How to do Intraday Trading?
If you’re reading this, you are probably well-versed in the basics of intraday trading.Just as a refresher, the concept of day trading revolves around the sale and purchase of stocks and other financial instruments in the span of a day. Since all positions are squared-off before the market shuts, the ownership of shares does not change as a result of these trades. Therefore, intraday trading is a short-term investment strategy.
Day trading in India has earned investors phenomenal returns. The best thing about the process is that you can start intraday trading online by following a few simple steps these days. Allow us to elaborate on how to do intraday trading by leveraging the technology you already have.
How to Do Intraday Trading Online
Here’s how day trading online works: let’s say you purchase 50 stocks of a company when the market bell rings. As an intraday trader, you are obligated to sell them before closing hours. On the other hand, if you were to sell your stocks before buying them, a tactic referred to as short-selling, you’d be required to buy the same amount of these stocks within the day. Your purpose is to earn profits by taking advantage of the market’s hour-to-hour volatility.
Also Read: How to Make Profits in Intraday Trading?
Before any of that, you need to open a trading account, which is the platform traders use to execute trades online. When you buy a share, it gets transformed into an electronic format and stored in a Demat account that ‘dematerializes’ it. However, this account doesn’t let you perform trades — that role is accomplished by a trading account.
As a beginner, it’s important that you learn the ropes of intraday trading and take things slow in the initial days.
Here are a few beneficial tips and tricks to get you started with intraday trading online:
- Master the Basics
This entails attaining as much knowledge as possible about the dos and don’ts of intraday trading in India. Studying trends, charting price waves, and keeping up with financial developments in the country become integral to your role as a day trader. The more you learn, the better you can plan.
- Always Have a Strategy
Winging your trades is unwise even for the most seasoned investors. You should always appoint a strategy to determine entry and exit points before initiating any trade. This means identifying when to move in and, more importantly, when to get out. Don’t be discouraged by mistakes; instead, learn from them.
Also Read: 3 Important Exit Strategies for Day Traders
- Set Realistic Expectations
Of course, the goal is to earn high profits, but you need to be realistic about the expectations. Experienced traders tend to make quick decisions without having to think everything through then and there, and that’s only possible when you have practical approaches for every scenario. Being greedy or shortsighted might end up costing you in the long run. Remember to limit your risks to a specific percentage.
- Maintain Separate Funds
The biggest fatality of intraday trading online is failing to set aside funds for transactions. You don’t want to lose everything you own, which is why it’s better to separate capital that you can afford to lose if the trades don’t go as planned.
When you get into intraday trading, you will have to set emotions and biases aside to focus on reality and make spontaneous decisions based on facts. Since there are multiple considerations, such as timing trades, picking the right stocks, devising strategies, and determining stop-loss limits, the most important advice is to stay calm and think logically. Spend as much time as you can to understand how the market works, and once your foundation is solid, you’ll be able to close transactions on the winning side more frequently.
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Frequently Asked Questions
Moving average, Bollinger Bands, Relative Strength Index (RSI), and Momentum Oscillators are some of the most commonly used indicators in intraday trading.
If things aren’t going as you anticipated and the stock you chose begins to fall, a stop-loss will let you cut your losses by getting activated upon hitting the minimum price, which will be determined by you. It’s the smartest way to mitigate risks and avoid huge potential losses when you are day trading online.
Pick stocks that are liquid, come with a medium to high volatility, and are moving in relation to the sector. Try not to flow against the current of the market unless you have gained a lot of experience and developed a playbook of your own.
To perform day trading online in India, you can start as low as Rs. 5,000 with no real upper limit. There’s no fixed amount because it depends on how much capital you can spare.