Is it Safe to do Intraday Trading? ( Beginner’s Guide)
This should be in everyone’s mind once in a time before starting the intraday trading, am I right?
Actually this question is normal even if you start any of the business you make sure that it will be correct for you.
And so every individual have crossed this stage of such questions.
Don’t worry about this as through this article on “Is It Safe to do Intraday Trading?” has all your answers.
Starting with the solution, first let’s again understand the definition of the intraday trading.
What is Intraday Trading?
Intraday Trading defines about the position that is taken when the market opens and the same position is need to be squared off before the market closes.
This is highly volatile market with many of the challenges associated with.
To any of the beginner, they might seem it to be safe and lucrative option to earn money in short term by booking the profits.
But the thing is that this is just the cover or the top layer that the trader finds it interesting or attractive to choose but the inner surface has the real ball game.
No doubt that intraday trading provides high returns on the investment but with that it also has the risk factor associated with it.
For the beginner, it is not safe for them to directly start their career in intraday trading but rather than that they should start the trading by choosing the delivery trading.
If you want to understand the difference of intraday and delivery trading, then read this blog on “What is Intraday and Delivery Trading?” this will provide you more clarity.
As in the intraday trading, there is no such overnight risks associated with it but it has highly risk during the market hours due to the volatility.
So, Intraday Trading is not safe but it can be safe when the individual is ready to get lot of experiences, expertise and knowledge about the stock market which will come after a lot of practices and dedication in the trading.
For making the intraday trading to be safe there are different pointers that will help the trader to form the habit and that will them to earn profits from the intraday trades.
Pointers for Safe Intraday Trading
The traders need to monitor the market using multiple screens with the use of technical analysis of stocks and also to use the software for predicting the correct moves and to act wisely on them.
The traders takes a long time for developing the skill for analyzing the price and volatility patterns.
Though, you know that intraday trading is associated with higher amount of risk so in order to do the safer intraday trading the important thing to do is to understand the risk management and after that follow in every step of trading.
As the intraday trading increases the fluctuations that increase the levels of risk associated with it and with this there might be chances that you lose all your trading capital in a single trade.
So, therefore it is advisable for the traders to take the guidance and proper knowledge first about the intraday trading.
The important thumb rule for the intraday trading is to risk only 1% of your total capital on each of the single trade.
And always remember to calculate in every trade your entry point, exit point and most important the stop loss.
Only the stop loss can help to cut your huge losses if in case your decision goes wrong.
There are more few factors for the traders to know that will help them to reduce their risk factor in the intraday trading.
1. Do Thorough Analysis
With the help of thorough analysis, you can find all the loop holes and get time to make decision on it.
The trader should know about the sector or the index very well for the trading purpose.
With the help of the technical analysis, the trader can predict the price momentum of the securities or the assets and with the fundamental analysis it will help for the company purposes and mainly it is for long term purpose.
If the trader has done his research completely, then he will be aware of any of the unexpected events and if they occur then how to execute the decision.
This all is the main purpose for the trader to do the thorough analysis.
2. Select the Stocks Wisely
For the trader, you should note one thing that if you are trading in intraday then you should select the stocks that are liquid in nature.
Avoid the stocks that are volatile in nature and rather then that choose the stocks with higher volume in it.
There should be more correlation with the sectors and the indexes and this should be known by the traders.
For safe intraday trading, you need to trade in 1 or 2 large cap liquid stocks and volumes.
I am sure that you got about selecting the stocks wisely as this is where the whole game depends on while decision making in trading.
3. Use the Stop-Loss in every Intraday Trades
Stop-Loss is the only essential tool that the traders have in order for their risk management.
Before executing the trades, the trader needs to make a strategy that will help them to get the right entry point, stop-loss and the exit point.
Setting up the stop loss is what helps you to limit your losses from the trades.
In intraday trading, the risk management is as essential as the profit management.
So, this was all about the important pointers for using the stop loss in every single trades of intraday trading.
Conclusion
“Is It Safe to do Intraday Trading?” and from this article I hope that now there is no stone unturned in your head about this question. As we have given the solution in a lot brief and in simple words so that any common man can understand this. Hoping that this pointers will be useful for you in the intraday trading and always remember that always keep the risk to reward ratio to 1:3 or rewards is what you decide but risk should be 1% of the trading capital.
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