Five suggestions for intraday trading
From choosing the right stocks to freezing the entry, exit price and from setting a stop-loss level to closing open positions and booking when the target price is reached, there are lot many things that an investor has to keep in mind while day trading on equity. As an investor, you also have to remember the essential trading rules and choose the right trading platform. Here are five key intraday trading tips that could help you make a profit on intraday trading in Exchanges:
1. Pick more than one liquid stocks
Intraday equity trading involves buying and selling a set of shares on the same day before the end of the trading session, i.e., squaring off open positions. Experts often recommend traders to pick two or three shares that are highly liquid otherwise investors have to hold these shares because of low trading volumes. If there is not enough liquidity in the market to execute the orders, your squaring-off order may not get executed, forcing you to take delivery instead. Further, avoid putting all your trading money in a single stock so as to balance your intraday trade strategy and minimise your risk.
2. Set entry-target price, stop-loss level
Before placing an order, decide on what your entry and target price should be. As a buyer or investor, it is common for you to undergo an immediate change of mind upon purchasing the shares. You could end up selling even if the price undergoes a nominal rise, thereby forfeiting the opportunity to take advantage of higher gains because of the price increase. It is also important that you decide how low the stock can be allowed to fall (instead of rising) before you square off the position. Setting a stop-loss level acts as a safety net and minimises your losses. A stop-loss order is essentially an automatic trade order given to a broker by an investor. The trade executes once the price of the stock in question falls to a specified stop loss price. For instance, setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%.
3. Profit booking and time factor
Being content is crucial to succeeding as a day trader. Desist from the tendency to get greedy once the target is reached, hoping that the price will keep rising (or falling, if you short sell). However, in case you think that a particular stock has a further possibility or potential to increase further, you should readjust the stop-loss option. Once you have identified a set of stocks by going through professional intraday calls, make sure to research them thoroughly. Look out for corporate events such as acquisitions, mergers, bonus issues, stock splits and dividend payments among others. Also, it is better to take a position when you are sure about the price movement; it could be within the first hour of trading for the day, when the volatility is high. You can also take an intraday position after that, when trend and volatility is settled down a bit.
4. Avoid swimming against the tide
It is near impossible to predict market movements, even if you are receiving guidance from experienced professionals with advanced tools. There are times when all technical factors indicate a bullish market, prompting one to expect target stocks to rise. However, the market prefers to disagree, and the stock price goes on a decline. This means the suggestive factors need not provide one any windfall guarantees. If the market moves against your expectations, you must sell the stock as soon as it hits your stop-loss level to avoid huge losses. Holding on to it in the hope that the market will make a turnaround can increase your losses. An intraday trader cannot afford to think like an investor. As the saying goes, “you win some, you lose some”. You should be prepared for both as not even the world’s best investors always make money. The idea should be to make more than you lose.
5. Choose the right trading platform
Last, but not the least, suggestion pertains to choosing the right trading platform. Intraday traders make frequent transactions daily, even as they accrue small gains. A right platform should guarantee quick decision-making, execution and low brokerage charges. There are various retail stock trading platforms, most of which enable you to open a trading account for free. However, there could be other charges involved like brokerage, for instance. Some of the platforms and brokerages also offer stock picks and recommendations. But what is most important is the quality of advice you receive, which will play the most crucial factor in your engagement with the broker. You can opt for an online trading platform, which could ensure effortless and seamless intraday trading across sectors with expert advice that help you navigate through tough times.
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.