What is Intraday Trading?
Intraday Trading is the most lucrative form of trading in the financial markets as it offers you the ability to make significant profits on a relatively small capital on a daily basis by giving you the ability to leverage trade (Margin trading).
Who is an Intraday Trader?
A trader who practices intraday trading to make profits consistently on a daily basis is an intraday trader. He/She uses technical analysis to pick stocks, spot trades, and get in and out of trades quickly with the sole purpose of gaining from small movements in the prices.
Intraday trading is important to the overall health of the market, because if everyone traded with a broader view in mind then the price would jump and not move organically. Intraday trading helps us understand the sentiment of the market. News-driven price movement can only be captured in intraday trading.
To be an effective Intraday trader, it is essential to have an in-depth understanding of market psychology and technical analysis. Once you have an in-depth understanding of technical analysis you need to start developing various trading strategies and take the right trade in order to make profits.
Intraday Trading Strategies
A trading strategy is a system developed using various aspects of technical analysis, a system that is used to recognize various parameters of a trade such as which financial asset to trade and at what price to enter/ exit the trade.
There are already a number of ready and reliable trading strategies available for a trader to deploy, but the most successful traders usually backtest and develop their own trading strategies.
Rules of Intraday trading
Having a strong and tested trading strategy is important/ however, it is something that is personalizable and something that could change from trader to trader.
Something that is not changeable is a few fundamental rules associated with intraday trading. These rules are absolutely essential to follow in order to have a successful trading career. The following are the non-negotiable thumb rules of intraday trading.
- Always choose liquid stocks.
- Pre decide the entry and exit points.
- Always have a stop loss for your trade.
- Have a traders mindset as opposed to an investors mindset.
- Never trade against the trend
Following these rules, coupled with a sound trading strategy will result in a long and successful intraday trading career.
Requisites for Intraday Trading
There is a certain set of requisites for Intraday trading, at the core of which you must be the owner of a trading account with a stockbroker. The other requisites are
- One needs to have sufficient margin available
- The ability to choose the right asset for intraday trading
- The ability to choose the right stock for intraday trading
- One must always check their order book
- One must continuously monitor your positions
Once you have equipped yourself with all the tools above, you can begin Intraday trading, but you will master the art only through consistent practice. It is absolutely worth it as intraday trading can be a very potent trading weapon to have in your arsenal.
Advantages of Intraday trading
There are a number of advantages associated with intraday trading that make it such a potent form of trading.
- Elimination of overnight risk.
- Provides a higher return on investment compared to traditional investing.
- Ability to open a leveraged position.
- Position can be rolled over.
- Ability to profit off of both directions of price movement.
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Do’s and Don’ts of Intraday Trading
There are certain sets of do’s and dont’s associated with intraday trading to ensure an effective trading career.
Do’s
- Practice trading before you start trading with sizeable capital
- Trade using a tested and sound strategy
- Control fear and greed
- Trade liquid stocks
- Always use a stop loss
Don’ts
- Do not overtrade
- Do not trade if you are unclear about the direction of market
- Do not trade with emotions
- Do not take over-leveraged positions
- Do not leave your position unattended
Intraday trading is a double-edged sword. If practised correctly it can bring home significant daily profits but if practised without being equipped with the correct knowledge, it can eat up your entire trading capital.
A brilliant place to start educating yourself about intraday trading is by getting yourself enrolled in our brand new webinar “ how to start intraday trading in India “, which is available for free on our website www.tradebrainsacademy.com.
Following the completion of the webinar, you can expect to have an understanding of
- What intraday trading is.
- The importance of intraday trading.
- Intraday trading strategies.
- The thumb rules of intraday trading.
Get started on your Intraday trading journey today by getting yourself enrolled in the how to start intraday trading in India webinar.
