Intraday trading refers to the buying and selling of stocks on the same day before the market closes. Today, this kind of trading has become extremely popular, primarily because it requires minimum capital to begin with, and provides unlimited opportunities to earn from.
Intraday trading or day trading demands traders to be proactive in their approach and acquire practical knowledge about stocks before investing. This gives them leverage over other traders and a better understanding of the market. Besides, this kind of trading requires good analytical skills too. So, if you are a beginner with a keen interest in day trading, here are a few reliable tips that will help you earn good returns on your investments:
- Identifying Strong Stock Trends: This is one of the most important intraday trading tips. The stock market is a very volatile market and even a small error in judgement can result in huge losses. Therefore, it is important for traders to keep track of strong trends in the market and capitalize on it – as many of these tend to be short-lived. Some of the best indicators used for identifying stock trends are:
- Price movement
- Delivery quantity
- Open price for the day
- Future and options
- Delivery %
- Stock volatility
- Initiate Early Trade: The opening slot in day trading is highly volatile. Experts suggest waiting for about half an hour before making the first trade. Many a time, a stock trend is established within 30 minutes, followed by no trade for the rest of the day. Therefore, it is advisable to make your move within this time frame. However, if you’re certain of a strong stock trend, you can make your investment within a few minutes.
- Avoid More than 3 Trades per Day: Stocks in intraday trading can be highly volatile. As such, even experienced traders avoid more than 2-3 trading sessions per day. Besides, it is never a good idea to risk too much capital on a single trade. In doing so, you may also miss out on better opportunities in the market.
- Fix your Profits and Losses: Intraday trading comes with its own set of advantages and disadvantages. Thus, it is essential for a trader to know the correct entry and exit point to avoid losses. As a rule of thumb, it is important to fix your gain and loss from a single trade. Typically, seasoned traders follow a ‘stop loss’ principle, which is designed to limit an investor’s loss.
- Avoid News and Speculation Driven Stocks: While they may promise quick profits, such stocks tend to be extremely unpredictable and volatile. As such, it is advisable to only invest in stocks which show a definite strong trend.
Some other common tips in Intraday Trading include networking with other traders, showing dedication and patience, and developing good analytical skills.
But, the most important thing that every trader must remember is that the only way one survives in stocks is by developing and maintaining a strict discipline. While it may be extremely tempting to earn extra profits, a trader’s sole objective in day trading must be to protect profits and prevent losses.