‘Buy low, sell high’ is the mantra of stock traders everywhere. But nowhere is it more evident than in the intraday trading space.
The intraday trader does not go looking for an investment to hold on to for the long term. Instead, their objective is to profit off the minute price fluctuations of a stock over a single trading day.
The day trader’s goal seems simple enough: Buy stocks at low prices and sell them when the prices rise. However, a great deal of planning is required to achieve this target. As a beginner on the intraday trading scene, you may not know where to start. There is such an abundance of market data to sift through, so many charts to look at, so many research reports to cover.
If you find yourself stumbling, intraday trading tips from the experts could help. They can serve as thumb rules to get you started in the fast-paced world of intraday trading.
Intraday Trading Tips
Intraday trading is not as easy as it looks. What seems like random buying and selling may actually be based on a very detailed plan, and it requires a lot of discipline. If you need inspiration to start your journey as a day trader, the following intraday trading tips could provide some guidance.
Shortlist your Intraday Trading Stocks
Remember, you will be taking positions and squaring them off within a single trading session. So it is important to choose liquid stocks (e.g. shares of large-cap companies). Such stocks are in high demand, making it easier for you to find a buy or a seller before market close. Most traders have a shortlist of eight to 10 stocks across sectors and segments that they follow closely. This makes it easier to recognize patterns and trends that can be capitalized on.
Know when to Enter a Trade
Although the opening hour sees heavy activity, there is also the risk of volatility. This is why experts often suggest waiting 30 minutes to an hour before making your move. By now the day’s trends should gradually become clear. If you have been following a particular stock, figure out the right time to enter into a position on it. Here again, planning comes in handy, and it is a good idea to plan your entry points in advance.
Develop a Clear Exit Policy
Just as important as knowing when to enter a trade is recognizing when to exit it. Experts offering intraday trading tips will always advise you to set a stop loss target. If the stock price moves against you, the stop loss will get activated at the trigger point. The trade will be closed and your losses minimized.
While you’re at it, set a profit target as well. This allows you to close the position and collect profits when your specified target is met. It prevents you from waiting too long for further gains that may never arrive.
Have a Plan, But be Flexible
Your intraday trading strategy provides direction. But as a day trader, you should always be prepared for the market to move unpredictably. If the market is not moving the way you had expected, exit any open positions and cut losses. Avoid the temptation to wait for the market to move in your favor.
Know the Intraday Trading Thumb Rules
- If you are new to intraday trading, start small with one or two trades per day. Many seasoned day traders execute only four to five trades in a single session.
- Remember to close all open positions before the closing hour. Otherwise, they will be closed automatically at market close and you might miss the opportunity to book profits.
- Technical indicators hold the key to successful trades. Use intraday charts to spot trends and reversals.
Watch for Research-Based Tips
Many brokers provide intraday trading tips and stock recommendations based on research. For instance, they may highlight specific stocks along with entry points and stop loss targets. If you do not trust your own judgement at first, these research-based stock tips could provide essential support. This is why it is helpful to open an account with a broker like Kotak Securities that has a dedicated research division.
Stock market wins and losses are part and parcel of the day trader’s life. Even seasoned traders who have been trading for decades struggle to predict market movements. As you gain some experience, you will find that it is not possible to eliminate the losses completely. But with the right intraday trading tips, you can learn to minimize the impact of losses with simple tweaks to your trading strategy.
There is plenty of advice to go around, so make sure to pick the tips that fit your intraday trading style. While there is no substitute for thorough technical research, advanced charting tools and educational resources on your broker’s website could help you along.