What is Intraday Trading?
Intraday trading is to buying and selling a financial instrument (stocks, derivatives, commodities, futures) within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be a lucrative game if it is played correctly. But it can be a dangerous game for newbies or anyone who doesn’t know how to trade or they are trading without any strategy.
People can earn great returns if they are long term investor but on the daily basis, they can earn profits with intraday trading. Example- Suppose a stock is currently trading at 600 after you have studied the stocks by analysing the volume and technical indicators, you buy the stock on leverage of 500 quantity, after 2 hours the stock went up to 650, so you made the profit of 50 on 1 share and your total profit will be 25000.
Rules for Intraday Trading
Most traders, especially beginners, lose money in intraday trading because of the high volatility of the stock markets. Generally, losses occur due to fear or greed because, while investment is not risky, the lack of knowledge is.
- Exiting the Position under Unfavourable Conditions:
For trades that provide profits and price-give reversal (price expected to show reverse trends), it is prudent to book the profits and exit the open position. In addition, if the conditions are not favourable to the position, it is advisable to immediately exit and not await the stop-loss trigger to be activated. This will help traders reduce their losses.
- Intraday Trading indicators
While you do intraday trading, you will require a lot of research, for doing the research you have to follow the technical indicators. You can do backtesting of your strategy so you can get the idea of how many times your stop-loss is hitting and how many times you make profits.
- Always Close All Open Positions:
Some traders may get tempted to take delivery of their positions in case their targets are not achieved. You have to remember if have done intraday by using leverage you cannot convert into delivery you have to bring the funds of the asset amount. If you haven’t closed your positions before 3:20 pm the exchange will automatically square off your position and you have to face a penalty.
- Opt for 3:1 Risk-Reward Ratio:
Traders, especially beginners, must understand the appropriate risk-reward ratio. Initially, finding stocks that provide a potential risk-reward ratio of at least 3:1 will be beneficial in earning profits in share market investment. This strategy will allow them to lose small while giving them the opportunity to earn big even if they have losses on most of their trades.
- Start Small
As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding opportunities is easier with just a few stocks. Recently, it has become increasingly common to be able to trade fractional shares, so you can specify specific, smaller dollar amounts you wish to invest.
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