A Simple Share Trading Strategy Based on Price Movement
I would like to share a straightforward strategy for trading shares, which I personally tested in 2012 and found effective, especially with NIFTY-based stocks. The idea is to control risk and maximize profit through systematic buying and selling, while ensuring your investment remains stable over time.
The core principle is to respond to price deviations with small, planned actions — adding more when the price dips and selling when it rises. This method is most effective when applied to high-volume, fundamentally strong stocks.
Here’s a step-by-step breakdown of the strategy:
Step 1: Initial Investment
Start by buying shares worth ₹10,000 of a particular company.
Choose a well-established company with good trading volume and low volatility.
Step 2: Delivery Period
Wait for three days for the shares to be delivered and settled in your demat account.
Avoid panic buying or selling during this period.
Step 3: Monitor Price Movements
Carefully track the daily price movements of the stock.
Use a trading app or platform that shows real-time data and allows you to set price alerts.
Step 4: Buy More on a 5% Drop
If the share price drops by 5% or more, consider buying additional shares.
This helps you average down your buying price, reducing your break-even point.
Step 5: Sell on a 5% Gain
If the stock price rises by 5% or more from your average purchase price, sell your entire holdings to book profits.
This disciplined exit strategy helps lock in small but consistent gains.
Additional Tips:
Buy more shares over time if your budget permits. A larger holding can make your portfolio more resilient to short-term market fluctuations.
Apply this method to liquid stocks in indices like NIFTY to avoid getting stuck in illiquid stocks.
Avoid emotional decisions; stick to the 5% rule as your trigger for action.
Conclusion:
This method is ideal for conservative traders seeking small, consistent profits rather than speculative gains. While it's not foolproof, applying it with discipline can help protect your investment and take advantage of minor price movements.
