Intraday trading is an excellent trading method in stock market trading. If you are interested in making money real quick, what else could be better than the intraday?
There was a time when people had lots of misconceptions regarding the share market and people who had lots of money or had deep knowledge on that matter. But now, the situation is changed drastically. People now can invest their funds in the stock market via different methods.
Depending on the goal, people choose the way they want to grow their investment. If you are looking for long-term benefits, your selection of funds would be different.
In this article, we are going to talk about short time profits and benefits. How short? As low as one day. Yes, you can bag your profits in a single day.
Through this article, we will walk you through every pros and cons of intraday trading. You will also come to know the basics of intraday trading, how to start, how to pick stocks, and other things related to the topic.
So, without making it monotonous, let’s start the topic with,
What is intraday trading?
Intraday trading or day trading is when your buying and selling of your shares get completed within the day. The main concept of making a profit from the share market is, you buy a share at a price point and then sell it when its price gets high.
Now, the same thing with intraday trading also. On the same day, you buy shares of a company and then sell them. And bring your commission to your accounts. Technically speaking, you don’t need to even wait for the day to be over. If the share price reaches your expectation before the day ends, you can sell your shares and earn handsome earnings.
Indian stock markets start at 9:5 AM and close at 3:30 PM.
For example, you buy a share in the morning at Rs. 300 and after a couple of hours it reaches Rs. 400, and you don’t see any chances of an increment of that share later and you are not looking for more profit, you can sell it right away and bag Rs100 profit for each share. Now, if you 100 shares to that price, you earn Rs.10,000 profit.
So, in that example, you make money in a couple of hours. But, most people wait for a long typically the day till the market closes.
But, all the buying and selling of shares occur during that single day.
Intraday trading is not for the long term or becoming a shareholder of a company. It is for making quick profits. You can buy any type of share listed on the stock exchange and you find it useful after analysis.
Now, that you know what is intraday trading, now let’s discuss the pros and cons of intraday trading.
Intraday trading pros:
No overnight risks:
Share prices fall for various reasons and if the incident is immense, the amount of losses is so. Imagine, a situation where incidents take place at night it would be like war, or the company you are owning shares has faced a serious issue. Now, as the incident happened at night, you have nothing to do with it. You have to wait for the morning. But, till then, the share prices are so low and you book huge losses.
But, you won’t see any similar issues while you are in day trading. The whole thing wraps up within the day.
High profits:
Intraday trading often offers a high amount of returns, if you buy the right stocks and sell them on the right course with the correct strategies. You may have noticed a live stock market chart for intraday, it fluctuates a lot. If the day is good and the market is stable, the share price of good companies chances are high, the share price will go up within a couple of hours. You just have to wait with patience.
You need fewer funds:
Intraday trading is quite different from long-term investments. You do not require a considerable amount to get into intraday trading. Actually, in intraday trading, you get a profit margin for your investment. That means, for example, if you invest Rs.1000 through the broker, he will allow you to trade 4 times or 5 times to that amount.
So, by investing less amount you can trade high and bag higher returns.
You invest your money for a single day:
The whole trading is of one day, and you get profit or loss within a day period. In mutual funds, or long-term investments you need to keep your funds for real long if you want to see any significant growth. But, that is not the case with intraday trading.
You make money even though the market crashes:
Yes, that’s true. If you have a deep knowledge of intraday trading, and you are in touch with finance and economics, you short-sell and make huge profits. Typically, you buy a share at some price point and when the price goes up, you make profits.
But, in short selling, you first sell shares at a high price and then bought again with lower pricing. However, the process will not work fully if your calculation, observation, and analysis are accurate.
Now, let’s see the flip side of the coin.
Intraday trading cons:
High risk:
As, you know, intraday trading can make you reach in minutes or hours, and it can make you lose your all investments too in a matter of minutes. That’s the reason, newbies are advised to come to the field with little capital. To get succeed in day trading, you need deep observation of the market and other market factors.
Small mistakes can give you losses:
The intraday trading graph fluctuates a lot. There is a very small room for any mistake. A small wrong decision ends up in a devastating way. You need to stay focused and take smart moves fast.
You have to put long hours in a day:
If you consider being on day trading, you have to put all your time into it. You need to stay in touch with your broker, look at the live graphs, and always be in standby mode. If you are taking it part-time and not putting your time seriously, chances are you get delayed taking the right decision and face losses or don’t get the expected profit margins. So, it is better to take it as a full time.
Pressure on your nerves:
It’s true that if you are in day trading, you have to make your nerves super stronger and it is not for people who get nervous easily or hesitate to take decisions that are full of risks. If you look at the price chart, every moment, even in 2 two-three minutes, the prices go up and down. That makes it quite hard for many people. So, it’s better for them to stay away from intraday trading.
Now, as you know the advantages and disadvantages of intraday trading, you might be interested in it. But, before that, you need to understand some of the indicators of intraday trading.
Moving average:
The moving average is a line on the stock chart that discloses the average closing rates over a given period of time of stock. This moving average indicator helps understand the ups and downs of the stock price and to decide the stock flow.
Bollinger bands:
This indicator is superior that shows three lines; the moving average, and upper limit, and the lower limit. These lines help understand the underlying movement of the stocks and take smart decisions.
Momentum oscillators:
Momentum oscillators help understand a trader whether the stock is going up or down in a given period of time. It is shown in the 1 to 100 range and also, and it denotes whether the stocks are going up or down. This indicator also helps investors decide when to buy the shares.
Relative strength index:
As the name suggests it is calculated in an index where the RSI score ranges between 0 to 100. The index goes up when the share price goes up and it gets down when the share price goes down.
If you want to bag good profit margins from intraday trading, you need to understand the aforementioned indicators properly.
However, after knowing all these factors, you may want to get started with intraday trading.
How to get started with intraday trading?
Here are a few things to remember before you start day trading.
Gain the knowledge first:
Learn the basics of stock market and technical analysis. You need to understand how the market works, what factors influence the prices of shares, and how to use charts and indicators to identify trends and patterns.
Choose a reliable broker and platform:
You need a broker who can execute your orders quickly and efficiently, and a platform that offers you the tools and features you need for intraday trading, such as real-time data, charts, news, alerts, etc.
Create a great trading strategy:
Develop a trading strategy and plan for your trading. It is very important because you need to have a clear and consistent approach to intraday trading, based on your goals, risk appetite, capital, and time frame. You should also have a plan for entry and exit points, stop-loss and target levels, position size, etc.
Start with a demo account:
Practice with a demo account. Before you start trading with real money, you should practice your skills and strategy with a demo account that simulates real market conditions. This will help you test your performance, learn from your mistakes, and gain confidence.
Start with small approaches:
Start small and scale up gradually. When you are ready to trade with real money, you should start with a small amount of capital and low-risk trades. You should also limit your exposure to one or two stocks at a time, and avoid overtrading or chasing losses. As you gain experience and profits, you can increase your capital and risk level gradually.
Conclusion:
The goal of intraday traders is to profit from short-term price movements and fluctuations in the market. Intraday trading can be rewarding, but also risky and challenging. So, firstly you should gain proper knowledge on it, and then go for real trading.
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