Strategies for Making a Daily Profit of Rs 500 in the Stock Market

Here Are The Strategies of Making a Daily Profit

It’s feasible to make a daily profit of ₹500 from the stock market using various tactics such as intraday or swing trading, among others. The key is to adhere to fundamental guidelines.

Every person enters the stock market with the aspiration of earning money. It’s seen as the most profitable avenue for generating income, offering returns that surpass those of other financial channels. The question then becomes whether it’s possible to make Rs 500 from the stock market every day.

Indeed, it is possible, given that one possesses the necessary knowledge, skills, experience, discipline, and market timing abilities. However, many people fail in this endeavor and attribute their failure to the market. It’s important to remember that the market is always correct and provides every trader with opportunities to profit, regardless of its direction.

Therefore, trading is essentially an art based on strategy. While some may view it as a form of gambling, for others, it’s a significant source of income. With dedication and practice over six months to a year, keeping the above factors in mind, one can indeed earn Rs. 500 daily from the stock market. Let’s explore some of the numerous ways one can achieve this daily Rs 500 goal in the stock market.

Withdraw small profits from multiple trades

You may be curious about the potential earnings from day trading in India.

The primary goal here is to generate a steady income, so it would be advantageous for traders to focus on securing small profits through multiple trades each day.

Traders should remember that it’s highly unlikely to consistently make a 2-3% profit on a single trade. However, this strategy can lead to profitability by increasing the number of successful trades, even if it means sacrificing the size of the wins.

This approach differs from the “let your profits run” concept, where a trader endures a lot of uncertain price action and may eventually see their profits turn into losses.

Therefore, it’s crucial for traders to book profits whenever they have the chance, rather than waiting for the market to turn in their favor.

The approach is based on three fundamental principles:

(I) Limiting exposure to the volatile market for a short duration reduces the likelihood of encountering an unfavorable event.

(II) It’s more likely for a stock to experience a Rs 2-4 movement than a Rs 20-30 movement in a single day.

(III) Smaller price fluctuations occur more frequently than larger ones. Even in a range-bound market, there may be minor movements that a trader can take advantage of.

By implementing this strategy, traders can accumulate multiple small wins throughout the day, contributing to a substantial daily return. This approach could enable them to earn Rs 500 from the stock market on a daily basis.

However, this doesn’t imply that traders should overtrade. They should only take positions when they are confident.

Trade stocks in news

Momentum in a particular direction is crucial for a stock to yield a significant intra-day return. This momentum is often driven by news flows, which directly influence a stock’s price.

News regarding earnings reports, orders, brokerage upgrades/downgrades, product announcements, FDA announcements, economic data releases, geopolitical factors, and other macro and micro issues can significantly sway a stock’s price in either direction.

Monitoring daily news and understanding its implications can assist traders in identifying stocks with momentum and placing their trades accordingly.

Trading in stocks with momentum increases the likelihood of making profits, thereby contributing to their daily income.

This is another method through which one can earn Rs. 500 daily from the stock market.

Stop Loss Discipline

One key strategy to maximize profits is to implement a stop loss for every intraday trade. Depending on their risk tolerance and the stock’s volatility, a trader can determine the percentage of stop loss to apply.

The use of stop-loss benefits a trader in several ways:

(I) It prevents the erosion of capital.

(II) It facilitates faster money turnover, which is crucial for enhancing trading profitability.

(III) It allows a trader to decrease the duration of risky stock positions, thereby minimizing the number of open positions susceptible to market fluctuations.

Therefore, it’s evident that strict adherence to stop loss can significantly limit a trader’s losses, thereby aiding in achieving better daily returns.

Minimizing trading cost

This strategy can aid a trader in maximizing their daily profits. It’s important to remember that every trade incurs a cost, regardless of whether it results in a profit or loss.

Trading costs include brokerage fees, Securities Transaction Charges/Commodity Transaction Charges, turnover charges, GST, SEBI charges, stamp charges, and Annual Maintenance Charges (AMC), among others.

Transaction costs have a greater impact on day trading as it typically involves large volumes and a higher number of transactions.

Let’s illustrate this with an example:

Mr. Z, an intraday trader, bought shares worth Rs 1,00,000 and sold them for Rs 1,01,500. The total volume for the day is Rs 2,01,500.

Assuming a brokerage of 0.1%.

Sell price – Cost price = Profit

Rs1,01,500 – Rs1,00,000 = Rs 1,500

The actual profit earned is Rs 1,500 i.e., 1.5%.

Now let’s calculate the return after accounting for transaction costs.

From the above calculation, it’s clear that about 18.35% of the profit is lost due to transaction costs, with brokerage being the highest.

