Intraday Trading, It’s a term you are probably familiar with if you are involved in the financial markets. Intraday trading is a form of trading where the transaction is completed (buying and selling) within the same day.
Intraday trading is useful, as one gets to make a sizable amount of profit using limited amounts of capital. And this is possible because of the factor of leveraging (Margin Trading). And This is where the risk associated with it can be high as margin trading also comes with the risk of losing a large chunk of trading capital.
If statistics are to be believed, nearly 90% of intraday traders lose money, but the money lost by that 90% is being earned by those remaining 10% traders. So, what are the reasons which contribute to one losing money while doing intraday trading? Let us find out:
- Lack of Trading Discipline:
Discipline is the most important trait if one wants to be a successful trader. And the importance of discipline is even more important if one is looking to get involved in Intraday Trading.
Because they lack trading discipline, trading discipline revolves around three main principles
- Having a rigidly tested strategy that you’re familiar with
- Using stop losses to minimise the downside
- Consistently cashing in profits without getting greedy.
- Because they Panic
One of the main reasons people lose money while intraday trading is because they tend to panic. The market will not always have a favorable environment. So, a trader who panics always ends up gifting his money to a stable trader.
- Training to rapidly make up for losses
When a trader faces losses, they often feel the urgent need to take subsequent trades to make up for the losses, this often results in the poorest of judgments and which mean. You need to stick to your strategy and wait for the correct opportunity to make your losses back.
- Overtrading
Overtrading is often the Achilles heel of even the most seasoned traders. Overtrading is when you have had a good trading day and you get carried away as a result and start taking sub-par trades, resulting in bigger losses.
- Trading against the Market Momentum
Trading against the trend for the day is the biggest sin any intraday trader makes. And if someone does that, then the day trading trade ends being a positional trade (as against the original plan) and which requires different types of planning.
Trying to trade a trend reversal in a short time frame is extremely difficult, thus it is usually a bad idea to trade against the market whilst intraday trading as it could lead to big losses.
- Being dependent on trading tips externally
- This is often the strategy which is followed by new traders, they often have the mentality of ‘HERD’, but which is generally a recipe for disaster. So, it is advised that ons uses his own judgement while doing trades using Intraday trading strategy.
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These are a few of the reasons why the majority of Intraday traders lose money in the markets. To be part of the minority that makes money consistently it is essential to educate yourself before you start making trading decisions.
The perfect place to get started is by getting yourself enrolled in the brand new webinar “How to start Intraday Trading in India” on Trade Brains Academy which dives into everything you need to know to get started with intraday trading in India.
