How to find stocks for Trading in Stock Market ? #Learn2Trade Session 6
Welcome to class number 6 of Learn2Trade. This series has become popular. People are enjoying it and I feel they were waiting for this. I am getting such good comments and encouragement from everyone. Thank you all for being a part of this series to learn the trade of art.
I am teaching A to Z of trading in this series. I am teaching Annapurna but a lot of people are also able to learn. I am getting good feedbacks. So lets start class number 6 Annapurna Hello sir, how are you? I am good sir. How are you? I am good too Market is giving a very good opportunity now. Really? You cannot get a better market if you’re trading currently
After a stock identification, it runs up by 5% to 7% as it is in one direction Did you see how market in is in the uptrend. Sir, I am following Sensex and Nifty, Which shows going up and down, nothing more than that Sensex, Nifty are at all time high but do not fluctuate a lot, but the stocks fluctuate a lot But sir you’re saying that it’s going up but the 5 to 10 stocks that I am tracking I didn’t see any major movement in there. Oh that’s correct You must have added all the consumption-oriented stocks. Let me guess
You must have added Hindustan Unilever, Dabur, Maruti? Yes sir So every stock has it’s own time. So the FMCG sector you’re tracking There was a lot of activity during the Covid, now they’re resting They’re consolidating. I had told you in the previous video about trending market Either there will be an uptrend, downtrend or a consolidated market. Currently the FMCG sector is resting Hence you can’t see the movement in your stocks. But is it right to track stocks with no movement. It’s a waste of my time
It’s a waste of your time and it’s a waste of your opportunity There are other stocks and sectors which is showing activity now which is known as momentum So if you want to trade, then apart from the stocks that you are tracking You want to understand their movement, you want to befriend them Like I had mentioned in the previous video But you should also be tracking stocks which can show momentum I had told you in the previous video that we will learn how to identify the momentum stocks or the stocks which has probability to show activity there is a process called screening. The screeners that run or the process of screening Today I will teach you that process. You must remember I had asked you to download 2 software, TradingView and StockEdge You are tracking it as well, I will use one those softwares to show how you can identify and screen a stock In the olden times. All the markets have been adapted by predominantly the US market You understand that US is the base of the capitalistic society. The stock market has been born in the US
Around 1920’s there was a concept called tape reading. A lot of people know it as ticker reading Initially, there was no electronic medium, no computers and laptops So everyday, at end-of-day, the stock price was written in a paper Did you watch that Guru movie where Abhishek Bachchan is shouting and trading offline It’s known as pit session. It was used a lot in US in the early days The price was written on a paper and people used to check paper to understand what’s going on Even today if you read the Economic times, you can still see the stock price in one or two pages You have a laptop in front. You can use Google or StockEdge to get all the data But we didn’t get the data in those days, so it was written in paper People read those and tried to make a judgement based on it Tape reading is now electronic, you use the electronic medium You try to identify the momentum that can come later. Either intraday or over a period of days Identifying intraday momentum means trading intraday And identifying momentum over a period of time means involved in swing trading Do you understand swing? You had explained that it needs to kept for sometime You must have played around swing as a child in the park. Even I have done a lot
How does it work? Back and forth. That’s where the concept of swing has been derived Each stock swings, it keeps going up and down As a trader your role is to identify the swing in the stocks If it’s in uptrend the swing will work like this If it’s in downtrend the swing will work like this It keeps going back and forth. This concept is also known as Dow Theory Have you heard of Dow Jones? Dow Index? This is US’s Index which is widely followed Like India has Nifty, US has Dow Index As per Dow Theory, market always moves in swing, even if it’s in uptrend It will keep going up and down but it will make higher highs and higher lows in the uptrend And it will be opposite in the downtrend For someone who is in swing trading, they will try to identify momentum in stocks end of the day Intraday traders try to identify momentum intraday by ticker reading I will show you how to do both in this video. First, let’s talk about Intraday I have a tool which is specially used for Intraday. We use it in our office. It’s called Falcon
