What is Intraday Trading?
Intraday trading or day trading is the most active form of trading in the stock market. It involves trading financial securities within the same day, i.e. buying and selling the same securities within the same trading session.
- Day trading involves utilizing small price movements in the best possible way that only remains for a short period.
- Day traders can place multiple high-volume trades within a few minutes. They can take numerous positions and trade as many times as they want during a trading session following their strategy.
- Intraday traders need to ensure that they balance off their trade before the trading hours end. Failing to do so can lead to huge losses because of price gaps in the opening and closing of the position.
What Should Traders Know About Intraday Trading?
Intraday trading is a skill that develops with extensive knowledge over time. Understanding day trading basic rules and techniques to minimize losses is very important. Day traders have enough knowledge about the stock market. They are capable of capitalizing on small price movements of stocks with high liquidity.
Know Basic Rules and Techniques
Capital preservation is more paramount for them than doubling their capital. It is impossible to entirely avoid losses in day trading, but traders can minimize them by implementing the right techniques.
Following are the basic rules and tips that will help day traders to make profits:
1. Pick liquid stocks: Liquid stocks increase the possibility of making profits with a timely exit. Traders need to select liquid stocks for easy entry and exit. Experts suggest day traders enter positions till 1 pm during a trading session.
2. Set entry and target Prices: Day traders need to trade based on strategies. They must have a clear trade plan and entry/exit points based on analysis before initiating a day trade.
3. Start small: Beginners should start day trading with small amounts to avoid a situation that leads to unbearable heavy losses.
4. Monitor Market: Day traders need to monitor market movements closely. Focus on intraday trading indicators like the market trend and time analysis that help to determine the stock movements with the help of daily moving averages. Keep an eye on upcoming IPOs.
5. Act like Trader Only: Intraday trading is different from investing. Investing depends more on fundamentals, while trading works with technical details. Strategic factors are different for both.
6. Utilise Stop-Loss: Apply to stop loss on your trades. It is a compulsion for day traders. Do not wait for the stop-loss trigger if you find yourself stuck in an unfavorable trade. Exit from the position immediately.
7. Disciplined Approach: Be disciplined. Always close all your positions on your own irrespective of profit or loss.
Know The Impact of Brokerage Fee on Day Trading Profits
A brokerage fee is a fee charged on every trading transaction a stockbroker facilitates on its online trading platform. Brokers deduct the fee from your day trading profit. Brokerage is a concern for most day traders as they trade with high volumes multiple times a day. With such a huge volume of trade, the brokerage fee becomes a big amount and becomes a concern for traders. Therefore, day traders need a brokerage firm that can offer trading facilities at competitive charges.
If you invested in stocks worth Rs. 2 lakh and sold for Rs. 2.2 lakhs. The total trade transaction for a day is 4.2 lakhs. The broker will charge the brokerage on the total trading value of Rs. 4.2 lakhs. If the brokerage charge is 0.5%, you need to pay 0.5% of 4.2 lakhs = Rs. 2100. It will be deducted from your profit of Rs. 20,000.
You can consider a discount brokerage to save on trading costs. They charge a flat percentage as a brokerage fee irrespective of trade volume.
This is the basic knowledge about intraday trading. You can keep learning about the market and develop your trading place and execute it with effective trading strategies. You can open a trading account for free with discount brokers offering affordable subscription-based brokerage plans. If you want to invest in the Indian share market, you need to gain some basic knowledge about the stock market.
