Every individual comes to the stock market with the hope of making money.
It is viewed to be the most lucrative money making avenue as it provides a return better than what the other financial avenues have to offer.
Now the question that arises is whether one can earn Rs. 500 daily from the stock market.
The answer to this is, yes, one can, provided one has the required knowledge, skill, experience, discipline and the ability to time the market.
However, most of the people fail in this Endeavor and blame the market for it.
But one has to keep in mind that the market is always right and gives every trader a chance to make profits, irrespective of the directions it moves in.
Thus, we understand that trading is not gambling as many see it but a strategy based art.
Keeping the above in mind along with hard work and practice, over a period of six months to a year, one can earn Rs. 500 daily from the stock market.
So, let us discuss few of the many ways one can earn Rs. 500 daily from the stock market.
1. Take small profits and do multiple trades
As the prime intention here is to make regular income, therefore it will be in the trader’s benefit to concentrate on small profits and do multiple trades a day.
Traders need to keep in mind that it is highly impossible to make 2-3% profit in a frequent basis in a single trade. However, implementing this strategy will help them to achieve profitability by increasing the number of winners and sacrificing the size of the wins.
This is contrary to the “let your profits run” concept where the trader has to sit through a lot of uncertain price action, and may eventually end up turning his profits into losses.
So, trader must keep booking profits whenever he gets an opportunity rather than exiting on his weakness.
The strategy revolves around three basic ideas:
(I) Exposure to the dynamic market for a small time frame will limit the probability of running into an adverse event.
(II) It is easier for a stock to make Rs 2-4 move rather than making a Rs 20-30 move in a day.
(III) Smaller price movements are more frequent than the big ones. Even when the market is range bound, there may be small movements that a trader can exploit.
Thus, implementing this strategy will help traders to generate multiple small wins throughout the day adding to a good amount of daily return.
This way they can earn Rs. 500 daily from the stock market.
However, this does not mean to over trade and should take position only when he is confident.
2. Trade stocks in news
Momentum in either direction is very much essential for a stock to provide a significant intra-day return. This is usually fueled by news flows, which has a direct impact on the price of a stock.
News based on earnings reports, orders, upgrades/downgrades by brokerages, product announcements, FDA announcements, economic data releases, geo-political factors and other macro and micro issues can push stock price significantly, in either direction.
Tracking daily news and comprehending the same will help the traders to pick stocks with momentum and place their trading bets accordingly.
Trading in momentum stocks will increase the probability of making profits, thus adding to their daily income.
This is another way one can earn Rs. 500 daily from the stock market.
3. Stop Loss discipline
One of the golden tips to maximize profit is to put a stop loss in every intraday trade. A trader can decide upon the percentage of stop loss to be applied depending upon his risk appetite and volatility of the stock.
Application of stop loss helps a trader in the following ways:
(I) Protects capital erosion.
(II) Helps to churn the money faster, which is essential for increasing profitability in trading.
(III) Helps a trader to reduce concentration of positions in risky stocks for a longer period of time. Thus, minimizing the number open positions, which are vulnerable to market fluctuations.
So, from the above it is clear that adherence to strict stop loss will limit a trader’s loss to a great extent, helping him to earn a better daily return.
4. Minimizing trading cost
This will help a trader to maximize his quantum of daily profit. A trader should keep in mind that every trade that he places comes with a cost and are incurred irrespective of profits or loss made by them.
Trading cost includes brokerage fees, Securities Transaction Charges/Commodity Transaction Charges, Turnover charges, GST, SEBI charges, Stamp charges and AMC (Annual maintenance charges) among others.
Transaction costs impact day traders comparatively more as it usually involves huge volumes and higher number of transactions.
Lets understand this through an example:
Mr. Z , an intraday trader who bought shares worth Rs 1,00,000 and sold the same for Rs 1,01,500, thus the total volume for the day will be Rs 2,01,500
Assuming 0.1% brokerage.
Sell price – Cost price = Profit
Rs1,01,500 – Rs1,00,000 = 1,500
The actual profit earned is Rs 1,500 i.e., 1.5%.
Now, let’s calculate the return applying the necessary transaction costs.
So, from the above it can be understood that about 18.35% of the profit is lost due to transaction cost, brokerage being the highest.
The solution to this is:
(I) A trader can open his trading account with a Discount Broker. Discount brokers charge low brokerage as low as Rs 10/trade, irrespective of the order value. In this case, the total brokerage & tax would be Rs 83.78 according to above table.
(II) A new concept is emerging in the market called Free Intraday Trading where brokerage is charged as a flat fee of say Rs 999 on yearly basis i.e., Rs 83.25 per month. In this case, the total brokerage & tax would be Rs 157.03 according to above table.
These will help a trader to reduce his brokerage significantly and maximize his profits so that he can easily earn a daily return of Rs 500.
Assuming that the market functions for 240 days a year, Rs 500 daily means that the stock market will provide a sum of Rs 1,20,000.
Implementing requisite knowledge, correct strategies and discipline will be the perfect ingredients helping a trader to earn this daily income.
A trader should not get emotionally attached to any stock or sector; rather they should focus only on profit and loss and should always adhere to stop loss.
He should learn the art of timing the market and take position and book profits whenever he sees opportunity rather than on his weakness.
He should never go against the prevailing trend of the market. He should trade in strong stocks during uptrend and weak stocks in a downtrend to lower the potential for loss.
He should keep in mind that the market is always right and it’s his capability, focus and hard work that will help him to generate a daily income from the stock market.