What is intraday trading?
Intraday trading refers to day-based trading, where traders open and close their positions on the same day. This involves taking advantage of market volatility to make immediate money. It also helps traders prevent overnight losses caused by events that surface after the markets have closed.
Many people consider intraday trading as speculation-based gambling and not as a value investment. However, one can make money in the stock market by following simple day trading rules and anticipating market moves.
Invest only what you can afford to lose. Do not invest all your money in a single trade. Try to invest about 2-5% of your money on a single open position depending on your total account size. Some brokers such as 5Paisa provide a financial advisor, an auto investor, and a trading app, all of which can be helpful to beginners. By using such services, traders can keep track of their stocks seamlessly.
Selecting stocks and time of the trade
As a day trader, investing in stocks that are volatile in nature is beneficial. The prices of these shares fluctuate more as compared to others and, if executed properly, lead to increased profits. Intraday stock tips provided by brokers can be used as an insight to improve your strategies. As a beginner, do not start your trade immediately after the market opens. Take about 30-40 minutes to read and interpret the market sentiment for the day.
Intraday trading techniques
When it comes to analyzing stocks, charts play an essential role. Depending on the duration, traders can use 1-minute, 5-minute, 15-minute, 30-minute, 1-hour, or 4-hour charts. For intraday traders, 5-minute and 15-minute charts are recommended. Candlestick charts should be used to get a better indication of open, close, high, and low of the stocks. Focus on company-issued press releases as stock prices tend to react to news announcements. Some investment strategies that can be used are:
Use stop loss & save profit
Scalping: Selling almost immediately after a trade becomes profitable.
Fading: It involves shorting stocks after rapid upwards move.
High volatility in stocks may lead to an increase in the number of losses. This is why placing a stop loss while opening a position in the stock market is crucial for avoiding huge losses. For long positions, stop loss can be placed below the recent low, and for short positions, it can be put above the recent high. Accordingly, profits marker can be set to get the risk to reward ratio as 1:2 or 1:3, depending upon the volatility of the market.
At times, the share bazaar may unexpectedly become volatile and test your nerves. It is imperative to stay calm and composed in such situations. Do not let greed and fear cloud your decisions of opening or closing your positions. Trust your analysis and allow your stop loss to trigger instead of closing a position in between.
Conclusively, day trading can be made profitable by following these steps. You can also practice on virtual trading platforms to improve your analysis without the risk of losing money. Plan your day and set up a maximum loss per day limit beyond which you will not trade.