In this article, learn completely about intraday trading and things to know before investing.
Trading of stocks is a large topic and there are lot many things that can be covered in it. One of the topics that come under the trading of stocks is day trading or intraday trading.
Though stocks are categorized as long-term investment avenues, they can still be day traded.
Many day traders like to take advantage of the news and happenings of the companies and market to, day trade and make selling and buying a profitable activity.
Objective of Day Trading
As trading is becoming more and more digital and there is no need for the trader to even reach the stock market, it is becoming easier to day trade. The technology available is making day trading a great dynamic activity for traders.
Intraday trading is all about making the speculation work in the favor of the trader. You can make use of the market volatility to make a profit.
Also, intraday trading takes place for at least a few hours every day, especially during the morning as soon as the market opens.
Also, short-term trading is seen as a difficult option for many as there is no way to study the stock gaps, and thus can prove to be risky. But as the risk is higher, so can the leverage causing day trading profitable for many who can do it right.
A few things should be included in the strategy of day trading like:
- Weaker stocks should be trading downward and stronger ones should be trading upward.
- Always make sure to trade according to the current day trend of the market.
- Keep tracking profits whenever possible to avoid losses while stocks trading.
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Some Intraday Trading Tips for Beginners
If you are entering the intraday trading market and are not sure how to start with the trading practice, then follow the below tips as the basis for it.
Getting carried away in the stock market after earning some profits is a very common occurrence. However, always remember that the market is prone to volatility, thus it will not be wise to go up and raise the investment amount by a significant amount.
Volatility easily leads to beginners losing their investment. Because of this, a key intraday tip is to only invest amounts that the customer can afford to lose.
If the markets are not in their favor, this will ensure that people do not have financial issues.
Choose liquid shares
Intraday trading involves squaring off the investment position before the trading session ends. And to be able to successfully square off the position it is best to invest in highly liquid stocks like that of any large-cap shares.
For small and mid-cap shares, usually, the trading volume is low, therefore, you might end up holding them for longer.
Avoid moving against the share market
Predicting the movements of the share market is not child’s play, even seasoned traders find it difficult to do it. The technical tools may be indicative of a bull market but it may fall in the future.
Thus, if the market is moving against your requirements or expectations, it is best to exit the market to avoid losses.
Exit under unfavorable conditions
It is wise to book profits and close out open positions for trades that result in gains and price-give reversals (price anticipated to display reverse trends).
Furthermore, it is advised to exit the trade right away rather than waiting for the stop-loss trigger to be engaged if the circumstances are not favorable. Investors’ losses will be minimized as a result.
Know the Resistance and Support
Every stock price varies within a certain range for the first 30 minutes of the trading session, known as the opening range. The resistance and support levels are thought to be the highest and lowest prices during this time.
When the share price exceeds the opening range high, it is good to buy, and when it drops below the opening range low, it is advisable to sell.
Monitor the indicators
If you are aiming to earn a good amount of profit through intraday trading, then your capacity to research and monitor the market should be high.
One of the best ways to keep track of the shares is by following the market indicators or using the tools of technical analysis. It may not be accurate at all times but when used properly can tell a lot about the market movements.
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How to find the Best Stocks?
Finding the right stocks for day trading is the biggest trick that you need to pull to benefit from this. Two things should be kept in mind while picking any stock; volatility and volume.
Volatility tells the risk factor of the stocks and will tell how wide the range of value is. Higher volatility means, the value can move in a larger range and thus providing the trader with higher chances to make profits.
But low volatility means the price of the stocks is steady and thus has less chance to bring profits for fast traders.
Volume is the other factor that needs to keep in mind while making day trades. Volumes are the count of trade transactions that happens in a day in a particular market or security.
Now, the larger the volume of the day more is the more market move. More moves are equal to higher chances of profits and activity in the market.
Intraday trading involves same-day settlement meaning it is very fast and requires constant vigilant monitoring of the market.
You should be well aware of the market and should also do some thorough research before intraday trading. As the day trading moves faster you should keep up with the trends daily.
The golden rule of intraday trading is to ride the tide of the market movement as that is the only way to book on profits.
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