What is Intraday Trading? How to become successful in trading?

intraday trading stock market fundamental analysis

Intraday Trading

Intraday trading also known as day trading is a trading style when the asset class or financial instrument is bought and sold within the same trading day. Intraday traders aim to make profit from small price movements in the market, often taking advantage of short-term fluctuations in stock prices. Intraday trading requires more skill than any other trading style just because it is very complex to make profit out of the short price movements within the market and it took lot of experience and skill to make income from intraday trading consistently. Intraday traders can also get the leverage benefits from the brokers and short sell a stock to make income in any market condition. Intraday traders can use margin trading to increase their buying power, which can help them make larger profits. However, leverage also increases the risk of losses, and traders must be careful not to over-leverage and must have a good risk to reward ratio as well. To make consistent income by Intraday trading , it is prominent to have deep understanding of market trends, technical analysis, and risk management.

Short selling also known as shorting, is a trading strategy where an investor borrows shares of a stock from a broker and sells them with the expectation that the price will go down. Investors can buy back the shares at a lower price than buy price and make profit .Short selling helps the investors to make income even when the markets are falling and provides the opportunity make an income and sustain in the markets at any market condition.

Benefits Of Intraday Trading

No Overnight Risks – Intraday trades has lower risk exposure as the trade is exited within the day . The biggest problem positional traders are facing is the risk of holding the positions overnight. Weakness or panic in the global markets can create huge impact on Indian markets with big gap up or gap down. This can create huge losses for positional traders. Trading intraday can minimize overnight risks and help to maintain proper risk reward ratio.

No capital block – The biggest advantage of intraday trading is that the profit or loss incurred will be realized the same day getting our deployed capital free. The problem that swings traders face is not realizing the losses and which lead to getting their capital blocked in a trade. Intraday traders are able to easily recover their losses as their capital is not blocked in a trade.

Leverage benefits- intraday traders will be provided with leverage benefits by their respective brokers. Leverage facility is the extra margin that the broker provides to the traders to take positions. Leverage facility will be beneficial to traders with good risk management and discipline. Leverage facility provides traders to make huge profits with small capital but this can also create huge losses. So traders must have proper investment knowledge and risk management before taking leveraged positions.

Short selling – short selling facility can be used by intraday traders to make income from the falling market. By shorting the stock intraday traders can make profit from the expected decline in price. Short selling facility enables the day traders to make income in any market conditions. Short selling also have associated risks , proper risk management and discipline is very prominent in case of short selling also.

How To Become a Profitable Intraday Trader

Intraday trading is the most complex trading style and it requires top quality skills to make consistent income from the markets. Let’s closely analyse the qualities an intraday trader requires to become successful in the stock market.

  • Acquire Basic Market Knowledge- The primary step to do before even thinking about intraday trading is to gather proper market and investment knowledge. It is very essential to learn market basics and market psychology to become successful in the market.
  • Develop a Trading Plan –For an intraday trader it is very prominent to develop a trading system which has a good win ratio. It is important to develop a trading plan that outlines your trading strategy, risk management, and exit strategy.
  • Learn Technical Analysis- Intraday trading is heavily based on technical analysis. It is important to learn technical indicators, chart patterns, and price action to help you identify potential trading opportunities. Intraday traders must focus on mastering technical analysis than fundamental analsyis as understanding proper exit , entry and market price action is very significant.
  • Paper trade your trading plan – Practice intraday trading with a demo account  or paper trade before you start trading with hard earned money. This will help to gain experience and test the  trading strategy without risking your capital.
  • Manage risk – risk management is the key of successful intraday trading. Keeping realistic risk to reward ratio and following the system is very prominent for intraday trader to minimize their losses and to brace themselves from high volatile market movements.
  • Proper money management- Proper money management is essential to becoming a profitable intraday trader. Intraday trader only risks a small percentage of your trading capital on each trade and avoid over-leveraging. Proper money management and position sizing helps the investors from getting emotionally attached to the trades and following their trading system with discipline.
  • Keep up with news and events – Trader must be well informed and updated about  financial news and events that can create huge volatility and impact the markets. This can help traders to brace themselves from market volatility and take informed decisions accordingly.
  • Have realistic expectations – Traders should not treat Intraday trading as a overnight success method or a get-rich-quick scheme, and it is important to have realistic expectations. Focus on making consistent profits over time rather than trying to make a large profit on every trade. It is important to have realistic targeted returns from market and proper financial goals.
  • Review your trades – The golden rule to become a successful intraday trader is to improve from their experiences and not repeating the same mistakes.  Intraday traders must review their trades and analyze their performance and get better over a period of time . reviewing trades helps to improve and refine  trading strategy.
  • Follow trading plan – Apart from developing a great trading plan , most of the traders fails to follow and stick to the trading plan in real life. Traders brings in emotions and fail to follow their trading plans and ends up making bigger losses.

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