Importance of Regular Scanning

Published by Sharekhan Education | October 7, 2022

Importance of Regular Scanning.

A trader’s ultimate intention is always to earn profit. But very few do realise the importance of consistency or rule base trading approach. Usually, when I ask this question on the very first day of the core strategy class; Who is interested in profit? Everyone is almost saying “yes” to the answer. But again, when I alter my question to “Who is interested in learning?”, that’s where the students realise that there is something more to profit (only).  This can only be practiced with patience, consistency and smart scanning approach with strong conceptual foundations. We have to accept the universal fact that no model/approach is 100% full proof. However, if one can even achieve close to 70-75% of consistency with a good RR of more than 2:1, then that is nothing short of being a professional trader. Let us discuss some of the key factors on improving our learning approach.

Often, I have observed in the class that students refrain from making regular notes, or even if they do, the notes written are messy. In turn, while revising, they themselves aren’t in a position to read their own writings. This results in poor foundation or conceptual background. There is no harm in going back to school and re-write the notes in the book in a structured format. Isn’t it? Once the foundations are concrete, it further helps us to move in a faster & smarter way for scanning process.

Scanning – The Next Step

With thorough clarity, we are in a strong position to understand the “Purpose” of a trade. Depending on the requirement or time availability of a trader, he should choose by himself which purpose suites him best. My suggestion to the income traders (DIT/HIT) is they should focus onto scanning regularly once the hourly or daily candle is complete. This helps them to gauge the location clearly by increasing the probability of the trade set-up. While the wealth traders, (WIT/MIT) should atleast scan twice a week/month respectively.

Any special set-ups while scanning?

Well, every experienced trader has his own way to scan/choose scrips, either through a pre-defined scanner or by a manual approach. If you ask me, my first step, I usually prefer to have a clear location with a strong move. There should be enough room for the scrip to give me a comfortable return of at least 3:1, with no HTF obstructions/opposing levels. Followed by the next step of LTF, where I try to focus on areas with perpendicular moves having less trading activity as possible. Making sure, that the LTF and HTF should be as close as possible to each other, thus, not allowing the trend to bend during the time of the entry. Once the 3 major factors are in sync, along with the overall market/sector conditions (Nifty), it further adds as an increased odd enhancer number to my trade.

To conclude:

A trader should have a clear and planned set-up rule base model with less fancy additions onto the trade. Making sure the risk management is properly observed, and limiting live trades t0 three.

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