Intraday Trading Successful Strategies
You may have wondered how intraday trading works for stock market traders. Intraday trading is when you buy stocks and sell them on the same day in order to make financial gains. Instead of considering delivery dates, demat, etc., intraday trading is about securing your open position before the close of each trading session. Intraday trading isn't as easy as it looks. To get good returns, you need to take into account a variety of factors. You should be aware that intraday trading can have greater market volatility than regular investments in stock exchanges. Before you start trading, it is important to assess your risk tolerance.
Below is a list with five strategies to make intraday trading profitable.
1. Learn the basics of intraday trading
Here are the basics of intraday trade.
- Do your research Before you buy stocks of a company, conduct thorough research to determine the key parameters that will indicate the company's strength or weakness.
- Risk management and risk-reward ratio - As a beginner you should only invest the amount you can afford to loose. One of the most basic intraday trading strategies involves investing in stocks with a risk-reward rate of 3:1. This allows you to lose money but also gives you the chance of earning good returns. Another risk management strategy is to not invest more than 2% in a single trade.
- Choose liquid stocks: Instead of investing in many small and medium-cap stocks you can choose a few large-cap stock. These stocks are more liquid because they trade in larger volumes. However, buying small- or mid-cap stocks could force you to keep them because they trade at a lower volume.
- Time the Market: After you have purchased the stocks, market experts recommend that you avoid trading during the first hour of the trading day. To balance price movements between the closing and opening hours, you can take opening positions as early as the afternoon. You should square your position no later than 1 pm.
- Avoid emotion and predict returns and risks Another important technique for intraday trading involves determining your target and entry price in advance. No matter what, you must not make impulsive or emotional decisions. You should immediately square your trade once you have reached the target price. You can set a stop-loss limit on your trade to avoid any emotions. If stock prices drop below predetermined levels, your transactions will automatically close. This will allow you to start over with a new plan and minimize your losses.
2. Analyze intraday trading times:
Second on the list is to analyze daily charts. Daily charts show the price movement during a trading day between the closing and opening hours. Daily charts allow you to analyze price fluctuations over the short-term as well as the medium-term. Intraday trading can be done using a variety of charts such as the five-minute, 15-minute, and two-minute charts. The tick-tack charts (line charts that represent every trade) are all available.
3. Use sound intraday trading strategies
Follow credible strategies to be the third option in our list of intraday trading strategies. These techniques can be used:
- Using the Opening Range Breakout to map resistance/support: The opening range refers to the stock price fluctuations -whether they are high or low - after the start of a trading day. ORB's time period can be anywhere from 30 minutes up to three hours. After identifying the resistance and support points, you can choose to take different positions. The ORB can be used for intraday trading. Remember that if a stock moves up from its breaking range, it is likely that the prices will remain bullish. A downward trend could indicate a bearish price. You can combine this intraday trading strategy with other market indicators.
- Search for demand-supply inequalities This intraday trading strategy is used by traders to identify stocks with significant imbalances between supply/demand and then use these as entry points. These points can be identified on price charts by looking at the historical price movements.
- Combine the Relative Strength Index with Average Directional Index : While RSI can be used to identify stocks that are over-purchased or over-sold, the ASI helps traders to make decisions about when to buy and sell. Combining the two can help you make informed intraday trade decisions.
4. Learn the difference between trading and investing.
Fourth on our list of intraday strategies is understanding the differences in intraday trading and investing stock markets. Trading and investing require different strategies. As a trader diligent, you have to close all positions on the same day regardless of whether the target price is reached. However, stocks investments require a long-term view. Prudent investors are not affected by market volatility. Intraday trading, on the other hand, is more technical than investing in stocks.
5. Remember, the market is unpredictable
Remember that intraday trading is risky. This is the last of our list of intraday strategies. Even if your trading skills are advanced, it is impossible to predict the price movements with certainty. Sometimes, even though technical indicators predict a bullish market the prices may fall. This can lead to bearish trends. Don't be surprised if the market behaves contrary to your expectations.
These intraday trading strategies will maximize your profits. Now you are familiar with intraday trading. To open an intraday trading account, you must always rely on a trusted partner. Angel One offers many benefits such as comprehensive technical analysis, cutting edge technology and insightful reports. You can also enjoy low brokerage fees.