Intraday Trading Tips

Last updated on November 17, 2020

The stock market comprises two kinds of participants- the traders and the investors. It is often seen that these two terms are used interchangeably by many people when talking about stock market investments. However, there’s a huge difference between the terms.

An investor is concerned about the financials of the company. An investor always puts money with a long-term objective in mind. Investors put the money in the stock market with the belief that the company will perform well in the future, and hence the stock prices will rise. An investor is least concerned about the volatility of the market or the volume of the trading stocks.

On the other hand, a trader is more concerned about the changes in the prices of the stocks. A trader buys the shares at a low price and sells them at a high price, thereby making profits from the bargain. Traders are not concerned about the financials of the company. They are also least concerned about the longevity of the business and hence analyze only the price movements in the stock price.

An intraday trader is the one who buys and sells the stocks within the same trading day. Intraday trading tips can be used by intraday traders to make quick profits from buying and selling stocks on the same day.

Intraday traders can follow the below-mentioned intraday trading tips to earn good profits from intraday trading.

  • Buying Some Shares with High Trading Volumes: The basic intention of purchasing stocks for intraday trading is to make profits by selling the stocks on the same day. An intraday trader never purchases the stocks or takes delivery of the stocks. When an intraday trader buys the stocks, he enters an ‘open position’. The intraday trader then needs to sell off the stocks to close the open position; otherwise, the intraday trader will have to pay for the stocks that can be sold later. Thus, this is why trading volume plays an important role in squaring the traders’ open position.

Intraday traders focus on the stock price as the prime intention is to buy low and sell high. However, in such a process, most of the intraday traders tend to miss out on the trading volume of the stocks.

Trading volume implies the total number of shares that a company trades in a day. If the trading volume of the stocks is low, then the trader might have to bring his liquidity down and buy more shares. Thus, to prevent this, it is always advisable to buy shares with high trading volumes so that the intraday traders can maintain their liquidity.

  • Choosing Few Liquid Shares: Intraday traders need to square off the position before the end of the trading session. Hence, it is always advisable to choose two to three stocks of large-cap companies having high liquidity. Holding mid-cap and small-cap shares can cause the intraday traders to hold these stocks for a longer duration as the trading volume and liquidity of these stocks are low.
  • Never Make Impulsive Decisions: One of the main aspects of intraday trading is to know the price at which you wish to enter and exit the market. Thus, it is essential for an intraday trader to decide on the entry price and the target price before entering the market. This is also vital as human psychology changes after buying the stock. After buying the stocks, market volatility might force you to make sudden trading decisions that limit your profits or result in losses. Thus, it would be best to have a rough idea about the optimum buying price and the target price before you make a trade.
  • Using the Power of Stop-Loss for Lower Impact: Stop-loss is a common term that we all have heard while entering stock market trading. Stop-loss is a trigger that is used in the stock market to automatically sell the stocks if the prices of the stocks fall below a certain limit. Using stop-loss limits the potential loss for an investor if the prices of the stocks fall. Successful intraday traders, thus, are those who are able to manage their risks efficiently by using the power of stop-loss. Using the technique of stop-loss ensures that the losses incurred by the intraday traders are within the check. Using a stop-loss strategy also ensures that emotions are eliminated from your trading decisions.
  • Harnessing the Power of Education: It is crucial for the investor to analyze the external and internal factors and what impact these factors will have on the stock markets. For this, it is vital for intraday traders to keep themselves educated and updated on market trends. You can follow some stock analysts online and try to understand how they analyze the various market factors and their impact on the stock prices. Regularly following stock analysts online will make you capable of picking up the right stocks on your own following the market trends. You can also read books on intraday trading to keep yourself educated.
  • Keeping Emotions Away From Trading: One of the most important trading tips applicable to any trading is keeping emotions away from trading decisions. Though the strategy is essential for both investors and traders, it is more important for traders as the chances allowed for making a mistake are less. Market trends help us in determining the direction in which the stock prices are moving; however, the trickiest part of intraday trading is not to get carried away by emotions. This is because emotion-driven decisions can be dangerous and can lead to losses in the long run. Thus, intraday traders should focus more on facts and figures to make informed decisions.
  • Booking Profits When You Reach the Target: Intraday traders can be classified into two categories- those who are afraid and those who are greedy. Intraday trading, as we all know, is all about taking risks; however, taking a risk does not mean not being cautious while making trading decisions. It is thus important for the traders to not only limit their losses by using the stop-loss technique but also book their profits once the target price of the stock is achieved. If an individual trader believes that the prices of the stocks can rise further, then the stop-loss trigger can be readjusted to match these expectations.
  • Avoid Moving Against the Market: There are incidences where market professionals, even with their advanced tools, are not able to predict the market movements correctly. There are chances that the market might decline even if the technical factors are depicting a bull market. All the technical or other stock market indicators are only indicative and do not provide any success guarantees. Thus, it is important to exit your position to avoid major losses if the market moves against your expectations.

Apart from following these tips and strategies, intraday traders can also follow some of the intraday trading basics. These basic rules are as follows:

  • It is always recommended by experts to avoid trading during the first hour when the market opens. The chances of earning profits are increased when the positions are taken between noon and 1 pm.
  • Before starting trading, every intraday trader should have a planned investment strategy and stick to it while trading. One such important trading tip is to use a stop-loss.
  • Suppose the trader finds that the market conditions are no more favorable. In that case, it is always advisable to exit the market immediately and not wait for the stop-loss trigger to be activated.
  • Beginner intraday traders should always start with a small amount of investments that won’t pinch their pockets in case of losses.
  • Understand the basics of stocks market trading before you commence intraday trading. Conduct fundamental and technical analysis. Do in-depth research and select liquid stocks, i.e., stocks having high volumes in the intraday market.
  • Close all the open positions even if you have to book a loss when opting for intraday trading.

Though there are various other things that a trader learns during his trading journey, these are some of the basic tips that can be followed by every intraday trader to minimize their probabilities of facing a loss. By following these tips, you can make informed intraday trading decisions.

Get 90% Discount on Brokerage Now!
Open chat
Need Help?
Connect Us for More Existing Offers