Intraday trading has been catching on in a big way in recent times, with more and more people jumping onto the bandwagon. Intraday trading means buying and selling stocks within the same day, and it is a good way of earning an extra income.
But those who are just starting out as intraday traders need to embrace not just the profits but also the potential for risk. There will be many ups and downs, and your primary goal should be to maximise profits while keeping losses at a minimum.
For intraday trading, time and patience are key. Anyone with an appetite for risks and the time to track the markets can start intraday trading.
For beginners, having a trading and a demat account is a must. But that’s not all. You need to do a lot of research and homework too.
Here are five things you should do before you start online share trading.
Build your own strategy
Intraday trading is not something that you can do on a whim. It requires discipline and meticulous planning. This is what will give you an edge on each trade you perform.
Before you bring your online share trading strategies into play, ask yourself these questions:
- What should you trade in (e.g. forex, stocks, futures, commodities)?
- How would you get into a trade?
- What are your entry price and target price?
- How much can you risk on winning and losing trades?
- How much are you planning to buy and how would you get out?
Once you have answered all these questions, focus on the win-loss ratio. Also, assess your chances if you place more bets on similar trades.
You may need to apply the same method a few times to understand how it works. Besides this, following the regular price movement of an asset will help you to create your own strategy.
Set aside time
In intraday trading, the trading session might last for a few hours, but the background work may take up most of the day.
Day trading is all about tracking the markets and finding opportunities to make money. Hence, you will need to prepare technical charts and closely follow price fluctuations.
Knowledge is everything
Being knowledgeable about basic trading techniques is essential, of course. But you must also be aware of the latest news and events that can affect the stock market.
Political changes, mergers and acquisitions, and so on may influence market trends.
Practise as much as possible
New day traders usually do not practise much. This is why they tend to lose more. As a beginner, you might not know the factors that can influence your stocks. So, test your strategies over and over again in different scenarios.
Remember, that no two trades are ever the same, and each trading day is different. Without practice, you may miss important trade signals.
Do not hurry
Many investors and traders start to trade as soon as the market opens in the morning. In fact, many orders are executed during the first couple of hours of opening, which results in price volatility. For a professional trader, it might be easy to recognize patterns and pick accordingly. But a novice will take time to understand the market.
The middle hours are comparatively less volatile, and then the market begins to pick up in the final hours. You can take advantage of the opportunities during the rush hours, but it is best to avoid dabbling too much in the beginning.
Summing up – Intraday Trading for Beginners
Day trading might seem easy on the surface, but it takes a lot of effort and patience. It is no doubt rewarding, but it also carries a high element of risk. Try to start small in the beginning and increase your investment gradually.
You can always open an account with renowned brokerage firms if you need sound advice and a stress-free trading experience.