the trend in a stock.

Pivot Point Theory :- Taking previous day’s trading prices of a stock,we can calculate the support and resistance levels for that stock for the next day.

Support and Resistance terms are self explanatory.A stock which is moving higher,may stop at resistance level and come back.Similarly,a stock moving lower,may stop at support level and reverse its move.After crossing first support or resistance level,stock is expected to move to next support or resistance level.

Coming to the Pivot Point Formula,we select a stock for Intraday Trading.For that stock,we need its previous day trading data- Intraday high price it touched ( H), intraday low price it touched ( L) and the previous day closing price ( C) for that stock.

         Add theses three values- H+L+C=X.

         Divide the total value by 3 (P) = X/3.

         Multiply it by 2 :- X/3*2=Y

This value P is called the Pivot Point.Stock sustaining above Pivot Point is likely to move higher towards first resistance level and above that towards second resistance level.If stock continues to trade below the Pivot Point,it is likely to drift lower towards first support level and after that towards second support level.

Let’s calculate resistance and support levels.

First resistance level ( R1)  = It is the difference between the {Pivot Point X 2} or Y and the Intraday Low price.

         R1= Y-L

         R2=P+( H-L)

First support level ( S1) = it is the difference between Y and the Intraday High price.

         S1= Y-H

         S2= P-(H-L).

Fraction Theory :-  This theory is also based on previous day price movements of a stock.

Add up high (H),low(L) and closing (C) price of previous day of the stock and multiply it by 0.67 (ratio of 2:3 as in pivot theory and it is constant)

         (H+L+C)* 0.67=Y

         Resistance (R1)= Y-L

         Support (S1)= Y-H

     Possible Buy (P.B.)= Y-C

Above possible buy (P.B.),buy the stock for resistance levels.

2652 Theory of intraday Trading :- 2652 Theory is based on previous day and present day High and Low prices of a stock.This theory has its own disadvantage that it makes you trade for gain of 0.5% while keeping your stop loss 1% lower.Your risk is double of your profit and using such strategy in day trading doesn’t make sense where probability of going wrong remains high.

You should also use technical analysis based on short-term charts for stock to know the trend and other indicators of technical analysis.Buy stock which show uptrend while look to short which are down trending.

The Intraday Chart with 15 Minute interval remains best for effective Intraday trade,though you may use any interval like 1 Minute,5 Minute or 10 Minute.

Prefer to use trend lines on Intraday Charts to take buy or sell call on your trade.5 Minute Bar Chart can be a good method to use trend lines for Intraday Trading.

Only formulae do not work to survive in Intraday Trading.There are certain strict rules which you need to follow. Move on to the next page to know about these Intraday Trading Rules.

  • Sathish Babu N Suganthi

    can you help in particular stocks which we are trying..

    • Hello sathish,
      Let me know which stock you are talking about.

  • Hi Dear ,

    Make it some Example .

  • Shashikant Salvi

    Hlo,
    Ref: 2652 Theory

    NSE trading times have changed from 10AM to 9 / 9:15 since the time it was proposed.

    Now should “TODAY” H/L range be from 0915 to 0930 IST?

    • Hello Shahsi,
      Ofcourse,you will take 15 minute interval from 9:15 AM onwards now πŸ™‚

      • Shashikant Salvi

        Thanks dear

  • Sikani

    Which technical strategy to be used for intra day, and how to study charts for intra day.

    • Pivot Theory is more reliable and accurate.

      • Sikani

        Thank you for your reply. But is there any chart study for intraday and how experts giving targets on intraday, explain please. Provide me the link if you have any.

        • You can trade intraday by using Pivot Points or previous day candlestick.Previous trading day candlestick gives an idea about the possible stock move direction.Targets are the past resistance points while the supports are the stop losses.
          Also there are more sophisticated trading software available in the market which can give you buy and sell signals more precisely.You can google and find these software.

  • Manas Chattaraj

    Add theses three values- H+L+C=X.

    Divide the total value by 3 (P) = X/3.

    Multiply it by 2 :- X/3*2=Y
    Sir, what is the meaning of = ” Multiply it by 2 :- X/3*2=Y ” value…plz clarify

    • Hi Manas,
      sorry for late reply.X/3 *2 is the multiplication of the result of division of X/3 to 2.Suppose X/3 = K then you have to multiply K with 2,that is , K x 2.

