Want to know more about Intraday trading? If yes, this article is the right one to read.
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You will learn a lot about Intraday trading just reading this article, regardless of your experience.
This article also answers many of the questions you might have about this type of trading.
Why Intraday Trading
If you are interested in stock trading, then you would want to adopt the best strategies to make your trading a success.
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You would need to master how to trade in a specific timeframe.
You can choose to trade by the minutes, hours, days, weeks or even months.
In other words, you could be trading as a scalper or as a swing trader.
This is especially if you are into Stock or Forex trading.
One of the widely used timeframes by traders is “Intraday trading”. This is adopted by many beginner traders as well as expert traders who like to make money fast trading financial securities.
There are important facts about Intraday trading you should know, and it is a good you are now reading this post now.
The post explains beneficial insights about this trading timeframe.
It also discloses the best answers to some other intraday trading frequently asked questions.
What Is Intraday Trading?
Intraday trading is simply the buying and selling of financial instruments, stocks or securities within the same trading day.
It is a time frame for trading whereby positions are closed before the market closes for the trading day.
There is no change in the ownership of shares as a result of the trades.
Wikipedia explains that:
“Day traders exit positions before the market closes to avoid unmanageable risks negative price gaps between one day’s close and the next day’s price at the open.”
According to Investopedia:
“Intraday literally means “within the day.” In the financial world, the term is shorthand used to describe securities that trade on the markets during regular business hours. These securities include stocks and exchange-traded funds (ETFs).”
That said, we can confidently summarize that Intraday trading also means Day Trading.
You will get to watch the trading chart from the time the market opens and to the time it closes.
Guide to Maximizing Your Intraday Trading
Here are some takeaway points that would help you maximize Intraday Trading strategy.
You must understand what Intraday trading is all about so you can avoid loses
This is an important fact to keep to heart especially if you have no money at all but sincerely want to make money quickly.
You should trade in only a few stocks
This is an intraday trading strategy that helps traders to engage in detailed study of share movement.
It would also save the trader from huge losses in case things go wrong.
You should always invest with or trade with the amount you can afford to lose
Even in Intraday trading, this rule should be applied so as to avoid facing financial difficulties.
It would be foolish to use the money for your personal or household bills to trade stocks within the day or with any other time frame.
You need to research and understand the most important trading indicators for Intraday trading
These tools would help you trade with ease and also maximize your profit.
For instance, use the Moving Average crossover with Pivot Point indicators to find the right support and resistance level is an effective day trading strategy.
Other useful indicators for intraday trading include Bollinger Bands, Relative Strength Index (RSI), and Momentum Oscillators.
You must always consider the factors that could affect your profit making in intraday trading
Factors like price volatility as a result of economic news, natural disasters, the daily volume of trades, and price of stock or currency must never be ignored.
When you employ day trading, consider your trading capital, and enter your trade with risk to profit ratio
Most experts recommend that you don’t risk over two percent of your total trading capital.
You need to employ the “Take Profit” and “Stop-Loss” strategies to increase your profit level and lower your risks respectively
These tools are infused into most price charts.
There are currencies and stocks that would actually help you to make a profit from Intraday trading
Do your homework and select the appropriate stocks, financial securities or currencies to do daily trading.
Angel Broking provides the following guidance on how to choose the right intraday stocks.
Trade Only in Liquid Stocks
Intraday trading strategies depend on speed and precise timing, and utilizing a lot of volumes makes getting into and out of trades easier.
So, liquid stocks can be bought or sold in larger quantities without significantly affecting the price.
Stay Away from high Volatile Stocks
It is preferable to choose a stock with medium to high volatility.
Choose stocks that tend to move a lot in dollar terms or percentage terms. Price movement under any of these filters will make money for the intraday trader.
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Trade in Good Correlation Stocks
Most traders look for stocks that move in correlation with their sector and index group.
When the value of these stocks moves upwards, your stock’s prices also increase.
Follow the Market Trend before deciding the Right Stock
Pick the Stock you are most confident in after Research
In addition, the following criteria should be applied to pick the right stock for intraday trading:
Watch out for the stocks that are expected to perform well
These are referred to as Stocks of the day. Pick your stock using this criterion.
