Unlike traditional trading, intraday trading or day trading involves buying and selling shares on the same day. This kind of trading is slightly risky; however, it bypasses the risk of accumulating money for a longer duration.
Here is an intraday trading guide for beginners that illustrates it in depth.
Day trading is a one-day game played every day. It is most common in the forex exchange market, but nowadays, it is gaining traction in stock markets as well.
Day traders usually are experienced individuals who deploy short-term strategies and identify the best time frame for intraday for securing heavy gains. A consistent outlook on the trend lines of the market charts with comprehensive technical analysis about the highs and lows of the share prices sets fire to this game.
This kind of trading is highly subjective to national events, corporate gains and losses, economic statistics, variability of interest rates, market dynamics, and its associated psychology. The pump mechanism also plays a crucial role in determining the fluctuations on the charts.
Therefore, a strong viewpoint, keen analysis, and experience are the three most important ingredients of preparing a successful intraday trading strategy. Some of the famous strategies are listed below.
- Range trading: Refers to a constant oscillation of share price between the maximum and the minimum of the day. This concept stands with support and resistance levels that decide traders’ decision to buy or sell the share.
- Scalping: This kind of strategy is based on the motive of executing numerous trades in small financial ranges. It deals with shares whose price changes only minutely.
- High-frequency trading: HFTs are automated algorithms that execute high-volume trading at enormously fast speed. This strategy is mostly preferred by institutional investors and international banks. It is highly criticized for its inequity towards small investors.
- News-based trading: Based on the monetary policies and excerpts from the experts of the trading world, this kind of trading revolves around national economic and political events.
Day traders are well-versed with the volatility of the market and therefore use only the risk money. Deployment of margin accounts is a common practice seen among day traders. They usually look for liquid stocks that have the potential to soar in a short time.
Benefits of doing intraday trading
No matter the risk and pressure involved in day trading, its benefits surpass the related disadvantages. Some of them are listed below.
- Autonomy: Day-trading is similar to self-employment. It eliminates the bossy culture of a 9 to 5 job and offers the ultimate freedom to do things of your choice. In the west, day traders are considered entrepreneurs and often referred to as fast guns of the old west. It is also a comfortable occupation for retired individuals, housewives, and people interested in the finance sector.
- Short-time profits: Trade during the day and enjoy the profits in the evening; that’s what day trading offers you as subsidiaries. However, it’s not always unicorns; profits do follow some loss, nonetheless relishing the game makes it more interesting. The returns of day trading are higher than usual Fixed deposit and postal money plans.
- Independence from the global market: Since day traders do not keep their positions open 24/7, their gains and losses do not depend on overnight events that happen across the world, unlike the stock market.
Tips for doing intraday trading
Intraday trading requires comprehensive research, discipline, and guidance from professionals to lead the way. Following are some tips to help you in your journey of day trading.
- Entry-exit points: to bypass the last-minute anxiety before buying and after selling
shares, it is recommended to pre-decide the prices, as per the risk that can be taken.
- 3:1 ratio: Many times, the stock you bought might fall; however, it is still in your hands to calculate the amount of loss that can be tolerated by you. Set a stop loss to a maximum of 3 times lesser value than the buying price and sell it as soon as it reaches the mark.
- Close the positions on the same day: It is not a wise move to convert a share in the loss to a delivery share, as it imposes a higher risk of greater loss.
The right platform and timing of the market are other essentials of profitable intraday trading. Learn while you trade and experiment enough to develop strategies along the way.