Here is a bit of ground work every prospective trader ought to do. The time required might vary for different persons, so take your time to get this right.
- Start watching the top nifty stocks like HDFC, Reliance, ITC, SBI. Don’t trade. Don’t even try to predict the movement. Just watch how they behave in different market conditions - trending and range-bound. Stocks with high liquidity are optimal for option trading.
- Once you understand the movement of some stocks, start observing how the options behave in tandem to their underlying. This is crucial to understanding the option greeks without which one might lose money even in the right trade.
- Last but most important - understand the STT for ITM options.
By now you will have a good comprehension of some high liquidity stocks and the movement in their options. Don’t start trading yet.
Note: I follow high liquidity stocks like Reliance, Yes bank, SBI, ITC, Maruti, TCS. After much study now I also follow low liquidity stocks like Eicher for my own trading strategy.
Now, assuming you have already learned some basics like candle-stick charts, Moving Averages, RSI, Stoch, VWAP, etc., apply some popular strategies to paper trade your shortlisted stocks.
TradeAcademy has several good strategies in their tutorials. Watch them, apply them and see the results. I have learnt all my strategies right here on Quora from erudite professionals. That eventually helped me in building my own strategy.
By now you will know that there is no foolproof strategy for trading. Every trader has his or her own strategy depending on the capital, risk-reward ratio and emotional quotient. And the strategy should always be a work in progress - evolving with every trade, fine-tuned with every loss and baselined with every profit.
Note: You can start off with the Opening Range Breakout strategy - which is simple to understand and build upon.
Nifty and Bank Nifty have the most traded options and it is consistently more profitable to build a strategy that works with these indices.
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