Intraday trading is the most cosmopolitan activity on stock trading platforms, with possibilities of losses also. It is essential to follow the rules while online trading in the stock. The article notes the steps to follow when indulging in an intraday trading platform to maximise profits and minimise losses.
Introduction
Intraday trading is the riskiest activity that can wipe out your entire trading capital. It is done when a trading position is closed on the same day.
Unlike an investment, where profits only accumulate when stocks are moving up, you can make money on an intraday trading platform, whether the market is going up or down.
Identifying the right stocks for intraday trading is very important.
Following are the rules to be followed while participating in intraday trading —
● Understand and learn about intraday trading
Intraday trading is not suitable for everyone as a practical approach is needed, and there is an emotional factor also.
To trade on the following day, traders should list stocks they wish to trade. You should actively trade stocks with a considerable quantity of shares traded.
Charts and patterns beneficial for trading should be examined.
A trading strategy should be ready, and entry into the markets should only be considered when all the conditions related to the strategy are met.
There are no shortcuts to success in intraday trading, and you will learn with experience.
Assuming that you can make money with a single trade is wrong. Dedication is required to make money through an online trading app.
● Follow the market trend
A trader should follow the market trend and never go against it. If the stock is bullish, you should buy it and sell it in a bearish trend. A trader should never challenge the trend, as it may wipe out their profits.
● Have a practical, realistic approach
An intraday trader must concentrate on earning profits through several small deals instead of waiting for a colossal profit deal in one trade. This avoids losses, as waiting too long to book profits may see the profits disappear because the direction of the stock may reverse.
● Usie the stop-loss function
A stop-loss facility stops the losses in case of a sudden reversal in the market’s direction. The stop-loss must be set up when the trade is entered, instead of waiting for the actual reversal. This helps the trader minimise losses and concentrate on a new trade. For example, if a trader has a 5 per cent profit target, the stop-loss should be set at 2 per cent lower than the purchase price.
● Do not use all the margin money
A trader is given leverage to trade about 10 times their investment. But they have to be careful not to use the total leverage provided and use only about 50 per cent and keep the balance as a backup.
● Other factors
Risk management is a critical factor in intraday trading. Every trader has a different risk-bearing capacity, and risk management must be conducted properly. A person has to have proper entry and exit strategies.
Greed and fear are factors that impact intraday trading profits.
If a trader is fearful, they may book the profits too early, as they fear profits vanishing. On the other hand, if greedy, they may not book profits at the right time, hoping for higher returns. A trade should not be converted to investment just because the trade is resulting in huge losses. It may well happen that the stock may fall further after taking delivery and increase losses. It is better to book losses and move on.
Conclusion
Intraday trading is a good way to earn money with limited capital. However, it has to be disciplined, adequately planned, using the stop-loss function and traded per the market trend.