Intraday Trading
What is Intraday Trading?
Intraday trading refers to buying and selling of stocks on the very same day before the market closing time. People invest in intraday trading only to get quick gains in a shorter period of time. This can also be done by monitoring the stock indices movement.
The trader's main goal is to take advantage of stock market movements to make a profit.
Therefore, the size of the profit depends on the volatility of the price of the stocks that the trader holds in the portfolio. You need an active online trading account to be able to trade during the day.
In daytime trading, buy and sell orders are set by trading parties.
The basic purpose of opening an order is to close or settle the order before the market closes. One of the most important questions that every day trader has to ask is "How to find the right stock for day trading".
After all, it all holds the right stock when it comes to making big profits in daytime trading. There are several factors to consider when choosing a stock to trade.
Both qualitative and quantitative. You can come across hundreds of listed stocks on the market, but not all stocks are suitable for daytime trading. Therefore, you need to make informed and accurate decisions in this area.
How Does Day Trading Do?
To begin with intraday trading, you need to have a trading account. Hence, you are required to open Demat account with a brokerage firm such as Swastika.
This is the first step. Now, you must go through the fundamentals of intraday trading before investing any money into it.
Once you acquire enough knowledge about intraday trading, you can start trading. Do remember, there is no buying/selling of shares that happens after your buy order gets squared off against the sell order.
Buy order/sell order needs to be done on the very same day.
In intraday trading, you should also get acquainted with the concept of margin. This is because margin enables you to trade in large volumes.
You have to pay a fixed margin to the stock broker. Margin is the percentage of transactions you carried out. For instance, if your margin is 5% and you want to buy or sell shares worth Rs 1 lakh, you will have to pay Rs 5000 to the stock broker.
Largin margin will help you make more profits. Same, it also leads you to make huge losses. Hence, it is suggested to use margin carefully.
Tips for day trading
Intraday trading is riskier than regular trading in the stock market. Hence, it is important for newbies to understand the fundamentals of intraday trading and avoid huge losses. Investors are suggested to invest only in the amount they can lose without facing any difficulties.
Make Consistent Profit With Intraday Trading
Intraday traders always go through risks. In intraday trading, the things that matter a lot are price volatility and daily volume. Hence it is suggested that traders should not risk more than 2% of their total trading capital on a single trade.
How to Select Stocks for Intraday Trading
For a successful intraday trader, it's imperative to recognize the way to choose out shares for intraday buying and selling. People often fail to pick the greatest stocks and as a result, they are not able to make income during the day.
Choosing the proper shares to book profit is an intelligent task that you may get only through research and experience.
For beginners, right here get a few guidelines to pick out shares for intraday buying and selling.
Intraday trading involves higher risks than stock market investment. If anything comes wrong, intraday trading can wipe off the day`s profit.
With experience, you may want knowledge of essential micro and macroeconomic elements influencing the marketplace to make knowledgeable decisions.
Once you've got shortlisted shares, you may analyze and examine their overall performance to become aware of trends.
Trends will help you when to enter and exit from day trading.
Difference Between Intraday Trading and Regular Trading
There is only one difference between regular trading and daytime trading.
It is to take over the shares. In day trading, you square your position on the same day. Therefore, sell orders balance buy orders.
As such, there is no transfer of ownership of the shares. Regular transactions take place over several days, if not more. Therefore, the purchased stock will be delivered and the sold stock will be deducted from your Demat account.
How to Pick the Right Stock for Intraday Trading
Stock Volume
One of the most important criteria for trading during the day is stock volume. Volume is expressed as the total number of stocks traded in a particular market at a particular time.
You may not be able to tell which stocks are in high demand just by looking at the screen. Inventory size helps to put the inventory that is purchased in bulk on the candidate list.
Resistance level
The resistance level is the price at which the stock price cannot rise above that level. The main reason for this behavior could be the overwhelming supply of stocks at the current price level of the market.
As a daytime trader, you can pay attention to what level of resistance is broken and moving north.
Stock List Trading
Some traders during the day prefer to trade only certain stocks. Traders may have arrived at this stock list after scrutinizing stock price fluctuations.
News Stocks Due to the Good Performance
Among affiliates, some stocks may work well in line with trader expectations. He/she thinks it moves in the expected direction with good volume. After doing a basic analysis, you can consider trading such stocks.
Top Winners and Losers
You can usually find a list of top winners and losers according to recent market activity on social media and news channels. Such a list provides a simple calculator to help you choose the right inventory for your needs. However, do not blindly follow such a list. Judgment and analysis can also be used.
Weekly Fluctuations
You can examine stock price fluctuations over various periods. Analysis of price fluctuations over the past week shows stocks that are continuously closing negative or positive. Such an analysis will reveal which stocks are suitable for daytime trading.
FAQ’s
Intraday trading is mainly for generating small yet quick profits with several trades. Making small profits often minimizes traders’ risk to a greater extent. For beginners, who want to earn huge profits, it is suggested to work on several trades and earn a small portion of profits.
A trader buys a stock worth Rs 200 with a hope that after sometime the stock price will rise. The trader then instructs its broker to place a stop-loss order of Rs 210. In case, if the price goes upto Rs 210 or more, the stop order gets executed and hence the trader makes a profit of Rs 10 per trade.
It has been said that intraday trading is not safe for beginners. Intraday trading consists of huge risks. If someone is willing to trade intraday, he needs to acquire huge knowledge about intraday trading.
Intraday trading can give you huge profits only if you have enough stock market knowledge and skills to trade. It doesn't mean that all intraday traders earn profit. According to a study, many intraday traders lose their hard earned money in the market.
