Day Traders delight!

The Nifty had a classic trend day, opening near the lows of what became a strong up move. For the short term trader, there were many signals for a long position. Once a position was taken, the stops were installed but never triggered. Such was the strength of the rally!

For short term traders, there are two issues to think about.

First, what should be the approach to trading? Do you wish to take small profits which assures a high percentage of winners. Or, do you wish to capture these trend days (like today and yesterday), which will give big profits but many small losses. All of us want the big profits, but these profits come with many days of whipsaws and losses.

Second, should a trader begin the day with a view or theme? I start the day with a view on the market – go long or go short. Sometimes, this changes during the day, but mostly I trade on one side of the market which makes life easy.

The answer to the first question is: Our system testing suggests that waiting for trend days makes more money as compared to taking small profits. But, this also requires lot of patience and the ability to take numerous small losses.

For the second point: having a view is really a personal choice. I think each trader needs to determine what suits best psychologically. But whatever course is adopted, be consistent.