Intraday trading is riskier than investing in the regular stock market. It is 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.
Choose Two or Three Liquid Shares
Intraday trading involves squaring open positions before the end of the trading session. This is why it is 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.
Determine Entry and Target Prices
Before placing the buy order, you must determine your entry level and target price. It is common for a person’s psychology to change after purchasing the shares. As a result, you may sell even if the price sees a nominal 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 is 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 ensures emotions are eliminated from your decision.
Book Your Profits when Target is reached
Most day traders suffer from fear or greed. It is important for investors to not only cut their losses, but also to book their profits once the target price is reached. In case the individual thinks the stock has a further possibility of rising in price, the stop loss trigger must be readjusted to match this expectation.
Avoid being an 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 is common for day traders to take delivery of shares in case the target price is not met. He or she then waits for the price to recover to earn back his or her money. This is not recommended because the stock may not be worthy of investing, as it was purchased only for a shorter duration.
Research your Wish list thoroughly
Investors are advised to 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, etc., 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 are not able to 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; however 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.