There are similar tools available in the market. We don’t have it in StockEdge As StockEdge is not meant for intraday, it’s for end of the day You need to do homework in the evening and try to capture small or large swings You need to use one of these specialized tools for Intraday which captures each trade Or each tick. Remember tick? The one in the bottom that has arrow I had shown you the 5 paise tick that NSE has 5 paise tick Each movement is of 5 paise. These software capture each tick Can you see what’s going on in the software? Yes I can What do you think of it? I can’t understand anything No worries. I will try to explain
This has the scrip’s name. This is a code Any scrip/equity/stock in an exchange is denoted by a symbol We can’t use such big names. It’ll be weird to see big names like Larsen & Tourbo Infotech Ltd Hence it’s given a code which is called symbol Call it scrip name or symbol. This is the rate at which it has been traded last. This is % change vis-à-vis previous close. You had shown this earlier
This ticker is highlighting a few events. It’s saying at low of the day These stocks are all trading at it’s day’s low and green means it’s trading at it’s day’s high It looks like a trading terminal. Some brokers provide this feature in the trading terminal as well You need to ask your broker for the tick reading facility This is a 3rd party software, this is not a part of the trading terminal But you can ask the broker if this is available in their terminal, mostly they have it But I use it for charting purpose as well, hence I have shown it this way Stocks that are making low, who makes low? That have selling pressure Who will make today’s low, the one which people are selling There is buying momentum in the stocks which are making the day’s high An intraday trader tries to identify the stocks which are being bought and sold They will buy the stock which is being bought and sell the stock being sold Whether it’s a pharma company, burger company or a plywood company, it doesn’t matter We are not checking fundamentally. We need to check the price and judge which is heavier? Buyer or seller? These are called tickers and we need to judge today’s movement Then another ticker watch that I monitor is quantity. When are people working with large quantity
If only 1 share is traded, then is it important? If 100 shares are traded, then? It depends on the company. 100 shares of Reliance is a big deal 100 shares of Vodafone Idea, i.e., a Rs. 12 share is not a big deal The value traded is important even if it’s just 1 share There is a seller of 48 lot in Nifty. It means there’s a big player Then even you would want to sell it. You can use this system. I have created different windows.
This is a detailed science, we will record another video on Intraday trading But I use this system to select stocks which show momentum of buying/selling today I can only do that when I can try to gauge the movement of the big players Big players can be an individual or a group whether they are here to buy or sell You can form a judgement after reading the ticker Can we not to this in the TradingView? No we can’t Do we have to see the ticker to identify momentum? This is for stock identification. If you observe that a stock is being bought Let’s observe this for sometime. These are events, and this is the large quantity Red means selling and green means buying In today’s date, at this moment, there is a green tick in Axis Bank Can you see that seems to be buying interest in Axis Bank or ICICI Bank What will you do? You will immediately go to TradingView So let me go to TradingView. If I want to do intraday trade, then I will not see the daily or the 2-hourly chart Then a 5 minute chart? It will be too less, it is for tick-by-tick trading 30 minutes, 1 hour? 15 minutes chart for Intraday trading You need to create a layout of a 15-minute chart in TradingView. Let’s create a layout. I will make a new layout
There is chart in the falcon software as well. Whenever you click on a stock, a chart opens up You can see the intraday chart there as well, or you can use TradingView I’ll make it a 15-minute chart. Which was the stock that we picked? ICICI Bank Let’s quickly check ICICI Bank. You need to be quick with this as opportunities are limited in intraday You can see in a 15-minute chart of ICICI Bank that there is a buying interest of large quantities Green means buying and it showed large quantities What will you look for in the chart? Demand Zone or Supply Zone? If people are buying, then even you would want to buy. If you see here, is this near support? Here the swing low Has gone up and back here, we can make a small attempt here 625 can be a support, the price is 627, so we can make a small attempt here As it is being traded in large quantities and you can see the buying propensity of the buyers And maybe the risk rewards are also favourable? Yes as it is near support If it was trading here, then maybe the risk rewards wouldn’t have been favourable As it would have been further away from Support If I buy at 626 and put a stop loss at 624, then the loss will be 2 What will be the estimated profits? Till the supply zone So I will try to square it up before 635.
