Definition: Intraday Trading means the trade that starts when market hours start at the particular day and ends when the market hours ends on that same particular day. This is the single-day trading that moves with the price movements and the trades ends on the same day. In Intraday trading, you need to square-off the positions at the end of the market closes down. The motive of the trader is to earn profit and not to hold the stocks for the long term.
Basic Guidelines for Intraday Trading
1. Choosing the Right Stocks
Most of the intraday traders like to trade in that stock that has liquidity and have volatility. Liquidity means that there are enough volumes of the shares that are being traded. This permits to enter or to exit the market at the right price without having to worry about the buyers or sellers for that particular stock in the market.
Intraday trading allows trading in higher volume. Volatility makes sure that there is vast momentum in the price of the stock which can even transfer into great profits or losses. High Liquid and volatile stock mean when the volume is higher and that certain company has some brand value then only higher profits are made.
2. Do your Homework
Before you make any assumption on buying or selling of stocks, it is important to understand completely about the fundamentals of the stock. You should work on that sector in which you find it interesting and you can easily grasp about the segments of that particular stock, find few shares that you are comfortable with and start applying your trading learning on that by doing trades.
After trading on these stocks for a few days you will make to notice about the price movements, volumes, liquidity etc. It is also important to know about the company that how strong it is and it is also important to make yourself learn every day and regularly.
3. Find Stocks that move along with the market
Many stocks in the market have a great correlation to the momentum of the major indexes. This results that they lensed the momentum of the indices. The pattern also works when the indexes are rising it leads to an increase in the price of the stocks or the vice versa. The patterns are easier to predict the momentum of the stock and hence increases the chances of profit.
Many stocks do not follow any particular pattern for the stock and it is difficult to predict their momentum of stock prices. Some of the mid-caps and small-caps fall under this category which shows no pattern in the momentum of the stocks.
4. Know the Right Place
There are numbers of strategies that the traders follow to find out the right price for entry and exit from the particular stock. They use the combination of resistance and support prices of a particular stock to decide when to buy and when to sell that particular stock.
Basics for buy or selling of the stock is when the share price is above the base price then one should opt to buy that shares with the target of selling at resistance levels and when the share price is below the base price then one should opt to sell the shares with the target of buying at the support levels at which the base price is average of high, low and closing of the stocks. Some traders like to book the profit immediately after the trade become profitable, were while others like to move along with the momentum of the stock price. No matter whatever your strategy is, you should importantly to stick with it in a disciplined manner.
5. Set a Stop-Loss
The importance to work with the stop-loss is better for the intraday traders. Many of the traders find it difficult to book a loss and take the delivery of the stock if the prices go down. Keeping a stop-loss is the prevention of controlling over the losses.
To set the stop-loss beforehand the trade starts is the better step to make the trade profitable. Stop-loss is an essential part of the process of knowing the right entry and exit point. This is the only method that the trader can prevent from making losses in trading.
6. Move with the Trend
If the market is in an uptrend or a bull run, it is usually a good idea to stay positional in that trade. If the market is in a downtrend or a bear run, then it is usually a good idea to exit the market before getting into a positional trade.
You should not work with emotions while trading or else if you do this then surely you will make a loss in that trade. Trading should be planned beforehand and just to decide on the market with the movements of the stock price. Discipline and consistency are the two key factor to be a pro-trader in the stock market.
This blog will make you understand the basics of doing trading in intraday trading. Following these basics with discipline makes the trader earn more profits. Trading Fuel is the blogging site for the educational purpose and provides blogs for free of cost to the learners in the market. We are working intensely to make the information very easy and simple for the readers to understand. We hope that you get answer of How to Trade in Intraday Trading?. For more info read Trading Fuel!