How to Earn Money In Intraday Trading?

Stock markets are portrayed as a place where profit is long-term. Many world-famous investors have been quoted as saying that they hold stocks for many years. However, long-term investing does not mean you can't make a living from the stock market. If done properly, intraday trading could also yield handsome profits.

What's intraday trading?

Intraday trading, also known as day trading, is the act of buying and selling shares the day before the market closes. In intraday trading, you simply square off all open positions during market hours. An intraday trade has one key feature: the trader does not take delivery of shares. In India, a regular order can be settled within T+2 days. However, intraday trades close the positions on the same day. Intraday trades don't affect the ownership of shares.

Intraday Trading

A trading account and a demat account are essential for long-term investing and intraday trading. You should also ensure your broker offers fast executions. Even seconds can make a difference in intraday trading. You should also consider the technical support provided by the broker. Intraday trading is a complex business that requires continuous monitoring and extensive research. The brokerage's fees are an important factor to consider before you start trading. High transaction fees can have an adverse effect on overall returns, as multiple trades may be made in one day. Let's start with the basics.

You should choose liquid stocks. Day trading requires that you square off your position before the end the day. You may not be able sell a stock that doesn't have enough liquidity if you purchase it. Day trading is based on the principle of only dealing in liquid stocks. Trading volume is not limited by adequate liquidity. Day traders need volatility in order to make profits. Liquid stocks are volatile because there are many buyers and sellers.

Do your research before you start: Day trading is a lucrative business, but there are also high chances of losing money. Do your research before you start trading. Choose stocks that you are familiar with. Before you initiate trades, keep an eye on the price movements of the shares after you have finalized them.

Select stocks that move with market movements: While price movements can be triggered for many reasons, certain stocks tend to follow the general indices' movement. If the Nifty goes up, these stocks will also rise. However, a large number of stocks do not follow a consistent pattern so it is important to be careful when dealing with them.

You must recognize the correct price: In order to make intraday trades profitable, you need to decide the price for entry as well as the exit price. Different traders use different strategies to determine the exit and entry prices. Some traders will adjust their positions once the trade is profitable while others will ride the momentum. While your strategy might be different, it is important to stay disciplined and adhere to the plan.

Stop-loss: Brokerages offer substantial leverage for intraday trades, which increases both the profit potential and the loss potential. Day trading can result in huge losses, so it is important to set a stop-loss. Stop-loss limits automatically cut your position when the share price crosses a certain level.

Follow the trend: Day trading is best when you follow the market's general trend. If the market is bullish, it may be a good idea to go long. If the market is bearish, it's a good idea to go short, or wait for stocks bottom before entering.

Conclusion

Day trading success is about consistency and discipline. Intraday trading can be profitable if you stick to a set of rules. Day traders can often lose a lot of money because they get too excited.