10 things to know on trading intraday

Intraday trading refers to engaging in the stock market on a day-to-day basis using strategies for turning a profit around quick price changes in equities. Day trading is a volatile measure that can give a lot of profits to traders. There are some basic rules for intraday trading that need to be kept in mind. These tips are a must to be followed and can help individuals earn a profit, or in the worst-case scenario, limit their losses. From avoiding overtrading to deciding your risk-return trade-off, here are some things you must know.

10 things to know if trading intraday

Understand your profit target: Decide your profit target and the amount of risk you are willing to take to gain returns. Keep this factor in mind when you are investing in stocks, or even calculating your returns. Do not put your money in equities that will not give you the return ration you have in mind.

Never trade without a stop loss: A stop loss means that your security is automatically sold if it reaches a certain limit. This is done to prevent big losses to any bidder. Stop loss is a must in intraday trading.

Start off small: Invest only in one or two trades at first. Understand how the market functions and only then proceed with more securities.

Avoid overtrading: Overtrading happens in situations when you buy an equity and the stop loss is triggered. People often tend to recover their losses by buying more stocks. Overtrading should never be encouraged and will lead to loss only.

Know the market well: To succeed in intraday trading, you must keep up with any news about the companies whose securities you are buying, their business and other details. Learn to evaluate Futures and Options (F&O) data to understand what can make the value of a security fluctuate.

Losses are a part of trading: Do not panic over losses in intraday trading. Ensure that you learn from the errors and do not fixate over the money is gone.

Beware of overnight risk: If you hold on to any positions overnight, you capital may not be prepared to handle the risk. Be cautious and end your positions the same day, unless there are some exceptional circumstances.

Do not average your trades: Averaging your trades can increase your chances of being exposed to a stock more than needed. It will put your money at greater risk. Averaging also means that you can end up buying more of any security than needed, when it corrects.

Learn to recognise patterns: The time of market opening and closing see a lot of activity. Experienced day traders will be able to recognise any patterns in the price and earn a profit.

Stick to your plan: If you feel that your intraday trading is not going according to plan, don’t panic and change your strategy. The markets will often be volatile, and you will have to maintain your nerve to handle the day trade.