Intraday Trading – The Advanced Way Of Stock Trading
As the name goes, intraday trading is buying and selling of stocks on the same day, during the stipulated trading hours by the stock exchange. In this trading pattern, stocks are bought and sold in large numbers strategically with the intention of booking profits in a day. The main objective of the intraday trader is to make profit by taking advantage of the stock market movements. Hence, the level of profit depends on the extent of stock price fluctuations that the trader holds in his portfolio. You need to have an active online trading account to make online intraday trading possible. Intraday trading involves buying and selling of orders specified by the person involved in trading.
One of the common question that every intraday trader needs to address is, “How to find the right stock for intraday trading?”. When it is about making huge profits in intraday trading, everything boils down to hold the right stocks. When you are picking stocks for trading, there are a number of factors that need to be kept in mind, both qualitative and quantitative. There are hundreds of listed shares in the market but not necessary every share is suitable for intraday trading. Thus, you need to make informed and accurate decisions in this domain.
Right Stock For Intraday Trading
Picking right stocks might seem like a challenge. Here are few criteria that will simplify the process.
- Stock Volume – One of the major criteria being the volume of the equity shares. It is indicated by the total number of shares which are being traded in a given market at a particular time of the day. By simply looking at the screen it is not possible to find out the stocks that are high in demand. Share volume will help you shortlist the stocks which can be purchased in high volumes.
- Resistance level – Resistance level defines a price beyond which an equity share cannot rise. This is because of an overwhelming level of supply of the equity share at the particular price level in the market. As an intraday trader you may look out for the equity shares that have broken resistance levels and are moving upwards.
- Trading as per the stock lists – Few intraday traders prefer to trade only in particular equity shares. There are chances that these traders might have arrived at this stock list after conducting a detailed study of price movements of the shares.
- Stocks in the news – Based on a positive development as regards to the related companies, some of the stocks may perform well according to the expectation of the trader. They may anticipate that it will move in the expected direction with good volume. You may think to trade with such shares after basic analysis.
- Top gainers and losers – As per the recent market activity, you may find a list of top gainers and losers shares on the social media and news channels. Such kind of lists provide a ready reckoner that will help you in picking up the right stock that meets your desired requirements. However, blindly following such lists won’t be of very wise, use your judgement and analysis as well.
- Week’s movement – As per different time horizon you can study the price movement of stocks. You can analyze last one week’s price movements that will indicate stocks which are closing in negative or positive on a continuous basis. Such an analysis will indicate the stocks suitable for intraday trading.
Basic Rules of Intraday Trading
An unexpected movement can wipe off all your investment in a few minutes. Hence, it is important to keep in mind a few rules while carrying out intraday trading. It is better not to trade in the first hour as the opening range is established during that time. The fluctuation then can help to identify the intraday trend. Move with the market trend potential for a greater profit. Another basic rule is to fix the entry price and target levels. Set a stop-loss limit so that your losses can be curtailed if the share price drops. Also, it is wise to withdraw if your desired profits are met. Stick to the plan and carry trade in a disciplined manner.
Advantages and Disadvantages of Intraday Trading
The biggest advantage of intraday trading is, positions are not affected by any overnight negative news that has the potential to materially impact the price of a security. For example – key economic and earning reports as well as broker upgrades and downgrades that occur before and after the market opens or closes. Other advantages include – the ability to use tight stop-loss orders, access to increased leverage and provides more learning opportunities to traders. Disadvantages of intraday trading include insufficient time for an increase in profit position and increased commission costs as trades are being taken more frequently.