Intraday trading is buying and selling securities within the same day between market hours. When it comes to intraday trading, there are myriad strategies that you can choose to trade with.
The prices of shares keep fluctuating all day, and traders try to benefit from this price movement and buy and sell shares on the same day using intraday trading. If you fail to close your trades before the market closes, your broker will automatically sell your shares.
It’s a very popular trading strategy but involves high risk because you have to make quick decisions.
There are different types of Intraday Trading strategies that you can follow, and it is recommended for experienced traders. However, beginners can use it if they trade with proper risk management.
This blog will discuss Intraday trading and the types of intraday trading strategies you can use to make a profit.
Understanding intraday trading
Intraday trading means making a profit from the shares by selling or buying within a day. Most traders use this technique to make a profit in the short term.
Traders buy shares at low prices, assuming their price will increase during the day. Intraday trading can be a great tool for beginners if they understand how it works.
For example, when traders use this method, they look for stocks with low prices that have a chance of trending higher. With this thing in mind, suppose you buy 100 shares at Rs 30 per share.
You are investing a total of Rs 3000. During the day, the cost of share increases to Rs 45, so you sell all the holdings, which gets you a profit of Rs 1500. It is one of the ways to make money by using the intraday strategy.
Intraday trading can be useful for traders who know how to predict the trend. Making money from the increasing trends is not the only way, but investors can also use this technique to short-sell their stocks and save themselves from losses.
There are many advantages of intraday trading. In intraday trading, you make money in one day and don’t have to wait too much, as happens with equity. Traders even make a profit using this technique within minutes. Due to high margins on shares, traders can buy more shares for less money.
Intraday trading and short selling combined can generate money from falling trends.
Intraday trading is used by many people who don’t have any jobs and make a regular income from utilizing this technique.
The best thing about intraday trading strategies is when you buy shares of a particular company, you don’t need to have much knowledge about its fundamentals. It is all about analyzing the company’s recent trends and focusing more on chart reading.
Things to keep in mind while trading intraday
Compared to equity trading, in which share prices increase after falling, with intraday trading, if the share price falls, they may continue to do that. And if you don’t close your trade on time, you may blow up your trading capital.
In intraday trading, you can make huge profits, but the chances of losing are also the same. If you misinterpret anything, you could lose a big amount. The price movement constantly changes and can shift to any side. You must have adequate knowledge of stock when trading intraday.
An Intraday trading strategy needs control, discipline, and practice. Traders also need to observe things related to the particular stock they are interested in buying. If you use this method, you need to practice a lot, so try to maintain a minimum balance in your account that you can utilise for practising.
Before starting intraday trading, beginners must educate themselves. Without any prior experience in intraday trading, you can lose a lot of money. Intraday trading can help you generate regular income if you are well-versed with its functioning. It has proven to be a great method of making profits from the stock market.
Risks to take care of while using an intraday trading strategy
An intraday trading strategy can be risky, and the risk factor can become high if you are not following the rules. Trading is not as simple as it seems. Before implementing intraday strategies, you must collect all the information and do thorough research. You can’t just trade on any random stocks or goods.
To profit from intraday trading, beginners must follow the rules and tips that can help them. You must have complete knowledge of aspects that can help you make more profit and reduce losses.
Create an Investment Strategy
Without a precise plan or investment strategy, becoming a profitable Intraday Trader is impossible and challenging. For beginners, when you start a trade, it is necessary to have a plan, and if you are trading without a plan, you are just throwing your money. The most important thing is identifying the entry and exit positions and initiating your trade.
Using the Stop loss
If you don’t know about stop-loss, you must educate yourself about this technique. Intraday traders utilize stop-loss as a catalyst to minimize the possible loss because of a change in position. A stop loss is a part of risk management, and it automatically closes your trading if the market’s direction is not going as you predicted.
Suppose if you are risking 1% of your trading capital, then your stop loss with activate only when you lose 1% of your capital. So, you don’t lose any further. All new traders should make use of stop losses.
Trade with timing
To attain the most profit, professionals usually advise that you avoid trading the first hour after the markets open. Taking positions when the market is moving toward noon increases the possibility of earning profits, so try to set up your positions during the afternoon.
If you have other assumptions regarding the market, you can also take positions according to that. But to do so, you should verify your predictions with the help of technical tools and indicators.
The more you risk, the more rewards you can expect. But this only means you might lose a big trade. When beginners make a profit from intraday trading, they can get carried away. Due to the high volatility, it’s not easy for experienced traders to predict the trend because you never know where it will shift.
And beginners might struggle to cope with that. Investing with a specific amount will help you reduce the risk of losing money. Always think rationally and trade with small amounts.
By the end of the day, close open positions.
When you do not get what you expected, you may be lured to open new poisons, knowing that the market will close. Avoid this! The market can be extremely volatile during closing hours. It can be challenging to control your feelings but close the positions to avoid big losses.
Intraday trading is not for busy people.
When trading intraday, you will have to check on market movements throughout the day. Changes in trends can make you lose a lot of money if not identified.
If you are one of the people who have a regular job like a 9 to 5 job, we suggest you stay away from intraday trading. To make the right decisions during intraday trading, you need to keep track of market sessions.
