I am explaining the method being currently adopted by me to do intraday trading. The method which I explain may NOT suite everybody’s style of trading, kindly re-adjust as per your style.
Before we begin, Few words of caution, for the benefit of New Traders :-
(Experienced Traders may go to the sub-title – “Zones of Camarilla” , by skipping other paragraphs)
It is highly risky to do intraday trading, no method can be 100 % perfect, If so, the market may not exist, Because, only when someone feels like selling the other can buy and vice-versa.
Kindly, trade equal value ALWAYS.
Why ??? In my initial days I used to trade 4 lots Nifty (and sometimes CALL and PUT – Options) on each trade and keep winning almost 70 % of the trades, till 20th of each month, then I become over-confident and trade 10 or 20 Lots (most of the times, by seeing Lower premiums on the options, I used to get tempted), and that is HOW, I had been loosing money pretty consistently, This is called IN-DISCIPLINE, hence the caution to trade equal value ALWAYS.
Calculate Risk/Reward, ratio, before you initiate a Trade :- For every trade we say Target and Stop-loss, before you initiate the trade, kindly, check whether the loss incurred, IF and When, the Stop-loss is hit, is AFFORDABLE to you. Usually, any loss of more than 10 % of your Capital, in any ONE trade is considered Dangerous. I set my ideal limit, less than 5 % and on very few occasions, between 5 to 10 %. If the Stop-loss trigger is likely to give more than 10 % loss on my capital, I do NOT trade that call, even if I am confident on the system and on that particular trade. Please, remember this sentence, “To recover 50 % of Loss you made, you need to make 100 % profit using the remaining capital”.
“Get Down from the Train, when you reach the destination” : – When your Target is reached please book profit, the stock may go further, and you may re-enter the stock ONCE AGAIN, after considering the Risk/Reward once again.
Wait for Opportunity :
Market will not go away, do not be in a hurry to enter or exit a trade. Have patience and once entered stick to your SL and target.
Zones of Camarilla :-
The zone between R1 and S1 is known as “Trend-forming Zone”, This zone is most of the times very volatile and difficult to trade, hence Avoid making any New Trade Entry while the stock is trading in this ZONE.
Trend Reversal Zone :
The Zone between R1 and R2 and the Zone between S1 and S2 are known as trend reversal Zones. Any stock opens in this Zone above R1 and goes towards R2 (especially when the market trend is bearish), will get resisted at R2 and commence bearish run towards S2 and further below till Break-Down and S5 and sometimes even below. The vice-versa is also applicable especially when the market trend is bullish and the stock is trying to test S2, will get support and proceed towards R2, Break-out and R5 and even above.
Bullish Zone :
If the stock Opens the day between R2 and R3 or R3 and break-out, it is in Bullish Zone.
If the stock Opens the day between S2 and S3 or S3 and Break-down, it is in Bearish Zone.
If the stock opens above break-out level and within R5, it is break-out Zone.
If the stock opens below break-down and above S5, it is break-down Zone.
Trade Reversal :
When ever break-down or break-out levels are used as Stop-loss, you have to REVERSE the trade on Hitting the STOP-loss with DOUBLE the quantity, keeping previous entry point as the current STOP-loss.
Any stock opening beyond the levels of S5 or R5 are NOT tradable using this CAMS equations, though there are advanced calculations available, it is highly risky, hence better ignored.
Also, stocks opening in Danger Zone not to be traded till they form a clear trend.
Trade Along the trend of the Market, till you get experienced, However, experienced traders may trade stocks against the overall market trend, Only IF the stock trades above R3 consistently or below S3 consistently.
Please Take position only AFTER 09-45 AM after assessing the market trend.
Trade pattern – 1:
If a stock opens in Danger Zone or in Trend reversal Zone , and when the Stock Moves in the OPPOSITE Direction of the Overall Market trend, wait till the stock encounters S3 or R3. These are very powerful resistance and support Zones, When the overall trend is against this stocks movement, these levels will Buck the trend of the stock and send in sync with the overall market trend. For Example: – Nifty is Bullish and trading approximately 40 points above the open price and bullish since open, IF you find any stock heading towards S3, please watch and you will find the stock getting resisted at S3, initiate Long position at this level (more cautious traders can WAIT for the stock to make “Higher” – LOW, before entering), with Target as R3 and Stop-loss as S4. The vice versa is to be done at R3 to go Short when the market is bearish. If the stock DOES not get resisted at R3 or does not get support at S3, wait for the stock to go to R4 or S4 then take position, after it breaks-out or breaks-down, keeping R3 and S3 as SL, for a target of R5 and S5.
Trade pattern – 2 :
Any stock opening between R3 and break-out is sure to break out (Well almost – hehehe – no one can be 100 % right), usually this will re-test R3 at least once before break-out, that is better entry point. Keeping, R2 as Stop-loss you may target R5 for the day. The vice versa is true for Break-down and S3 levels.
Trade Pattern – 3 :
Any stock opening above break-out or below Break-down, will usually re-test breakout/breakdown level before proceeding, initiate trade at this re-test time with R3/S3 as stop-loss and R5/S5 as target.
On the trades attaining the target or even before it attains I usually clear 25 to 50 % of the holding to cater for the stop-loss (incase the stock suddenly reverses) and ride the trend with trailing stop-losses.
Trade Pattern – 4:
Quick traders/experienced and jobbers, can use each level crossing as entry for the target of next level. They should keep caution on S3, R3 and Break-down, Break-out levels as these can act as reversal points for the trend.
Very important, 95 % of day traders are LOOSERs only 5 % make profits, please exercise utmost care while doing intraday trading.
If the previous day’s range had been big , usually the stock will trade between R-3 and S-3, use R-3 and S-3 to “BUCK” the trend keeping R-4 and S-4 as stop-loss. The stop-loss given in these methods are very powerful, and whenever the stop-loss is hit, you may REVERSE the trade with DOUBLE the volumes and make good profits.
It is our advise to paper trade and familiarise with the system , before you enter the actual trade.
With Wishes for Happy Trading,
Trading is HIGHLY risky venture you may loose money be cautious and follow system strictly.