| The first principle is to do few trades. At any point, one should not have more than 6 trades outstanding. A good number is 3-5. |
| Equal capital allocation: Divide your short term trading capital equally into each trade. Ideally if one has Rs 1 lac of capital, one should put around Rs 20,000 in each trade. |
| Clear Targets and profit booking: While entering a trade, one should be clear about the target price he expects to achieve. Once the target is reached, profits should be booked promptly. Here, some traders often fall to the greed-syndrome and hold on for more profits. This, more often than not, leads to losses in the long run. |
| Strict stoplosses: No strategy, however good, can ensure 100% success. A strategy that yields above 65% success rate is reasonably good. |
But there is a catch here! 65% success means you achieve your targets in 2 out of every 3 trades. But how much do you lose in the third? This is what determines your overall profitability.
In a nutshell
Short-term trading has its advantages when compared with day-trading and long-term investment. It is suited for both full-time and part-time traders. When performed in accordance with the basic principles, it can be an engrossing and potentially lucrative activity/profession.