Intraday trading means to buy and sell stocks in the stock market on the same trading day.
When a person puts money in the stock owned by a company, and mentions ‘intraday’ on the portal of the platform used, this enables the user to buy or sell the stocks on the same day before market closes.
The stock market gives great returns for long term investors and short term investors as well. For instance, if a stock opens a trade at ₹500 in the morning, it soon climbs to ₹550 in an hour or two. Now, if you’ve purchased the shares priced at ₹500 and sold them at ₹550, you could soon make a whooping profit of ₹50,000, all within a few hours. This is called intraday trading.
A stock broker Depository Participant is the agent or the registered stockbroker for the management of a depository. A depository is an institution or organisation that holds the securities of an investor through the depository participant or agent, and also makes sure to provide services with respect to these securities. The depository holds the securities of the investors in the form of shares, debentures, Government securities, bonds, index funds, mutual fund units, etc. all in an electronic form. It acts as a bridge between the businesses which issue the shares and its shareholders. Following are a few investment tips for intraday traders to make money from stocks in India.
● Choose Two or Three Liquid Shares
Investing in mid-size to small-caps may result in the investor having to withhold the shares because of low volumes of trade. Instead, in intraday trading it is recommended to choose two or three large-cap shares that are highly liquid.
● Develop an informed short-term plan beforehand and abide by it
It is important to determine your entry level and your target price so that you don’t miss out on an opportunity to enjoy higher gains from a price increase. It is also recommended to book your profits once your target price is reached. Uninformed greed may lead you to keep a stock beyond the appropriate time frame.
● Realign your investment strategy for intraday trading (instead of long-term investment)
Intraday traders commonly take delivery of their shares when their target price is not met. They then wait for the prices to recover to earn back their investment. This is not a recommended strategy as the stock may not be worth the investment, since it was bought only for a short duration of time.
● Research Your Wishlist Thoroughly
Investors are recommended to include at least 8 to 10 shares in their wish lists and research them in depth. Knowledge about corporate events, such as mergers, bonus dates, stock splits, dividend payments, etc., along with their technical levels can also be important. Browsing the Internet to find resistance and support levels will also be helpful. Ofcourse, researching the fundamental concepts and jargon surrounding the stock market is necessary.
● Don’t Move against the Market
It is difficult to predict market movements, Even for experienced professionals with advanced tools. There are times when all technical factors predict a ‘bull market’, but there may still be a decline. These factors are only indicative and do not guarantee anything. When the market starts to move against your expectations, it is important to exit your role to avoid huge losses. Intraday trading provides higher leverage, which inturn provides decent returns in a day. Being satisfied with smaller benefits is crucial to succeeding as an intra day trader.
● Time the Market
Experts do not recommend individuals to trade during the first hour, once the markets open.
● Exit the Position under Unfavourable Conditions
For share trades that provide profits and price-give reversal (prices that are expected to show reverse trends), it is clever to book the profits and exit the open position. In addition, it is advisable to immediately exit and not await the stop-loss trigger to be activated, if the conditions are not favourable to the position.
● Invest Small Amounts:
It is not uncommon for beginners to get carried away once they make some profits during day trading. Markets are volatile and predicting the trends is not easy even for advanced professionals. In such situations, beginners can easily lose all their investments if they get carried away making a few profits during the day. This is why an important intraday tip is to invest small sums of money that an investor can afford to lose. Traders must not risk more than two per cent of their total trading capital on a single trade to maintain right risk management.
● Always Close All Open Positions:
Traders might get tempted to take delivery of their positions in case their targets are not achieved. This is one of the biggest errors and it is crucial to close all open positions even if traders have to book a loss. Not closing open positions, exposes the trader to overnight risk (which had led to the market crash in USA or Europe)
● Spend time on the monitoring and execution throughout the day
Traders must be able to monitor the market movements throughout the market session (from opening bell until its closing), and that cannot be done with a full time job.
● Monitor Intraday Trading indicators
For booking profits in intraday trading, you need to do a lot of research work. For the same reason, you also need to follow the indicators. Intraday Trading indicators are beneficial tools when used with a comprehensive strategy in order to maximise returns.
● Intraday Time Analysis
Daily charts are the most commonly used charts that represent price movements in the market, on a one day interval. These charts are an essential intraday trading technique that helps determine the movement of the prices between the opening bell and closing of the daily trading session.
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