Investing made easy: Best Intraday Trading Strategies You Should Know

INTRODUCTION

As an intraday trader, whether experienced or new, you experience volatility that investors might not. Since you complete entire transactions in a single day, you are susceptible to higher risks. However, as an intraday trader, you can also make high returns when armed with the proper knowledge and strategy. To ensure that you begin with a good understanding of the practice, here is an intraday trading guide with strategic recommendations and handy tips.

ADVANTAGES OF INTRADAY TRADING

You require less principal amount in intraday trading as compared to investment.
You have the potential to make substantial profits as you don’t have to wait long durations for profits.
You can gain more money when the stock market is showing a lot of volatility.
As an intraday trader, you do not require to lock-in your money for a long time. With this, you can have money to make other frequent trades.
Day trading leads to lower risks which means if you are holding at least 5 small positions you will be frequently going long and short at the same time. This indicates that at least one side of your portfolio will make money.
You can have high leverage on your trading capital. This leverage facility varies from broker to broker.

DIS-ADVANTAGES OF INTRADAY TRADING

When you are making money faster there is also a scope of losing money faster. So there is no fixed salary on which you can depend.
When you are overconfident with a couple of good trades or else if you are losing you might be psychologically affected. This can take a toll on your health.
The moment you start ignoring your trading diary and trading plan, your success as an intraday trader is difficult.
You will not succeed if you try to make money by tips or titbits from your WhatsApp groups. Here, you need to work on charts, understand structures and learn to put your own trades independently.
You can lose money on all your positions if the market makes medium term counter trend move.
You can be difficult to make massive returns when the market is trending very strong.
You know that your career is a lonely one as you sit at home staring at the computer.

STEPS TO BE FOLLOWED IN INTRADAY TRADING

Choosing liquid stocks:

Intraday trading involves the buying and selling of stocks on the same day. This practice calls for a lot of liquidity in the market. Thus, an important point you should keep in mind is trading in large-cap stocks and avoiding small-cap or mid-cap stocks.

You should also avoid intraday trading with only one stock and aim to diversify your position across a few stocks. This kind of diversification can help you achieve a balanced intraday trading strategy and mitigate risk.

Freezing the entry and exit price:

While intraday trading, several traders fall for a buyer’s fallacy, due to which they immediately doubt their selection after buying a stock. The buyers begin to believe that they have not made a good choice, with such anxieties leading them into making hasty and wrong decisions.

You can avoid falling for this fallacy as a trader by deciding an entry and exit price before beginning the transaction. These pre-decided prices allow you to remain objective and keep unnecessary doubt at bay.

Set a stop-loss level:

When you are intraday trading, the stock you have chosen may fall instead of rising. In such cases, the pertinent question is how low you will allow the price to fall before selling the stock. Deciding on a price at which you must square-off position is an important tip to keep in mind. This intraday trading strategy can help reduce your losses and acts as a safety net.

For beginners, the 3:1 ratio tip works well. Using this tip, you can set your stop-loss at a price three times lower than the price you would have closed at to book a profit.

Booking a profit when you meet the target:

The leverage and margins offered by intraday trading are what makes this practice attractive to traders. With intraday trading, you have the potential to earn high returns. However, it is essential to remember that you need to exit the transaction while booking a profit and not get greedy.

Unless you have good reason to believe that the stock price will climb higher, it is better to exit once you meet your target.

Close your open positions:

One of the best intraday strategies to adopt is always to close all your open positions, i.e. complete your transactions. Often, when the stocks fail to give the set target price, traders tend to opt for delivery of the shares. The transaction takes place on the next day, hoping to reach the target then.

However, altering the type of trading practice might not be a wise move. Since you bought the selected stocks for intraday trading, they might not present desired results through delivery trading. Therefore, look at the strength of the stock and only then take the call opting for a long-term investment.

Do not challenge the market:

Predicting the stock market is a tedious task. You will often make decisions regarding the intraday trading strategy you wish to adapt based on your market analysis. However, when you begin trading, the market may go in the opposite direction.

You must remember to refrain from challenging the market and getting fixated on your analysis during such scenarios. A better option is to sell your stock as soon as it reaches stop-loss level.

Research thoroughly:

When you identify the stocks, you wish to trade in, make sure to research the concerned companies. Reading up about the company can help you understand how market conditions can impact the stock. You should also check for any events like mergers, acquisitions, dividend payments, etc. These events can keep you updated and help fine-tune your timing.

Timing:

Conducting your intraday trading transactions at the right time is of utmost importance. Many traders advise that you should avoid taking a position within the first hour after trading begins. This hour is perceived to be very volatile, and thus, several traders tend to take positions post-noon.

BELOW IS THE LIST OF STOCKS FOR INTRADAY TRADING

Finally, Intraday trading is a reward but a risky tool. For gains, it is advisable to trade after doing thorough research. Furthermore, deep knowledge and upgraded news may enlighten the traders to select profitable stocks.