  • pandit

    I am pandit I like to day trading.
    Sir I read u r blog I like.b it sir very losses . Through it.
    Sir give me u r suggestions.

    Thanks dear sir.

    • First suggestion is to avoid Day Trading.It is not as easy as it looks.Keep your trading duration little longer,say few days or weeks.
      Secondly go for trading only after proper research and home work for a stock you want to trade in.

  • Dileep

    Hi Bikramjitsingh,
    What time we will do this analysis ? Soon after opening the market ?

    • You can do that after the market close or before the market opening for a daily chart.
      You can do that for hourly chart also for each passed hour.

    • Hi dileep,
      Technical analysis is done after market closure or before market opening. During market hours, you execute yours plans.

  • Omkar Gajanan Vaikul

    IF NIFTY SPOT
    H 7505.9
    L 7444.1
    C 7485.35

    Then Pivot points come 15032, but I guess some prblem in FORMULA , becz I can’t find support levels by your first mention method I.e Pivot points theory…..pls help me to find Pivot points and Resis & support

    • Hello Omkar,
      For your nifty levels,pivot point is –
      (7505.9+7444.1+7485.35) / 3 = 7478.45
      Support is (7478.45 X 2) – 7505.9 =14956.9 – 7505.9 = 7451
      Resistance (7478.45 X 2) – 7444.1 = 14956.9 – 7444.1 = 7512.8

      • Arpit

        Sir i am new to this market i am not trading right now. Want to learn first so please guide me. From where to start to learn intraday trading.

        • Hello Arpit,
          Intraday trading can be very risky for the freshers.You would need to learn reading technical charts before jumping into trading. Initially, keep your trading time to few days instead of Intraday and start with small capital. All the best πŸ™‚

          • Arpit

            Definately sir i will not trade. Only i will do is paper trade first. Is their any book or notes for where i can learn technical charts.

          • You can do that by joining technical analysis courses conducted by trading brokers like icicidirect.com or search online literature available there.

          • Arpit

            Thanks for your reply sir.

      • Arun

        Hi

        R1= Y-L

        R2=Y+( H-L)

        R2 does not seems to be right?

        • Dear Arun,
          Formula is like that only.What problem you are facing. Kindly share πŸ™‚

          • Arun

            Dear Bikramjit,
            If you take the nifty values today then
            X=7508+7405.15+7498.75=22411.9
            X/3=7470.63
            Y=7470.63*2=14941.26
            Now if you calculate Resistance values
            R1=Y-L=14941.26-7405.15=7536.11
            R2=Y+(H-L)=14941+(7508-7405.15)=15043.85
            If you see the R2 value it doesn’t seems to be right.

          • Hello Arun,
            Sorry for late reply.I have made the necessary changes.It should look fine now :).Let me know if you still have any query.

          • Arun

            Many Thanks Bikramji ji.

          • naveen

            hi sir plese help me for intraday trading formulat…so i can earn per day 100/- bugs.. naveen.singh659@gmail.com

        • Hormuzdiar Pestonje Mistry

          Please.indicate changes made to arrive at R 2 level.

  • Manus Ki

    Which trading platform do you use? Which is best and lowest broker?

    • Hello Manus!! I use TradeRacer by icicidirect.com
      While choosing a broker, you must keep in mind that quality comes with a price.

    • Hello Manus!! I use TradeRacer by icicidirect.com
      While choosing a broker, you must keep in mind that quality comes with a price.So make sure the broker you choose also provides satisfactory services along with low cost.I am quite happy with icicidirect.com though it is bit costly compared to peers.

      • Manus Ki

        Hi,

        How about Zerodha broker? It is claiming that it is lowest charging broker with best service?

        • You have to check them by yourself only πŸ™‚

          • Manus Ki

            ok. Thanks

  • raja

    can you give
    some tips for intraday trading

    • Sorry Raja, I don’t offer any Intraday trading tips :-). Moreover I would like to advise you to create your own trading ideas by reading technical charts than relying on trading tips.

      • Prakash Ampile

        Hi Bikramjitsingh
        Good mrng
        I am very new to this trading concept
        can u pls tell me
        formula for Support Level and Resistance is same
        For
        Nift and sensex

        • Hello Prakash,
          Formula remains same irrespective of you apply it for Sensex,Nifty or any particular stock or share.

          • Mr.Hari

            Can plzz provide me your email id .

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