This article focuses on 5 successful intraday trading strategies that will guide you in bagging good returns on a daily basis. The total number of stock market traders in India including personal and other trading entities stands at 20 million. With still a majority of people out of the hold of the trade market, Financial education is given a lot of attention. If you are an amateur stock trader or someone piling CNC trades and thinking of moving on to intraday trading, you should read the article.
What is Intraday Trading?
The sale and purchase of stocks on the same day are referred to as intraday trading. It is carried out through the use of internet trading platforms. If somebody wishes to own stock in a company, they must specifically use the option of ‘intraday’ on the platform’s interface. Before the market shuts down, the user can buy and sell the same amount of stocks in the same firm on the same day. The target is to make a profit from market indexes moving up and down. Sometimes it is contexted as “day trading.”
What are the tips for Successful Intraday Trading Strategies?
Intraday trading may sound appealing but it is quite riskier in reality. If one tries his luck without completely understanding the market, you will end up in a dreadful scenario and maybe lose all your hard-earned money. So, here are 5 tips for successful intraday trading strategies to have complete learning of how intraday trading works.
1. Basic knowledge of Intraday trading
1. Perform your homework: The first tip in successful intraday trading strategies Before buying a company’s stock, do an extensive study to determine the essential parameters that indicate the company’s strengths and weaknesses.
2. Risk management and the reward-to-risk ratio: As a newbie, you should only spend as much as you can afford to lose. Investing in stocks with a risk-reward ratio of 3:1 is one of the most fundamental intraday trading methods. This will allow you to lose the amount that will not hurt you while also giving you the possibility to make a profit. Another risk-management strategy is to never put more than 2% of your whole trading money into a single trade.
3. Choose equities that are liquid: You can invest in a few large-cap stocks instead of multiple small and mid-cap stocks.
4. Pre-define profits and risks to avoid emotions: Another approach in intraday trading is to determine your entry-level and goal price ahead of time. Whatever the case may be, you must avoid making impulsive or emotional decisions. Square your position as soon as you hit the desired price. You can set the stop-loss level on your transaction ahead of time to avoid emotions. If stock prices fall below the pre-determined levels, your trades will be automatically closed. You can then start over with a new plan while still suffering from migraines.
2. Recognize the distinction between investing and trading
The second successful intraday trading strategies is to recognize the distinction between stock market investing and intraday trading. Trading and investing both necessitate distinct strategies. For example, as a responsible trader, you must close all open positions on the same day, regardless of whether the goal price was met or not. Stock investments, on the other hand, necessitate a long-term strategy, and smart investors are rarely influenced by short-term market volatility.
Intraday trading is more technical than stock investment, which demands a more fundamental approach. Therefore, try to avoid investing in penny stocks. You are surely looking for deals and low-cost investments but beware of penny stocks. These stocks are typically illiquid, and the chances of making a fortune are limited.
3. Volatility of Market
Keeping in mind that the market is unpredictably volatile, our third successful intraday trading strategies suggests that even if you’re a seasoned trader using cutting-edge equipment, you can’t guarantee that the price will move in your favor. Despite technical signs indicating a bullish market, prices can sometimes decrease, resulting in bearish patterns. Remember to quit your trade immediately if the market moves against your expectations. Before entering or exiting a trade, always decide the kind of orders you’ll put beforehand, whether it is a market order or a limit order?
There is no price guarantee when you make a market order because it is executed at the best price available at the time. Create a stop-loss order for such stocks. Meanwhile, a limit order ensures the price but not the quantity. Firstly choose a stock you are going to employ enter and exit scenario. Will you choose to use market or limit orders? When you submit a market order, there is no price guarantee because it is executed at the best price available at the moment.
Nevertheless, a limit order does not mean it will get executed there is a guarantee of price. Limit orders give the flexibility to trade with great precision only by establishing your price for purchase or sale. One can also use the Options method, however, this method is more commonly exploited by experienced and skilled intraday traders to hedge their positions.
4. Intra Day Trading Methods
The fourth successful intraday trading strategies is to use reliable intraday trading techniques. The strategies listed below can be used. To map resistance and support, utilize the Opening Range Breakout. ORB is the opening range of the price changes in stocks after the start of a trading session, whether high or low.
ORB might last anything from 30 minutes to 3 hours. After determining the highest point, which is assumed to be resistance, and the lowest point, which is assumed to be supported, you can take a variety of positions. When employing the ORB for intraday trading, keep in mind that when a stock climbs upward from its breaking range, the price trend is likely to continue.
Relative Strength Index (RSI) and Average Directional Index (ADX) together are other tools for intraday trading. While the RSI is a technical indicator used to identify overbought and oversold stocks, the ASI is a trend identifier that helps traders make buying and selling choices. When you combine the two, you can make more informed intraday trading selections.
This intraday trading method identifies equities with significant supply and demand mismatches and uses them as entry points. After analyzing the past price movement, you can locate these locations on price charts. Thus these successful intraday trading strategies can be very fruitful for someone who applies them correctly on the trend.
5. Time analysis for Intraday trading
The last successful intraday trading strategies is to examine the daily charts thoroughly. The price movement between the starting and closing hours of a trading session is depicted on daily charts. The daily charts can be used to examine price variations in the short and medium term. One needs to study a variety of charts for tick-tack charts (line charts representing every executed trade), and intraday trading, including the five-minute chart, two-minute chart, and 15-minute chart. It is always advisable to read the chart of at least 15 minutes duration to have a stable result.
The middle trading hours are often less volatile, and then the market begins to shoot again during the closing hour. Although the rush hours intimidate opportunities, it’s said for beginners to keep away from the rush hour to play safely. Read the market first and when you become an expert start using the upper hand luck at the ups and downs.
There are several brokerage platforms such as Zerodha, Groww, Angel one, etc. that offer a tutorial guide on successful intraday trading strategies for a newbie.
In order to reap maximum benefits from the upheaval of NSE, one needs to have a stronghold on successful intraday trading strategies. There are a lot of people who earn thousands of money on a daily basis solely from intra-day trading. This is possible through regular investment and practising what you learn.