Intraday trading may appear to be a lot of black box techniques, whereas it is actually a lot about simple rules and basic discipline. Focus on the discipline as that is the basis of intraday trading. In a highly dynamic trading environment, nothing works as well as some basic tips and strategies that can make the task of intraday trading simpler. Here are a few tips and a few more strategies, although tips can be the wrong word to use here.
Intraday trading entails an inherent risk compared to delivery trading. When you take delivery of shares then time works in your favor. When you trade intraday, you have about 6 hours time in front of you to close out your positions. With every passing minute, the time works against you and the pressure builds up. Remember, you cannot afford to take losses for too long because it impacts your core trading capital. You only have so much capital to risk in the market. That is where some useful tips come in handy. These tips are about some practical rules that can make you trade better. It also covers strategies that can enhance your intraday trading experience in a more organized way. Here is how you go about it. You can start off with these five tips to make a success of your intraday trading experience. They may not make you a millionaire but surely increases your safety quotient when trading intraday.
Focus on a very small set of stocks. That is the best way to stay focused. Intraday day trading is all about specializing in a small set of stocks. Yes, you heard right, it is about specialization. Don’t think that intraday is about punting in the market at random. Unlike what a lot of people believe, an intraday trader is not oblivious to research. On the other hand, the intraday trader needs to track charts, macros and news flow as the time frame available are only for a few hours. Therefore, it is always better to keep your universe of stocks small. You need to do a lot of smart tracking and smart monitoring of your open positions.
There are 3 decisions you take in intraday trading. When to buy, when to sell and when to keep your mouth shut? You are not obliged to trade every day and every hour. That is what a lot of intraday traders tend to believe. That is a primary error. Once you identify your stocks you must also identify the levels of entry and exit. Have the discipline to wait until these levels are achieved. Don’t jump into the market in a stroke of impatience. But most important is when to just sit quietly and do nothing. People gradually realize that normally you’re the most profitable intraday decision is to sit out when others are burning themselves in the volatile market.
Don’t try to average your positions. When your stop loss is triggered, just exit your position. The stock may bounce back and hit your target but that is off the point. It is not your job to predict the stock price but trade on the side of momentum. The stop loss is a discipline and you need to adhere to that discipline; come what may!
An intraday trader should never try to become an investor by default. That holds even if you have the funds to take delivery. If you want to take delivery do it separately as a distinct activity. Don’t mix up with intraday. You are an intraday trader by design and that is what you should remain. Quite often, traders tend to hold on to positions with the view that the stock could bounce and go higher. You are breaking the basic code of intraday trading here. Investment is a different ball game; here just stick to intraday trading!
When it comes to intraday trading, the trend is your friend. Always respect the market’s wisdom and read the message from the market. Then decide your trading strategy accordingly. A smart intraday trader will never try to outsmart or outguess the market. When the market depicts a certain underlying trend, it is giving you a message. As an intraday trader, it is your job to read that trend and trade accordingly. Intraday traders are more likely to be profitable by being on the same side as the market trend.