Investing in the stock market through intraday trading is a riskier strategy than other stock market investing methods. When starting out in intraday trading, it's critical to fully understand the fundamental and most effective tactics in order to minimise losses and maximise returns quickly. In the meanwhile, a little piece of advice for novices to intraday trading is to make sure they just invest what they can afford without negatively impacting their financial circumstances. Depending on how successfully the trader applies the fundamentals and tactics of the stock market, intraday trading can result in either good profits or The strategy is not risky but focuses on small gains, using the snowball effect to achieve big wins over time. good losses.
Intraday trading's strongest feature is its ability to entice investors to leverage price movements. That's it, invest and watch it. However, intraday trading can be loss-making if the proper tactics are not used and executed correctly.
What is Intraday Trading?
Intraday trading is a method in the Indian market where traders buy or sell securities on the same day to profit from swift price changes. This involves understanding market patterns and price fluctuations, and the ability to act swiftly and decisively. Traders must have an account with a brokerage company providing intraday trading services on the Indian stock market. develop in-depth knowledge of risk management strategies to minimise losses. Intraday trading tips for beginners can help beginners gain a better approach to intraday trading.
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Table of Content
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What is Intraday Trading?
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Some of the Major Intraday Tips
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Best Intraday Trading Strategies
Some of the Major Intraday Tips
Intraday trading is a time factor training where timing plays a vital role. Some of the tips for intraday trading are as follows:
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Choose Liquid Shares
First up, here's an intraday trading tip: Since shares for intraday trading are meant to be sold before the end of the day, it is usually advisable to select liquid shares. It is also advised that you select two or three highly liquid large-cap stocks. High liquidity makes it feasible to buy or sell the stock whenever needed, which makes it easier to profit from any potential profits that could result from a day's worth of intense price activity.
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Utilising Stop Loss for Lower Impact
When the price drops below a certain threshold, the shares are immediately sold, thanks to a stop loss. To reduce the amount of money you may lose if stock prices drop, you need to figure out the stop loss.
For Eg, In the event that you purchase a stock at Rs. 1000 with the expectation that it would climb and you set a stop loss at Rs. 980, you will only have to endure a loss of Rs. 20 should the stock dip below Rs. 980 if it is in a reverse trend.
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Watch Out for Volatile Stocks
Volatile equities have a more significant potential for profit in the volatile stock markets. However, trading intraday may be dangerous, so you should only do it if you have a solid grasp of the particular stock or industry. To reduce risk in your intraday trading strategy, you should constantly place stop losses. The trade will be closed immediately if the stock price hits your predetermined stop-loss level. By taking this measure, a quick shift in the wrong direction is less likely to result in severe losses.
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Correlated Stocks
One of the most straightforward strategies for intraday trading is to invest in firms that are closely related to an index or industry. Since the broad index's or sector's performance, it is easier to create high returns on investment since it gives a clear picture of how the market is changing. Users can pick a company with a clear rising or downward trend and track the profitability of a specific sector by visiting the NSE website. Stock trading is easy since its price movement is linked to the index or sector.
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Choose Transparency
Investing in stocks of companies that give the market sufficient information about their business operations is often a bright idea. Taking into account all pertinent information makes decision-making easier. If important facts are kept a secret, you could take the incorrect position and suffer consequences. For intraday trading, only companies with a transparent business process ought to be chosen. Stable management is another factor to take into account while choosing intraday stocks.
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News-Sensitive Stocks
Choosing stocks that react well to news is a popular strategy for intraday stock selection. Typically, these stocks respond to any news, whether positive or negative. Understanding the movements sparked by the media makes taking stances easier to handle. However, you should use caution while trading stocks that are highly susceptible to changes in the market. The news may occasionally shift due to these stocks. Even if the news is good, the share price might fall.
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Do Not Challenge the Market
Market movements are unpredictable, and it's crucial not to rely solely on your analysis. If the market doesn't align with your expectations, sell your position as soon as it hits your stop-loss level. Holding onto the hope that the market will act as predicted can increase your losses. Fluctuation is the nature of the stock market.
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Choose the Right Platform
Intraday traders often make frequent transactions and earn daily gains, so selecting the right platform with quick decision-making and minimal brokerage charges is crucial, as it may consume a percentage of their intraday profit. Know more about trading profit and loss account.
Best Intraday Trading Strategies
Intraday trading requires accurate timing and market knowledge, followed by technical analysis, realistic execution, indicator use, and risk management. Beginners can start trading using this method, but with consistent practice, they can become experts. Stop-loss limits are essential to avoid losing money. Choosing the right trading strategy depends on your needs and personality. This list includes profitable trading techniques in India.
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Moving Average Crossover Strategy
Technical indicators such as moving average crossings assist traders in determining when to enter and leave a trend. They might miss precise peaks and troughs, but they can be helpful in determining the general direction of a trend. When moving averages cross, it indicates that a trend change is imminent and provides a more substantial chance to enter. They struggle when the price ranges, though. The crossover approach is helpful in volatile or trending conditions but not when prices range since it provides precise triggers for possible entry and exit positions.
