Introduction to intraday trading strategies

Introduction to intraday trading strategies

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Intraday trading refers to buying and selling shares within the same day. While trading intraday, you should square off your position before the day ends. Beginners may find it challenging to trade intraday since the market’s day-to-day volatility tends to be high. However, if intraday trading is strategised well, you can make the most of your investments.

As lucrative as intraday gains can be, you need to know the risks of such trading in the stock market.

  1. Security selection risk: It is the risk of selecting the wrong stock for day trading. A faulty portfolio mix can make your intraday trading plans go for a toss. It is necessary to apply the right intraday strategy to determine the stocks to buy today.
  2. Volatility risk: It is the risk of sudden and unexpected market changes that further impact stock prices.
  3. Exposure risk: Since intraday trading provides traders with extra leverage, they tend to take positions higher than they can afford to cover. Gains from a high level of exposure come with a higher risk of loss.

The above risks, along with the following five significant rules, must be considered before opting for intraday trading:

  • Place trades for an amount that you can afford to lose
  • Research well before trading
  • Have a clear intraday strategy
  • Time your trades
  • Always close your position

It is crucial for you, as a beginner in intraday trading, to determine the right trading strategy. Mentioned below are a few intraday strategies used by traders for achieving success:

  • Scalping: It refers to a strategy designed to generate small profits from slight changes in prices throughout the day.
  • Range trading: This type relies primarily on support and resistance levels for buying and selling decisions.
  • News-based trading: This type of trading typically capitalises on the elevated volatility associated with news events.
  • High-frequency trading: This strategy aims at exploiting short-term inefficiencies and minor market variances through sophisticated algorithms.

To improve your chances of success, do not lose sight of the following day trading tips for beginners:

  • Restrict stock selection to 3–4 liquid stocks
  • Set your stock target price and stop-loss levels
  • Do not move against the market trend
  • Once the target is reached, book profits

Questions to consider before diving into intraday trading

  1. Which intraday trading strategy should I adopt?

You can narrow down on your intraday trading strategy after trying out different techniques, which depend on the market conditions and your appetite for risk. A successful trader’s most potent weapon is a well-designed strategy.

  1. What is the best way to overcome greed when it comes to intraday trading?

Maintaining the correct balance between greed and fear is essential while trading intraday. The most effective way to control desire is to book profits at the level you set.

  1. Where should I place my stop loss?

You can put a stop loss according to the price levels you arrived at through technical analysis. Knowing the amount of loss you can afford to bear is essential while determining stop-loss levels.

Intraday trading requires a thorough understanding of the market, its trends and the factors that influence or set these trends. While trading strategies could help you book profits, these aren’t foolproof ways to avoid any kind of loss or risk when deciding on the stocks to invest in.

To ensure that you take the right investment decisions, it is prudent to reach out to a financial expert who can curate bespoke stock and mutual fund investment plans that are aligned with your financial goals, standing, investment horizon and risk appetite.

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