What is Intraday Trading?
Intraday trading entails purchasing and selling stocks on the same trading day. Stocks are bought here not to invest in, but to profit from the movement of stock indices. As a result, fluctuations in share prices are tracked in order to profit from stock trading.
For intraday trading, an online trading account is set up. When doing intraday trading, you must specify that the orders are for intraday trading only. It is also known as intraday trading because the orders are squared off before the end of the trading day.
Basic of Intraday Trading
As a trader in the stock market, one can buy or sell shares from the secondary market to achieve short-term goals. The market goes up or down and so does the share price. Traders cash in on this market volatility to make a profit. But losses also happen while trading. Intraday trading simply refers to buying and selling of shares within one day itself. You should understand intraday trading’s meaning before you start trading.
Best Time Frame for Intraday Trading
Long-term day traders benefit greatly from the best time frame. Using these hours, which are known for high market activity, can help you increase your efficiency. Those who day trade for the entire day, on the other hand, have very little time for other things with inadequate rewards. Even knowledgeable intraday traders can make a loss if they trade outside of the best intraday trading time frame. This raises the question of what time frame is best for intraday trading. The correct answer is between 9:30 and 10:30 a.m.
Intraday trading should be done between one or two hours of the stock market opening. However, most stock market trading stations in India, most stock market trading stations start live broadcasts at 9:15 a.m. But why not begin at 9:15 a.m.? If you are an experienced investor, whether you are interested in learning more about buying and selling within the first 15 minutes will not be as risky. If you’re a beginner, you should wait until 9:30 a.m. The reason for this is simple: markets react to the previous night’s news in the first few minutes of trading.
Pointed price movements in one direction are frequently depicted in trades. The “dumb money phenomenon” occurs when people make their best guesses based on old news. Experienced traders may be able to make some profitable trades within the first 15 minutes. They also take advantage of unusually high or low price points in order to buck the trend. Newcomers who have never heard of the stupid money phenomenon or the strategy used by experienced traders to combat it would find the sector particularly unpredictable. As an outcome, waiting until 9:30 rather than 9:15 is a wiser choice.
Volatility isn’t always a negative idea. After these initial extreme trades, the market has reached the ideal level of volatility for newcomers. As a result, the time period from 9:30 a.m. to 10:30 a.m. is ideal for trading. Intraday trading in the first few hours after the market opens has numerous advantages:
– The first hour of trading is typically the most volatile, providing ample opportunity to execute the best trades of the day.
– The first hour provides the liquidity required to enter and exit the market. Because liquid stocks trade at a higher volume, they are more likely to be sold off quickly.
– Stocks traded or purchased in the first hour have shown to have some of the largest moves of the trading day. If done correctly, it has the potential to provide the highest returns when compared to other time frames during intraday trading. Failures can be huge if done incorrectly.
– After 11 a.m., trades typically take longer and occur in lower volumes, which is inconvenient for intraday traders who need to complete their transactions by 3:30 p.m. If you need more time, you can extend this session until 11 a.m. The strategy of limiting one’s trades to the first hour, on the other hand, is better suited to day trading.
The 9:30 to 10:30 range is not a hard and fast rule that every trader must adhere to. It is designed for beginners in general but can be tailored to individual requirements. It’s a good idea to think about the big picture.
Another strategy, in addition to using the best time frame for intraday trading, is to keep the day of the week in mind. Monday afternoon is frequently a desirable time to make market purchases because it has historically tended to fall at the start of the trading week. Experts advise selling on Fridays, just before the Monday dip
Furthermore, not all trader needs to fill that first hour with activity. Those who make repeated trades during the trading day can opt for a shorter time frame. Intraday traders who only make a few trades per day, on the other hand, can choose a longer time frame. Experienced traders are also known to change their timelines on different days, depending on how active they are.
Features of day trading
Expert day market participants who trade for a living rather than as a hobby—are usually well known in the industry. They generally have a thorough understanding of the market as well. Here are some of the requirements for becoming a successful day trader.
- Understanding and skill set in the marketplace
Individuals who attempt to day trade without a thorough knowledge of market fundamentals frequently take a loss. A day trader should be able to perform technical analysis and read charts. However, without a deeper knowledge of the market and its remarkable risks, charts can be misguiding. Undertake your proper research and learn the ins and outs of the products you trade.
- Capital sufficiency
Intraday traders just use investment money that they can stand to lose. This not only helps protect them from economic disaster, but it also aids in the removal of feelings from their trading. To effectively capitalize on intraday price movements, a large amount of capital is frequently required. Access to sufficient capital is critical because most day trading uses a high level of leverage in margin accounts, and changing market swings can activate large margin requests on an urgent basis.
