How to generate regular income through Short Term Stock Trading?
We generally invest in stocks for short term, medium term and long term. Many of us believe that blue chip stocks or large cap stocks can be consistent performers in the long run. However, picking up stocks for short term could be a big challenge. There are several investors who are trying their luck to see if they can make regular income through short term stock trading. In this article, we would share strategies to get regular income through short term stock market trading. I would also provide how these tips are helping me to generate regular income along with the proofs.
What is Short Term Stock Trading?
Short Term Share Trading in simple terms refers to buying a stock and selling within 3 months’ time frame. This time frame can be within 1 week or 15 days or 1 month or 3 months. You may not need a huge capital to do short term trading.
What strategies I adopted to get regular income through Short Term Stock Trading?
I have tried several of the below strategies to make money in the short term.
1) Target stocks in upper circuit (5% or 10% or 20% increase in share price in a day)
2) Target stocks where there is an increase in volume of shares
3) Stocks which are price shockers i.e., increase in stock prices in the last 3 to 10 days
4) Positive news about the sector – Pick some Midcap or small cap stocks from such sectors
5) Target shares where delivery %age is increasing.
6) Stocks that have concurrent gainers (continuous 5 days or 7 days)
What strategies worked well for me to get regular income through Short Term Stock Trading?
It is not a single strategy worked for me. It is about a combination of a few pointers is helping me to make money in the short term.
1) Price Shockers
There are several stocks that might gain during the day. However, if a share price has gained in the past 3 days, then you can filter such stock. You can also check how such stock performed well in the last 5-10 days. Moneycontrol – Price Shockers report can come handy here. This report provides last 3 days price increase and RED/Green bars which tells you how such share price increased in the last 5 days (day-1 to day-5).
If the company share price is in Green for most of the week and with limited downside / fall, then it could be a 2nd filter which can apply in picking up short term trading stock.
2) Continuous Gainer
This is another simple check point one can do. If the stock is continuously raising in the last 3 days, 5 days, 10 days, 15 days etc., then this could be considered for short term trading. Again, in Moneycontrol there is a Concurrent gainer report, which is readily available to track this strategy. This report provides current price, %age gain today, %age change compared to 3 days back, 5 days back and 8 days back along with volume. You can remove small volume stocks and focus on high volume stocks (say anything above 5 Lakh shares).
3) High delivery percentage of shares
For every share transaction, an investor need not take delivery of the shares. As an example, in Intraday trade, shares would be purchased in the morning and square-off is done before the market closure and vice versa. However, sometimes an investor would take the delivery of the shares, keep it and sell it in future. If there is a high delivery %age of shares of a company, that means, that investors are willing to invest in this company for medium term to long term. This indicates that there is an increase in interest in the shares of the company. This could be another filter which you apply for short term stock trading to get a regular income.
4) Increase in Volume of Shares
There could be scenarios where there is a huge trading of shares happening in the counter of a company. The current volume of purchase/selling of shares would have increased drastically compared to previous 1 week or 2 weeks. This indicates that there is increased interest in the shares of the company. Such stocks can be considered as another filter for short term trading. NSE gives an interesting report, Top 25 Volume Gainers. This report provides the 25 companies list where there is an increase in volume of shares. This report includes the current volume of shares, 1-week back volume and 2 weeks back volume. This simple report can help you to filter a stock to do short term trading and get a regular income.
5) Increase in Volume with Increase in Price
You can combine both volume increase with a price increase in a stock and generate your short-term trading ideas. Money control gives you an awesome report, which provides if there is an increase in volume + increase in price. This can be handy in picking up a couple of stocks for short term trading strategy.
How to invest in these filtered stocks?
Once you have implemented these short-term trading strategies, you would get a list of stocks to invest for short term trading. You can compress this to say 5 to 10 stocks.
If you want to invest Rs 1 Lakh, you can consider 4-5 stocks.
If you have more money to invest, you can consider 8-10 stocks.
Do not buy all such stocks in a single day. Wait for a correction of 500 points in Sensex and then purchase 2-3 stocks. Hold on and watch whether your strategy and then proceed and buy remaining ones in a staggered manner.
You would gradually see that the shares you purchased earlier, would start going up. Do not get upset if the stock prices are going down marginally by say 5% or 10%. That could be temporary for-profit booking done by investors.
There is no hard and fast rule about the selling price. If you think 10% should be your profit target, once you reach that price you can sell and book the profit.
Are these proven Strategies to get regular income through short term stock trading?
I have personally implemented these strategies and making money regularly. Yes, one need to be careful in picking up these stocks which can turn to be bad investments. If you ever thought it is a bad investment, just get rid and book losses.
Below are some of my sample trades in the last 6 months. There are bad trades too where I had incurred losses on few occasions, but my goal is to make regular income.
Sample Screenshots from my ICICIDirect Demat A/c in last 3 months
Note: Below are not stock recommendations. These were used as short term trading purpose during that time.
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