5 Intraday Trading Rules to Never Break

Hello, friends. This is Vijay Bhambwani. I hope the markets are treating you well and you're making good profits from your trades and of course, investments.

In this video, I want to talk about some critical aspects of what not to do or some rules that you must never ever break when you are attempting to make profits in intraday trading.

Now what do I mean by intraday trading?

Trading that strictly must be squared up at the end of the day or eod. Professional traders call it going flat out, just like your electrocardiogram or ECG goes flat when the patient is dead, your open book, your trade book must be closed at the end of the day. This is called intraday trading.

Now within intraday trading of course, there are many other type of trades. You could have micro scalp trading, which means you get in and get out with a few tick points. You could also have micro trend trading where you don't hold your trades for more than one hour at a time.

But I assure you, the ground rules that I am mentioning which you must not break will remain constant.

So let's take a deep dive and see how I can add value to your process of becoming a better intraday trader by knowing what not to break.

Rule number one. Never trade on days when you are not prepared. What do I mean by preparation?

Now when you're an intraday trader, you would be using some kind of a system to basically segregate, which counters you will trade. You could be using technical analysis charting. You could be doing a statistical analysis of data based on the day's trading data that is available in the public domain. You would even be using your trading terminal screen reading to formulate kind of trading signals for the next day.

Believe me, trading is more about behavioural science and behavioural finance than you would like to think.

At the back of your mind, your subconscious psyche knows that you're not prepared. You will hesitate to kill the trade. If you're in a wrong trade, you will hesitate basically to even enter the trade because your mind knows that you have not done in a ground work. Herein lies a high probability of errors creeping. So please do not trade when you are not prepared.

Rule number two, which you must never break. Don't ever jump at a trading signal immediately. For example, if the previous stop is 100 bucks and the stock or index of whatever it is that you're trying to trade is trading below 100 bucks, attempting to break out above 100, giving you a lot of hope since a lot of days but failing to break out of 100, the minute it breaks out above 100, do not jump in.

Now, this is something that is the experience of 3.5 decades of mine that is talking.

Why I have always regretted, almost invariably always regretted, whenever I have jumped into a trade when the signal just occurred because many a time, vulture traders, dark pools, algo traders, know that a lot of people are waiting for this particular break out and they could trigger a tease break out. This could just be to tease the traders to get on the long side.

Now, do remember that somebody's gain in trading is equal to somebody's loss. So when you make this mistake, somebody else is going to profit from your mistake.

What is the way out? I would say, wait for 30, 40, 50 seconds, maybe even a minute, maybe even two minutes, whatever is dependent on the kind of beta or the volatility of a particular counter that you are trading in. Wait for a while. Let hyper emotional reactions of traders settle down. If the breakout is still persisting, by all means, take the trade.

But don't jump in. By not jumping in at the trade as soon as it occurs, believe me, you can save yourself from a lot of loss making trades and that's a big difference.

Rule number three. Don't try to day trade for the sake of trading. Don't try to extract profits from the market when the market is in no mood to give them to you.

This is not a 9 to 5 job. Believe me when I tell you this. This game is really, really very different. If it all your trade set ups are not yet confirming a trade, do not try to make money from the market. It's as easy or as difficult rather as trying to grab meat out of a hungry lion's jaws. What makes you think it's sitting out there to give them to you?

So just because you've done nothing for two days or three days, I am feeling bored, I've done nothing, so let's do something. That's not why you should trade.

Number four. Follow the money. Don't try to swim against the flow of money. That is basically a loser's way. If the trend is upward, you go long, and if the trend is downwards, you go short.

A lot of people myself included after the lockdown, occurred in 2020, were somewhat sure that the covid pandemic based lockdowns were very serious stuff, and the market should be falling.

In the month of March our expectations were proved right but come end of March, latest by first week of April, almost every asset class started jumping higher, and that is where a lot of traders basically could not see that the direction of the wind had changed. That money was flowing into the market rather than going out.

They tried to find short selling opportunities where they should have been going long. Like I said, this included myself. For quite a while, I was sort of trying to seek trades on the short side where none existed.

So guilty as charged. It is always better to go in the direction of the money. I have not made any single swimmer who has managed to swim against the tide of a waterfall. If you're swimming in the river, that's going down in a waterfall, nobody I know can swim up. You have to fall with the water. So it's always easier and infinitely more profitable to trade in the direction of the overall market.

Now, intraday trading is exactly that. Like I said, you have to go flat out. You do not, I repeat, you do not roll over your train to the next day. No matter how much you are experiencing distress at a loss making trade or euphoria and a profit making trade.

This is how traders become long-term investors. You started out by entering an intraday trade. You got sucked into the vortex, got greedy or fearful of whatever, maybe even both, and roll your trade over and that's where your misery starts. So follow the discipline. Going flat out means going flat out.

Position sizing is extremely important in day trading. When you're very sure of the trade you may want to increase your exposure size a little bit, but it cannot be 3, 4 or 5 times bigger than your average exposure. Here, you would want to keep clear check on the risk that you're taking.

You can never take an out sized amount of risk in one single trade. That's the best way to get hit by a whip saw in an unexpected trade and deplete your trading account.

Believe me, your capital is your freedom to trade. Treat it like a precious jewel in the family. If you lose your capital, you will not be able to trade tomorrow. So risk management, trade bet size management is extremely important.

Some of the most successful intraday traders are those who would like to keep their position size constant. If they're trading with two lots, they will continue to trade with two lots. Only in an extreme case when they are extremely positive above the trade set up will take about to 3, 4 lots, but they will never make 2 lots into 10 lots. Now that's a kind of over positioning that you should avoid.

Friends, I think, by implementing these things the very simple things of what not to do, I am 100% sure you will be far better traders tomorrow than you are today when you have not implemented these simple hacks.

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Thank you for your patience. Thank you for watching. Do take very good care of your health, your family, your trades and investments. I wish you have a very profitable day ahead. Vijay Bhambwani signing off.

Take care. Bye.