This article will see what is Intraday Trading and things to know about Intraday Trading before investing.
Trading is a process of buying and selling stocks. When the trades are purchased and sold after a long time, it is referred to as long-term trading. When the buying and selling of trade are done in a single day, it is called intraday trading.
Intraday trade requires monitoring the fluctuation in the price of a stock that is available and selling the stocks when finding the best price for it, but within the same day.
It is an exciting topic that every investor should know and be curious about. The thing to keep in mind is the market can show any face, so always be aware before making such investments. You should have a good knowledge of trading, and a good stock market course can help you in this.
No problem, if it seems like something new, I am going to explain intraday trading in this article. This will enhance your knowledge as an investor and work for some of you.
Basics of Intraday Trading
It refers to buying and selling of stocks within a day. This can be done on online trading platforms.
Let us understand the basics with an example.
Suppose you buy some 100 stock of a company at rupee 100 for each stock, after an hour, or so the stock rises to 150 per stock, and you sell them and earn 5000 easily within an hour.
It looks like a great deal, but there are many other factors involved in this. There is a chance when the price of a stock may fall to as low as ten or even less. This would incur a good amount of loss to the investor. Hence it is advised to perform intraday trading only after proper knowledge of the market. We will study in deep later in this article.
Intraday trading indicators
Intraday trading looks easy on paper, but it isn’t easy when done practically. There are high chances of loss with improper trade.
A lot of research and knowledge is required to get good returns out of this trading. Intraday trading indicators help to get maximum returns over a short time, within a day.
However, it is often advised not to follow any indicator blindly as no one has seen the future, and they are based on the past performance of the stock.
There are chances, and also it has been proved by examples that the stock may have been reduced in rates in the past, but the people who didn’t lose hope and got a great profit in the long-term from that stock. It only takes a few seconds to change the bad luck into a piece of good luck.
The trends and the indicators are helpful for a beginner and also for an expert. They help choose the best possible stock from the bunch of stocks and reduce the chances of risk involved. Let us see some of the indicators.
- Moving average
The moving average is a line on the chart used to determine the behavior of that stock over time.
- Bollinger bands
There are three lines here: the moving line, the second is the upper limit, and the third is the lower limit.
- Momentum oscillators
We know that the stock market is highly volatile. The momentum oscillator is depicted over a range of 1 – 100, which helps determine whether the stock will rise or fall short. This allows us to make a better investment.
Intraday Time Analysis
The daily charts are beneficial when it comes to intraday trading. It helps to monitor the performance of a stock on the opening of the market and at the closing of the market.
Since the momentum shifts quickly in the stock market, time analysis becomes a valuable tool.
Choosing Stocks For Intraday Trading
It is crucial to trade good stocks that will give a good return.
Thorough research is needed before buying any stock since intraday trading is done within a day, so the right stock can give a good profit while an inappropriate one leads to a loss.
Let me tell you some valuable things to keep in mind while buying an intraday stock.
- If a stock looks unstable, then it is a wastage of money and time investing in that stock.
- Buying the stock of some major industry has a less chance of falling and would give a good profit.
- As told earlier also, doing a good amount of research of the stock before investing in any.
- In intraday trade, it is often advised to follow the herd rather than being an alone king. This can lead to a significant loss. When the market rises, the stock will increase and hence give profit returns.
How to get profit from Intraday trade
There is always a risk factor involved with every investment in the stock market.
Traders must avoid investing too much in a single stock. This has a high risk; if the market crashes, you may lose everything.
Traders should also not invest more than what they can afford to lose within a day, not to impact their financial condition.
Five things to know about Intraday Trading
In Intraday Trading, usually, the investors take advantage of the price fluctuation of the stock within a day. If a trader expects a stock to rise, he buys many securities and then sells them during the day.
The reverse can also happen when there is a short-selling. This is when the trader looks at the falling market; he borrows and buys the stocks when the price fall and returns that to the lender.
As in Intraday trading, there are good chances of market volatility since it is done within a day, the chances of risk are high.
These kinds of investors take a massive amount of risk compared to those who are making long-term investments. Good investors make a trade of lakhs and crore of rupees within a day by using margin trading.
In return, they earn a high amount of profits.
Stock price impact
When the price of a stock is ranging somewhere between 100 – 105, suddenly many stocks are purchased, which tends to increase in demand, and there is a sudden change in the value of the stock, the value rises. As soon as the value increases, it is sold to the people, which leads to a lower value of that stock.
This is what stock price impact is all about.
How to day-trade
First of all, selecting a liquid stock that has a high volume of trade. You can buy the stocks of some low company with a price as low as 25.
Don’t buy more than 2 – 3 stocks as this would make it difficult for you to manage the stocks as you have to monitor them and sell as they reach the best price.
Another important thing is deciding the entry and target price. This means pre-deciding the price at which you want to buy or sell the stock. This knowledge you will gain with time.
Deciding will help reduce the risk factor, helps in better management of the stock, and worry about the change, sell as it reaches the target price.
Note that, as a beginner, set a low target price to safeguard yourself from the risk of losing your money.
Delivery v/s Intraday Trading
When you do delivery trading, you are an owner of that stock, and you can hold them for as much as you want to. Whenever you feel the market is high, you can sell the stock and earn great benefits.
In intraday trading, you can call it a compulsion to sell the stock within the same trading day. Even if you are about to lose the trade, you can’t do anything. Also, if you forget to sell, the stock will automatically get sold as the market on the day closes.
Intraday trade has a motive to make quick profits, but not done with the investment interest.
We have learned in this article to avoid the volatile stock that may lead to our loss, and we would be responsible for that.
The Stock market is a big thing when you get into it. To know about the market thoroughly, you can join a course provided by The Thought Tree on the stock market and become the king of the market. T3 covers every point of the market and gives practical knowledge to get to know everything they are taught in the live interactive classes.
I hope I have cleared your doubts related to intraday trade using this article.
Happy learning, happy intra-trading!