ETF Intraday Trading: A Low-Risk Strategy for Profitable Trades By Vishal Das Manikpuri with Guided by Mr. Pushkar Raj Thakur

By Vishal Das Manikpuri


 ETF Intraday Trading: A Low-Risk Strategy for Profitable Trades

Introduction

In the world of trading, most people are unaware of a unique intraday ETF trading strategy that leverages price differences and arbitrage. This blog will explore a low-risk trading opportunity that exists due to demand-supply imbalances in ETF pricing, specifically focusing on Motilal Oswal’s MON100 ETF, which replicates the NASDAQ index.

What is Arbitrage in ETF Trading?

Arbitrage in trading refers to taking advantage of price differences between two markets. In the case of ETF intraday trading, we observe how the NASDAQ’s price movement can indicate an opportunity in its Indian equivalent ETF before it fully adjusts to its intrinsic value.

Understanding the Trading Opportunity

1. NASDAQ vs. MON100 ETF

  • The NASDAQ index moves based on U.S. market trends.
  • MON100 ETF, listed in India, replicates NASDAQ’s movement.
  • However, due to market timings, there is often a price lag between NASDAQ's movement and MON100’s reaction.

2. Identifying Price Gaps

  • When NASDAQ moves 1.5% up, MON100 should ideally follow.
  • However, sometimes MON100 does not immediately reflect this change due to market demand and supply imbalances.
  • This delay creates an opportunity for traders to enter before the ETF catches up to its intrinsic value.

Step-by-Step Guide to Intraday ETF Trading

  1. Monitor NASDAQ Movements:
    • Observe the NASDAQ’s closing movement on Friday before Monday’s Indian market opens.
  2. Compare with MON100 ETF:
    • Check how much the ETF has moved relative to NASDAQ.
    • If MON100 has moved less than NASDAQ, there is an opportunity.
  3. Execute the Trade:
    • Buy MON100 ETF if the price gap exists.
    • Wait for price adjustment and sell at a profit.
  4. Understanding Demand and Supply:
    • If selling pressure is high, the price may take time to rise.
    • Look for significant buying volumes before making an entry.
  5. Exit Strategy:
    • Exit when the ETF reaches its expected price increase (matching NASDAQ’s movement).
    • Typically, an intraday profit of 1% can be expected.

Risk Management & Leverage in Intraday ETF Trading

  • Low Risk: Since ETFs are market-driven, drastic fluctuations are rare unless major global events occur.
  • Leverage: Intraday trading offers 4x-5x leverage, meaning you can trade with higher exposure using a smaller capital.
  • Stop-Loss Strategy: If the ETF does not move as expected, exit before incurring losses.

Why This Strategy Works

  • ETFs always tend to revert to their intrinsic value.
  • Demand-supply delays create short-term price gaps, which can be leveraged.
  • High liquidity in ETFs like MON100 ensures smooth entry and exit.

Final Thoughts

This intraday ETF trading strategy allows traders to minimize risks while making consistent profits. By monitoring NASDAQ’s movement and executing trades based on demand-supply differences, traders can identify lucrative opportunities. However, proper risk management and patience are key to success.

Do you want to learn more about ETF trading strategies? Drop a comment below and stay tuned for more insights!

Call-To-Action (CTA)

  • If you found this strategy useful, share this blog with fellow traders! ๐Ÿ“ข
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  • Have questions? Comment below and let’s discuss! ๐Ÿ’ฌ

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  • Special Thanks to Mr. Pushkar Raj Thakur to Guide us

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