To address this:

(I) A trader can open a trading account with a Discount Broker. Discount brokers charge low brokerage fees as low as Rs 10/trade, regardless of the order value. In this case, the total brokerage & tax would be Rs 83.78 according to the above table.

(II) A new concept called Free Intraday Trading is emerging in the market where brokerage is charged as a flat fee of say Rs 999 on a yearly basis i.e., Rs 83.25 per month. In this case, the total brokerage & tax would be Rs 157.03 according to the above table.

These strategies can significantly reduce a trader’s brokerage costs and maximize their profits, enabling them to easily earn a daily return of Rs 500 from the stock market.

How do I find a good discount broker in India?

Finding a good discount broker in India involves considering several factors such as the brokerage fees, the services offered, and the trading platforms provided. Here are some of the best discount brokers in India:

1. Zerodha – Known for being suitable for every trader.
2. Upstox – Considered a good alternative to Zerodha.
3. 5paisa – Best for traders with no security holdings.
4. Wisdom Capital – Known for offering a lifetime free account.
5. SAS Online – Recognized for its lowest brokerage charges.
6. TradeSmart Online – Noted for its lowest percentage-based brokerage.

Each of these brokers has its own strengths and caters to different types of traders. It’s important to do your own research and consider your trading needs and preferences when choosing a broker. Remember, investing in the stock market involves risks, and it’s important to do thorough research and consider seeking advice from financial advisors

How do I manage risk while trading?

Risk management is an essential part of trading. Here are some techniques that can help you manage risk effectively:

1. Determine the Risk/Exposure Upfront: Before entering a trade, understand how much money you are willing to risk.
2. Use Stop-Loss Orders: These orders can limit your losses by automatically selling a security when it reaches a certain price.
3. Diversify Your Portfolio: The lower the correlation between your investments, the better the diversification.
4. Keep Your Risk Consistent: Don’t risk a large amount of your capital on a single trade. Many traders follow the one-percent rule, which suggests that you should never risk more than 1% of your capital on a single trade.
5. Maintain a Positive Risk to Reward Ratio: This means that the potential profit of a trade should be greater than the potential loss.
6. Manage Your Emotions: Trading can be stressful, and it’s important to stay calm and stick to your trading plan.
7. Stay Informed: Keep up-to-date with market news and changes in the financial markets.

Remember, even with these strategies, trading involves risks and it’s important to do thorough research and consider seeking advice from financial advisors.

What are some common mistakes traders make while managing risk?

Traders often make several common mistakes while managing risk:

1. Holding on to Losing Trades: Traders sometimes hold on to losing trades in the hope that they will turn around. This can lead to significant losses if the market does not move in the expected direction.
2. Over-Leveraging: Leverage allows traders to control larger positions with a smaller amount of capital. While leverage can amplify profits, it can also magnify losses.
3. Ignoring Stop-Loss Orders: A good risk management system ensures that stop-loss orders are set for every trade, based on predetermined risk tolerance levels. Ignoring or not setting stop-loss orders can result in substantial losses.
4. Not Planning Trades: Successful traders commonly quote the phrase: “Plan the trade and trade the plan.” Unsuccessful traders often enter a trade without having any idea of the points at which they will sell at a profit or a loss.
5. Not Understanding Win-Loss Ratios: The first key to risk management in trading is determining your trading strategy’s win-loss ratio, and the average size of your wins and losses. If you don’t know these numbers, you are putting your trading account at risk.
6. Not Giving Investments Time to Grow: Investments often need time to grow and provide returns. Impatience can lead to premature selling and potential losses.

Remember, even with these strategies, trading involves risks and it’s important to do thorough research and consider seeking advice from financial advisors.

How do I avoid over leveraging?

Over leveraging can lead to significant losses, but it can be avoided by following these steps:

1. Understand Your Trading Strategy: Have a solid understanding of your trading strategy, risk tolerance, and account size.
2. Use Proper Risk Management Techniques: Always use proper risk management techniques. This includes setting stop-loss orders to limit your losses.
3. Choose the Right Leverage: Choose a leverage ratio that aligns with your risk tolerance and trading strategy.
4. Monitor Your Trades Carefully: Keep a close eye on your trades and adjust your positions as necessary.
5. Limit Your Risk: Only risk a small percentage of your account balance on each trade.
6. Use Stop-Loss Orders: These can limit your losses by automatically selling a security when it reaches a certain price.

Remember, even with these strategies, trading involves risks and it’s important to do thorough research and consider seeking advice from financial advisors.

BottomLine

StockEdge can provide you with a competitive advantage in both short-term trading and investing. This means that you not only have access to data in one place, but you can also create your own combination scans based on your unique technical and fundamental parameters. We trust that you found this blog informative and will utilize the information to its fullest potential in your intraday trading activities. Please share this blog with your loved ones to help us spread financial literacy.

Wishing you successful investing!

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