Purchasing and selling stocks on the same day is known as intraday trading. It all comes down to timing and understanding the market. Only after technical analysis, realistic execution, indicator use, and appropriate risk management can a successful intraday trading strategy be implemented. To avoid losing money when trading intraday, you should use stop-loss limits to support your risk. Additionally, you must determine which trading strategy best fits your needs and temperament. Let’s look at some useful tips for intraday trading.
Select Stocks with Enough Liquidity
In intraday trading, stocks are purchased and sold on the same day. A great deal of market liquidity is required for this activity. So, invest in large-cap companies. Avoid small or mid-cap stocks. Additionally, you should try to diversify your position among a few equities rather than trading a single stock. You may reduce risk and develop a balanced intraday trading strategy with diversification of assets.
Fix the Exact Entry and Exit
Many traders during intraday trading make the mistake of believing the buyer’s fallacy. This causes them to second-guess their choice as soon as they purchase a stock. The purchasers start to feel as though they have made a poor decision. These fears cause them to act rashly and incorrectly.
As a trader, you may prevent yourself from falling for this mistake by determining the entry and exit prices before starting the transaction. These predetermined prices enable you to maintain objectivity and eliminate needless uncertainty.
Define a Stop-loss Threshold
The stock you have selected for intraday trading may decrease rather than increase in value. The relevant question in these situations is how low you will let the price drop before selling the shares. Selecting a price that you view as a square-off position is a crucial consideration. This intraday trading technique serves as a safety net and can help you cut losses. The 3:1 ratio advice works great for novices. By following this advice, you may place your stop-loss three times below the closing price at which you would have booked a profit.
When you Hit the Target, Book a Profit
Intraday trading is appealing to traders because of the leverage and margins it offers. Trading intraday gives you the chance to make large profits. But it’s important to keep in mind that a margin trader shouldn’t chase unrealistic profits. Close the trade while earning a decent profit. When you hit your target, it’s best to sell unless you have strong evidence that the stock price will rise.
Close Positions at the Right Time
Closing all open trades and completing your transactions is very important. Traders frequently choose to have their shares delivered when equities fall short of their predetermined target price. The transaction is completed the next day in an attempt to hit the target by then. However, changing the trading strategy might not be a good idea. The chosen stocks may not yield the expected profits during delivery trading because you purchased them for intraday trading. Thus, consider the stock’s strength before deciding to hold it for the long term.
Avoid Challenging the Market
Stock market forecasting is quite difficult. Based on your research of the market, you will frequently decide what intraday trading strategy to adopt. At times, the market can move in the other way when you start trading. In these kinds of situations, it’s important to keep in mind not to challenge the market or become overly focused on your research. Selling your investment as soon as it hits the stop-loss level is a preferable course of action.
Do Extensive Research
When you’ve decided which stocks to trade, be sure to do your homework on the relevant firms. You may better understand how market circumstances can affect the stock by learning more about the firm. Additionally, you want to look for any occurrences like takeovers, dividend disbursements, mergers, etc. These happenings might help you stay current and improve your timing.
Time your Trades Properly
You must execute your trades at the appropriate moment. A lot of traders suggest staying away from opening a position in the first hour of trading. There is a perception that this hour is extremely volatile. So, many traders choose to open trades in the afternoon.
A significant amount of time must be invested in thorough analysis, research, and performance review while engaging in intraday trading. In addition, selecting a trading platform for intraday trading is crucial. You can trade on the platform offered by Kotak Securities, a leading brokerage firm. You can also use their online share trading app. The firm also provides daily stock selection advice and employs highly experienced analysts. So it may serve as your one-stop trading platform.