Every individual yearns for quick money. A life of waking up to luxury, sitting on a sofa, earning money without much effort is a secret dream for many. In the stock market, everyone craves to break the mantra of Rakesh Jhunjhunwala. Yet only a few do it. There is no rocket science behind earning quick money. It’s a matter of persistence and a smart job. Thus, in this article, we’re going to discuss how to start doing stock intraday trading for beginners.
What Do You Understand By Intraday Trading?
In this article
Intraday itself suggests ‘on the same day.’ It involves the purchase and sale of shares from the stock market on the same day itself. It should get sold before the market closes on the same day during trading hours.
For trading, you can set a specific price for a share to do the transaction. Once the stock hits the targeted amount, the transaction executes. In case you forget to sell the share the same day, it gets executed before the market closure. For example, you purchase 100 shares of TATA on 10th June 2020. You’ve to sell the shares the same day before the market closes. You can clash your spot in the same trading forum.
Square off trading is a type of trading style. In this, you buy/sell a specific quantity of shares and later reverse the transaction to earn a splendid profit. For instance, you buy 100 shares of Reliance Jio at Rs.500 per share. Before the market closure, you sell it at Rs. 550 per share. You will learn more about it in books. The net profit earned is appreciable. Isn’t it?
Benefits Of Intraday Trading
i. You Can Gain More By Investing Less
You can buy shares on margin. This means the market allows you to pay a part of the total price. You can thus gain more by investing less.
ii. Small Brokerage
The brokerage commission is a squat in intraday trading. It is 1/10th the positional trading.
iii. Great opportunity of short sell
In short selling, you can sell the assets not owned by you. It’s done when you find the price of the stock about to fall during the day. Later, depending on the profit, you can buy it at a lower rate.
For example, if you predict the shares of Reliance will decline, you can first sell it even though you’ve not yet purchased it. You can sell it for Rs. 500 and buy later @ Rs. 485 and get a net profit of Rs. 15.
iv. It doesn’t hold on to any overnight risk.
One of the most important benefits of intraday trading is its zero overnight risks. At the end of your trading session, as you’re about to close the position, the profitability remains unaltered. It’s left unhampered by any event during this period.
v. Quadruple Leverage Perk
Even if you’ve little capital, you’re free to invest in intraday trading. Several brokers who’ve acquired millions come up with special leverage for practicing brokers.
vi. Great Learning Opportunity
You can learn new techniques, smart strategies and plan for quick money. In a short period, you can decide which is the best option for you.
Point To Note: Verify the entry and exit of a transaction before investing.
Strategies Of Stock Intraday Trading For Beginners
a. Get On A Small Start
As a beginner, center your focus max 1 or 2 stock trading during a session. Tracking and researching on companies is easier when done on 1-2 trading.
b. Keep Ample Time In Your Hand
Intraday trading requires time, especially for beginners. You need to give most of your time keeping an eye on the rise and fall during trade session. On that basis, you’ve to make a purchase or sell.
c. Avoid Hill Of Beans
Penny stocks are often non-viscous and illiquid. Thus, hitting the price is bleak until, and unless you see a crystal clear opportunity, stay out of these.
d. Limit Your Orders
Orders are of two types, market orders and limit orders. The market order is best executed at the perfect available time. Thus it doesn’t guarantee any price or profit. Yet, a limit order guarantees a profit. It helps you execute the trade at the price of ‘sell-buy’ without any issues.
e. Be More Acceptable
Every trade involves risk. About 50-60% of your trades you win. Not always, you lose or win. It is that there’s more profit than loss. So stay cool and accept the loss if it happens. You need to keep persistence, control over your greed, and dedication. Don’t let your emotions take over your logic.
Make sure the risk in a specified percentage. Before getting in, watch for the entry and exit point of the trade. Successful traders don’t think fast rather move according to their strategy. It is important to follow your strategies than following blindfolded.
How To Start Stock Intraday Trading?
It all starts with the opening of a Demat account. You can open an extra account for day trading for extra security.
1. Wait For The Right Stocks
Look for stocks with high liquidity and volatility. In simple words, high volume and fluctuation in price. The stocks with low fluctuation in price will yield either very little or no profit.
For example, you might first look for the base price of the stock. Then you can compare it with the current and resistant prices. Have a look at the low, average, and high prices. You should buy when the price is above the base price and sell it below the resistance price. When the price fall below the base price, you ought to sell it at the support price.
As a beginner, you might think of waiting for long. This might result in a bigger profit or loss.
2. Acknowledge The Fundamentals Of The Stock
Be it a beginner or an experienced, you must research well about the stock’s fundamentals before investing. Find the perfect stocks for you to invest in. Mentioned below are few important criteria to help you decide which stock is best for you to invest in.
a. High Liquidity
Stocks with high liquidity have a high volume and fluctuating prices. It allows you to buy large quantities and sell without making much price difference. Since day trading depends on precise timing and patience, a stock with a lot of volumes makes trade easier. Depth of stock implies how much liquidity it own at various price levels. It can be above the expectations or below the present market offer.
b. Optimum Volatility
Intraday traders need many price fluctuations to earn money. The more the fluctuation, the more the variation. Either you grab at the perfect moment and win loads or lose it. Stocks that bear a fluctuation of 3% or more have high congruous efforts to make large in intraday.
c. Follow Your Group
When the demand for a stock increases, its price increases. It doesn’t matter if you’re expending on the same group/stock every day. You shouldn’t worry if it’s correlated with anything else or not.
