Intraday trading is one of the most popular avenues for making quick money. But the quick money does not come easy. It requires lots of skills, experience, and knowledge to be successful. Most traders in the stock market think that intraday trading is easy and anyone can make money out of it. This is not true. The traders make some common mistakes in the market and end up with huge losses. To help them in overcoming these mistakes, we list down some of the tips that will help them in becoming a successful trader.
Things to Follow in Intraday Trading
- Never Trade Against Market
As a trader, you must trade in the direction where the market is heading. If the market is going up then you must take long trades and if the market is going down, it is advisable to take the short trades. This is because in intraday trading you have to square off the transactions on the same day and taking a trade against market direction can lead to losses. The right side of the trade is always the side where the momentum is more. Therefore, never try to outsmart the market.
- Put Stop Loss
Stop-loss is one of the most important components in intraday trading. Stop loss protects you from huge losses by closing your trading position when a particular price is hit. Stop-loss not only saves you from extreme losses but also protects your capital. Without putting a stop loss there is always a risk of heavy losses and losing the entire capital. By minimizing the loss you are able to stay in the game and make new trades. Therefore, it is always advisable to put a stop loss in place in intraday trading.
- Average In Loss Trade
One of the common mistakes that intraday traders make is that the averaging the stocks when their trade is in the loss. This is not at all a right practice. Instead, they should square off the trade immediately when it is not in their favor and not go for averaging the loss trade. If one trade is in loss then it is always better to exit from it and enter into a new trade where the chances of making profits are higher. Risk management is very important for intraday trading.
- Never Rely On Trading Tips
The biggest challenge that intraday traders face is what stocks to trade and how to trade. To find the trading ideas, intraday traders rely on the trading tips that are given to them from the external sources. Intraday traders must avoid following these tips. Instead, the best way for an intraday trader to find the stocks is by learning the charts and technical analysis of stocks. Also by understanding the impact of news flows on the stocks can help in taking the right trade. With time and experience, you will learn all these things gradually.
- Too Much Panic In The Market
Many traders lose money in the market because of panic. The traders who panic in the market end up making wrong trades and tend to close their positions soon. When you are entering into intraday trading, you must learn to manage the risks well. The key rule in the market is not to panic when there are signs of volatility.
- Be Disciplined
To be successful in intraday trading you must be disciplined. Here discipline means that you have to put limits on the amount of loss that you are ready to bear. This means that every trade must have a stop loss in place. Without following trading discipline, there is always a chance that you might make huge losses in the market, leading to an overall loss of capital. With discipline, you get the insurance that if one trade makes a loss you always have the opportunity of entering into another trade and make a profit from it.
- Sell Early In Profits And Hold In Losses
Intraday traders make losses in the intraday trading because they have the habit of booking profit at a very early stage of trade and holding trades in losses for a long period. Here they do not use their brains and instead trade with heart, leading to heavy losses. It is always advisable that the intraday traders enter a stock with a target and stop loss in place. If the target is hit then exit the stock. Similarly, if the stop-loss triggers, close the intraday position immediately. This strategy will help in making maximum profits.
- Control Emotions
Controlling emotions is very important in the stock market. There is no place for emotions in day trading. Only by following a practical approach you can make profitable trades. Overcoming fear and greed is very important to be successful with intraday trading. By avoiding emotions in intraday trading, a trader can save himself from the wrong decisions that he may take out of fear or greed.
Overtrading is one of the most common problems with intraday trading. Since intraday trading can be done on margins, most traders enter into leverage trade and end up losing everything. Intraday trading should be done only with only that amount of capital which you are ready to lose and not more. By overtrading, the traders put many more things at stake other than their capital which can even destroy their life financially. Therefore, always trade within limits judiciously.
- Trying For Rapid Loss Recovery
When the intraday traders suffer loss, they over trade aggressively or average stock to recover the losses. This strategy backfires most of the time and leads to more losses. An intraday trader must understand that when they incur a loss in a particular trade, it means that the trade was wrong. By averaging or overtrading to recover the loss is a very wrong approach. Losses are part of intraday trading and you must learn from it rather than trying to cover your loss rapidly.
- Every Day Is Not Trading Day
When you are not able to analyze the market correctly then you must understand that every day is not a trading day. On some days it is good to be at the sidelines rather than taking an intraday position with less confidence. You can become a successful intraday trader when you can realize or understand which days you do not need to trade
By following the above points you can avoid losses in intraday trading. To learn more about the stock market and become a successful trader, you must visit Trading Fuel regularly. Our website posts blogs and articles that are beneficial for traders and investors. Moreover, the content on our website is free of cost. Our aim is to make our visitors financially independent by imparting them with stock market education.