A trader must have a competitive advantage over the other traders in the market. Swing trading, arbitrage, and trading headlines are just a few of the strategies employed by day traders. They fine-tune these strategies until they consistently produce profits while effectively limiting losses.
A valuable strategy is worthless if it is not accompanied by discipline. Most day traders lose a lot of money because they do not execute trades that fulfill their own criteria. Without discipline, the achievement is impossible.
Day traders depend heavily on price fluctuations to make money. A stock that moves a lot throughout the day may appeal to a day trader. This could occur for a variety of reasons, such as a financial report, investor sentiment, or overall economic or business current affairs.
Best Intraday Trading Indicator
Share market trading entails a great deal of chart analysis and making choices based on patterns and indicators. Indicators are crucial in trend analysis, irrespective of whether a trader is new or experienced. The stock market is very vibrant; current events and simultaneous events also have a significant impact on the market situation. The indicators provide useful information about market trends and can assist you in maximizing your profits. Read on to learn more about the different types of indicators and the importance of each one.
- Bollinger Bands
Bollinger Bands is a popular technical indicator that draws three different lines, one below and one above the safety cost curve. Its specific period moving average is marked as the midline in order to form an ‘envelope.’ These lines depict a band or a volatility range in which the price of specific security moves up or down. Uncertainty is depicted for specific security using standard deviation, which is denoted by a top and bottom line/band, as standard deviation is a measure of variability. John Bollinger created Bollinger Bands in the 1980s and copyrighted the term in 2011. Originally known as trading bands, John Bollinger refined the concept and dubbed it Bollinger Bands.
- Relative Strength Index
The Relative Strength Index (acronym RSI) is among the most widely used progress oscillators in stock technical analysis. Welles Wilder introduced it in June 1978, and its computation is detailed in his book New Concepts in Technical Trading System. The velocity and magnitude of a security’s price movements are measured by a momentum oscillator. The RSI compares the size and scope of a security’s average profits and losses over a predefined timeframe to draw conclusions about its positive and negative aspects.
- Moving Average Convergence Divergence (MACD)
MACD, or moving average convergence divergence, is among the most widely used momentum indicators in technical analysis. Gerald Appel created this near the late 1970s. This indicator calculates the difference between two-time span periods, which are a collection of chronological time series, to understand momentum and its directional strength. In MACD,’ moving averages’ of two separate time intervals are used (most commonly on chronological closing prices of security), and a momentum oscillator line is obtained by subtracting the two moving averages, which is also known as ‘divergence.’
A Super Trend, like shifting averages, is a trend following indicator. It is charted on price, and the latest trend can be determined simply by its placement in relation to price. It is very easy that is built with only two parameters: period and multiplier.
When we build the Supertrend indicator strategy, the standard parameters are 10 for the ATR and 3 for the multiplier. The average true range (ATR) is important in ‘Supertrend’ because it is used to compute the indicator’s value and indicates the degree of price volatility.
- Advance-Decline Line
The advance/decline line (or A/D line) is a technical indicator that outlines the difference between the number of stocks that are advancing and those that are declining on a regular basis. The indicator is long-lasting with an optimistic amount being put to the previous number and a negative number being deducted from the previous number.
The A/D line is being used to display market volatility because it tells traders whether more stocks are rising or falling. It is used to verify market prices in main indexes and can also inform of missteps when there is a disconnect.
- Average Directional Index or ADX
The Average Directional Index, or ADX, is a method for analyzing a trend’s overall strength. It is premised on the idea that trading when the market is heading in the direction of a higher tendency increases the chances of profit while significantly lowering the risk.
The ADX indicator was established by Welles Wilder for regular commodity rankings, but it is now used to know the strength of trends by technical traders and finance professionals across a wide range of markets.
- Moving Averages
A moving average is a technical indicator that takes the price points of an instrument over a given time frame and divides them by the number of data points to produce a single trend line. It is popular among traders because it can assist in determining the direction of the current trend while mitigating the impact of random price spikes.
By analyzing the previous movement of an asset’s price, a moving average allows you to examine the levels of support and resistance. It is a measure of change that follows the previous price action of an asset, analyzing market movements in the past to predict possible future patterns. Moving averages are primarily lagging indicators.
