Unlike long-term trading, investors participate in intraday trading to make returns from price movements that occur during the day. It is a form of trading where a trader can both purchase and sell securities on the same day. This necessitates making decisions soon and realizing that markets are not static.
For both the novices and the professional traders, a free Demat Account is vital for intraday trading. It is, however, not without the risks. This is why you must follow these intraday trading tips for beginners to make your intraday trading more effective.
Understanding Intraday Trading
The term Intraday means “within the day”. As the name itself suggests, Intraday Trading refers to the purchasing and selling of stocks within the same day. Also known as day trading, intraday trading aims to capitalize on short-term price swings, leveraging market volatility to generate profits.
Intraday trading looks at price movements throughout the day and attempts to make money from minute changes in the market. Unlike long-term portfolios, intraday trading involves opening the position and closing it before the market closes.
Dematerialization Meaning and Importance
Before diving into intraday trading tips and strategies, it’s crucial to understand the meaning of dematerialization. The dematerialization is the process of turning physical paper based share certificates into electronic certificates. After the conversion, all these shares are stored in a digital form in a Demat account.
Demat account is utilized for holding the securities in an electronic form and is mandatory for trading in the securities market.
Key Intraday Trading Strategies
Here are the best tips for intraday trading you can follow the make higher returns and reduce losses:
1. Choose Liquid Stocks
Liquidity of the stock is one of the first things that you should look for during intraday trading. Both liquidity and volatility offer investors the necessary price swings to make returns. You must also invest in large-cap companies and avoid small- or mid-cap stocks.
2. Diversification
Intraday trading can prove to be full of risks and losses at times. One strategy to reduce your losses is to avoid investing all your money in a single stock. Try not to put all of your trading capital into one stock. You can reduce risk and balance your intraday trading strategy with the use of diversification.
3. Freeze the Entry and Exit Price
The purchasers’ fears cause them to make rash and incorrect judgments as they start to feel as though they have not made the right selection. By freezing the entry and exit prices before starting the transaction, investors and traders can avoid falling for this mistake. You can maintain objectivity and eliminate needless uncertainty by using these predetermined prices.
4. Use Stop-Loss Orders
Trading at market opening and closing requires the use of stop-loss orders to control risks. It also helps to fix your loss at a certain level since they will close your position as soon as the price gets to that level. Stop-loss orders allow you to safeguard your invested capital and reduce the likelihood of making irrational decisions.
5. Set Clear Goals
It is very important to have specific targets that need to be accomplished before the actual trading day begins. You need to determine your level of risk, desired profits, and maximum acceptable losses. Therefore, having a plan can assist you in keeping an organized focus and making the right decisions.
6. Book a Profit After Hitting the Goal
Trading intraday has the potential for significant profit margins. However, it’s crucial to remember that you should close the sale while making a profit and that you shouldn’t turn greedy. Unless you have compelling information that the stock price will grow, it is preferable to sell when you reach your target.
7. Stay Informed
For intraday traders, information about market events and news is crucial. Market trends are mainly influenced by factors such as economic indicators, company releases and statements, and global trends. Invest in up-to-date news to be in a position to make relevant trades in the market.
Conclusion
Intraday trading is a high-return trading type as long as the right techniques are adopted and tips are followed. It doesn’t, however, favor those with greed but those with plan and patience. This is why you should book the profit when a share achieves an all-time high during a day trading session.
A demat account is what you first must possess to participate in intraday trading. Ensure that you find and open a free demat account to maximize your returns. Also, you should start with a small scale, small goals, and gradual enhancement of skills.
