Intraday trading is about investing at the beginning and getting the results by the end of the day, and you do not need a demat account for that. However, it is not an easy task, especially as a beginner. Thus, here are the 8 things to learn before intraday trading because it requires a lot of research.
Intraday trading and other trading methods differ from each other before you must leave your position before the market closes, no matter whether it leads you to a profit or loss. On the other hand, other regular trading methods allow you to hold the stocks until you find the right time to sell them on any day.
Your Checklist For Best Intraday Stocks
1. No Intraday Trading In The Volatile Market
Volatile markets are unpredictable, which means you cannot decide whether they will bring you profit or loss at the given period of time. Volatility is the major risk in intraday trading. Thus, make a move in this type of trading when the direction of the market is predictable according to your research.
2. Maintain A Stop Loss
Stop Loss in trading is a risk management tool that helps you decide the maximum loss you can suffer. After that, you have to sell the security to avoid more losses. You may determine the maximum loss by taking out a percentage from the purchase price. Generally, the purchase price should be 1% to 3% more than your stop-loss.
3. Do Not Flow With Your Emotions
You, especially as a beginner, might be affected by emotions such as fear, greed, panic and more that have no place in the stock market. Emotions in stock market trading can affect the stop-loss you set or invest more than what you can afford to lose. Similarly, you might fall prey to attractive deals that might bring losses over time.
4. Find The Right Time
You must find the right time to buy, hold, and sell the stocks. Otherwise, the whole market will be having profits, while you might be still waiting for the right time. For that, you must find the low risk entry and exit points and have extensive study of money market, and it applies to all types of trading.
5. Smaller Investments In The Beginning
Make small investment in stock market in the beginning, no matter how much you believe in yourself. In that case, you may buy 1 or 2 stocks and increase their number (to a limit) as time passes. Learn from your mistakes and apply those lessons in the future.
6. No Overtrading
Do not overtrade in stock market. Overtrading occurs when you buy or sell excessive securities over a short period, and you might even overlook your research and strategy in this case. To avoid overtrading, you must have a risk management strategy, a well-researched trading plan and think rationally than emotionally.
7. Understand The Chart Patterns
Chart patterns in trading help a lot in technical analysis. Here, prices are graphed when a pattern repeats or occurs naturally. In short, you study chart patterns to predict what will happen in future based on the past data in the stock market. Types of chart patterns in stock market are ascending triangle, head and shoulders, double top, symmetrical triangle and more.
8. Follow Your Research
Do not lose your calm in this volatile stock market. Follow your research rather than following others because they have their formula and you have your own. Do not panic if you think that the market does not go according to your research.
Choosing Stocks For Intraday Trading
As an intraday trader, you have to prioritise technical analysis, by looking at the charts, rather than just doing the fundamental analysis. Some intraday traders might trade a lot of stocks, but you stick to only a few. The following are the tips for selection of stocks for intraday trading:
1. Choose High Volume Stocks
Stocks have a higher volume if they are actively traded in the stock market. On the other hand, volume also refers to the number of shares that are traded during the trading day. So, looking for a high volume stock is a better move because it has more demand and you can enter and exit the position without any effect on its price.
2. Correlated Stocks
Correlated stocks move in the same direction. So, you may determine the performance of one stock by looking at the movement of another to reduce risks. Thus, buying correlated stocks in intraday trading is a better idea.
3. Volatile Stocks
Do not fall prey to the stocks that suddenly undergo large price movements, especially in intraday trading. However, some volatility in stock market is acceptable if someone can take your position after you leave it.
4. Consider The News and Trends
Intraday trading might not be suitable for every trader. Points mentioned above suit you more as a beginner in stock market and you might change your trading strategy over the years. Consider your financial objectives, risk taking ability, available capital and more before investing in stock market. Similarly, know before you want to trade or invest in intraday trading.
Conclusion
Volatile stock market conditions bring several risks. Thus, as a beginner, you must perform enough research, especially under expert guidance, while making a decision. Similarly, be ready to invest in a wide range of stocks to enhance your portfolio. Know your investment style and put in only the amount you are ready to lose. In that case, do not put everything in. Moreover, the money market has various stocks for you to invest in as a beginner.