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I think there is no better business than trading in this world. In COVID-19 19, when there was a lockdown in the whole world, the stock market was the only business where people were working, and not only this, but many new people also entered the market and made profits. The world of trading is fun as well as risky. Intraday trading is a part of trading, about which we will talk today. You can read about positional trading, scalping trading, and different trading strategies on my website.
Momentum trading is a popular trading strategy. Momentum trading involves trading in stocks that are moving in a particular direction with high volumes. The main objective of this strategy is to make a profit from the ongoing movement in the stock. In this strategy, special attention has to be kept on stock movement and volumes.
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| INTRADAY TRADING |
What is Intraday Trading
Intraday trading or day trading is a trading strategy where the trader buys and sells shares in a single day. Traders cannot carry forward the position created in intraday trading. The objective of intraday trading is to make profits by taking advantage of the daily fluctuations in the market. Different trading indicators and trading tools are used for intraday trading (which we will discuss later). Simply understand that technical analysis is needed for trading and fundamental analysis is needed for investment.
In intraday trading, you have to close the position before the market closes, otherwise, your position is automatically squared off by the broker. To be successful in intraday trading, one must have strict discipline and risk management Because traders have to face high volatility and volatility in the market.
Top 10 Intraday Tips for Beginners
Here we are giving you some special tips related to intraday trading which are beneficial for a beginner trader.
1. Paper Trading: You should do paper trading before starting trading with your real money in the market. With this, you will get used to the market and you will be able to develop trading skills
2. Develop a Trading Plan: To achieve success in any business, a plan has to be prepared. In the same way, prepare a plan for trading, in which your trading strategy, loss tolerance, and profit-earning limit are determined.
3. Learn Technical Analysis: Emphasis on learning technical analysis. The more you learn to read charts, the more you will be able to identify trading opportunities.
4. Follow all the news: Keep an eye on every news and events affecting the stock market.
5. Select Right Stocks: Select only those stocks that have good liquidity (volume) and which have 2 to 3% movement for intraday trading.
6. Control your Emotions: This is the most important tip, you have to avoid emotions like fear and greed. Traders take most of the wrong trades on emotions. Be disciplined and stick to your trading plan.
7. Follow the Trend: Always follow the trend whether it is a bullish trend or a bearish trend. Do not trade against the trend.
8. Manage Your Risk: Always use stop-loss orders, this can save you from huge losses. Don't risk more than you can afford to lose.
9. Maintain Trading Journal: Make sure to make a trading journal and write the details of every trade in it whether it is a profitable trade or a loss trade. Why did I take this trade, on what basis did I take it, what was the stop loss, what was the target, profit or loss, all these details should be mentioned in it.
10. Increase Endurance: Wait for the right trading opportunities. Avoid taking trades in haste. Intraday trading requires a lot of patience and discipline.
Read This Also: Breakout Trading - Comprehensive Guide for Beginners
Best 5 Intraday Trading Strategies
1. Momentum Trading
2. Gap Trading
In gap trading, trading is done in those stocks whose price opening is likely to open higher than the previous closing price. In the gap trading strategy, you have to keep an eye on those stocks that have made a strong movement with volumes in the last 5 to 10 minutes before the market closes. So that by buying that stock, you can take advantage of the gap you get the next day.
Scalping trading is one of the most popular trading strategies among traders. In Scalping trading, you have to buy or sell stocks in minutes or seconds. Scalping trading requires the ability to make quick decisions and react quickly to price movements. Scalping trading is a high-risk and high-reward trading strategy. Which requires discipline and experience.
There are times when a stock gets stuck in a range. This range can be several days, several weeks, or several months. But whenever the stock breaks out of this range and we trade in it, it is called breakout trading.
5. News Trading
Trading done on the basis of any news or events is news trading. Like news about any stock that is about to come or any event like the RBI's monetary policy or the Fed's monetary policy. If you are able to analyze the news/events in the right way, then you can earn very good profits from this strategy.
Friends do not start trading directly in the market after reading whatever strategies have been told to you. First practice well and then start trading.
Advantages and Disadvantages of Intraday Trading
Advantages:
1. Quick Profits: Traders get a chance to make quick profits in intraday trading.
2. Low Capital Requirement: Intraday trading can be started with less capital whereas swing trading, positional trading, or futures trading requires more capital.
3. High Liquidity: The stock market is highly liquid, which means intraday traders can easily buy or sell the stock.
4. No overnight Risk: Intraday traders don't hold overnight positions, so they avoid any overnight risk.
Disadvantages:
1. High Risk: The risk involved in intraday trading is very high as the price of the stock/index changes every moment.
2. Emotional Trading: Because decisions have to be taken very quickly in intraday trading, so many times traders make decisions emotionally.
3. High Trading Costs: Intraday traders have to take multiple trades during the day as a result of which traders have to pay higher brokerage fees, taxes, and other charges.
4. No Overnight Gains: Intraday traders liquidate their positions on the same day by netting their profits and losses and therefore are unable to take advantage of potential overnight gains.
Read This Also: The Dos and Don'ts of Stock Market Investing
Top 5 Intraday Trading Indicators
1. Moving Averages
Moving averages are the most common indicator used in trading. Intraday traders can identify trends and support/resistance using moving averages. Traders can use moving averages to track the average price of a stock over a specific period of time. Moving averages include a simple moving average (SMA) and an exponential moving average (EMA). From my experience, you should use ema as it calculates the latest price whereas in SMA old price is considered. You can use 5, 10, 20, 50, 100 ema.
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| Moving Averages |
The general view is that as long as the stock/index is above the ema the stock is bullish and bearish if below the ema.
2. Relative Strength Index (RSI):
RSI is a momentum indicator that shows the momentum in the stock. RSI is measured between 0 and 100, if it is below 50 then momentum is weak and if it is above 50 then momentum is strong. You can use this indicator to know whether a stock/index is overbought or oversold. You can make proper entry and exit using this indicator.
3. Bollinger Bands:
Bollinger bands are a volatility indicator that helps identify potential breakouts. Bollinger bands are based on moving averages and represent the upper limit and lower limit of a stock.
4. Stochastic Oscillator:
The Stochastic Oscillator is also a momentum indicator. Through this also you can find out the overbought and oversold position. Many traders use RSI and stochastic oscillators together. The stochastic Oscillator is also measured between 0 and 100.
5. Volume:
You can't think of trading without volume. Through volume, you can see how many shares have been bought and sold during a specific period. Whatever trading strategy you use, you must take care of the volume in each strategy. If the volumes are high, it indicates strong momentum and if the volume is low, it could be a trap too.
Best 5 Books on Intraday Trading (click on the link )
How to Identify Stocks for Intraday Trading
Liquidity: While picking stocks for intraday trading, pay attention only to those stocks that have sufficient liquidity.Volatility: Look for those stocks that have a high probability of price movement. Stocks with high volatility give you the opportunity to make higher profits.
Technical Analysis: Learn to read charts, grab only those stocks that you see clearly in a downtrend or uptrend on the chart.
News and Events: Keep track of news and events that can affect the stock market. Such as earning reports, geopolitical events, and economic data releases. Keep in mind the stocks that can be affected by these news or events.
Sector Analysis: Analyze different sectors, this thing is sure that one or the other sector is definitely buzzing in the market.
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