Intraday trading is one of the essential aspects of the stock market. Intraday trading has the potential to generate huge returns. The sky is the limit when it comes to making returns in the stock market. By following a strategic approach you can make a good amount of returns. Since the global economy is hit by the Corona Virus and there are many disruptions, the stock market volatility is at peak. Therefore, it becomes essential for traders to have the right approach to be successful in the market. In the article, we will list down points about how to trade during the COVID-19 phase in the stock market.
Things to Keep In Mind While Trading in COVID-19 Phase
- Technical Analysis
To make good returns consistently in the market, the following technical analysis is important. The stocks during the COVID-19 phase are showing extreme volatility and picking correct stocks for trading might be a difficult task. However, if the stocks are rightly picked for trading, you can make incredible returns just in a single trading session. This is possible only if you know the technical analysis of stocks. With technical analysis, you can enter the stocks at the right time and make a timely profitable exit. By having a good technical analysis knowledge you can understand the markets and stocks in a much better way. It will help you in predicting the future movement of stocks accurately.
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- Control Emotions
The stock market has been showing wild swings due to the uncertainty of the Corona Virus. It becomes important that the decisions you take are practical in nature and not driven by emotions. Emotions have no place in the stock market and only people with a practical approach can survive in the market. Therefore, in volatile markets, it is important to maintain composure and take decisions wisely. Emotional decisions comprising of extreme greed and fear often lead to losses in the market.
- Stop Loss
Stop loss is one of the essential ingredients to become successful in the stock market. Stop loss minimizes the loss and saves your capital from erosion. In a volatile market like it is now, the importance of stop loss is much more. Stop loss is the price at which the position of intraday transaction squares off. When the price of a stock reaches that particular price level, the computer automatically closes the open position. This helps in protecting the capital and making you exit a trade with minimal loss. The level at which you can put a stop loss depends on your risk taking ability and knowledge of technical analysis.
- Timely Book Profits
COVID-19 hit market is presenting many opportunities to the traders. Since the market is very volatile, it is advisable to timely book profits and exit the trade. By timely booking profits in one trade, you can enter another trade and look for making profits there. Timely profit booking will help you in remaining surplus even in an unfavorable market.
- Always Close Open Position
The basic rule of intraday trading is to close all the intraday positions by the end of the day. Suffering from the disruption caused by COVID-19, the uncertainty it at all-time high in the market. This is leading to volatility and no one can predict accurately how the market will open in the next trading session. Therefore, it is always good to close the open position during the same market session. This will protect you against the uncertainty against the next market session.
- Select Liquid Stocks
Liquid Stocks must be the priority for intraday trading. Liquid stocks mean those stocks that have higher volumes. Since intraday trading is all about opening and closing the position on the same trading session, you must exit a stock before the market closes. This is possible only if there are sufficient buyers and sellers in the market. Therefore, it is always good to select liquid stocks for trading in the stock market.
- Don’t Move Against the Market
The key to success in the volatile market is trading in the direction of the market. Any trade taken against the market trend can prove to be fatal and lead to big losses. The best way to overcome this is by taking the trade on the long side when the market is rising and taking the trade on the short side when the market is falling. This will save you from unnecessary losses and make profits consistently.
- Follow Disciplined Approach
To become a successful trader it is always advisable to follow a disciplined approach. This can be through putting stop loss in trade, not averaging stocks for intraday, selecting stocks by technical analysis, researching, etc. By following the systematic and strategic approach in the market will help you in making profitable trades consistently.
The above are some of the points that you must keep in mind while trading in COVID-19 volatility. You can learn more about intraday trading on Trading Fuel. We are the leading provider of stock market education in the country. With our free blogs and articles, you can learn the different concepts of trading and investing in the market. Subscribe to our website and learn about the stock market at zero cost.
How To Trade During COVID-19 Phase | Part 1