Take small profits and do multiple trades

The successful strategy for day trading is to “take small profits and do multiple trades”.

Basically it has been observed that many times traders especially day traders loose money due lack of knowledge.

For example — Suppose if day trader’s buying price is at Rs.200 then he waits till the price goes to minimum Rs.204 or Rs.205 and then they will plan to book profit, which is highly impossible on very frequent basis in single trade or in single move.

If you are expecting Rs.4 to Rs.5 as profit on share price of Rs.200 in single move then you are expecting 2% profit in single trade. So do you think it is convincing you?

We feel this doesn’t sound practical and this is the reason why traders loose money after waiting for long time.

Your intention is to earn money in a day, so just concentrate on small profits and do multiple trades instead of wishing to get huge profit in just single trade.

Markets are always right so to avoid the further risk it is always recommended that day traders should keep booking profit wherever applicable.

Take small profits and do multiple trades

This will assure you to that you do profits, and all the profits that you do through out the day, will add up to good amount and this is what you want, right?

So please have a look on following example about taking small profits and doing multiple trades and how it will provide you a good amount at the end of the day.

Following few things about day trading brokerage and taxes calculation

- The current maximum intraday brokerage offered is 0.05% for buying and 0.05% for selling (you may

even have less brokerage and if you are paying more brokerage then you should either negotiate or

change your broker)

- The service tax is of 12.36% only on brokerage.

- The STT (Security Transaction Tax) is of 0.025% only selling amount.

- The stamp duty on total turnover for a day which is 0.002%.

- and finally you have to pay Regulatory charges on total turnover for a day which is 0.004%

Don’t worry these all taxes will add up to very small amount at the end of the day compared to your profits in thousands.

Now let’s see how to take small profit which will add up to big amount at the end of the day by doing multiple (more then one) trades.

Example — Buy KotakBank at Rs.315, quantity — 100 i.e. Rs.315 x 100 = Rs.31500.

So if you have Rs.10, 000 in your trading account you can do day trading because you get margin on your available amount for day trading.

Some brokers provide 3 or 4 times or even higher margin amount.

So you bought Kotakbank at Rs.315, Qty — 100 i.e. Rs.315×100 = 31500 and sold it at Rs.316.

You took only Rs.1 as profit for Rs.315 share price and you sold 100 shares so your profit is Rs.100.

So you get Rs.100 as profit in single trade.

Now lets calculate how much you have to pay as brokerage and taxes and finally how much you will get as your net profit behind this single trade.

Your buying amount is

= Rs.31500 (Rs.315×100 Qty shares)

= 0.05% as brokerage (we took it maximum brokerage but you may have even less) on 31500 which comes to Rs.15.75

= you have to pay service tax of 12.36% only on brokerage

= so 12.36% on Rs.15.75 comes to Rs 1.92

The total brokerage + service tax on buying is Rs.15.75 + Rs.1.92 = Rs.17.67

Now let’s calculate the brokerage and taxes on selling amount

= you sold KotakBank shares at Rs.316, Qty — 100 so the amount comes to Rs.31600 (Rs.316 x 100 Qty shares)

= 0.05% brokerage on 31600, comes to Rs.15.8

= service tax 12.36% on brokerage comes to Rs.1.93

You have to pay STT (Service Transaction Tax) of 0.025% on selling amount which comes to Rs.6.32.

So total brokerage + taxes you have to pay for selling is

= Rs.15.8 + Rs.1.93 + Rs.6.32

= Rs.24.05.

Total amount you have to pay on buying and selling is

= Rs.17.67 (buying) + Rs.24.05 (selling) = Rs.41.72.