Intraday trading or day trading refers to the trading system where traders square-off the trade on the same day. Squaring off the trade means to sell and buy or buy and sell shares before the market closes on the same day.Intraday traders or day traders are most prone to risk and market fluctuations. One can lose all investments or become a millionaire within a few hours.Many traders use high-end technical data from brokers as well as their own calculations to decide their intraday trading strategy, best stocks for intraday, and their spending limit. It requires patience and dedication to make decent profits. If intraday trading is something which attracts you, here are some rules to remember before taking the plunge.
Choose particularly liquid shares:
Traders need to square off before the market closes. Always choose shares which are very liquid and traded in large volumes. It ensures that despite market fluctuations, you will have some buyers for your shares at the end of the day. If you trade in small-cap shares, you might stand to lose a lot of money.
Scrips or shares are traded every minute, intra-day traders may have a lot of scrips in their portfolio, but it’s practical to trade in two or three as they have to be monitored continuously for the entire day during day trading.
Stop Loss refers to an order placed with a broker to sell or buy shares if it reaches a certain price. This is done to avoid losses.
Example – A trader has bought 20 Reliance shares worth INR 100 each and sets a stop loss of INR 80. If the price of the share falls to INR 80, the shares are sold. This ensures that if the price falls even further, the traders safe from loss.
A trader’s mentality changes whenever he/she makes a trade. It’s vital for a trader to book a profit whenever it’s made. If a trader has 20 Reliance shares worth INR 100 each and a stop loss of INR 70, however, the trader feels bullish that the share price could increase to INR 120, the stop price should be increased from INR 70 to INR 90 to reserve some profits.
Intraday trading involves traders doing obsessive research and analysing data provided by broking houses. Traders need to know all upcoming business events (IPOs, mergers, bonuses, bankruptcies). Any event which can change the market trend should be known to a day trader.
Respect The Market:
There’s a saying at casinos ‘The House Always Wins’. The same rule is applied in trading. A trader can feel that he/she can overcome market trends and each time a trader feels this, he/she bites the dust. Work hard, trade hard, and always respect the market.
Every intraday trader wishes to earn a lot of money. If a trader’s having a great run, it’s good, but the trader shouldn’t fall in for greed and put in more money to trade without careful thought. There’s a good chance that whatever profits made earlier could be wiped out. Always book your profits, simple profits accumulated over time is better than blind and greedy risks.
Choosing a Broker:
A trader needs to have an excellent broker. Brokers should provide services which are quick and efficient when it comes to intraday trading. A great example would Angel Broking, they offer well-researched data, market updates during the night, efficient money management and their brokers come with a wealth of experience. Always go for such brokers.
Invest money you can afford to lose:
The last and most important point. Do not pledge valuables, go in debt, or borrow from others for intraday trading. A trader should always invest money which he/she can afford to lose and which belongs to him/her.
Intraday trading can seem lucrative with easy money, but it’s far from that. It takes a lot of years of experience and hard work to earn money. If you are up for it, tread with little steps keeping the above rules in mind.