Online trading has empowered people from all walks of life and across the country to invest in the stock market. Given its transparency, online trading has picked up tremendously with more and more people opening Demat and trading accounts with reputed brokers such as Kotak Securities, to trade in the stock market.
Intraday trading is based on technical analysis, and as a day trader, the analysis can help you to capture short-term price movements. The biggest advantage of intraday trading, over investing in the stock market, is that you can make money regardless of whether the stock price moves up or down. However, in spite of the speculative nature it must be dealt with caution and discipline.
To begin with, it is important to understand that investing and intraday trading are two different things. Their very intentions and definitions of goals separate the two activities from each other. One of the most fundamental differences between intraday trading and investing is that, as an intraday trader you must have an exit expectation with regards to price target and understand that trading has a finite life. On the other hand, investors buy stocks with an indefinite time in mind on its selling date.
In this regard, there are some important rules to keep in mind when trading online. Here, we look into the dos and don’ts of intraday trading for a safe and smooth trading experience.
- Intraday trading involves risk. Hence, it is strongly advised to trade with funds that you can afford to lose, if it comes to incurring losses.
- You can gain an edge by obtaining knowledge on the principles of technical analysis and relevant tools used in day trading.
- Employ stop losses and trailing stop losses to your benefit. Stop loss is crucial in day trading and can help mitigate risk connected to trading. Similarly, trailing stop losses are effective in safeguarding your profits while you are riding the momentum.
- Follow the trail of your accomplished trades. Review them to see if you can improve the methodology used when trading.
- When entering a trade, look into transaction expenses and make a note of your breakeven points.
- Conducting a trading session in a manner that suits you the most. This could be in the form of technical analysis, fundamental analysis or a combination of both to bring about a rational and effectual trading position.
- Buy into strengths and sell into weaknesses.
- Do Not convert your trading position into an investment stance
- Do not try to capture the bottom of a falling stock. Buying into weakness and going against the trend can result in significant losses.
- Do not be swayed by speculative information, hearsay or market rumours.
- Do not let your profit become into a loss; rather make use of trailing stop losses to avoid a loss situation.
- Do not assume numerous trading positions. Although diversification is a good move, it can become challenging to track many trading positions at any given point. This could result in significant losses if there is an adverse movement in the market.
Intraday trading can be risky; but there are ways to manage the risks. The key here is to comprehend and grasp fundamental principles and practices like the dos and don’ts mentioned above. By doing so, you will be able to build the right trading frame of mind and become successful.