Normally the question that beginners ask is “What type of trading should be considered to complete the transaction in a day?”. Well, if you are seeking an answer to this question then you are on the right track. Intraday trading deals with buying and selling of stocks or shares on the same day, during the trading hours that are stipulated by the exchange. In Intraday Trading, the stocks are bought and sold in large numbers strategically to book profits in a day.
The Intraday trading ranges from holding stocks for a second to hold stocks for a whole day.
It is important, especially for beginners, to understand the basic concept of such trading to avoid losses.
Why do people go for Intraday Trading?
Intraday trading is indeed riskier but no trade does not involve any risks. Intraday Trading is normally performed by beginners who are new to the stock market.
The reason they prefer this type of trading is that:
- There is no overnight risk, so news and events will not affect the risk of significant events. This simply states that when you buy or sell shares, the transaction gets settled within a day.
- With Rs. 1000, you can trade like 10 times with leverage or margin.
- Profits remain on both sides- Buying and selling. If there is any up-swing in shares you can sell or when it is down-swing you can buy the shares at a minimum cost.
- You can work from your home and at your comfort.
- If done with the risk and money management, returns can be very good.
SIX BASIC RULES FOR INTRADAY TRADING
Rule No.1: Time the market
Taking positions between noon and 1 pm. This period can increase the possibility of earning profits.
Rule No.2: Exiting the position under unfavorable conditions
If the conditions are not favorable immediately exit and not wait for a stop-loss trigger.
Rule No.3: Start small
Beginners should start trading with a small amount to avoid huge losses.
Rule No.4: Liquid Stocks
Liquid stocks allow traders to exit open positions before the end of the trading sessions.
Rule No.5: Always close all open positions
Adopt a disciplined approach and close all open positions daily irrespective of profit or loss
Rule No.6: Spend time
Monitor market movements closely during the session to increase the chances of placing the right calls.
Rightly said, “Higher the risk higher the returns”. This line explains the concept of trading. The investor has to take the risk to gain profits. Every investor faces losses, at an early stage or later. Follow up the 6 rules of intraday trading to mitigate risks and earn a profit.