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Intraday trading involves buying and selling stocks within the same day, using online trading platforms. The objective is to make profits based on market movements. It is different from delivery-based trading, where purchased stocks are deposited into our Demat account and can be held for an extended duration, ranging from days to months or even years.
Intraday Trading Tips for Beginners
Intraday trading can be a challenging and risky activity, especially for beginners. However, here are a few intraday trading tips for beginners that help them get started:
- Select the Right Stock:
- Once you have selected the right stock, the next step is to determine both the entry price and the exit price.
- It is dangerous to enter trades blindly, as it can lead to unfavourable outcomes or potential losses.
- It is advisable to set the right entry price and stick to it. This helps prevent missing out on buying the stock due to fluctuations in market conditions.
- It is also important to set an exit price, which indicates the price at which you want to sell the stock.
- This practice will help you to become a profitable trader.
- Set the Right Entry and Exit Price
- Once you have selected the right stock, the next step is to determine both the entry price and the exit price.
- It is danger to enter trades blindly, as it can lead to unfavourable outcomes or potential losses.
- It is advisable to set a right entry price and stick to it. This helps prevent missing out on buying the stock due to fluctuations in market conditions.
- It is also important to set an exit price, which indicates the price at which you want to sell the stock.
- This practice will help you to become profitable trader.
- Use Stop-Loss
- Once you have set the entry and exit points, the next step is to set a stop-loss level.
- A stop-loss is a predetermined price at which you will exit the trade to limit potential losses. It is a risk management tool to protect your capital in case the trade goes against your expectations.
- Setting a stop-loss level is very important as it helps prevent significant losses in case the stock does not perform as expected.
- For Example, let’s assume that you buy a stock at Rs. 1000 with the expectation of it rising in price. If you set the stop-loss at Rs. 980 and the stock begins to move in the opposite direction, reaching Rs. 980, the stop-loss will be triggered.
- As a result, you would bare a loss of just Rs. 20, even if the stock continues to decline further to Rs. 900. The stop-loss helps you limit your losses and manage your risk effectively.
- Book Your Profits
- In intraday trading, it is most important to maintain discipline and avoid greed and emotional decisions.
- High-volatility markets can offer both high profits as well as losses.
- Instead of being driven by greed, it is important to stick to your predetermined trading plan and exit the stock once it reaches your target price.
- Additionally, if you have a strong feeling that the stock price will move in your favour, you can adjust your stop-loss level accordingly to protect your profits.
- By following these principles, you can better manage your trades and reduce the influence of greed on your decision-making process.
- Do not challenge the market
- Fluctuation is one of the fundamental characteristics of the stock market.
- In intraday trading, you should know that the market may not always move according to your expectations. Even if you anticipate a bullish trend, there is always the possibility of a sudden reversal, leading to a bearish market.
- It is wise to stay away from challenging the market as an intraday trader, understanding that market dynamics can change unexpectedly.
- By maintaining a discipline and adaptable approach, you can better get the uncertainties of intraday trading and make informed decisions based on market conditions.
- Close all your open positions before the market closing session.
- One of the important tips for intraday trading is to close all open positions before the market closes.
- Intraday traders shouldn’t take delivery of stocks as it goes against the nature of intraday trading.
- Holding intraday stocks for delivery can harm your portfolio. Unlike delivery stocks, intraday trading is based on technical analysis and takes advantage of short-term price movements.
- Therefore, it is recommended to avoid converting your intraday trading stocks into delivery stocks, as post-market news can significantly affect delivery stocks but not intraday trades.
- Timing is Important
- Intraday trading profits are heavily influenced by timing. It is important to catch the market’s mood during different sessions, such as morning, noon, and closing sessions.
- Typically, it is advised to avoid taking trades within the first hour of the market opening due to high volatility.
- Experienced intraday traders often execute trades between noon and 1 P.M. This is a time frame where they get favourable trading opportunities.
- By understanding and considering the timing factors, intraday traders can enhance their decision-making and potentially optimize their trading outcomes.
- Research your target companies thoroughly
- After selecting a stock for intraday trading, conducting thorough research on the company is also helpful.
- Begin by performing technical analysis to understand the stock’s price patterns and trends. Additionally, it is important to examine any upcoming corporate events related to the company, such as mergers, acquisitions, dividend dates, bonus issues, or stock splits.
- These events can act as valuable indicators for catching the momentum and potential direction of the trade.
- By considering both technical analysis and corporate events, you can gather valuable insights to inform your intraday trading decisions effectively.
- Process of choosing the stocks in intraday trading for beginners
- It is often useful to select stocks with high trading volume for intraday trading.
- When trading volume is high, it typically indicates increased market activity, leading to price movements that are more likely to be in the upward direction. Additionally, it is important to analyse the resistance levels of stocks.
- When a stock breaks its resistance level, it tends to become a support. This means that upward-trending stocks may fall after breaking resistance, presenting a potential opportunity for short-selling, while downward-trending stocks may rise after breaking resistance, offering a favourable buy option.
- By considering trading volume and resistance levels, intraday traders can identify potential opportunities for profitable trades.
- Learn Technical Analysis:
- To gain a comprehensive knowledge of intraday trading, it is required to learn about technical analysis.
- This will help you to understand various technical indicators and their utility in making informed trading decisions. Technical indicators can assist in stock selection and potentially lead to profitable trades.
- Take the Relative Strength Index (RSI) indicator, for example. When the RSI is above 30, it generally indicates a buy signal, suggesting that the stock may be undervalued. Conversely, if the RSI is above 70, it suggests that the stock is overbought, indicating a sell signal.
- By utilizing technical indicators like the RSI, intraday traders can gain insights into the market’s momentum, identify potential entry and exit points, and make more informed trading decisions.
- In short, learning technical analysis can give you direction to achieve your goal.
In addition, the most important intraday trading tips for a beginner is to practice, learn and follow discipline very strictly. Don’t let your emotions and greed ruin your trading career. Always remember that the right mindset and psychology is the key to winning in the stock market.
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