There was a day when people used to think day trading was meant for big financial firms and professional traders. Thanks to technology, even ordinary people can start day trading in the comfort of home.
Intraday trading is the buying and selling stocks, futures, options, commodities, currencies, etc., on the same day. It is also known as day trading. In Intraday trading, there is a need to square off all positions before the closing of the market, where there will be no change in ownership of shares as a result of the trades.
When buying shares for the long-term, you get the ownership of the shares from the seller. You will get the shares in your Demat account. There is no transfer of shares in Intraday trading. The buying and selling of shares take place on the same day, so there will be no addition and deduction of shares in the Demat account.
You may be wondering now how to do intraday trading. So, here are the following points to ace intraday trading:
Account Opening
To participate in Intraday trading, you must open a Demat and trading account. To open an account, submit the following documents:
- Proof of Identity
- Proof of Address
- Proof of Income
- Bank Account Statement
- Photograph
- PAN Card
Make sure you have completed your KYC (Know Your Customer). Many stockbrokers and banks in India offer the facility of online account opening. Two trading accounts are available in India: cash and margin.
You can trade using the available balance when using a cash account. Suppose you have INR 10,000 in your account; you can place a buy order for shares worth INR 10,000.
Using a margin account helps you buy more shares with low capital in your account. Suppose you have INR 10,000 in your account; you can place a buy or sell order of up to INR 1 lakh, depending on the broker’s margin value.
Go for Liquid Shares
Liquid shares are those shares that have high volume and sharp bi-directional movements. These types of stocks are very liquid because of their high investor participation. That means you can trade any quantity with convenience where you will not have to worry about the prices getting impacted. Large-cap stocks that belong to an index like NIFTY 50 or BANK NIFTY are the most liquid. In comparison, mid-cap or small-cap stocks don’t offer any liquidity. While picking such stocks, there is a chance of getting stuck for days for the momentum you are looking for.
Determine Risk-reward
It is always better to determine the entry, exit, and stop loss before you enter any trade. Suppose a risk-reward ratio is 1:1, then there is a chance of losing INR 1 in the hope of INR 1. While, when a risk-reward ratio is 1:5, there is a chance of losing INR 1 in the hope of five times the profit. The speed of liquid stocks is breakneck, so you may find trade execution difficult. You can be worry-free from tracking price movements second by second by placing a target and stop-loss.
Control Your Emotions
You can experience a buoyant market than your expectancy. So, you may lose control over your sense of judgment and make wrong decisions. In Intraday trading, you will find that nothing is permanent. You must control your greediness by sticking to your target. It is better to use stop loss to mitigate loss.
Learn the Basics
It is wise to understand the Intraday trading basics before challenging the market. Build your confidence to enter the market quickly and smartly by doing top-class research. You can look for three broad trend types (uptrend, downtrend, and sideways) in the market. You can buy first and sell later when there is an uptrend in the market. At the same time, you can sell first and buy letters when there is a downtrend in the market.
Intraday is a trading option in the stock market. To advance your Intraday trading skills, you must learn the share market in detail. A share market is a market that allows the issuance and trading of shares. So, there is a similarity between a share market and a stock market. You can trade financial assets (bonds, mutual funds, derivatives, including shares of companies). To learn how to trade the financial markets, you must first educate yourself by reading and understanding the financial markets using charts, price actions, etc. To determined price action, you must understand technical analysis and fundamental analysis better.
