What is Intraday trading? What are the Basics of Intraday Trading?

In simple terms, intraday trading refers to purchasing and selling shares or equities on the same day during trading hours. Indeed it is a challenging task to accomplish as you have a time limit and need to achieve your short-term goal. The share price fluctuates and you are required to follow up the price changes to earn a profit.

 

You must an online trading account dedicated to intraday trading. Also, you would need to mention that the transactions are for intraday trading. In the process of intraday trading, you would require to square off your position within the given time. Now, what is square off in intraday trading of stocks?

 

Square off means if you have made a share purchase then you have to sell the same quantity of share to another trader. Similarly, if you have sold a part of your share, on the same day, you have to purchase the same amount of share. The intraday trading process goes like this and the target is to square off your position before the time ends.

 

The process is undeniably a risky one. Thus it is always suggested to invest an amount that you can afford to lose. You must go slow and observe the market situation until you become a pro and reach the advanced level. Once you start understanding how exactly it works, there is no looking back.

 

Points To Take Note of If You Want To Do Intraday Trading

 

• The first condition is that you should know what Intraday trading is. It is much more elaborate than the aforementioned paragraphs. You need to observe how exactly it works and then realize if you are ready for this or not. Judge your compatibility in the trading of stocks and then step into it. Think before you act on it.

 

• Now, as you have decided to start intraday trading, which stocks are you going to choose for purchasing? Remember that you would be required to sell the stock on the same day. Thus you should choose a stock that can be easy to sell out. This means a stock with high liquidity can be sold off quickly and this can help you earn a profit. This factor is crucial as failing to sell the stock may result in a huge loss.

 

• You can easily handpick a stock by looking into its demand in the market. Observe how many traders are interested in that particular stock and you would know the demand for it. If more and more traders show interest in a particular stock, don't think twice and immediately buy this stock. This is known as the trading volume where you analyze the demand for the stock. A stock with high trading volume is profitable to buy as it can be sold easily to a bunch of interested traders.

 

• No matter what, if you want to accomplish your goal with the help of intraday trading, you have to stay incredibly alert. Don't miss out on the news on stock markets. You must check the news on the trading of stocks, see the latest trends, know about the companies that are doing well, and learn about the fluctuations in the price of the stocks. You should stay updated to understand the market as well as search for your opportunity to make a profit by intraday trading.

 

• It is strictly advised to beginners to consult an expert before stepping into the market. Even if you enter the market as a beginner, you must keep in touch with an expert who can guide you through. Before you become efficient and expert in understanding and executing intraday trading successfully, you must ask an expert about each step to prevent loss and earn a profit.

 

• Use the stop-loss strategy to minimize the loss. You need to analyze and estimate the price of a stock. In case you assume that the price of a stock is 100. You should fix a price slightly below that, around 95. Now, you can stay assured that your stock will get sold as you have fixed a lower price. Thus, even though you may not earn a huge profit, you won't lose any amount. This strategy works like magic to reduce loss in the trading of stocks.

 

• Studying the market is always suggested. Before buying or selling out the stocks, you must examine the market condition. The market situation tells a lot about how you can earn a profit and may be aware of the risk factors. Don't forget to thoroughly examine and study the risk-factors before starting your intraday trading.

 

• You should strictly avoid trading in penny stocks. These are incredibly risky, unreliable and illiquid assets that won't give you any profit. Yes, it may look very tempting and profitable initially but can result in great loss. Therefore, be aware of penny stocks and control yourself from investing there.

 

• You must examine the risk factors and find productive solutions. Yes, intraday trading is very risky but once you grab the concept and understand the way it functions, you can reach your goal of earning a profit. But to accomplish the goal, you must know the barriers you have. Consider the risk factors and find out useful solutions to minimize the loss and earn a profit.

 

Yes, intraday trading is challenging as well as tempting. However, you would be required to control your excitement as the trading of stocks is an addiction. You can easily get addicted as the process of buying and selling is very rapid and exciting. Once you start earning a profit, it becomes even more accepted and liked by the traders.

 

However, there is no assurance that if you have earned a profit today, you would earn a profit tomorrow. It totally depends on your day-to-day performance. Thus you must analyze the market daily to understand the market trend and decide where you would like to invest and which one you would sell.