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Reversal Trading Strategy
Pull Back Trading, or turnaround Trading, is a method used by traders who wager on equities against their price trends in the hopes of seeing a turnaround. Both long-term investors and day traders utilise this method to decide whether to enter or depart a market. Traders use trend lines and trading channels to study price activity. Technical indicators such as the moving average convergence divergence (MACD) and moving average (MA) are used to identify and isolate reversals. The securities achieve maximum fluctuation when the security movement reverses, and a halt is indicated. When the reversal value approaches the trader's projected limit, a trade is completed.
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Momentum Trading Strategy
A trading approach known as momentum trading opens positions in response to changes in price. It entails locating stocks—of which there are 25–35%—that have daily variations. These stocks are found using stock scanners. The technique is predicated on the idea that a price move would persist in its direction provided sufficient force is applied. An asset's market price rises as it reaches a higher price and gains greater attention. Momentum shifts and drives the asset's price lower when enough sellers enter the market. Catalysts such as technical breakthroughs or earnings can generate momentum. In momentum trading, the profit-to-loss ratio is 2:1. It functions well in high volume or early trading hours. In order to maximise wealth with this approach, traders need to be vigilant throughout opening trading hours.
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Gap and Go Trading Strategy
A stock's price starting higher or lower than the previous close is called a "gap" in gap trading. Gapers, or places on the stock chart where no trades have been performed, are the subject of this method. News spikes, earnings releases, or a modification in trading strategy can all result in gappers. The gap-and-go method is used when a stock rises sharply from its close price the previous day. Using a pre-market scanner to find high-volume equities is necessary for successful gap trading. Day traders use this method since gapping stocks are frequently identified in the morning.
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Breakout Trading Strategy
A trader using a breakout market technique enters the market when the price breaks through its own support and resistance levels. Traders use volume as a technical indicator to look for patterns in the market. Breakouts need rapid entry and departure. There is no waiting involved. Strong trading indications known as breakouts come before rash market moves. It happens when the price abruptly moves outside of a preexisting range. That's why it goes by BREAKOUT. Prior to waiting for the breakout, the traders determine the price level of the breakout. Because there won't be any leftovers for purchases when the breakout finishes, this is a dangerous trading strategy.
Check out the breakout stocks here.
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Bull Flag Trading Strategy
The bull flag pattern is a continuation chart pattern that extends an uptrend by consolidating price action within parallel trend lines in the opposite direction. It is a bullish pattern, unlike the bear flag that occurs in the middle of a downtrend. The pattern forms when a strong price movement occurs, and when the resistance line breaks, stocks move ahead. Bull flags are violent in the beginning, causing breakouts and blindsides for bears. The formation of the upper and lower lines takes time.
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Pull Back Trading Strategy
A pullback occurs when a long-term trend reverses, saving traders from losing. This strategy is suitable for strong stocks with high relative volume. It buys weaknesses and sells strengths, with a good opportunity after a breakout. Pullbacks typically last a few trading sessions, while a reversal signifies a complete change in market sentiment.
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Pivot Point Strategy
A pivot point strategy is a crucial tool in the forex market, used by range-bound traders as an entry strategy and breakout traders to understand breakout levels. It involves identifying the level where the market's sentiment changes from bullish to bearish, and vice versa. Professional day traders use pivot points to identify potential support and resistance levels, take-profit and stop-loss, and to predict market movements.
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CFD Strategy
Intraday trading is challenging and requires extensive knowledge. Contracts for Difference (CFD) are a user-friendly derivative product that allows speculation on global markets like forex, commodities, indices, and shares without owning the underlying asset. CFDs are leveraged, allowing access to positions with a small margin deposit. Profit and loss are calculated on the full size of the position, but leverage can magnify profits and lead to magnified losses. Investing time in knowledge can provide a significant advantage and reduce risk.
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Scalping Strategy
Scalping is a popular Forex strategy that focuses on minor price changes, requiring accurate timings and a risk-oriented approach. It aims to accumulate small gains from small price exchanges until profitable times come. The strategy is not risky but focuses on small gains, using the snowball effect to achieve big wins over time.
click here to read more about Intraday Turnover Calculation
Conclusion
Although intraday trading is riskier than normal trading, it is among the most rewarding tactics. That being stated, having a trading & Demat account is essential in order to engage in day trading. You can open both accounts with BlinkX and start trading with an advanced stock trading platform.
If you compare it to investing in delivery trading, intraday trading is riskier. Due to the extreme volatility of stock markets, most traders, especially novices, lose money when engaging in intraday trading. Evaluating the best intraday trading strategy can be challenging, but you can choose the suitable strategy for your trade as per your requirement.
Convention dictates that in order to maintain adequate risk control in intraday trading, one should not risk more than 2% of their whole capital for trading on a single trade. You can also take advice from an intraday expert or follow these intraday trading tips for beginners in India. Additionally, if you are new to trading and need help understanding it, you may check out the user-friendly trading app, which provides online support and direction.
