Buying and selling financial products on the same trading day is known as Intraday Trading, also referred to as Day Trading. Intraday trading’s objective is to profit from short-term price fluctuations and market volatility during a single trading session without carrying any positions overnight or next day.
The time frame that intraday traders concentrate on are typically minutes or hours (may be 3 mins, 5 mins, 15 mins, 1 hour) as per their preferences. They open and close their positions within the same day no matter whatever may be the outcome maybe in Profit or Loss. Intraday Traders plans to take advantage of price changes that take place during this constrained window of time.
Developing right mindset for Intraday Trading is crucial for successful trading and requires a specific skillset to be successful and consistence profitable trader.
Here are the few key aspects and skills require to be a successful Intraday Trader.
Adhering strictly to your trading plan and methods is necessary for intraday trading. Avoid making impulsive judgments and decisions based on your feelings or market noise. Be calm and stay with your determined analysis and stick with your entry and exit spots you’ve chosen.
2. Avoid taking Leverage:
Intraday traders usually make use of Leverage or margin provided by the Brokers so that they can take more quantity to increase the potential returns on their trades. Using leverage, traders manage to take more number of shares with less capital expecting to generate more profits with less capital but you should also know that Losses are also more likely as a result, though.
Therefore, to avoid huge losses it is always recommended not to make use of Leverage and trade with the capital you have with lesser quantity.
Also check: Successful investing mindset qualities
3. Strategies and Proper Setup:
Scalping, momentum trading, continuation and reversals are some of the trading tactics employed by intraday traders. Each strategy has its own method for determining entry and exit points, which is based on technical analysis, chart patterns, indicators, and market news. Intraday traders should always trade with pre-determined strategies and proper Setup instead of random entry and exit with no proper analysis.
4. Risk and Money Management:
The most important key factor for intraday traders is to Manage Risk & Money Management and very crucial to protect your capital. Risk management is critical due to the quick pace of intraday trading. Stop-loss orders are used by traders to minimize potential losses and set profit objectives to secure gains. This helps to protect funds and avoid large losses from particular trades.
5. Real-time Monitoring:
Throughout the trading day, intraday traders must constantly watch the market and their positions. Price fluctuations can occur quickly, and being able to react swiftly is critical to the success of any trading strategy.
6. Psychological Considerations:
Intraday trading can be stressful due to the requirement for quick decision-making and the possibility of rapid price volatility. To succeed, traders must have discipline, emotional control, and a well-defined trading plan.
7. Learning Curve:
Intraday trading requires a strong understanding of technical analysis, market movements, and trading methods. Before trading with real money, traders regularly spend time in studying and practicing more on demo accounts, also known as Paper Trading.
8. Avoid Over Trading to Recover Loss:
The most common mistake every new trader do is Over Trading. It is always suggested to limit you trades and not more than 2-3 trades a day and most importantly shutdown your trading terminal if you have reached your Limit of Loss.
Over Trading not only increases your losses but also generates more charges which includes Brokerage charges, taxes and other trading related charges.
Intraday trading can provide possible profit opportunities, but it also carries a higher risk due to the short-term nature of the deals. Traders must have a well-defined trading strategy, risk management strategies, and the capacity to adapt to changing market conditions.
Also check: Best trading platforms in India