Looking to earn some extra money in your free time? Intraday trading allows you to profit from short-term price movements in the markets. Buy stocks in the morning and sell them for a profit in the afternoon! But, how to do intraday trading profitably?
Intraday trading has risks too. The markets can be volatile. Stock prices can change direction suddenly.
Read on to learn some simple intraday trading tips. Master these, and you can call yourself a successful intraday trader!
Understand Intraday Trading Basics
Before you learn how to start intraday trading, get a solid grounding in the basic concepts. Some key aspects to know are:
- Intraday trading involves taking multiple buy/sell positions within a single trading session and squaring them off before the market closes.
- Traders aim to capture ongoing price movements and volatility in stock prices and leverage smaller trading ranges.
- Positions are closed out within the same day they are opened; hence, there is no overnight risk exposure.
- Requires vigilance and quick decision-making based on real-time market data and price action.
- High risk, high reward. Potential for significant profits but also losses if disciplined risk management is not followed.
These are some important introductory intraday trading tips to get a basic understanding before starting intraday trading.
Intraday Trading Tips
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Getting started with intraday trading requires some preparation. Here are some intraday trading tips for beginners:
1. Open a Trading and Demat Account
The first step is to open a trading account with a reputed stock brokerage firm. This will allow you to buy and sell shares seamlessly. You should also open a Demat account to store all your shares and securities electronically. Leading brokerages offer integrated trading and demat accounts online.
2. Start with a Small Capital
Only invest an amount you are willing to lose as you are just starting. The ideal would be ₹50,000 to ₹2 lakhs to begin with. This capital will be your trading margin. As you gain experience, you can increase capital deployment. But be prudent initially.
3. Understand Market Movements
Before trading, spend 2-3 weeks understanding market trends, price charts, and volume patterns. Observe how the stock reacts to news events. Reading analysis reports from experts can help build perspective. Start paper trading to validate your ideas; this is an essential step for intraday trading for beginners.
4. Choose the Right Stocks
Analyse and shortlist 15-20 stocks suitable for intraday trading based on factors like liquidity, volatility, sector momentum, etc. Stick to quality large-cap stocks with high volumes. Avoid penny stocks early on.
5. Develop Your Trading Strategy
Choose a strategy based on your risk appetite, such as trend trading, swing trading, range trading, etc. Backtest the intraday trading strategies thoroughly and practice with paper trading. Build conviction in the strategy before going live. This intraday trading tip will help you to choose the best day trading strategies.
6. Start Small
Place your first few live trades with a smaller position size. Give yourself time to understand real market order execution and analyse live price charts. Do not rush to scale up. Stay patient and focused.
7. Follow Discipline
Rigorously track trading performance and journal learnings. Do not overtrade or chase losses. Follow risk management rules and stop losses diligently. Stay calm, review periodically and keep improving.
Following some of the above Intraday trading tips will improve your performance, and as a beginner, it will increase your profitability rate.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
Intraday Trading Strategies
1. Scalping:
Scalping is a fast-paced intraday trading strategy where traders aim to make small, quick profits multiple times daily. The focus is on capturing tiny price movements by entering and exiting trades within seconds or minutes. This strategy relies on high trading volume and rapid decision-making, making it ideal for those who thrive in a fast environment.
2. Breakout Trading:
Breakout trading involves entering a trade when the price breaks through key levels, such as support or resistance. Traders look for strong price movement when the stock moves beyond its defined range, signalling a potential trend. This strategy works best during periods of high volatility and when trading volumes are strong, helping traders catch the beginning of a new price direction.
3. Moving Average Crossover:
The Moving Average Crossover strategy uses two moving averages—short-term and long-term—to identify buy and sell signals. A buy signal occurs when the short-term average crosses above the long-term average, indicating upward momentum. Conversely, a sell signal happens when the short-term average crosses below the long-term average, signalling downward momentum. This strategy helps traders spot potential trend changes.
4. Trend Trading:
Trend trading involves trading in the direction of the current market trend, either upward or downward. Traders use indicators like moving averages or trendlines to confirm the trend and make decisions accordingly. The goal is to ride the trend until there are clear signs of a reversal, maximising gains by staying aligned with market momentum.
5. Reversal Trading:
Reversal trading targets opportunities when the market trend is about to change direction. Traders look for signs that the current trend is losing steam and prepare to enter trades as the reversal begins. This strategy requires keen observation and quick actions, as reversals can be swift and short-lived, making proper risk management crucial for success.
Picking Winning Stocks for Intraday Gains
The stock markets offer a diverse universe of companies to trade in. But not all make for profitable intraday trading. Traders need to cherry-pick stocks with the right characteristics for short-term gains.
Liquidity is key. Stocks must have ample trading volumes and tight bid-ask spreads, allowing easy trade execution. Look for average volumes over 5-10 lakh shares daily. Options are Reliance, TCS, Infosys.
Volatility in price movements enables traders to enter and exit multiple times within a range. Analyse historical price charts to identify stocks displaying suitable intraday high/low range percentages. The wider the band, the better the opportunity.
Understand correlation with broader markets. Stocks positively correlated to indices like the Nifty move in tandem, allowing you to profit from the underlying trend. Negatively correlated stocks can be played when the index is rangebound.
Mastering stock selection and trading techniques together is the winning formula. For a better success rate, stick to quality large-cap stocks from sectors currently in focus. While traders hunt in packs chasing momentum, your ability to identify potential movers early and stay nimble can deliver an edge. Following the Intraday Trading Tips will help you trade profitability even if you are a beginner.
Conclusion
Intraday trading offers the thrill of profiting from short-term price movements in the stock markets. However, success requires developing core competencies – understanding basic concepts, picking winning stocks, mastering intraday trading strategies, managing risk, and maintaining discipline.
Start with small trades, learn from experience, stay vigilant, and keep emotions aside. Remember, successful intraday trading is a marathon, not a sprint. Equip yourself with the essential intraday trading tips of the trade, and you’ll be well on your way to profitably trading those intraday swings and fluctuations!
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
FAQs
1. What is intraday trading for beginners?
Intraday trading involves buying and selling shares within the same trading session. As a beginner, your aim is to earn small but frequent profits from short-term price movements that happen during the day.
2. How much money do I need to start intraday trading?
You can begin intraday trading with as little as ₹50,000 to ₹2 lakhs as your trading capital and margin. It is advisable to start small, learn the ropes, and then scale up. Managing risk prudently is key.
3. What are some good intraday trading stocks for beginners?
As a beginner, focus on highly liquid large-cap stocks from sectors seeing strong momentum currently. Quality names like Reliance, Infosys, TCS allow easy execution and often display suitable volatility for intraday range trading.
4. What is the best intraday trading strategy for beginners?
Trend trading, swing trading and breakout trading are some simple starter strategies to practice for beginners. Use paper trading to backtest strategies before going live. This will build conviction.
Reference Links:
https://groww.in/blog/guide-to-intraday-trading-for-beginners
https://www.5paisa.com/finschool/10-best-intraday-trading-strategies-tips-for-beginners/
https://www.angelone.in/knowledge-center/intraday-trading/tips-strategies
https://www.kotaksecurities.com/intraday-trading/intraday-trading-tips-and-tricks/
