Intraday Trading Tips for Beginners

For beginners looking to make quick money, intraday trading is a very popular stock market. This type of trading offers exciting opportunities because it is fast. But in such a rapid environment there are also considerable risks. 

Newcomers may find themselves in tricky situations, and this could end up severely hurting their investment value if they do not have proper strategies for this purpose. This helps reduce these risks and maximize profitable trades.

The article will discuss key tips that every novice needs to learn to sail through the challenges of intraday trading successfully. 

Understanding Intraday Trading

Intraday trading is the practice of buying and selling financial instruments within the same trading day. This implies that all positions are opened and closed overnight, with no positions held overnight. Traders seek to benefit from temporary changes in stock prices or exchange-traded funds (ETFs) or other securities.

The traders watch real-time charts closely and adopt various strategies such as scalping, ranging trading, news-based trading to profit from them.

The aim here is to have many trades throughout the day that exploit small movements in prices resulting in returns.

Now, let’s discuss a few intraday trading tips for newbies.

Best Intraday Trading Tips for Beginners

In the Indian share market, below are a few of the intraday trading tips that will help investors to make the right choice:

1. Choose Liquid Stocks

It is important to choose liquid stocks when it comes to intraday trading as this allows for quick buying and selling of shares without causing significant price changes. These stocks have high trading volumes, resulting in sufficient market participation.

This high liquidity makes it easier to enter and exit positions smoothly, thus reducing the risk of slippage where execution prices deviate from the expected price.

Trading liquid stocks helps you profit from small price movements and implement strategies effectively, hence enhancing your trade outcomes.

2. Set Stop-Loss and Take-Profit Orders

It is important to note that placing stop-loss and take-profit orders is essential for intraday trading risk management and profit protection. A stop-loss order executes the sale of a stock automatically when its price drops to a predetermined level, thereby limiting your possible loss.

For instance, if you buy a share at ₹100 per share and set your stop-loss at ₹95, the stock will be sold once its price is down to ₹95 thereby limiting your loss on that particular stock by ₹5.

Conversely, take-profit order secures profits when stocks are sold with ease after reaching some specific target price. For example, if you place a take-profit order at ₹110, whenever the share hits ₹110 it will be sold consequently securing a per-share income of ₹10.

By using both orders, one can manage risks and ensure that they make profits without having emotional influence over them.

3. Avoid Overtrading

Overtrading has to be avoided as its results can bring about significant blunders and additional costs in the form of transactions when trading intraday.

Overtrading is often a reaction to emotions or an attempt to recover losses; however, it clouds judgment and leads to poor decision-making. Instead, you should concentrate on fewer but high-quality trades that fit into your trade plan and strategy.

Being selective and disciplined with trades reduces the risk of losses and ensures that every trade has a clear purpose for entering into it. This way, you have some kind of clarity over your trading activities.

4. Follow a Trading Plan

A trader who does not follow a trading plan may fail at intraday trading. A trading plan indicates how you will enter or exit specific investments, rules for managing risk, identification criteria for trades among other things that guide a systematic approach towards investment decisions. It helps make your decisions objective rather than being influenced by abrupt changes in market prices.

By staying within your plan, you achieve consistency in your trading style, which prevents emotional mistakes while trading.

Additionally, having a well-defined plan enables you to measure performance, fine-tune strategies and stay focused as essential elements in managing risk towards successful intraday trading careers.

5. Use Technical Analysis

Technical analysis makes use of charts and indicators to analyze the price movements of stocks and make transactional decisions.

The key tools are moving averages, which get rid of noise in price data revealing trends, and the Relative Strength Index (RSI), which determines when prices may be too high relative to the future earnings potential.

Another significant indicator is Moving Average Convergence Divergence (MACD) displaying the relationship between two moving averages that measure a stock’s price.

With these indicators, traders can identify possible buying or selling opportunities based on historical patterns as well as market directions.

6. Risk Management

Risk management is important in intraday trading with the aim of saving your capital from extensive losses. For example, if you had a trading capital of ₹1,00,000 then you should not risk more than 1-2% on a single trade, which would mean ₹1,000-₹2,000 at most.

With stop-loss order setting it is possible to limit potential loss by this amount. Assuming that you bought a share for ₹500 and put a stop-loss at ₹490. Once the stock price falls up to ₹490,the system will sell automatically thus limiting your loss to only ten rupees per share.

Through this approach, one can protect his or her money and still keep playing although some deals do not always go according to plans.

7. Diversify Your Portfolio

Diversifying your portfolio involves investing in multiple stocks rather than focusing on one.

This method helps spread risk; hence, if one stock does badly others won’t be heavily affected. It makes it possible for you to offset losses against gains achieved in other stocks hence making it a more reliable and robust investment strategy.

Portfolio diversification can also lead to investment in various sectors and industries, increasing the prospect of higher returns while mitigating the impacts of market instability.

8. Monitor Trading Volume

This is where monitoring trading volume comes in, which means keeping track of the number of shares being exchanged in a particular stock.

For example, if a share typically trades 1 million shares a day, but suddenly increases to 5 million shares, this indicates that interest has increased and there may be some price movement. In such cases, the increase in volume could indicate that something significant is happening like earnings reports or news could present traders with an opportunity for profitable trades.

These patterns help traders to make sound choices while taking advantage of market trends.

FAQs

1. What is the best time of day to start intraday trading?

It is usually the first hour of trading after the market has opened and the last hour before it closes. These times have high volume and volatility, which allow for quicker trades.

2. Can I use automated tools for intraday trading?

Certainly, automated systems or bots are widely used by traders to execute trades based on defined parameters. However, these instruments should be handled judiciously as they can help you act promptly and consistently.

3. How much capital is needed to start intraday trading?

There is no specific amount, but starting from at least Rs 1000 is a common enough margin for multiple trades and covering losses.

4. Are there specific stocks better suited for intraday trading?

Optimal choices should be stocks that exhibit a high level of liquidity and volatility since their prices tend to change frequently thus offering good opportunities for trading.

Also Read: 

• Best Indicators for Intraday Trading

• Best Time Frame for Intraday Trading

• Intraday vs Delivery Trading– Understand the Differences

• Intraday vs Positional Trading: Which One Should You Prefer