Is Intraday trading profitable or not, is one of the burning questions among beginner level traders before they place their feet in the stock market trades.
Well, any sort of trading or investment has a profiting potential as long as you research objectively and then place your money to work for you.
Nonetheless, let’s find out some of the proven intraday trading tools that can help you to place profitable trades at least at the initial level.
But first, let’s understand the basics!
Intraday trading or day trading, as the name suggests, means the buying and selling of stocks within the same day. So, traders buy stocks not as an investment, but as a means to earn profits by harnessing the movement of stock indices. Intraday trading involves higher risk than investing in regular stock markets.
Key factors that influence the stocks include fluctuating daily volume and price volatility. Hence, it’s important to learn the art of trading and buying stocks that are sure to churn out profits.
Is Intraday Trading Profitable – Factors
It’s important to know that day trading will not get you rich overnight; it’s practically impossible. However, you can make a profit in intraday trading with intense research and experience. Ideally, traders are recommended to not risk more than 2 per cent of their total trading wealth on one trade. Instead invest in multiple trades to play it safe and reduce losses, if they occur.
However, sometimes traders buy stocks more than the recommended number in order to earn high profits. To help you balance the risks and make intraday trading profitable, we have listed out some of the best intraday trading strategies you can adopt:
When the price of each stock keeps fluctuating within a certain range in the first thirty minutes of the trading period, it is called the opening range. The lowest and highest prices during the opening range are considered to be the support and resistance levels.
You must buy stocks when the price goes above the opening range high. Similarly, sell the stock when it goes below the opening range low.
Opening Range Breakout (ORB)
In the ORB or the opening range breakout strategy, the best use of indicators, correct assessment of market strategy, and strict trading rules are combined. Here, you’ll find an open window of 30 minutes to three hours.
You can follow numerous variations under this – you can either trade immediately on opening range breakout or trade on a substantial breakout from the opening range.
Demand and Supply Imbalances
Always scout for stocks where there is a substantial demand to supply imbalance. The markets follow the demand and supply norm. As such, when there is no demand for more supplies, the price drops and vice versa.
Over time, and with experience, you must learn to gauge the price points and buy stocks accordingly.
3:1 Risk to Reward Ratio
The typical risk to reward ratio is 3:1. This strategy helps you to curb huge losses and earn better profits instead.
Relative Strength Index (RSI) & Average Directional Index (ADX):
While RSI is an indicator that measures losses and gains in a stipulated time period, the ADX indicator points to when prices are trending sharply. A mix and match of these two strategies can help you earn profits. When the RSI crosses the upper limit, it’s advisable to sell trade and vice versa.
The ADX on the other hand, helps you take smart buy or sell decisions.
In conclusion, we would like to state that intraday trading is all about generating small profits with multiple trades not huge profits with a single trade. Also, adopt wise methods to minimize your losses, and you are sure to start profiting.
In case you are looking to get started with Intraday trading, just fill in the form below.