What is intraday trading?
Investors or traders reap profits out of markets on various instruments which have different time horizon and different risk factors. Intraday is one of those type trading technique which is used to reap gains in single day. It includes buying and selling of shares in single day where you gain out of it. If you fail to do so the orders might get place for delivery option. The intraday trading option can be exercised on online share trading much swiftly as offline trading system is more time consuming and can result into losses if you are doing intraday trading.
Intraday trading tips, tricks and strategies
Intraday trading is not a cakewalk thing to do, there are highest risk involved when you do intraday trading. Hence, you need to know the tricks and tips for intraday trading to start trading experience.
Planning- You cannot reap benefits of intraday trading you are not well planned about your investments and risk you plan to take while trading.
Spotting opportunity- Intraday trading involves deep research of charts and patterns of prices and indicators to spot opportunity in the market for intraday trading.
Greed & Fear- Too much greed and too much fear can ruin your trading strategies and investments. One should act after evaluating the situation and must not fall into the trap of greed and fear while investing in market.
Knowledge gain- Intraday trader must focus on keeping himself or herself updated with all market updates with key events, global markets, etc. This helps you to understand the sentiment in the market and lets you asses situation easily.
Rumours- Rumours often are created by manipulators for their own interest, to which retail investors and small traders fall prey and end up loosing more money. On should not fall prey to rumours and stay away from it.
Difference between Intraday and delivery trading
Stock market investments are subject to market risks and these risks define the style of investing and returns too. People with high risk category invest in short term strategies like intraday trading where the simple moto is to gain out the price fluctuation. On the other hand people with moderate risk hold on to their investments for a longer period for the purpose of wealth creation and value creation. The investments which are sold at end of the day define as intraday trading and the scripts which are hold for longer period of time and gets credited into your demat account is delivery trading.
Intraday trading has few advantages and disadvantages too. It provides you an opportunity to benefit from price fluctuation on daily basis. One can leverage his capital for more profits and also eliminates overnight risks. However, in this type of trading investor or trader cannot hold the investment for long. As the risk mounts the chances of losses also increase.
Delivery trading is more prescribed as long-term investing. Where the investors become shareholders of the company whose script they bought. Investors hold on to the scripts for longer period to benefit from the growth of the company and its share price.
Delivery based trading also provides additional options of profits for shareholders of the company when the company announces the dividend, bonus, rights issue, etc. This helps investors reap more profits from the delivery based trading. However, the major benefit available with intraday trading by using margins and leveraging is not available with delivery-based trading. Here the investor has to make the upfront payment to buy the stock
Choosing stocks for Intraday Trading
Choosing stock for intraday trading is not a cakewalk, it requires rigorous monitoring of prices, volumes, liquidity, etc. Intraday trading is often considered as gamble testing your luck too. Apart from that the economic factors, uncertain events, unpredicted events are few factors that too define the success of intraday trading. A trader also needs to factor in unexpected losses arising out of unexpected events in the markets.
Too much greed into the market for profits can also ruin your investments. One should have control over his or her investments which will help in prosper for longer period.
No position should be taken before ascertaining its target price, stop loss and buy price. These are the basic rules of starting intraday trading activity.
Don’t fall prey to market rumours about the position or any fraudulent messages they are used by manipulators to gain out of misrepresenting and manipulating retail investors and traders.
Try not to go against the wind. Sometimes you might be lucky, but most of the time you will end up loosing money. Look for expert comments and follow the wind.
Research on key indicators like moving averages, RSI ( relative strength index), charting tools, volume indicators, etc to spot the right opportunity in the market.
Try not to get along with positions and close them before market ends, otherwise the positions get squared off and they are proceeded by exchanges for delivery of scripts.
Intraday trading indicators
Intraday trading indicators are favourable tools used to maximize your returns. Some important indicators are as below.
RSI (Relative strength Index)
RSI determines the strength of the stock based on the gains and losses. It is one of the widely used indicator which is calculated from the index form and narrows down the score between Zero to hundred. Trader should sell the stock if RSI is beyond 70 and buy the stock below 30.
Moving Averages
Trading involves monitoring the price movements over period of week, months and years to understand the patterns. Most of the time prices do not move in one direction and the moving averages help you ascertain the trend of period end average movement of the price.
Bollinger Band
Bollinger band helps in understanding movement of stock price in more advanced way. It comprises of three lines moving averages, upper limit and lower limit. These lines help understand the movement beyond moving averages.
Risk management in intraday trading
Trading and risks go hand in hand, they cannot be dis-associated ever. Hence, planning your investment with your risk appetite is must while doing intraday trading. Brokerages provide you with extra margins which will help you in benefiting in gaining more profits in single day. But the positions need to be closed before market closing as they would square off your positions and make it to delivery of scripts. Then you are entitled to pay the brokerage the money you used for trading. Such kind of risks market involves.
Always do deep research before taking any position in the market. Be convinced with your strategies and then act on it
Do not copy other traders’ strategies blindly. Each one of the strategy has its own shortcomings hence cannot be applied everywhere.
Decide your risk exposure being as per cent of total portfolio and place the riskier bets accordingly.
Diversify your positions and follow experts comments during mayday’s where as a individual it is difficult to ascertain the risk underlying the falling market scenario.
Change the stop loss and target price expectations for each stock as each strategy cannot be applied on everywhere, thus mitigating your losses.
