Intraday trading, also referred to as day trading, is a system wherein you buy and sell stocks on the same day before the market closes. Traders all around the world generally prefer this type of trading as it comes with its own set of unique advantages. It involves relatively lesser brokerage charges and potentially higher margins, making it an attractive proposition for most traders.
However, since there are so many equities to choose from, you must first decide what exactly you want to trade in. Often, people are unable to generate profits in day trading because they lack the required knowledge and skill when it comes to selecting stocks. So, if you are just getting started, here are some tips that can help boost your confidence in intraday trading:
- Trade in liquid stocks only: If there’s one intraday trading tip that you must take home, it’s liquidity. Liquid stocks have larger trading volumes, making it easier for traders to buy and sell it without significantly affecting its price. It is generally difficult to buy or sell large quantities of stocks that are less liquid because of the lack of buyers.
- Always follow the trend: This is another important intraday tip you must remember. Following the trend is beneficial because the market always moves in waves, and as a trader you must learn to surf. Focusing on uptrends and downtrends and even dominant trends will show you the path and help you earn profits.
- Do your due research: Undertaking research will definitely bear fruitful results in intraday trading, but unfortunately many traders tend to avoid this. One must identify the index and then find sectors of interest. This will help traders find the right stocks and avail maximum profits.
- Stay away from highly volatile stocks: When investing in a stock, it is advisable to stay away from those that move in an unexpected way or are extremely volatile in nature. In addition to this, such stocks tend to have low daily volumes, which make them illiquid.
- Trade in good correlation stocks: The best formula for intraday trading is to choose a stock that has a higher correlation with big sectors and indices. This means when a sector or an index sees an upward trend, the price of the stock also increases.
- Be Patient: Trends don’t continue for a long time, thus there may be a few losses you may incur in the process. But be patient and focus on the overall profit.
If you are a beginner, learning about the right stocks, understanding its features and capitalizing on the current market trend will help you immensely. In addition, you must also learn and apply the right entry and exit strategy. While following all these ideas may aid your endeavour, it is important to note that the intraday trading trend fluctuates a whole lot, and thereby requires a lot of hard work and discipline.