Study about the Liquid Stocks and then invest
Understanding the stock market basics is essential before you start intraday trading. You must know about liquid stocks. These are the stocks with high volume. You can find a lot of educational content related to liquid stocks and how to identify them during intraday trading on websites such as Zerodha and Angel One.
Utilizing the Intraday Trading indicators
Trading intraday can be more profitable if used with trading indicators. They will help you maximize your profits by providing you with different entry and exit positions, but you will need to study these indicators to utilize them. Traders can also use charts to identify the trends in the market. There are many more ways traders can use these charts or graphs.
Avoid Over Trading
Intraday trading comes with many risks and can damage your portfolio if you don’t trade with the right methods. It can also leave you in a situation of a financial crisis.
There is one thing or more like a golden rule of intraday trading, never involve in overtrading. Sometimes, when you lose the game, you try to recover the losses and do not realise that you are overtrading. Avoid this if you want a successful career in intraday trading at all costs.
Intraday trading is one of the strategies that traders can use to make a profit in a day settlement. If you follow the rules associated with intraday trading, you can make a constant profit.
You do not need to know the company’s history in intraday trading, but you need to know about the rules and other things associated with intraday. Understanding these rules will help you become profitable in the long term.
9 Intraday strategies that beginners can start using
Breakout trading strategy
The first step in the breakout trading strategy is to identify the threshold points, also known as support and resistance levels. It is generally used to determine the highs and lows of a trend. Traders can accomplish this by reviewing the previous day’s statistics.
In this case, time is of the essence. Traders can use these points to start a trade. However, it would help if you waited for the price to cross the threshold levels.
By observing the prices, we can predict the price movement, whether it will rise or fall. The breakout method will help you reduce the risks involved in intraday trading tips. When a price breaks out of its previously established range, you can start your trade by following the direction.
Momentum trading strategy
A momentum trading strategy is one of the best ways for traders to find the best stocks to invest in. It highlights stocks in the market before a shift occurs and affects the trends. Traders use this strategy to buy or sell holdings in intraday trading. Traders can hold the shares based on the market’s momentum.
Traders have to be updated with the stock news, mutual fund, or other events related to the stocks added to their list and then act accordingly. Stock prices can shift anytime, so traders should be able to operate faster and smartly.
Reversal trading strategy
Reversal trading strategy that alerts traders to sell long positions or take short positions when the trend shifts. Traders use the RSI (Relative Strength Index) to determine the reversal trend, which can also be used to understand the market movement.
When the price trend changes its direction, traders attempt to get out of positions aligned with the trend before a reversal happens. It is important to get out from a reversal because they can stay for a longer duration.
Scalping is a method designed to use in intraday trading because it can provide you with the best information related to the stock that should be bought or sold for a short duration. The scalping method is used individually by traders to gain short-term profits.
Traders also use it to supplement other trading styles. Scalping has proved itself to be a perfect strategy that can be combined with intraday trading. The important thing to remember is to stick with its strict exit policy. If you are feeling to start intraday trading, you should learn about this method, and it will help you make profits in short durations.
Bull flag trading strategy
The Bull Flag Pattern is a chart or graph representing the bullish continuation pattern. Bullish flag formations are seen in stocks having robust uptrends, and the pattern emerges like a flag and pole, where the flag is due to consolidation in price, and the pole is the outcome of a steep rise in stock.
Timing is also crucial, and you can trade the Bull Flag Pattern when there is a strong trend in the market or break out. Intraday traders can use this to identify the trends that are short terms and then invest or trade accordingly.
Moving average strategy
Moving averages are to find out the movements of trends, and traders use the moving average crossover strategy to identify the middle of a trend. Now trends move either upside or downside. If the trend is going upside, the price is rising, and if it goes downside, it means declining. Traders can use the moving averages to find out the direction of the trend and trade accordingly. It can find the possible entry and exit points for traders in intraday trading.
Pivot point strategy
Pivot points are technical indicators that can spotlight the possible trade entering points. Traders use 2-minute or three-minute charts to find trading positions.
They mark pivot points on the charts, and when the price reaches that level or mark, you make a trade. As per the reports, these charts provide accurate information, and the risk is much lower.
Pull back trading strategy
A pullback trading strategy can be a profitable aspect while day trading. Traders use it to find the weak stocks (that will rise at some point) in the uptrend and then wait for the stock prices to increase.
Once the stock prices rise, they sell these stocks and profit from them. It is a technique for day traders to find the lowest price for the stocks they want to buy in an uptrend. It is a simple and accurate method to make a profit in short durations.
Gap and go trading strategy
Stocks with no pre-market volume are easy to find, and they open with a gap from the previous day. You must understand two terms: gap up and gap down. A gap up occurs when the gap opens higher than the previous day, while a gap down occurs when the gap opens lower than the previous day.
Day traders are always on the lookout for such stocks because they pose less risk. It is a quick and easy way to earn money in the short term.
The Key Takeaways
Successful intraday trading means buying and selling stocks within the same day. It is one of the most widely used trading strategies among intraday traders. This blog highlights everything that is linked to intraday trading. Before you plan to start with Intraday trading, you must educate yourself on how this strategy works and the risks associated with it to become a successful intraday trader.
There are plenty of free resources to learn technical analysis that you can refer to online. Even Youtube has some quality content on investing and trading. But make sure you read from genuine resources and take everything with a pinch of salt. For more such content on strategies and the stock market or stock exchange, stay updated with our blog.