- Stochastic Oscillator
A stochastic oscillator is a momentum indicator that compares a security’s final price to a range of its prices over a given time period. The oscillator’s sensitivity to market movements can be reduced by adjusting the timespan or by taking a rolling average of the outcome. It is used to create oversold buy and sell signals with a 0–100 value range.
- Commodity Channel Index
The Commodity Channel Index (CCI) is a momentum-based waveform that can actually decide when an investment product is overvalued or overhyped.
This technical indicator, created by Donald Lambert, assesses price trend strength and direction, letting traders decide whether to join or leave a trade, avoid taking a trade or add to an existing location. In this manner, the indicator can be used to get trade signals when it behaves in a specific manner.
- Aroon Oscillator
The Aroon indicator indicates whether a price is trending or trading in a range. It can also reveal the start of a new trend, its strength, and help predict transitions from trading ranges to trends. When the AroonDown and AroonUp indicators are used together, they are referred to as the Aroon indicator.
AroonUp calculates how big it has been since prices reached a new high within the given timeframe. The AroonUp value is 100 if the present bar’s high is the largest within the user-specified number of periods before it. In other words, it represents a new high for the time period. Otherwise, it returns a percentage value indicating how long it has been since a new high happened for the specified period.
- On Balance Volume
On Balance Volume (OBV) is a total combined indicator that adds volume on up days and deducts volume on slow days to measure buyers’ and sellers’ pressure. When the security gets closed higher than the previous close, the entire volume for the day is considered up-volume. When the security closes lower than it did the previous day, the entire day’s quantity is considered down-volume.
- Accumulation/Distribution Line (A/D Line)
Accumulation Distribution examines the similarity of closing prices to their highs or lows to ascertain whether the market is accumulating or distributing. To give the most load to moves with higher volume, the proximity value is multiplied by volume.
How to select stocks for Intraday Trading?
There are millions of stocks to select from, and day traders can buy almost any stock they want. So, for a day trader, the first task is to decide what to trade. Once a trading chance (one stock, multiple stocks, or exchange-traded funds ETFs, for example) has been identified, the next step is to devise some strategies for profiting from it.
The volume of liquid stocks is typically high. This enables larger quantities to be purchased and sold without having a significant impact on the price. Because intraday trading strategies rely on speed and precise timing, a high level of volume makes it easier to enter and exit trades. Depth is also important because it indicates how liquid a stock is at different price levels above–or below–the current market bid and offer.
To make money, day traders need price movement. Day traders can select stocks that move a lot, either in dollars or percentages. These two filters will frequently produce opposite results. Stocks that move 3% or more per day have a consistent large intraday move to trade. The same can be said for stocks that move more than $1.50 per day.
Economic, Political, Social and some of the other factors are responsible for the movement of the market upward or downward. Stocks are correlated to the negative and positive of the market. This means if the market rises, stock prices can rise or fall respectively. This is an important factor to keep in mind for an intraday trader.
The market can be divided into many sectors. For example, Technology, Pharmaceuticals, Automobiles, Oil and Gas, Banking. It is important to analyze every sector’s performance side by side as a day trader. If you can identify one sector or many sectors trying to consolidate for a few months or are ready for a breakout, then you can consider those sector’s companies and you can invest in it. If you can identify the stocks, that have generated substantial gains and you have missed to capitalize on the rise. Then you can consider the similar stocks in same the sector which are possible in the breakout area.
Over time, the change in the speed of stock price is known as the momentum of stocks. This will help in determining the stock price strength of the stock upward or downward. If any stock’s price parallel moves on the momentum strength, then that stock is known as momentum stock. Generally, day traders use it for taking long for upper strength or short for lower strength. for making a profit day traders use these types of stocks.
For a stock, there are many strategies that help to conduct technical analysis. You can identify the buying or selling signals of the stocks. You can look upon those stocks, where a gap is being displayed in any direction. These gaps can be an earning opportunity for a day trader. You can easy filter out the stocks which are breaking their support or resistance level with technical analysis
Tips and Tricks for Intraday Trading
Select the appropriate stocks
What if you wanted to sell your stocks but there were no buyers in the market?
Intraday trading, as you may know, entails buying and selling a group of shareholding on the same day before the market closes, i.e., squaring off open positions. However, in order for the stock exchange to implement these orders, the market must be sufficiently liquid.
As a result, the first of today’s free intraday tips is to avoid small-cap and mid-cap stocks that may not be fluid enough. Otherwise, there is a good chance that your squaring-off order will not be implemented, forcing you to policy instead. The most important factor to consider when choosing a stock to trade in is liquidity.
