Intraday Trading Strategies & Tips: A Guide for Beginners & Experienced Traders

Intraday Trading Tips For Mid-Level Traders

Choose the Right Stocks

• Choose liquid stocks with high trading volumes, i.e., an average daily volume of more than one crore. This makes them easier to buy and sell. 
• Do your analysis and check what stocks are gaining traction in the news, as these provide excellent intraday trading opportunities. 
• Be careful with volatile stocks, as their prices fluctuate tremendously. 
• Do not put all the amount in a single stock. Pick a handful of stocks before you start trading and diversify intraday positions across them. 
• Avoid penny stocks because they have high volatility, lower liquidity, and dramatic price change movements. 

Set Stop Loss

By setting a Stop Loss Level, you can limit your losses. 

Let’s understand this with an example of two trader friends! Sahil & Ravi buy 100 shares of Company XYZ at ₹500 per share, believing its price will go up. The total amount invested is ₹50,000 each. 

Ravi set a stop-loss order at ₹490 per share, but Sahil didn’t. 

They both did all the analysis, and all signs point towards a potential upward movement.But unfortunately, the stock price drops to ₹480 instead of rising. 

Till Sahil realised the loss, the share price dropped to ₹450, and he lost ₹5,000.

However, in Ravi’s case, the stop-loss order is triggered, and the shares are sold at ₹490 per share. 

Ravi only lost ₹1,000 because he set a Stop Loss Level/order. 

In short, stop-loss acts as a safety that automatically exits the position when it reaches a certain price, preventing bigger losses.

Trade Planning & Management 

• Analyse Risk Appetite 

Before starting trading, you need to analyse your risk appetite. The traditional rule suggests that you should not risk more than 1% to 2% of your capital on one trade. 

Find Hit-Rate/Success-Rate 

Hit-Rate/Success-Rate in intraday trading refers to the percentage of profitable trades. For instance, if a trader takes 10 trades, and 4 are profitable, their hit rate is 40%. 

Position Sizing

Position sizing helps traders determine the total number of shares to trade in an intraday position.  

For instance, you have ₹10,000 in your trading account, and you are willing to lose ₹200 per trade. You buy a stock at ₹100 and set a stop-loss level at ₹95; the stop-loss distance is ₹5. 

This means you can buy 40 shares of the stock with an average risk of ₹5 per share. 

Set Risk-Reward Ratio 

Before creating the intraday position, you must set your risk-reward ratio. This ratio refers to the total number of profits compared to the potential losses (risk) taken to attain these rewards.  

For example, a trader enters a trade at ₹100 with a target of ₹120 and a stop loss of ₹90. 

According to the formula, the Risk-Reward Ratio would be: 

₹100-₹90/₹120 -₹100 

½ or 1:2

Now, let’s understand how to do trade planning for a month.
Assuming you have

Total Capital:  ₹10,00,000

Number of Trades: 10 Trades of ₹1,00,000 each

Hit Rate: 40% (4 out of 10 Trades will be profitable) 

Risk Reward Ratio: 1:3

Hence,

For Single Trade

Capital per Trade: ₹1,00,000

Risk (Loss) per Trade: ₹10,000 (Which is 1% of the total capital available. i.e.,₹10,00,000)

Reward (Profit) per Trade: ₹30,000

For 10 Trades

Number of Profitable Trades: 4

Number of Losing Trades: 6

Total Loss:

Loss per Trade: ₹10,000

Total Loss:₹10,000 * 6 = ₹60,000

Total Gross Profit:

Profit per Trade: ₹30,000

Total Gross Profit: ₹30,000 * 4 = ₹1,20,000

So the Net profit will be
Gross Profit - Total Loss, i.e.

Net Profit: ₹1,20,000 - ₹60,000 = ₹60,000

The above illustration shows that with good trade planning, you can secure your capital and book profits in the long run. 

Avoid Overtrading & Book Profit If The Target Is Reached

Leave your emotions behind while trading. 

Many times, traders make the desired profits, but they still hold the position, thinking the stock will rise or fall (in case of a short-sell). 

But what happens in the end? All the profits are vanished! This is because no one can predict price movements in the stock market. It only takes microseconds to switch sides, and till one realises this, losses are made!  

If you want to be a successful intraday trader, follow the below trading tip. “If the target is achieved, book your profit and exit the position. There should be no room for greediness!”

Don’t Do Revenge Trading 

In the first two trades, if the stop loss level has been triggered, shut down the screen. Don't engage in revenge trading. Many investors make impulsive decisions and try to win back what they have lost immediately. However, this only led to more losses.

Square off The Open Positions 

Always square off the intraday positions before the market closure.

If you don’t, your broker will automatically auto-square off them, no matter where and what the stock price is! Different brokers have different auto-squaring-off timings. For instance, Groww’s auto-square-off time for intraday positions is 3:20 PM.

There are several consequences for not closing intraday positions in advance. 

• Let’s say you buy a share for ₹1,000 at 10:12 AM, and it goes to ₹1050 at 11:00 AM. The profit is made, but still, you don’t sell, thinking the price will go up. But it went down to ₹800, and because it’s already 3:20 PM, the broker has made you exit the position. You lost ₹200. 
• Penalties or fees may be levied by brokers. 

Be Disciplined 

The last but most important intraday trading tip is to be disciplined and realistic. In fact, discipline is one of those factors that sets successful traders apart.  

Trading Strategies can be learned and refined, but without discipline, nothing will work. So, never be allured by other’s profits! Limit the risk per trade, set strict stop-loss orders, and stick to them no matter what. 

Intraday Trading Strategies For Experienced Traders

Below are some of the advanced-level intraday trading strategies. 

Gap and Go Trading Strategy

Gap Up: When the market closes at 500 and opens at 510 the next day.

Gap Down: When the market closes at 500 and opens at 490 the next day.

Gap and Go Trading Strategy allows traders to capitalise on these price movements that occur when stocks open significantly higher or lower than their previous close. Here’s how this strategy works. 

Pre-Market Analysis

It is the initial step where you need to identify potential stocks to trade in the pre-market session. To do so, use tools like Trade-Ideas Scanner and look for stocks that have gapped up or down by a certain percentage (e.g., 3% or more). 

Pre-Market Volume Confirmation

Compare the pre-market volume to the average volume. It ensures the gap is supported by strong trading volume. High volume in pre-market hours is a positive signal.

Opening Range Breakout (ORB)

Opening Range Breakout (ORB) is the actual entry strategy. It involves observing the stock's price action during the first few minutes after the market opens (typically the first 5-15 minutes) to establish an "opening range." 

Momentum Trading Strategy

Momentum Trading Strategy involves buying assets or stocks that are trending up and selling those that are trending down. Here, traders can capture short-term price moves by focusing on stocks with strong momentum.

The key principles of this intraday trading strategy are to Buy High and sell Higher (for Long Positions). 

Reversal Trading Strategy

In a Reversal trading strategy, traders take advantage of price changes that go against the current trend. A trend reversal happens when the price stops moving up (bullish trend) or down (bearish trend) and changes direction. You can use indicators like MACD and RSI to spot divergences indicating a reversal.

Conclusion 

With Intraday Trading, traders can profit from short-term price movements, but it requires using the right strategies with precise execution and risk management. 

Remember, successful intraday trading involves staying focused, being prepared for market volatility, and continuously learning from both wins and losses.