If you are looking to make short term profits by investing in the stock market, what is Intraday trading is a question you’ve probably asked yourself. Well, as the name suggests, it’s an amazing way to invest your hard-earned money and trade within a specific day. Intraday trading is the trade activity done during the market hours of the day. Dive deep into the article to know What is intraday trading, how it works and start your trading journey without much worries.
What Is IntraDay Trading?
Talking in terms of a layman, Intraday Trading is the buying and selling of securities and stocks listed on the stock market within the same trading day. The transactions in this type of trading are not carried over overnight. It is done to minimize the risks of money investment for a long duration of time. For intraday trading, a person must have a sharp know how of the market and needs to keep an eye on the daily trends and situations.
The main motto of intraday trading is to earn profits from the price fluctuations that occur in the market throughout the day. As for instance, if a stock is likely to move up, one must buy it low and sell it at high and the vice versa when the share is likely to go down. These trades need to be done strategically in order to reap the most out of your investment.
Benefits of Intraday Trading
Deciding if intraday trading is made for you or not? Difficult, right? But don’t you think a detailed knowledge of Intraday trading could help you make the decision fast and correct? Now that you have an idea of what is intraday trading, why not have a look at the perks one can enjoy if one starts day trading.
- No overnight risks: Since the trading is done before the market closes for the day, the losses arising outside market hours can be altogether avoided.
- Small investments: The investments made in this type of trading is not much and as such, one can start it with little income too. These small investments can, at times, have huge profit margins.
- Higher Profits: With accurate investment strategies, Intraday trading can be a good option to earn profits. Even in case of adversities, these traders can sell short and earn profits.
- More opportunities: With the transaction happening every day and for a very short period of time, the door to new opportunities are always open.
- Lower commission charges: Stockbrokers charge nominal fees for intraday trading as the delivery expenses are foregone.
How Intraday Trading Works?
Ready to be an investor? Well, with a thorough understanding of what is intraday trading and how it works, you can surely be one and master your finances. You need to understand the kind of stocks that you should invest in and study the trends carefully. Identify the best Intraday stocks by having the following things in mind:
- High liquidity stocks: Stocks that can be easily bought and sold are considered good for day trading. These stocks from mid and small cap companies can help you in earning profits as a beginner.
- Trading volume: Price fluctuations of a stock are greatly caused by the demand and supply of that particular stock. Monitoring trade volume of any stock, is therefore, a vital concern for traders. Higher trade volumes are beneficial.
- Check stock volatility: Stock volatility is nothing but the rate at which the stock’s prices increase or decrease. Go for moderate to high volatility stocks for potential profits.
- Strong correlation: Choose intraday shares that have a high correlation with benchmark index of that particular stock. It means if the index goes up, the stocks tend to increase and vice versa.
Also Read: Swing Trading vs Day Trading: Which is Right for You?
Tips for Intraday Trading for Beginners
As a beginner, Intraday trading can be a bit risky as it may take time to understand the current market trends. However, if you take care of certain things and follow them as a precautionary measure, intraday trading can be quite fun and rewarding for you. Check out the following tips and invest risk-free:
- Plan and monitor the stocks before investment: Before you start your actual investment, be sure you have a plan of action. Check out the stock performance of a particular stock before making an investment.
- Start small and learn first: You wouldn’t want to incur losses in your infancy of investing. Take small steps at a time and learn the art of investment.
- Focus more on liquid shares: Stocks with high liquidity give you the chance to earn better profits. You can easily enter and exit the trade without having effect on the price:
- Be selective to avoid overtrading: Do not invest in each and every good-performing stocks you see in the market. Be selective with your investments.
- Stay updated with the latest market trends: Staying current on the trends could be helpful in trading, not just intraday but any other type of trading as well.
- Avoid trading in fear or greed: Stick to your trading plans and do not make investment decisions out of greed. This often leads to incur losses in the stock market.
Other Alternatives to Intraday Trading
Though Intraday trading has less chances of risks and is beneficial, however, the trader needs a constant eye on the market which becomes quite difficult at times. Apart from Intraday traders can also opt for various types of trading and make the best use of the stock market. Have a look, how:
- Standard trading
- Swing Trading
- Investment in Mutual Funds
- Buy and Hold
- Options Trading
- Dividend Investments
- Forex Investments
All these types of trading can be done through various platforms that are in the rise. Grow, Zerodha, Upstox, AngelOne and many more are examples of such platform. They charge a certain part of the profits earned from transactions as fees.
Beginners Guide: A Complete Guide on How to Apply for IPO in Zerodha
Wrapping Up!
After learning what is intraday trading, its perks and how it is done, what’s stopping you from starting it. By following the tips mentioned, you can easily start intraday trading from a beginner level and be a pro at it. The key is just to keep an eye on the trends of the market and following a proper strategy for your investments. Start making your own money with the stock market now! Happy Trading!