Intraday trading is a type of trading strategy in which shares are purchased and sold on the same day. In regular investment, a share is purchased, delivery is taken in the demat account, and then the share is sold whenever the investor wants to exit from the stock.
Intraday trading is a highly risky strategy. It requires skill, calculation, and careful study to profit from intraday trading. The swinging market provides a constant challenge for traders. However, with a few intraday trading tips, it is possible to make a decent return from the market movements.
The first step to intraday trading is to have a demat account. It is possible to open a demat account from different depository participants, such as Kotak Securities. Once the demat account is opened, you can start trading in different shares and venture into intraday trading. Let’s understand a few tips and tricks of intraday trading.
Intraday trading Tips and Tricks:
- Pick the right stock:
The crux of intraday trading is to pick the right stock. The stock to be traded needs to be a liquid stock. By liquid, it means the stock needs to have both buyers and sellers in the market. Some small cap stocks, and penny stocks are risky bets for intraday trading. The momentum of the stock may swing in another direction and there may be no trades executed. To avoid such a scenario, it is best to choose stocks that have a healthy amount of demand.
- Decide the entry and exit points:
By entry and exit points, this means the price at which to enter the stock and the exit point is the point at which to exit the stock. By deciding these points, you will have a clear target. Also, since trades are electronic and machine based, an order can be placed with the entry and exit points at the start of the day and the order will get executed.
- Fix a stop loss level
Perhaps the stop loss level is the most important concept for intraday trading purposes. A stop loss level is a level beyond which the intraday trader will not stay invested in the stock. If the price of the stock dips to the stop loss level, it is better to exit from the stock. Since intraday trades work on a slim margin, it is better to define the losses that can be borne on a trade.
- Limit the number of trades for the day
Intraday trading takes skill and effort. It is best to trade in 2 or maximum 3 stocks in a day. This will concentrate your efforts on particular stocks itself and ensure you make the maximum profits.
- Don’t trade in stocks in the news
It may be tempting to invest in a stock that a brokerage house recommends. Or trade in stocks that declare results or have some financial news. But this strategy is very risky and may not always pay off.
- Initiate early trades
One common intraday trading tips is to trade within the first hour to grab the momentum in a particular stock. This will help to profit from the swings in a stock.
- Research the company
This is one of the most important intraday trading tips. Research the company to be traded in thoroughly so that you know about the company’s business prospects. Since intraday trades are highly technical, it makes sense to study the price trends of the stock before trading.
- Close open positions at the end of the day
Every intraday trader has to close all open positions. If he has bought a stock, he has to sell it off by the end of the day, otherwise he will have to take delivery of the stock.
Now that you know the tips and tricks and have done your research, you might be tempted to start intraday trading. Well, don’t forget the first step—opening a demat account with a reputed depository participants, such as Kotak Securities that help you with numerous insights to master intraday trading. So what are you waiting for? Go and start your intraday trading today.