Stocks with large funds trade at massive volumes, allowing intraday traders to easily buy and sell larger quantities.
Furthermore, avoid putting all of your trading capital into a single stock. Experts advise diversifying your intraday positions across a few stocks. Diversification will assist you in balancing your intraday trading strategy and reducing risk.
The Entry and Exit Price Should Be Frozen
The buyer’s falsehood affects many stock investors and traders. They are easily swayed by false beliefs. This is the point at which the buyer begins to have second thoughts and doubts about their decision. The trader suddenly realizes that taking orders was not as good as he or she thought when entering the trade.
To stop creating such trading errors, simply follow the free extra intraday tip – decide the entry and exit price before entering a position. This ensures that your viewpoint is objective.
You must be able to plan your entry and exit without allowing emotions to influence your decisions.
When The Target Is Reached, Book Profit
Greed is the enemy of every intraday trader. Why you might ask? It is due to the fact that it only takes a few minutes for the market to switch sides, especially if the market is extremely volatile.
The secret to successful intraday trading is the traders’ access to high leverage and margins. Profits are boosted by leverage and margins (as well as losses). The trick, however, is to avoid becoming greedy once the target has been reached. If the stock price has reached your target, don’t wait for it to rise any further.
Prevent falling into the trap of believing that the price will continue to rise (or fall, if you short-sell). You must base your trading decisions on facts and strategies rather than how you believe a stock will perform.
If there is reason to believe that the price will move in the right direction, then the stop-loss should be adjusted accordingly.
Close All Open Positions at All Times
Today’s fifth free intraday tip is to always close all open positions. If the stock price target they set at the start of the day is not met, many intraday traders choose to take delivery of the shares. This could be a bad strategy. After all, the stocks were purchased for intraday trading on the basis of market trends and technical stock analysis. They might not be suitable for a long-term investment.
Consider what would happen if a major corporation declared bankruptcy after the market closed and the stock opened with a gap down the next day.
Investors who are still holding the stock at the end of the day may not be able to sell it and will have to take a hit to their portfolio.
An intraday trader, on the other hand, can process company-specific information released during the day on the same day. Intraday traders will be able to deal with the impact of information in real-time. Aftermarket
hours, the news would have no effect on intraday traders because they may have already squared off their position. It enables us to eliminate overnight risk without stifling capital.
So, before converting to delivery, consider the intraday calls and the stock’s fundamental strength.
Don’t Try to Outperform the Market
Forecasting market movements is extremely difficult. All of the indicators may point to a bullish market. Expect your target stock to rise, as is customary. However, the market disagrees, and the stock price does not rise.
Finally, don’t get too attached to your analysis. The stock market is characterized by fluctuation. If the market does not agree with the opinion, sell and close your stance as soon as it reaches your stop-loss level. Keeping your fingers crossed that the market will behave as you predicted can result in an increase in your failures.
Research Your Target Companies
Once you’ve identified a set of stocks to trade using professional intraday calls, make sure to thoroughly research them. Begin by comprehending how technical analysis can assist you in making better trading decisions. Find out when any corporate events are planned. These include, among other things, acquisitions, mergers, bonus issues, stock splits, and dividend payments. These events may turn out to be just as important as staying up to date on technical levels.
Momentum trading, for example, assists traders in determining how strong a trend is in a given direction and its ability to persist.
Select The Best Platform
The ninth trade free plan tip is to select the appropriate trading platform.
Intraday traders engage in multiple transactions on a daily basis, accumulating profits. As a result, it is critical that you select the right platform, one that allows for quick decision-making and execution while charging minimal brokerage.
In general, an intraday trader must pay a brokerage fee, which includes Securities Transaction Tax (STT), SEBI Regulatory Fee, Transaction Charges, Stamp Duty, and GST on brokerage.
This could eat up a portion of your intraday profit.
Rules for Intraday Trading
The best intraday trading tip is to stick to intraday trading rules. If you’re new to trading, you probably want to skip all the rules and get right to making money. We all know that intraday trading is exciting, but it is also risky. You don’t want to lose money in the first month, do you? As a result, market experts advise individuals to follow a few basic intraday rules.
To begin, they usually advise new traders to avoid buying and selling stocks when the markets open for the day. This is due to the fact that company stocks are typically volatile in the first hour of the day.
This article is not for investment advisor purposes. It is served as an educational purpose for intraday traders. Those who are interested in trading can achieve a better understanding of Intraday trading. Investment in Intraday can be risky. Get good knowledge before investing your money.