How to Enter and Exit In Intraday Trading ? : It’s a largely well-known fact that majority of the intraday traders don’t make profits in the markets. In most cases, they book profits one day, and the very next day they incur a loss because the market goes into a correction or they made a wrong choice of stocks. The moment a trader starts to book losses, they go back to the drawing board and realize the importance of how to enter and exit intraday trading. Notwithstanding the reasons, it’s important to understand the fundamentals involved in day trading. This is very important if you want to make day trading as your career.
How to enter and exit in intraday trading
Intraday trading strategy must always include entry and exit signals. A trader should know when to get into a stock position and when to come out of it. Here are some fundamentals that a trader should keep in mind to make the most out of intraday trading.
Choose the correct stocks
Most of the day traders like trading in stocks that have both volatility and liquidity. The volatility of a stock ensures a great price movement which translates to bigger profit margins, or losses. Liquidity, on its part, ensures that the stock is being traded in enough numbers. This helps traders to determine their day trading entry and exit points sans worrying about the number of buyers and sellers of that particular stock. Infosys, SBI, ONGC, and Reliance Industries are some of the actively traded volatile and liquid stocks.
The importance of homework
Before you zero in on a stock, it’s important to understand the fundamentals. Find a sector that interests you and then find some stocks that you will be interested in trading. Observe the stock for some days on the indices. Notice the key factors like liquidity, volume, movement etc. Do not trade in stocks that are news driven. These stocks usually involve panic buying and selling. It’s difficult to determine how to enter and exit in intraday trading in such stocks. Trade in stocks that are backed by a strong management have salable products and services and have robust financials.
Moving with the market
Stocks that move with the market are ideal for day trading. There are several stocks that bear a great correlation to the market and moves in tandem with the key indices. It essentially means that the price movement of these stocks mirrors index movements. For instance, when the Nifty rises, these stocks tend to rise and vice versa. As a trader, you are in a much better position to predict the stock’s movement and increase your chances of raking in profits.
Oil and gas stocks, for instance, moves according to the price of crude oil price in the international markets. Predicting their movement, hence, is much easier. At the same time, there are many stocks that show no particular pattern in their movement. These are chaotic stocks that are largely sentiment driven and must be avoided. Most small cap stocks fall into this category. They involve a risky trade.
The right price
Traders follow several strategies to determine how to enter and exit in intraday trading at the correct price. A combination of support and resistance prices of a stock are used to take a call on day trading entry and exit points. The usual strategy is to buy a stock when it’s above the support price and sell at the resistance levels. If the price of a stock is below its resistance level and is falling, one should sell it with a target to buy at the support level. Many day traders book profits immediately when the stock becomes profitable. Others like riding the momentum. Trade in a disciplined manner regardless of your strategy.
This is perhaps the most important day trading principles and can never be overemphasized. Many traders take delivery of their stocks to avoid a loss and holds on even when the price tumbles. This leads to greater losses. It’s wiser to book a small loss on a given day than to incur losses on each subsequent day after taking delivery. Such a strategy violates the basic principles of day trading. Having taken delivery, you don’t know when the stock will recover and are stuck with it. Always maintain a stop loss and exit the stock when the same is triggered.
Move with the trend
If you are wondering how to enter and exit in intraday trading, remember, it is always advisable to swim with the market trend. In the case of a bull run, i.e. when the market is rising, stay long and invested. If the market looks sluggish, wait for stocks to hit the bottom and then take a long position. You can also adopt a short selling strategy which is selling at higher levels and buying low to square-off your positions.
The old adage “survival of the fittest” is best described in intraday trading. It is a mind game where only the strong survive. Consistency and discipline is the mantra here. Keep your emotions at bay in day trading. There is no place for emotions like fear and greed here. These two, in fact, are the worst enemies of a day trader.Do your homework and determine the day trading entry and exit points before you invest.