3. Invest In Stocks Following Market Trend
The stock market sees highs and losses depending on various factors like political changes, critical thinking. In other words, the price of a stock rises with market demand and falls with a decrease in demand. So, it is better to predict the market value and choose the stock. Yet, some stocks are hard to predict. It is better to stay away from such chaotic stocks.
4. Read And Research The Entry And Exit Points Of The Trade
Most beginners set off without giving much attention to strict research. A successful trader often sets his path in a confident and lighted way. So, before investing, make sure you’ve read the company policies and studied shares.
a. Trade Only With The Trending
The market always floats over the tides of uptrend and downtrend. It is your duty to maintain the boat of your profitability on it. During an uptrend, make a long jump, whereas during a downtrend, make a tiny position. With a shift in the dominant trend, start a new trade. Day traders do not continue for long. But you can make more during reversal hours.
b. Strong In An Uptrend And Weak In A Downtrend
There is always more chance in the stock that fluctuates more. You must buy stocks that are moving higher than the futures. A strong stock doesn’t pull back when the future pulls back. Thus, strong stocks are always in an uptrend as they enhance the market value. This enhances profit potential.
Yet, the strong and weak uptrend may change under the market value.
5. Limit Your Losses
Stop losses are the most important criteria to avoid losses in a day trading. It reminds your brokers to get rid of the stocks when the prices fall below the targeted amount.
If your stop-loss is 2% below the actual amount, once the price hits below the targeted, your brokers sell it. Thus, the greatest loss endured would be 2%.
Intraday Trading Tools
There are many platforms and tools set for smooth day trading. Listed below are such-
1. Trading Platform
There are many trading platforms like Zerodha, Sharekhan Trade Tiger, Angel Broking Speed, etc. These flourishing party lines provide enough information regarding the stock policies, the volume traded, offer a range, and so on.
These create a customized risk profile for you based on your risk appetite, net worth, investment. It also provides technical analysis for a broader view.
A trading platform is generally evaluated based on the actual data provided. The flexibility of stocks, fees, trading strategy
These are some of the most important tools in intraday trading. It’s used to judge the stock movements, opening, closing of trades in the market. It also provides historical data along with price movements. It can be set to show a particular time you want to invest in- hourly, 30 min, etc.
The capability to read charts is most important. It needs time and patience for expertise. You’ve to analyze minutely how the chart changes in certain events. Companies like Reuters, Bloomberg provide real-time charts to analyze for beginners. For example, in a 30 min intraday chart, it shows the opening, closing, price movements of the chart in 30 min. You need to have a close observation to get analyzed.
Added to the time-period charts, there are also trade charts. They showcase the trades that get executed in the market. The representation does not depend on time. For a market with zero trades, the chart is a straight line. For a stock with high liquidity, the chart moves up and down.
3. Technical Indicators
These are in conjunction with the charts that provide an in-depth analysis. Besides the present movements, they also provide future predictions. It predicts future price movements, price directions by pattern analysis. It analyses only on short term price movements.
a. Moving Averages
It evaluates the mean value of the guarantee over a span of time. For example, a 7-day moving average gives analysis in the past 7 days. It provides a crystal clear analysis of volatile fluctuations.
b. Bollinger Bands
These follow price movements for analyzing. There 3 types of bands- middle band, upper and lower bands. When volatility increases, they widen. On decreasing volatility, they become narrow. While the upper band and the lower bands are the standard deviations, the middle band is the simple moving average. It helps you decide the price range of stock.
c. On balance Volume
It determines the strength of the trade. Combining the volume and the price, it regulates the buying and selling of trades.
d. Relative Strength Index
The relative strength indicator works like an oscillator. A single line, stretching from 0-100. It floats freely between the higher and bottom bands. It measures the speed and change in price movements, comparing the recent profit and loss in intraday trading. Thus, it throws lights towards conditions that are over-purchased or sold. If the reading goes above 70, there’s overbought. If it reads below 30, it indicates oversold, and the RSI is downtrend when below 50.
e. Advance Decline Line
Well, this breadth indicator works on your sentiments. It analyses on Net Advances. Net advancing means the difference between total advancing and total declining stocks.
1. Which dealer is the best for intraday trading?
Several factors are deciding which broker is best for intraday trading-
a. Low broker charges
b. Tips, tricks, and plans
c. Techniques and profitable strategies
d. Intraday trading limits and exposure
e. Trading policies
Based on all these factors, the below mentioned are best-regarded intraday trading companies.
- Kotak Securities
- ICICI Direct
- 5 Paisa
2. Who can take part in intraday trading?
Every trade has its own risk involved. So is intraday trading. To flourish smoothly, you must own three attributes- rigorous, disciplined, conclusive. You must be brave enough to bear loss anytime.
3. Which kind of stocks must you choose for intraday trading?
4. Is there any limit to day trading?
Recognizing the perfect stocks for trading requires various criteria. It involves both risk and gain. Once you put up with proper trading strategies, you’re ready. I hope this article helps you fill your pocket with intraday trading.