What are some intraday trading tips?

Posted by aarav badhe on February 15th, 2020

With electronic screen-based trading, it has become easy and convenient for people to make trades in the stock market. When it comes to stock trading, there are two types of trades; intraday and delivery-based trades.
 
Intraday trading is a type of trading strategy in which shares are purchased and sold on the same day. The position can be closed in a few minutes or a couple of hours, but it must be closed on the same day by taking an opposite position.

Starting this type of trading without getting the right information can lead to problems. Precisely why it is important to have intraday trading strategies before you put in your funds.

Here are some tips:

1.    Stock liquidity:
Intraday trades depend on buying and selling shares on the same day. This means you must choose shares that have buyers and sellers. The best strategy is to pick shares that have a high volume of shares that are traded in one day. This data is easily available on the stock exchange. You can check market depth through your trading account.

2.    Volatile:
Intraday trading is inherently risky. There is chance of both profit and loss in this strategy. Predicting market prices is not possible. The swing in either direction can have an impact on the profitability. Not all trades result in a profit.  

3.    Fix entry and exit price:
Choosing the best shares to buy today is only one part of the intraday trading strategy. It is also essential to decide your entry and exit price. Once you decide the entry and exit points, you can add the exit in your intraday trade which will give you higher profits.

4.    Set stop loss:
A stop loss is the maximum loss you can take on the trade. It is a limit beyond which a trader does not stay invested in the stock. If you set the stop loss while placing the order, the order will automatically close positions if the price breaches the stop loss limit. This puts a barrier to your losses from reducing further.  

5.    Smaller number of stocks:
Focusing on 2-3 stocks at one time will allow you to restrict your focus to price movements in these stocks. If you choose too many stocks, then there is a problem of getting distracted while keeping a track of open trades.

6.    Research based picks:
It is better to execute trades only when you have researched a stock and the technical price charts. Knowing the price movements for a share will help you make the right trades. This research can be done using a range of technical analysis charts and tools.  

7.    Small trial:
Before you start intraday trading in full swing, you can try a few small trades through your trading account to understand how it works. Once you understand the stock exchange’s order matching mechanism, the commonly used terms, day trading techniques, then you can start making bigger bets. One important thing to understand is that no upfront capital is put up in intraday trades. Intraday trading is done on margin basis where a margin amount must be put up and the profit or loss on each trade is adjusted from the margin account. This is important to understand.