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18 Intraday Trading Tips and Strategies You Should Consider

Intraday means ‘within the day’. Hence, intraday trading refers to trading stocks and ETFs during regular trading hours within single day. You can buy or sell shares within a short span of time. Also, you don’t have to undergo the dull process of availing physical share certificates.

Intraday trading works on the concept of price movement. You buy shares when the price is low and sell them when the price rises. The difference in both the prices amounts to the profit earned.

Here, stocks are purchased, not with an intention to invest, but for the purpose of earning profits by harnessing the movement of stock indices. Thus, the fluctuations in the prices of the stocks are harnessed to earn profits from the trading of stocks.

An online trading account is for intraday trading. While doing intraday trading, you need to specify that the orders are specific to intraday trading. As the orders are squared off before the end of the trading day, it is also called as Intraday Trading.

Intraday Trading Tips and Strategies Infographic

18 Intraday Trading Tips and Strategies

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.

Intraday trading is riskier than investing in the regular stock market. It’s important, especially for beginners, to understand the basics of such trading to avoid losses. Individuals are advised to invest only the amount they can afford to lose without facing financial difficulties.

Timing the Market

Experts often recommend individuals to avoid trading during the first hour, once the markets are open. Taking positions between noon and 1 pm can increase the possibility of earning profits.

Plan Investment Strategy and Stick to it

Every time users start a trade, it’s important to have a clear plan of how to do intraday trading. Determining the entry and exit prices before initiating the trade is crucial.

One of the most important intraday trading tips is to use the stop loss trigger to reduce the potential loss on your position. Moreover, once the stock achieves the target price, users are advised to close their position, and not be greedy and expect higher profits.

See Also: 8 Tips for long term investment strategies

Exiting the Position under Unfavorable Conditions

For trades that provide profits and price-give reversal, it is prudent to book the profits and exit open position. Additionally, if the conditions are not promising to the position, it’s advisable to immediately exit and not await the stop-loss trigger to be activated. This will help traders reduce their losses.

Invest Small Amounts that Won’t Pinch

It’s not uncommon for beginners to get carried away once they make some profits during day trading. However, markets are volatile and predicting the trends is not easy even for experienced professionals. In such situations, beginners can easily lose all their investments.

This is why an important intraday tip is to invest smaller sums that a user can afford to lose. This will ensure individuals don’t face financial difficulties in case the markets do not favor them.

Research and Choose Liquid Stocks

Before starting intraday trading, it’s recommended to understand the basics of the stock market, the fundamentals, and technical analyses. There’s plenty of research available on the Internet and taking the time to read it will be advantageous.

Moreover, there are hundreds of stocks traded on the equity markets. Thus, traders must trade only two or three liquid stocks. Liquid stocks are those shares that have high volumes in the intraday market. This allows traders to exit open positions before the end of the trading sessions.

See Also: Things to remember when picking stocks

Always Close All Open Positions

Some traders may get tempted to take delivery of their positions in case their targets are not achieved. This is one of the biggest errors. Thus, it is crucial to close all open positions even if traders have to book a loss.

Spend Time

Intraday trading is not for professionals who work a full-time job. Traders must be able to monitor the market movements throughout the market session (from opening bell until its closing). That will enable them to make the right calls as required.

Intraday Trading indicators

When it comes to booking profits in intraday trading, you will have to do a lot of research. For the same purpose, you need to follow certain indicators.

Often, intraday tips are believed to be the Holy Grail but this is not entirely accurate. Intraday Trading indicators are beneficial tools when used with a comprehensive strategy to maximize returns.

Choose Two or Three Liquid Shares

Intraday trading involves squaring open positions before the end of the trading session. This is why it’s recommended to choose two or three large-cap shares that are highly liquid. Investing in mid-size or small-caps can result in the investor having to hold these shares because of low trading volumes.

An intraday trader celebrating success in online trading.

Determine Entry and Target Prices

Before placing the buy order, you must determine your entry level and target price. It’s common for a person’s psychology to change after purchasing the shares.

As a result, you may sell even if the price sees a minimal increase. Due to this, you may lose the opportunity to take advantage of higher gains because of the price increase.

Utilizing Stop Loss for Lower Impact

Stop loss is a trigger that’s used to automatically sell the shares if the price falls below a specified limit. This is beneficial in limiting the potential loss for investors due to the fall in the stock prices.

For investors who have used short-selling, stop loss reduces loss in case the price rises beyond their expectations. This intraday trading strategy makes sure emotions don’t mix with your decision.

Book Your Profits When Target is Reached

Most day traders suffer from fear or greed. It’s important for investors to not only cut their losses. However, also book their profits once they reach the target price . In case the individual thinks the stock has a further possibility of rising in price, the stop loss trigger must  readjust to match this expectation.

Avoid Being a Investor

Intraday trading, as well as investing, requires individuals to purchase shares. However, factors for both these strategies are distinct. One kind adopts fundamentals while the other considers the technical details.

It’s common for day traders to take delivery of shares in case the target price is not met. They then wait for the price to recover to earn back their money. This is not recommended because the stock may not be worthy of investing.

A intraday trader looking at his computer, focusing on online trading.

Research your Wish-list Thoroughly

Investors should include eight to 10 shares in their wish lists and research these in depth. Knowing about corporate events, such as mergers, bonus dates, stock splits, dividend payments, along with their technical levels is important. Using the Internet for finding resistance and support levels will also be beneficial.

Don’t Move Against the Market

Even experienced professionals with advanced tools cannot predict market movements. There are times when all technical factors depict a bull market. However, there may still be a decline. These factors are only indicative and do not provide any guarantees. If the market moves against your expectations, it is important to exit your position to avoid huge losses.

Stock returns can be huge but earning smaller gains by adhering to these intraday trading tips & strategies should be satisfactory. Intraday trading provides higher leverage, which effectively provides decent returns in one day. Being content is crucial to succeeding as a day trader.

Choose stocks after historical research

The main aim of intraday trading should be to create the best stock picking strategy. Such strategy should preserve capital and, at the same time, controls risk. Start by trading a single stock and learn the characteristics, trends and risks associated with the stock. Once you’ve understood the behavior of stocks, you will have a better understanding of the best-performing stocks.

Have a pre-defined target

New traders may feel discouraged with their ability to reap profits. They may also fail to do important things necessary to succeed in intraday trading. It’s important to have a day trading plan to avail of the numerous opportunities in the stock market.

Beginners need to use trading strategies to take advantage of these opportunities. Set profit and stop-loss price targets before you trade. This is to limit your potential loss and to prevent yourself from being too greedy.

Pick the intraday market direction

You can pick an intraday market direction using the ‘value area’. The value area is the range where almost 70% of the previous day’s trade took place. If the market opens below or above this value area, and remains in this area for two consecutive half-hour periods, then the market has an 80% chance of filling the value area.

This parameter helps in gauging the market direction. Once you get used to the concept of value area and the 80% rule, trading can be profitable.

See Also: 9 Forex Trading Risks You Need to Consider

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