Intraday trading, or day trading as it is popularly known is considered to be a popular entry point for new traders. However, as traders develop their intraday trading strategies, they can even consider taking up taking it up full-time. When executed right, intraday trading can provide a host of trading opportunities to anyone with even a fundamental knowledge of the market.
Features of Intraday Trading
In order to understand how intraday trading is conducted, let us take a look at some of its most prominent features:
- – ‘Intraday’ means ‘within day’. Essentially, in intraday trading, a trader buys and sells securities within the span of a single day.
- – Intraday trading can work in a number of ways. A trader could buy securities in the morning and then sell them off by the evening. Alternatively, he could sell the securities in the morning, and buy them back by the end of the day.
- – Intraday tradersare not looking to invest in trades for the long term. They essentially focus on taking advantage of high liquidity or the fluctuating price movements of assets, within the day.
- – With regular trading, the settlement in assets takes place over a longer period of time. However, with intraday trading, there is no change in ownership as all positions are squared-off before the market closes for the day.
What is Needed for Intraday Trading?
Intraday trading is done successfully with the aid of a few essential requirements. While anyone can venture into intraday trading any time, to achieve success, it is important to have these tools by your side:
- – A reliable internet connection is paramount for intraday tradingin today’s time. The profits from a day’s trading hang at every little price fluctuation. This means that the trading platform of your choice should keep getting updated regularly. Even a minor disconnection from the trading platform could lead to major setbacks for your intraday trading
- – While intraday trading is recommended for beginners to trading, it is recommended to have at least a basic understanding of how the market works. With the knowledge you bring to intraday trading, you can improve your chances of success.
- – It takes new intraday tradersquite some time to develop the strategies that work best for them. But from the outset, it is best to have a basic business plan in place. It is best to approach intraday intraday trading with a clear understanding of your risk appetite, capital reinvestment and target markets.
- – Signing up with a good brokerage firm can go a long way in your intraday trading The right brokerage firm can provide you with the support, guidance and research you might need with your daily trades.
How to do Intraday Trading?
Finally, with the right tools in place and a strategy in mind, here are the steps to follow to do intraday trading:
- – First, traders typically practice their intraday trading strategies with a simulated trading account. With these, they can try out their intraday strategies with virtual money and get a fair idea of how to get started.
- – The next step is to open a trading and demat account. You can open one with a trusted brokerage firm that can connect you to the relevant exchanges based on the assets you want to trade in.
- – For intraday traders, since the time span of trading is so short, the key is to select stocks wisely. The best stocks for intraday tradingshould be high liquidity and have medium to high volatility. For a beginner, it is best to begin by focusing on one or two stocks at a time.
- – Intraday trading also depends heavily on the time at which the trading is conducted. This timing differs according to the financial market a trader is investing in.
- – Another practice followed for intraday tradingis setting a Stop Loss or Daily Loss Limit. If the amount of money a trader loses in a day hits this limit, he stops trading for the day. This helps minimise his losses and keeps his trading capital in check.
- – With the use of technical tools and referring to the relevant charts, a trader can predict trends in price movement. He also keeps an eye out for news stories about how his stocks could be impacted. With time, this helps develop his larger intraday tradingstrategy and he makes regular profits.
With the right intraday trading strategies, a trader can settle positions by the end of the day and reap considerable profits over time. In this way, intraday traders can make the most of both rising and falling markets and their capital is never blocked. With the support of a trusted broker and the right tools, anyone can start intraday trading and benefit from this system.