We all love the idea of making quick money and why not if you can earn profits in just one day. Intraday trading gives you an opportunity to make good profits by entering into a position in the morning and you can take home the profits by the end of the day. You do not have to stress about monitoring your portfolio and also end up paying lower brokerage in most of the cases.
But unfortunately, intraday trading is not a cakewalk. You need to learn the traits of the trade and master the art before putting in your hard earned money. So, if you are considering to start out your trading journey, here are a few trade secrets that can help you make good returns and excel the art of trading.
Tips on day trading for beginners
- Research your wish list thoroughly
It is ideal to conduct good research of the scripts that you are planning to buy. Knowing about corporate events such as bonus dates, mergers, stock splits, dividend payments, etc. is of paramount importance. You can also make use of the wide data available on the internet to find out the resistance and support levels of the stock.
- Begin cautiously
The key to successful trading is to begin cautiously. Avoid putting in your entire savings in one go. Rather, invest slowly and gradually after gaining confidence. For example, let us say you have a corpus of Rs. 3 lakhs which you have set aside for trading. Now, when you begin your trading journey, try to allocate only about 10% to 15% of your corpus in your first trade. Once you understand the nuances of intraday trading and start seeing profits, you can put in more money. This will help you avoid losses.
- Identify entry and exit levels
Before purchasing a stock, you must know your entry level and target price. Most often, people change their mind after buying a stock. As a result, you end up selling your stock even with a marginal increase. Due to this, you often lose on the opportunity to gain higher returns owing to price increase.
- Trade in limited but good stocks
Another tip on day trading for beginners is, avoid spreading your stock list to too many stocks. Meaning, instead of trading in 50 stocks, it is a good idea to trade in 10 to 15 stocks that are liquid, volatile and have good volume. This is because, before you purchase a stock, you need to do track charts, supports, resistances, levels, volumes, news flows, company announcements, etc. and it is practically not possible for 50 stocks.
- Use Stop Loss
As a beginner, you must use stop loss to eliminate the risk of heavy losses. Stop loss is basically a trigger that is used to automatically sell the shares in situations when the price of a stock falls below a pre-defined limit. This strategy not only limits your potential losses but also ensures that your emotions are eliminated from your decisions.
- Avoid being an investor
Once you have decided to be a trader, be a trader. Avoid becoming an investor when your target price is not met. This is very important as both the strategies are distinct. While day trading focuses on fundamentals, the other focuses on technical details. Moreover, a stock that you bought for trading might not be a good stock for long term investment hence it is always advisable to square off your position on the same day without giving a second thought.
- Follow the trend
Another tip on day trading for beginners is to follow the trend and not to move against the market. This is especially important in situations where all the technical factors indicate a bull market but still there may be a decline and vice versa. One must understand that these factors are only indicative and do not provide any guarantee. It is difficult to predict the market movements, hence if the market moves against your expectations, consider exiting your position to minimise the chances of heavy losses.
The bottom line
Undoubtedly, intraday trading provides higher leverage and has the potential to provide decent returns in one day. However, it is advisable to be content and not get carried away in expectation of huge returns. Invest only that much amount that you can afford to lose without facing any financial difficulties. Moreover, adhering to these intraday trading tips and strategies will help you avoid losses and trade successfully.
For more tips on day trading for beginners, you can get in touch with Kotak Securities.