Intraday Trading is a very risky and challenging domain. The securities are bought and sold within the same trading day and the positions are closed before the day ends. Therefore, any action that needs to be taken has to be taken within the day. It requires constant attention by the intraday traders. They have to remain attentive to all the market movements and trade accordingly.
Intraday traders also need to be up to date with the national and international happenings and their impact on the prices of the securities. Along with that, the day traders have to keep on learning every day and keep on evolving with every trade. They learn from their profits as well as their losses and adjust their strategies accordingly.
All this takes a lot of patience and dedication and it takes months and sometimes years to be a successful intraday trader.
Intraday traders have many tools and techniques at their disposal to help them analyse the market, study the historical trends and make informed decisions. Trading softwares, charts and technical indicators play a crucial role in helping the intraday traders make the correct and profitable moves. Along with the available tools and softwares, it is also required for the day traders to use proper, tried and tested trading strategies and follow certain rules.
There are some very important Intraday Trading tips that have to be kept in mind by the traders to ensure that they stay focused on their objective of making profits and do not lose their vision.
The 10 best intraday trading tips are as follows:
Invest only in the Liquid Stocks
A very important tip to be successful in intraday trading is to trade in liquid stocks. Liquidity is what intraday trading is heavily based on, when there is no liquidity there is no day trading. While choosing the stocks for intraday trading, the first preference must be the liquid stocks that have huge trading volumes, such that large quantities can be bought and sold without affecting the price much.
To make good enough profits, the trade size has to be significant and the liquid stocks provide the required volumes and the position size. If the shares chosen have low liquidity, then they may need to be held longer due to low trading volumes.
So, for intraday trading, the stocks chosen must be large-cap stocks, with high liquidity instead of mid-cap or small-cap stocks or penny stocks.
Identify the market trend and follow the trend
To be profitable in intraday trading, a useful tip is to always follow the market trend.
This is, in fact, the most difficult part of the job. This is where the entire learning, judgement, analysis and instincts are put to test and the intraday trader predicts the market trend and makes suitable decisions. Even when the trend has been identified, due to the volatility of the market, the trend is short lived and may begin to reverse soon.
Therefore, it is very important for an intraday trader to identify the trend quickly and follow it. The trend can be an uptrend or downtrend. To understand the stock trend, the intraday traders must analyse the open price, volume, delivery quantity, delivery percentage, price movement, volatility and range.
Also, an intraday trader must choose the stocks that follow the trend of a sector or an index, for instance, the Nifty and the Sensex trend. This will make it easier and more accurate to predict movements and trends and take profitable positions. The intraday traders must not move against the market trends, and if the market moves against the expectations and predictions, the positions must be exited to avoid huge losses.
Fix the entry price and exit price; fix the gains and losses; use Stop-loss judiciously
The intraday traders must keep in mind that they have to fix the price at which they enter the market and the price at which they exit. Fixing these prices in advance helps in protecting the traders against unprecedented losses. It is also necessary to book the profits and losses at the right time, neither too early nor too late.
If the intraday trader is affected by fear, he may book the profits too early and lose the potential to earn more; however, if he books the profit too late, affected by greed, he may lose all that he earned. So a fair balance is required to remain at optimum levels. For the same reasons, stop loss should also be fixed and intelligently used, so that the trade is automatically executed as soon as the price falls below a certain level.
This helps to curtail unexpected and huge losses. Once the stop loss is triggered, the trader must exit the trade and not try to adjust the stop loss price at all. When the profits are being made, the intraday trader must keep moving the stop loss price up, so that whenever the price moves up the stop loss also moves up and the trader is able to get maximum profits.
Do not Overtrade
One of the Intraday Trading Tips to be followed by all the intraday traders to be profitable is to not overtrade. Multiple trading sessions can be very harmful, even seasoned traders do not do more than 2-3 trades a day. This is because intraday trading requires 100% concentration, hence to make sure that proper attention can be given to each trade, the number of trades must be kept less.
A disciplined intraday trader goes slow when the market is choppy and may even not trader when the market is horizontal and does not trade till the market is stabilised. Make sure that the range of movements of prices is high enough so that the rewards exceed the potential risk. Also, the volumes of trade must be kept constant.
Till the time a trader is satisfied that he has learnt a lot, the number of lots must be kept constant and not increased and decreased drastically.
