Intraday Trading Tips: Strategies and Basic Rules
Intraday trading involves more risk compared to the regular stock market. Thus, if you want to avoid making losses, you must understand the basics of the concept. Traders must only invest the amount they are comfortable in losing to avoid financial disasters.
What is Intraday Trading?
When a trader buys stocks and sells them on the same day itself, it is known as an intraday trade. It involves high risks and can give high returns as well.
Many traders love the lure of intraday trading in India. You take a position in the morning, and by the end of the day, you take home profits. There is no worry about delivery and Demat. In other words, it is day-based trading where you open and close your positions on the same day. The net position is zero, and there is also no change in the ownership of shares.
The goal of intraday trading is the maximization of profits by making the best use of market volatility. It is suitable for investors ready to take risks and monitor the markets closely. For successful intraday trading online, investors must track the market trends continuously and plan the trade to perfection.
Know How to Make Profits In Intraday Trading?
Five Intraday Trading Strategies
Many traders seek intraday dealing tips to succeed. However, it is wise to build a strong trading strategy by understanding the basic rules and learning the nuances of the trade.
- Pick two to three liquid shares Day trading involves both the purchase and sale of shares by the end of the trading day. Thus, it is best to invest in liquid stocks. Small-cap and mid-cap stocks are not liquid enough, so go in for large-cap stocks. Moreover, do not invest all of your money in one stock. According to experts, you must diversify your intraday positions across different stocks. This way, you minimize your risk and balance your intraday trade strategy.
- Determine the entry and exit prices Deciding your entry-level and target price before buying stocks is a good idea. A person’s psychology often changes after the purchase. You can have the urge to sell the stocks when the price rises only a bit. Consequently, you can miss out on the chance of earning a higher profit.
- Set a stop-loss level to reduce the impact There are chances that the stock you buy does not rise on the trading day and instead falls. To keep yourself protected in such a scenario, you must decide how low the share price can go before you sell the position. The strategy helps you minimize your losses by creating a safety net.
- Book your profits on reaching the target Most day traders are greedy or fearful. On meeting the goal price, it is vital to book the gains and cut the losses. If the trader believes the stock will continue to rise in price, he or she must look at the stop loss trigger again to reflect on this belief.
- Close all open positions Another important intraday trading strategy is to close all open positions. Sometimes intraday traders take delivery if the prices of their shares do not meet the target they had set at the beginning of the day. This isn’t a good strategy. The stocks you purchase for intraday dealing are based on market trends. They are not suitable for long-term investment.
Also Read: Pre Open Market Session In Stock Market
Selecting the right stocks for intraday trading requires you to isolate the current market trend from the surrounding noise. The trader must capitalize on this trend. The best intraday stocks have certain common features - liquidity, correlation, and volatility. However, it is also essential to use the right entry and exit strategies.
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5 Essentials Intraday Trading Tips and Tricks
Intraday traders are no strangers to market volatility — in fact, they rely on it for profit. However, trading on a daily basis can be incredibly stressful, not to mention risky due to the short closing windows and fast market movements. If you’re on the cusp of your journey, it can be challenging or even dangerous to play the game of ‘buy low sell high’. It takes proper strategies and ample research to witness successful returns in intraday trading....Read More
Frequently Asked Questions
Many stockbrokers frequently provide trading tips. However, the intraday trader should do thorough research and adequate homework before making a trade. It isn’t a good idea to rely on the broker’s tips and/or advice.
No. It is entirely the trader’s choice. The trader can trade in equities or commodities, depending on the asset class he or she is interested in.
Absolutely. If you do it the right way, it is profitable. You must follow the rules of the game and remain vigilant at all times. Moreover, you should not indulge in trading if you don’t have a thorough understanding of the concept.
Yes. This income is recognized as speculative income and allocated under the section - Income from business or profession.
You can do anything with stocks bought on a delivery basis. You can hold it for as long as you want or sell it the next day.
No. You need a Demat account for trading. A reliable stock broking company can help you open a Demat and trading account.