Things to Know While Doing Intraday Trading
Intraday trading in India has gained momentum in the past few years. Day trading or intraday trading involves transacting securities to make profits in the same day. This may sound inviting and seem like a means to earn quick money, but there are lots of intricacies in the domain of day trading that you should know.
Get the Basics Right
Before deciding on which stocks to invest in for intraday trading, or figuring out the best brokerage plans, you need to get the basic rules right. These basic rules can be thought of as governing principles for placing day trades:
Humble Beginnings: You may think you can make inflated profits in day trading. But the opposite of this is also possible. Investing a large amount of money and ending up with losses can be disturbing. Hence, it is highly advised to start small, and invest only a portion of your income or savings toward day trading. Gradually work your way up, by gaining exposure to the market and increasing the investment amount.
Technological Support: Not a lot is required to place trades in day trading. A laptop/computer/mobile, internet connection and an online trading platform – and you’re all set for intraday trading. The market is bursting with trading platforms to choose from, and you would require to be technologically abreast to pick the one that would suit you the best. You can make this choice by comparing features such as cost, ability to replicate trades of other traders, user interface etc.
Brokerage: Transacting in securities results in incurring brokerage costs. Based on your trade volume, in intraday trading, you should look to close in your brokerage plan. If you are someone who is making only one or two trades a day, your brokerage plan would look significantly different than someone having a heavy volume of trades within a day.
Restrict Stocks: When deciding on which stock to bank on, stick to one or two securities within a sector that you hold knowledge about. While diversification is great, you need to first build your foundation about the workings of a few stocks only, before branching out to other securities.
Quick Tips for Successful Day Trading
The stock market has a mind of its own which is guided by demand and supply of securities. Even the most seasoned traders cannot fully anticipate how the market will perform on a day-to-day basis. However, there are some check-ins that you can keep in mind while being involved in intraday trading in India.
Liquidity: When engaged in intraday trading, it is recommended to invest in liquid stocks, which can be easily transacted within the day and always has buyers in the market vouching for it. However, an important point remains to check the liquidity of your stock at all price levels. It is found that some stocks are only liquid at a lower price, whereas some sell well in the higher price brackets.
Resistance & Support: Through technical analysis, you will gain the skill set to read market data and draw inferences from it. Typically, you should look out for stocks who have breached their resistance and support lines and take buying and selling trade positions, respectively.
Leveraging: You can capitalise on the opportunity of making levered trades, that is, you can borrow an amount from the broker to place higher value trades. However, you need to be careful to have a healthy mix of leverage in your trades, as situations of downfall will have a significant impact on you. So, only borrow within limits and do not get carried away in the hopes of making big bucks by way of highly levered trades.
Strategies: This may not be possible in the beginning, but as you begin gaining experience in the stock market, you can formulate your own intraday trading strategies. Strategy would essentially mean some tried and tested moves which have benefited you in the past, to be replicated time and again to gain profit through intraday trades.
Timing and knowledge are the most important factors when it comes to intraday trading. So, when it comes to trading, don’t let your emotions drive you. Bank on solid facts, ground research work and place trades for the win.
Disclaimer : ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.