Do not trade based on rumours and Media news
Then, out of all Intraday Trading Tips, this is a tip of paramount importance. Intraday trading is the kind of trading that is to be done based on technical indicators and predictions based on some fundamental indicators and absolutely not based on rumours.
Based on the same rumour, some analysts recommend buying the security and others recommend selling the same! This becomes very ambiguous and unclear with respect to what to do. An intraday trader must depend on his own skills and analysis, his own strategies and his own tools and indicators to make decisions on whether to buy or sell and when.
There may be a breaking news, but the reaction of the market to the news is unpredictable. The prices go all over and it is impossible to identify the trend. It may be very tempting to take on such trades with the anticipation of huge profits, but for a successful and level-headed intraday trader, it is advisable to trade only he is sure of the trend.
Do not be an Investor
An intraday trader must have his priorities right. He must know the reasons why he is getting into intraday trading and must stick to them. Intraday trading is not about investment; it is about making quick profits as a result of volatility in the prices of the securities.
Both the strategies are distinct and require different approaches. A stock that is worthy of being purchased for investment due to long-term gains, may not be suitable for day trading as it does not have the potential of short-term outcomes. So, another valuable Intraday Trading Tips is to not consider day trading similar to an investment in any form and treat the circumstances accordingly.
Keep analysing and learning:
Learn, learn and learn more!
This is the tip that separates the successful intraday traders from the unsuccessful ones. The intraday traders who either consider that they have learnt it all, or those who do not have the will and determination to keep learning find it very difficult to sustain in the intraday trading area. Intraday trading is all about analysing the market, analysing each trade, each mistake and each gain to help the trader to learn more each time.
Learning never stops.
It is rightly said that more than the profits, the losses provide an opportunity to learn. A successful intraday trader keeps a journal of his everyday trades and analyses them at the end of each day to understand what he did, what went right and what went wrong and what could he have done to trade better. In-depth research must be done before starting the trades for the day.
Do not get affected by Emotions
The holy grail of intraday trading is to not get affected by emotions. This is a tip for intraday trading that cannot be emphasised more. To become a successful trader and make good profits, one must keep all the emotions at bay, including greed and fear. The overt expression of any of these emotions can cause enormous losses to the intraday trader and also limit his profits.
Fear can make the trader not take risks, which is a prerequisite for intraday trading, and this may lead to the trader exiting positions when there is still more potential to make profits; and at the same time greed can make the trader keep holding on to the positions even when the trends have started reversing and may result in huge losses.
Similarly, an intraday trader must not be affected by the ultimate profits and gains. Profits on one day must not make the trader overconfident to indulge in risky trades and losses on the previous day must not make the trader fearful and apprehensive of making trades that could otherwise have given him good profits.
It is all a game of mental balance and keeping the balance intact even when the circumstances are not favourable. An intraday trader must move above the sentiments and have a practical approach towards trading. Also, to maintain a good work-life balance, the emotions must not be carried home, be it the happiness of making profits or the sadness of losses.
Do not take risks beyond the risk-taking abilities:
A critical tip for intraday trading is to not be reckless. The beginners who end up making good money in a short time may come under the impression that day trading market is the best way to make quick money and they may end up putting huge amounts in trade, which may result in drastic losses.
So, for a seasoned and successful trader, it is very important to be aware of losses and put in only the amount of money that they can afford to lose. Profits, when realised, must be kept away as cushions and not stowed back into the trades.
Owning a cushion may lead to less stress while trading and may prevent unprofessional decisions. Also, various ways and techniques can be used for risk management which includes stop loss, marketing the positions with limit orders and choosing the securities wisely and after proper research.
Intraday trading involves buying and selling the securities within the same trading day. All trades are squared off at the end of the trading day. There is so much volatility in the intraday trading market that there is not much time to lose and not much scope to lose focus.
The Intraday Trading Tips included for survival in intraday trading is to stay focused. Intraday trading does not provide the opportunity to the traders to lose focus even for a single minute during the trade. The intraday trader has to be on his toes and be aware and informed of everything happening around that can influence the trends and his trades.
An efficient intraday trader will not be distracted by any personal or professional occurrences and will keep a hawk’s eye on his trades from the beginning to the end, with equal dedication.
These Intraday Trading tips must be considered and kept in mind to ensure that the ultimate objective of making profits is reached and the intraday trader is able to establish himself as a successful one!
In case, you are looking to perform intraday trading but do not know which stockbroker suits the best for you, just fill in your details below.
We will arrange a callback for You, absolutely free!