Intraday trading can be exciting but is also a risky proposition as compared to investing in the stock market, for any investor. This is especially crucial, particularly for new investors, to know the basics of intraday trading to prevent losses. Since it involves the act of buying and selling stocks in the same day or many times during the course of the day, it can be a lucrative opportunity; however, it needs to be played accurately well. Nevertheless, intraday trading can be risky for beginners or new investors who are unaware of intraday trading strategies. Incidentally, you may want to look into a reputed broker such as Kotak Securities that operate high volume of trades, as not every broker is suited for large quantities made by day traders.
Let’s look into some intraday trading techniques and tips to help you sail smoothly.
- Obtaining accurate knowledge: In addition to understanding necessary intraday trading techniques, you may want to stay abreast on the most recent stock market information and events affecting stocks. Some of these include RBI interest rate plans, the overall outlook of the industry and more. Create a wish list of the companies you would like to trade and gain information on the chosen stocks and its respective sectors. Reading up on business news and visiting official financial websites can further boost your knowledge.
- Setting aside adequate funds: Look into the amount of capital you are willing to risk on every trade. Most successful intraday traders risk lesser than 1% to 2% of their overall account in each trade. Keeping aside funds specifically for intraday trading can help you in preparing for any losses if they occur.
- Setting aside adequate time too: Intraday trading is time intensive. If you have limited time to spare, it may not be a good idea to consider intraday trading. Since the process requires you to spot opportunities minutely and track the markets during the day, that can take place at any time during trading hours; it is crucial to make swift and wise moves.
- Beginning small: Concentrating on just one or two stocks during an intraday trading session is one of the critical intraday trading strategies you need to consider. Moreover, it can be easy to track and find opportunities with a few stocks.
- Timing your trades during the day: One such crucial intraday trading techniques is to time your trades during trading hours. Most investors or traders start trading as soon as markets open in the morning. This is one of the critical reasons that contributes to volatility in stock prices. Expert traders can easily discern such patterns and select the right stock to make profits. However, as a beginner, you may want to understand the market carefully without making any intraday trading moves, at least for the first half an hour when markets open. Typically, less volatility is seen during the middle hours, and movement begins to pick up towards the end of trading hours. However, some experts opine that rush hour provides critical opportunities, and as a beginner, you may want to avoid trading immediately when the markets, till the time you understand the markets very well.
- Exercising patience: At times, the stock markets can wreak havoc on your nerves. If you are looking to be a regular intraday trader, you may want to exercise patience, stay calm and do not let your decisions be governed by emotion. Employing logic and avoiding greed or fear can ensure calm and sensible trading.
To be successful, you may be called to move fast; but that does not mean you have to think quickly. Taking a cue from successful intraday traders, you may want to build an effective trading strategy and stick to it with discipline.