Intraday Trading Rules To Avoid Loss?

Author : nancyahuja
Publish Date : 2021-03-15


Intraday Trading Rules To Avoid Loss?

Have you ever thought about making quick money from intraday trading? Have you ever considered day trading as an additional source of income? If yes, then the inherent risk of losses may have kept you away from it. However, while there is no denying the fact that losses are a part and parcel of intraday trades, the profits earned can outweigh the losses. 

All you need is the basic knowledge of trading, technical analysis, a little bit of luck, oodles of practice and discipline. Once you have these key components in your kitty, then the sky's the limit for making money from intraday trading.

Now, let us understand some basic intraday trading rules.

Intraday trading rules

1. Choose the right stock

Not all stocks are suitable for intraday traders. The ideal stocks for intraday trading are stocks with high liquidity and less volatility. Sector-specific stocks are also good as you may have specialized knowledge of certain industries. Most importantly, technical indicators are largely used in day trading. So, the chosen stock must conform to market patterns or trends.

2. Monitor the day’s trend.

Understanding the market momentum is necessary to profit from day trades. Most online trading platforms will provide you with the requisite technical indicators to understand the market trends and momentum. The golden rule is to focus on declining stocks during bears and rising stocks during bulls.

3. Book profits fast.

Trend reversals are the opportune time to book profits. Technical oscillators will aid you in reading trend reversals. Indicators change signs or show crossovers when trend reversals are on the horizon.

You may book profits at an earlier high when you are long. Conversely, you may book profits at an earlier low when you are short. Trend reversals are potential entry and exit points.

4. Decide trading strategies

Effective trading strategies help you earn higher profits from day trading. Trading strategies comprise stock selection, trading frequency, stop-loss limits, entry and exit timings, etc. Maintaining a record of profits and losses may help you redefine your trading strategies in the future.

5. Research

Doing your homework helps. You may do a fundamental and technical analysis of stocks you wish to invest in. You also need to follow recent stock market news. Corporate actions or dividend payments have significant bearings on stock prices.

A professional trader will study historical trends, price patterns, technical charts using advanced technical analysis tools. You may start with the basics. With time, you will master stock analysis.

6. Specify a stop-loss price

Trading without stop-loss limits may be risky, especially if you are a novice. They will cap your losses and prevent unrealistic temptations for higher profits. Besides, trading based on limit orders is usually better than trading based on market orders.

7. Use margin trading to buy expensive stocks.

You may often wish to hold lucrative stocks but cannot, simply because they are unaffordable. Margin trading can solve this problem.

Under margin trading, you just need to invest a small amount of the total transaction value. The balance amount required for stock purchase will be funded by your broker. Thus, using margin trading, you can purchase high-yield expensive stocks that can boost your profits manifold.

However, you have to incur interest charges on the loaned amount. You may choose a broker who charges nominal interest rates.

In intraday trades, the broker will square off your open positions before the market closes for the day, in case you fail to do so. 

Thus, these were some intraday trading rules. Before you start day trading, you need to open Demat and trading accounts with a broker. These accounts need to be linked to your bank account. Once the accounts are linked, you can execute stock trades on online trading platforms. 

Choosing a robust online trading platform will help you carry out day trading in a secure and seamless manner.



Category :trading

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