As I know that there is supply zone at the top and there are people to sell it The risk reward ratio is favourable for me, estimated loss will be 4 and estimated profit will be around 7 to 8, so 2:1 ratio The estimated losses and returns both should be small in intraday. You can’t expect 5 to 10% movement on an intraday. You can maybe get 3% movement with 1.5% loss But you trade a lot. So many stocks are popping up You check the technical of all the stocks and you enter when the risk reward seems favourable and exit after the trade From 9:15 am to 3:30 pm, an intraday trader tries to make a judgement by reading the ticker On which stocks are showing momentum and typically he squares up these stocks You square up your position at 3:15 regardless of profit or loss This is in banking, which already in trend now, can we pick up some other stock I don’t care whether it’s banking or infra. An intraday trader doesn’t care about the sector
For me it’s a trade, give it any name, Shyam or Rajesh, it doesn’t matter This is price, people are interested in this price is what matters to me Name is immaterial, as there is no value of fundamentals for intraday There is no value of the business of the company Let’s take another example, and leave banking I am trying to identify This stock PFC, it’s trading at the day’s low. Let’s search for PFC – Power Finance Corporation It’s trading at day’s low, so I need to trade by selling this stock This is nearing the support, it can reverse from here. So I can take a risk of buying It’s not mandatory to keep selling, when the trend is selling The risk reward ratio is favourable when you play as a contrarian Can you elaborate on what exactly is trade by selling Trade by selling means that you can buy or sell any stock. Buying is simple, you give cash to broker in exchange for the stocks of that value How do you sell something that you don’t have? You can sell on Intraday. You can sell now and cover by the evening
You need to deliver if you’re selling in the cash market. But how do you deliver, if you don’t possess it? There’s T+2 settlement in India, if you’re selling today, you need to deliver day after tomorrow You can’t sell if you don’t have it. You can do Intraday, see now and cover up by the evening Or if you’re trading in derivatives, in futures and options, then you can short position Trade by selling which I will explain later, as it’s a very complex instrument and it’s important to completely understand it before you trade I’ve explained the concept of Intraday People identify small momentums, identify stocks and price behaviour to participate in the stocks See how they have sold support It’s clear now that it will break this support zone, you can attempt to sell it here You can attempt to sell it at 125.30 with a stop loss right above. You can put a stop loss at this candle’s high
Which is approximately 126.27. If it closes beneath this, as in another candle opens up right below It means convincingly that the stock is in further downtrend, so we can sell it further We will discuss intraday trading in detail later. I have shown you how to identify stocks But intraday is not an easy game. You need to be very alert in intraday. You need to do a lot of homework You need to be in front of the screen from 9:15 to 3:30 as it’s difficult to find out stocks with opportunity I’ll show you how to trade on intraday basis through end of the day homework That’s what StockEdge is for, to save you from effort while Intraday trading StockEdge gives you the opportunity to scan at the end of the day to cherry pick stocks which can show momentum You would want to participate in those stocks with chances of momentum This is the web version of StockEdge as you know it. There are scans
We have created readymade scans, some are free, some are paid I will show you some scans which can be very impactful for you Like price scans, what do you understand from it? Scanning the prices? Scanning the stocks on price-based parameters What can be the price-based parameters? Previous day breakout scans, i.e., stocks that have broken its previous day’s high, broken its previous day’s low Last week breakout scans, i.e., the stocks which have broken its last week high or its last week low So does it mean that it can show a breakout? It means that it has shown a breakout and it can move up now Last month breakout scan, i.e., close crossing last month high, it means that this stock has closed crossing the previous month’s high
Is it a good or a bad thing for the stock? A good thing because if it has broken last month’s high then it means that the buyers are very confident It might give movement from here onwards Close crossing last month low, i.e., it has broken its last month’s low These all parameters are derived from price 52 week high, i.e., the stocks which are trading higher that its 52-week high Stocks which are trading lower that its 52-week low The stocks trading higher than its 52 week high have higher chances of going up The stocks trading lower than its 52 week low have more chances of going down Which stocks are there in its 52 week high zone If you don’t know these meanings, click on i, click on it to understand its meaning 52 week zone according to me is whichever stocks are there in the 15% range of its 52-week high, it is in the hands of bulls There are bulls and bears. The bulls buy the good stocks at any price, the bears sell the wrong stocks at any price We’ve seen that 15% is a fair range. If any stock is in its 15% range, it’s under the control of the bulls
Similarly, there are 2-year breakout. The stocks which are breaking its 2-year high or are there in the zone Stocks which are breaking its 5-year high or are there in the zone All these indicators are price driven. Check out each indicators and study these indicators Try to understand the implication of these indicators. If you get to know these indicators
If you get to know about all the parameters, then you can combine multiple parameters and use it Let me quickly show you all the other scans. Price scans, then there is volume and delivery scans What does this mean? The volume of the shares traded. What is delivery scan? The shares being delivered. The volume of the shares being delivered There is high delivery percentage. But what does delivery exactly mean? How are the shares being delivered?
