Intraday Trading Guide for Beginners

How Does IntradayTrading Differ From Regular Trading?

One of the primary differences between intraday trade and regular trade is taking the delivery of stocks. In intraday, the trader is required to square off the position the same day before the market closes, irrespective of profit or loss.

Whereas in regular trading, the trader may choose to remain invested for a period, and thus, a trade settlement is made in a few days, depending on the category of the scrip. 

Also, in intraday trading, there is no change in ownership of the shares, whereas, in the case of delivery, the ownership of shares changes, and the rights are transferred from the seller to the buyer. The shares after settlement, sit in the Demat account.

Beginners often struggle with choosing the right kind of tools to execute trades and thus end up making losses.

Mantras to Stick by When It Comes to Intraday Trading

Here are some key points to remember while learning how to start intraday trading-

• Enter and Exit At The Right Time  

A great idea is to trade with a prevalent intraday trend. This offers the potential for low-risk entry points while providing high potential for gain if the trend continues. Identifying such patterns helps in finding useful entry and stop-loss strategies.

To identify when to exit, you can look at two conditions; when you have reached the target profit or when you have reached the maximum loss limit below which you don’t want to go. Once you have reached the profit level you want, you can consider making an exit. 

• Have A Stop Loss Always

An offshoot of the first point, always have a stop loss Having a stop loss is a type of exit strategy if in case your trend or expectation doesn’t come true.

On the other hand, if your expectation comes true, you should know how to have different target levels – T1, T2, etc. so that you keep exiting at various price points.

• Factor In Historical Returns 

We all believe the fact that – History repeats itself.  While this can’t be said with 100% certainty, usually stocks also follow their historical path. Thus, the aim should be to find a name that preserves the capital and at the same time, provides returns at a controlled risk. 

You may choose to start trading a few names initially after analyzing the trend and understanding its characteristics. Also, remember to choose a liquid name that has a high average daily volume. This ensures that you will be able to find buyers while exiting.

Bonus Watch: The Intelligent Investor: Book Review 

• Don’t Get Impulsive

Traders often feel discouraged if their ability to pick names doesn’t work wonders. Beginners should put to use the historical analysis to find opportunities and build trading strategies around those names. Also, an individual should have a well-defined profit and stop loss level and should not let impulsive nature take control of the trade activity.

If you have devised an entry and exit strategy that best aligns with your needs then don’t impulsively change it mid-trade. Successful trading requires you to be alert and in control at all times.  

• Start Small

A few good trades may have boosted your confidence but it’s still too soon. Don’t be very aggressive with your bets in the initial phase. Focus on a maximum of 1-2 stocks to start with. With time, the volume and the value should be increased.

Starting small will allow you to make mistakes and increase your familiarity with how the market works so that you don’t make the same mistakes twice. Increase the trade volume gradually as your experience and risk appetite increases. 

• Avoid Penny Scrips 

Penny stocks provide very high returns but at the same time, come with high volatility. As a beginner, you should avoid penny scrips owing to the high risk of capital loss.

Once you are comfortable with the strategy, understand trends well, you may enter the segment. 

• Remain Calm 

Since intraday trading requires you to be hyper-vigilant about the market, it surely brings with it anxiety. However, don’t let it get the better of you.

Trades and decisions should be based on logic and rationale. Emotions such as fear, greed, attachment, etc. should be kept at bay. 

Alternatives To Day Trading 

As mentioned previously, intraday trading looks lucrative but comes with a high degree of risk. So what are the other options if you wish to switch?

Following are some of the alternatives to intraday – 

• Swing Trading

In this, usually the investor play for a few days or weeks. It can be considered the right way for people looking to diversify.

• Traditional Style

This is not trading but investing where an investor puts the money for a longer term on the lookout for the real value of the company. These investments are decided based on fundamentals and have the potential to become multi-bagger if done right. Also, these methods need patience for making money.

• Robo-advisors

Many people are turning to Robo-advisors these days, which uses machine learning and many sophisticated algorithms to suggest potential names to buy. Based on the risk appetite of the investor, these systems throw up investment ideas.

Summing Up Intraday Trading for Beginners    

Intra-day is not very easy and this guide should be used only as a starting point to delve deeper into this trading type. It is also important to note that this type of trading is not suited to all stock market traders or investors.

Read more about this trading to see if it aligns with your financial objectives and risk appetite. If you want to explore intra-day trading, start with a small trade volume to protect yourself from market risks, also make sure your technical analysis basics are strong so that you are able to take wise buy and sell decisions.

However, if you want to take benefits from the stock market, you can start investing rather than trading. Stock investing involves assessing a stock based on fundamentals and then holding on to your investments for long-term wealth prospects. That way you don’t have to constantly watch and time the market and it can save you a lot of anxiety as well as a possible capital loss.

In any case, whichever strategy you select, make sure you enter stock markets with thorough preparedness, know fully well about the risks, and remain calm and composed.

Happy Investing!