Breaking the myth: Intraday trading engages you for the whole day!

One fine Sunday, a dear friend of mine dropped by to discuss intraday trading. It was a weekend and a perfect hangout time to watch an IPL match scheduled between two arch teams.

Hence, we decided to watch the match first over a bucket of popcorn and then, continue with our discussion.

As soon as the match began, my friend got glued to the screen like the ones shown in Fevicol ads! And, I thought, he wouldn’t move an inch until this match ends.

However, to my surprise, after the first six overs of the match, he jumped out of his chair enthusiastically and exclaimed, ‘let us start talking about intraday trading!’

At this point, I asked him, ‘don’t you wish to watch the rest of the match?’ He said, ‘the first six overs and the last five overs are the most entertaining periods of the match, the middle-overs are tuk-tuk (single and double runs only) kind-off stuff.

After listening to this, I explained, ‘my friend, you have just cracked one of the most important lessons for the intraday traders!’ On hearing this, he was knocked down with a feather!

I’m sure you too would be wondering as to how a cricket match and intraday trading can have any sort of connection?!

To date, you might have heard that intraday is about sitting in front of the trading screen from morning till the time of the closing bell but getting glued to the screen is no guarantee for profits.

In fact, sitting in front of the screen for the whole day would make you take more emotional decisions, and you might overtrade.

Hence, it is about being active at the right time and this, in technical parlance, is known as the ‘timing of the pattern.’

So, what exactly is the timing of the patterns? Well, like in a cricket match, there are particular time periods, where there is a lot of activity.

Similarly, in the stock market, there are particular time periods of the day when the market and its constituent major stocks begin to make the day’s decisive directional moves.

These time zones are high probability periods when the market or the stock that was earlier just loitering around or doing not much will start making meaningful moves.

Depending upon the bigger picture, the move could be in the direction of the trend or a reversal. So, any kind of a reversal or breakout pattern that either appears or starts getting confirmed at these times should be taken immediate note of and acted upon.

In the context of the Indian equity market, we can split up the current market operating hours into the following time zones:

9 AM to 9.15 am:
This is the pre-open time zone. This time zone is more about taking note of things such as how the market is reacting to overnight cues along with the impact of domestic cues. Also, it also takes into account the list of stocks that are witnessing major gap-up or gap-down opening. Basically, this period helps a trader to be in tune with the flow of the events around.

9.15 AM to 11.15 am:
The first couple hours of trading are really important and will give emphatic directional moves in many stocks. These movements may be a continuation of the movement initiated in the previous trading session or they may be the result of an overnight news flow, which the stock might immediately try to price in. This is a period of hectic play and will command all your attention; not to forget, it will also demand a very high degree of concentration. If you are ready with your homework and witness the tape playing according to your plot, then this could be the time to pull the trading trigger on many days.

11.15 AM to 1.15 pm:
This period of the trading session is probably a quieter period. Having said that, it doesn’t mean that there aren’t any major moves during this time of the day. There could well be, but the levels of aggression at display here are different. As the news stream hits the market every hour, there are new moves. The magnitude of the work and necessary attention requirement depends upon the tactics that you have deployed and the number of stocks that you are following. However, during this time, we often see many stocks hanging around.

1.15 PM to 3.30 pm:
This is the climax part of the trading session and many traders, based on the sentiment in the last hours of the trade, take home overnight positions; for example, BTST or STBT trade. Hence, this period will demand your undivided attention but watch out and don’t get yourself over exhausted!

I expect this piece of advice will help you to cut through the clutter and find your way as to when to be actively participating in the seeming madness called the intraday.

It’s very easy to complicate things. However, it takes real expertise to make things easier.

So, let the game begin!

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