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Why mind matters in Making Money

FInoux 19 Aug 2022

Reasonable > Rational – The book affirms this by advising his larger audience to not to be frigidly rational while making financial decisions. An individual should aim to be as reasonable as possible. Reasonable is more realistic, and you'll be more likely to keep to it in the long run, which is what matters most when it comes to managing money.

The book – Psychology of Money sketches the importance of finance and its management. In finance, what is often left unnoticed is that something can be technically correct but contextually incorrect. A reasonable investor makes his decisions or conclusions based on numerical facts and statistical data. When seen solely through a financial lens, investing has a social component that is often overlooked.

For most of the investors, day trading and picking individual stocks is not a viable option because the odds are stacked against them. However, if you only need to scratch an itch, they're both viable in modest quantities if you're willing to leave the rest of your more diversified investments alone. Being reasonable is greatly associated to Intraday Trading as it is all about taking wise decisions at the right time. This is why mind matters the most. How can Intraday help you be reasonable in managing your finances? What are those quick-witted decisions one should make to generate decent returns? Continue reading to know more.

What is Intraday Trading?

Buying and selling stocks on the same day is referred to as intraday trading. Before the market shuts, the user can buy and sell any amount (more or less) of stocks in the same company on the same day. The primary goal is to profit from market indexes moving up and down. Many people refer to it as "day trading."

If you are a long-term investor, the stock market can provide you with decent returns. However, it can also help you in making money even in the short run. Let's say a stock starts the day with a price of Rs 500. Within an hour or two, it had climbed to Rs. 550. You could have made a profit of Rs 50,000 in only a few hours if you had acquired 1,000 stocks in the morning and sold at Rs 550. This is called as Intraday Trading.

Let us also understand the downside of the trade. In case if the stock starts at Rs.500, and within an hour it goes down to Rs. 450, then you could have made a loss of Rs. 50,000, if you had 1000 stocks for the same share. This is how quick decisions might impact adversely on your trade.

Why should investors choose Intraday Trading?

The most significant advantage of intraday trading is that positions are not affected by the probability of negative overnight news that could have a potential impact on stock prices. Important economic and earnings reports, as well as broker upgrades and downgrades that occur either before or after the market opens, are examples of such news.

There are a number of other advantages of Intraday Trading. The ability to utilize stop-loss orders—the act of raising a stop price to minimize losses from a long position—is one advantage. Another one is the enhanced access to margin and, as a result, the increased leverage. Intraday trading also gives traders more possibilities to learn.

However, as every cloud has a silver lining, similarly, there are certain disadvantages too. The disadvantages include insufficient time for a position to see rises in profit, if any benefit at all, and greater commission costs as a result of frequent trades.

Example of an Intraday Trading:

In simple terms, intraday trading entails buying and selling today. Buying and selling must take place on the same day within the same trading session. For example, at 9:25 a.m., a trader buys XYZ for Rs 10,000 and sells it for Rs 10,200 at 12:45 p.m. The profit for the day will be 2%. Leverage is commonly used to increase intraday trading results. Leverage allows a trader to invest more than his or her available capital.

The trader, for example, purchases XYZ for Rs 1,00,000. The trader's capital is Rs 50,000 and the remaining Rs 50,000 is invested on margin. The trader obtains a return of [(1,10,000/50,000)-1] *100 = 120 percent if the stock rises to Rs 1,10,000. The return on the trader's Rs 1,00,000 investment would have been just 10%.

A margin call is initiated if the trader's position falls below the required maintenance margin. The margin call makes it obligatory for the trader to increase the quantity of equity in the account to compensate for the margin money lost. Margin calls are made before a trader risks losing all of his or her money.

Market Timings for Intraday Trading:

Market

Days

Timing

Equity

Monday-Friday

9:15 am - 3:30 pm

Currency

Monday-Friday

9:00 am - 5:00 pm

Cross Currency

Monday-Friday

9:00 am - 7:30 pm

Commodities (As per NSE)

Monday-Friday

9:00 am - 11:55 pm

Table 1.1 – Indian Intraday Trading Time Limits

Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in securities markets are subject to market risks, read all the related documents carefully before investing. 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. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

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