Intraday Trading: A beginner’s Guide to Stock Market
Are you new to the stock market and probably wondering what intraday trading means? Well I come bearing good news. Intraday trading isn’t as difficult to understand and invest in as most beginners think. Intraday trading simply means buying and selling of stock in the very same day during the trading hours that are stipulated by the exchange. Stocks are bought and sold in large quantities strategically with the intention of booking profits in a day.
The first thing a beginner should know about intraday trading is that traders involved in this line of the business normally book profit in small margins, it can be very rewarding at the end, because each day is a new day with new possibilities. Traders make profit by repeated trades or by trading large quantities.
However one thing you should note down is that intraday trading is full of risk. The number one rule is to always ride with the trend. If you do you are sure to make a reasonable amount of profit and cut down losses.
How to go About Intraday Trading
· The first step is to identify the stock and this can easily be done using intraday charts.
· Conduct proper research before entering the trade. Rely on only official and known sources for news, do not conduct trades based on rumors.
· Trade with the current market trend
· If the market is falling, sell first and buy later, and vice versa
· Make an intraday trade plan and stick to it
· Set your desired profit and stop-loss levels, it helps limit your loss if the market is not favorable
· Choose highly liquid shares and trade in a small number of shares at a time
Basic Rules of Intraday Trading
Keep in mind that an unexpected move can wipe all your investment in a matter of minutes, so it’s paramount to keep in mind the basic rules while carrying out the trade.
· Do not trade in the first hour as the market opens, as the opening range is set during this time. The fluctuations can help identify the intraday trend.
· Move with the market trend like I said earlier, as it allows potential great profit if the trend continues.
· Fix entry price and target levels.
· Set a stop loss limit so that your losses will be in check if the share price drops and also withdraw if your desired profit are met.
· Stick to your plan and carry trade in a disciplined manner.
How to Make Consistent Profits Using Intraday trading
Many traders follow a straight and simple goal to make consistent profits. The best intraday trading strategy you can implement to achieve a substantial amount of profit is to buy when the stock moves above the opening range high, and sell when the stock moves below the opening range low.
In the first 30 minutes of the trade, each stock creates a range, also known as the opening range. The fluctuations of these range are taken as support and resistance. If the stock movement is observed to cross the opening range high, it is advisable to buy. Likewise you can sell when stock movement is observed below the opening range low.
This strategy can give you consistent profits if done with discipline, proper study of the market trend and optimal usage of indicators.