Study the week’s movement of stocks to pick your intraday stocks
Here, you will concentrate on how the stocks closed for the week – whether in a positive note or in a negative note.
Understand the shares volume at a time
If the volume is high, then it is wise to pick that stock. The shares volume refers to the total number of shares that are traded in a particular market and at a given time.
Check out the top gainers and top losers
Pick the stock that provides fairly good movements.
Choose stocks that have broken the resistance level and also those that have moved in an upward direction
It is natural for you to use the daily chart to analyze your trades
You can increase your chance of success if you combine and monitor the minutes and hourly charts that make up the day.
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What Are the Popular Trading Strategies Employed by Intraday Traders?
There are lots of trading strategies employed by intraday traders. Some of the top strategies include:
This is a trading strategy to make small profits on small price changes throughout the day.
This is a strategy whereby news events are used to make trading decisions daily. Heightened volatility around news events affects the intraday trading opportunities.
The intraday trader use support and resistance levels to determine trading decisions.
This strategy utilizes sophisticated algorithms to exploit short-term or daily market inefficiencies.
Also See: Swing Trading.
What Are the Advantages of Intraday Trading?
- Negative overnight news or off-hours moves like economic reports, broker upgrade and downgrade, etc., does not affect the current position of the day trade.
- Day traders have access to increased leverage and margin. This makes it possible to increase profit and minimize loss. High margins are available to traders compared to investors.
- There is a high return potential and there is Short-to-medium horizon for strategies to pay off. Expert traders that adopt the right strategies can earn up to make more than 200 dollars in one day!
- Intraday trading makes the trader engage in so many trades. Consequently, this provides the trader with more learning experience.
What Are the Disadvantages of Intraday Trading?
- Multiple commissions are involved with intraday trading. This is as a result of the frequent or multiple trades that is carried out by the trader.
- The intraday positions may not realize its profit. This is because the position could close out sooner before the profit level.
- This form of trading leads to increased losses, especially if the margin is used to finance purchases.
Who Should Participate in Intraday Trading?
Intraday trading is suitable for those who have the time to watch the market daily and time their trades.
It is not suitable for those who cannot give full attention to the most trading hours of the day.
It is suitable for those who can work from home and looking for how to make money from home.
It is also suitable for those who can take risks since there is a higher risk involved with multiple trades.
It is also a suitable job for people who consider themselves introverts.
To maximize your success with intraday trading, you need to:
- Perfectly time and watch your trades.
- In order to stay on top of the latest trading activities, intra-day traders are almost always operating full-time as professional traders.
- Have a good understanding of how to apply technical analysis on daily charts.
Where Is the Right Place to Place Intraday Trades?
You place any trade with broker, and you must choose the right broker to place your daily trades.
Some factors you may want to consider when choosing the best intraday trading broker include:
- The broker should offer you with research and technical support
- The broker should provide you with right trading tools so you save time and money.
- The broker should offer you low brokerage per transaction.
- The broker should provide you with speedy execution of trades.
When Is the Best Time to Execute a Trade as an Intraday Trader?
You must always consider timing before executing any trade. Intraday trades would be profitable if they are executed at the right time.
Thus, the best time to execute intraday trades is when the market is not volatile. Many experts have suggested that executing trades during volatility hours must be avoided.
It is risky to trade on the first 30 minutes of the day as the market is volatile at this period. Within the day, trends are easily established and it becomes easier to follow the trend.
This article has provided insights on the Intraday trading guide and the best answers to the topmost FAQs.
Intraday trading has lots of advantages. It also comes with lots of risks – especially with the commissions associated with the number of trades executed within the timeframe.
A good Intraday trading guide helps the trader to open and close positions successfully within a day.
It helps to provide answers to all the most frequently asked questions by beginner traders as well as by expert traders.
However, with the consistency of purpose and the application of the best trading strategies he can easily become an expert and make more money.
This is rewarding just like those who work online from the comfort of their homes and get paid.
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