A lot of people are buying and selling shares, it’s on Intraday All trades won’t be intraday, some people will buy and sell today, they didn’t take the position home So delivery specifies how many people take the position home The more people take the position home, the higher conviction will be there for momentum If the trade increases, and the delivery was done for 1 lac shares, the price increased You will feel there is uptrend, but only 1000 shares were delivered People played intraday and took 1000 shares home Similarly another stock which went up, volume is 1 lac but the delivery was of 10000 shares So the 10000 shares that people took home was more valuable than 1000 shares which people took home The number of people who took the stock back home is more relevant as they are taking more risk, they might lose overnight Intraday traders just traded and left Intraday traders are game players while the people who build real position take delivery Like in swing trading? Yes This helps in showing the operator’s position, whether he took the position home or not Operator doesn’t do intraday trading he does delivery-based trading All these scans help us in identifying stocks that have overnight interest Then there are technical scans, which I will teach you in technical analysis on what is moving average and relative strength I will teach in detail. I had given you the example of priest and god. These are all priests You need to understand each priest as someone or the other priest will give you access to god Then there are fundamental scans Price is relevant for company analysis and fundamentals means performance of the business Their sales performance, the promoter stake These scans are all available that help in evaluating a company fundamentally There are multiple parameters in the fundamentals as well I will not tell you all these scans today. Today I’ll only ask you to give weightage to price scan As price will help you to identify which stock has momentum Let’s pick any one. Last week's breakout scan. Click on close crossing last week high You will get stocks which has crossed the last week high yesterday New India Assurance was 20% up yesterday, General Insurance Corporation 20%, Bank of Baroda 13%, Hindustan Copper 12% These stocks are on an upward trend. They have higher chances of momentum as they are in the uptrend When you are doing homework in the morning, you sit with this list of stock and studying this chart Whenever the supply zone of one these breaks, you enter with a stop loss And a downward stock which broke last week’s low Like Tata Elixsi, it broke the previous week’s low. Low was 2801, that it broke, close was 2748
Let’s see what happened in Tata Elixsi today We will see a 15-minute chart as we are trading intraday If we see the trade in the morning Whenever you’re trading intraday, wait for the first 15-minute candle to be formed When the market opens. What time does the market open? 9? 9:15 From 9:15 to 9:30, there is a huge battle between 2 elephants. They fight Who fights? People who want to create a position and people who want to square up the position The big players are fighting and we are ants and if an ant steps in between the 2 elephants, it will die So stay away. Let the first 15-minute candle form. This is candle.
The first 15-minute candle is formed by mapping the high, low, open and close. This stock is breaking its previous week’s low, it means it has a negative momentum As soon as it breaks its first 15-minute low , I should highlight the low and high of the 1st 15-minute candle Since it has broken previous week’s low, so when it has broken t’s 1st 15-minute low, you should sell it This is a strategy. Why should you sell? It had indicated yesterday night that it had broken last week’s low so it is weak now, so it’s best to sell. When should you sell? Not in the morning
You’ll sell only when it continues its low momentum One way to continue its low momentum is by observing the high low of the 1st 15-minute candle as soon as it breaks the low, sell it with a stop loss This is a strategy that I have shared with you My suggestion would be to check and understand all the scans in StockEdge Each scan is like a friend which will help you In future, I will show you how to combine multiple scans and filter better As 1 scan might show you 100 stocks, if you add another scan You must have studied probability, intersection If add more scans, the list of 100 stocks will be filtered down to 30 stocks With an additional scan, 30 will get filtered to 10, implying that these 10 stocks have high chances of a big event You will add those 10 stocks in your watchlist to track and whenever there is an action in the price, you will participate in it There are so many scans, you said we can make combination scans, but how do I determine which combination to use? Hence I suggested to understand the readymade combination scans in StockEdge We have given explanation in each scan, if you click on i, you will understand the scan The more you read on it, the better you will be able to understand the scans We will record another video after you learn it on how to create combination The objective of today’s video was that because of you selected limited stocks If you want to trade actively, then you would want to scan down stocks from the entire universe so that you can trade on limited high probability stocks I have explained the basic structure. Watch the video again, it’ll be clearer and we will discuss on the follow on about creating right combinations I have another question. This is the identification process but how do I determine on the quantity of stocks to buy Firstly, come out of the mindset to buy. It’s not necessary that you will only buy while actively trading You can even trade by selling intraday. The question of quantity Don’t go for quantity, check which stock has a high chance of giving returns. You should be trading in 5 to 6 stocks, maximum 10 stocks Because if you want to square up your position, and if there are more than 10 stocks, you won’t be able to square it up When you’re starting, your target should be not more than 5 positions When you’re starting, you shouldn’t have more 5 stocks or positions open Because if the market goes the other way, you will not get chance to square up your trade We will keep increasing it over time but you should have maximum 10 positions You need to identify 10 best trades out of 100 stocks. That’s the skill
It’ll take a lot of time before you can identify. Out of 100, you’ll filter 50, then 40, then 30 and finally the top 10 stocks which has the highest chance of making money But it will take some time This is the concept of scanning. It’s a complex concept. It will take some time for Annapurna and you to understand But at least get in the habit of using StockEdge. If you sit for half an hour to one hour and identify stocks as per the scans and start tracking the stocks over a period of time. You will understand the thought process, or the application better
Intraday trading is a different ball game. Swing trading with overnight positions is a different ball game. Generally people choose either one. Immediately, you won’t be able to decide what’s right for you So test both and check what is right for you and over a period of time you might get confidence whether you want to go for intraday trading or swing trading. Let’s end this video This class was long. We will record longer videos now as a class can’t be stopped in between So we will have more interesting discussion on a more interesting topic in our next class Thank you friends for watching this video