Intraday trading involves buying and selling stocks within the same trading day. Otherwise known as day trading, intraday trading ignores investment potential and instead focuses on securing profits from short-term price movements.
Seeking a lucrative alternative to regular trading? Looking for increased liquidity and greater flexibility when trading stocks? Read on for an overview of what intraday trading is, its advantages, and some essential tips for sharpening your day trading strategy.
Intraday Trading Explained
Unlike other types of trading, intraday trading refers to buying and selling stocks on a single day. The ultimate aim of intraday trading is to secure profits from rapid share price fluctuations. Intraday trading begins when the stock exchange opens at 9:30 AM. Trades then need to be squared off when it closes at 3:30 PM.
While opinion varies, most analysts agree that the biggest intraday trading wins can be gained between 10:15 AM and 2:15 PM. You’ll want to avoid taking a position too early in the day, as this is when the market is typically most volatile. By around 10:00 AM to 10:15 AM, volatility tends to taper out. While trades can be squared off at any time before 3:30 PM, it’s far safer to square off any positions earlier than this if you want to avoid becoming a trapped trader.
Because you’re squaring off all of your positions on the same trading day, transfer of ownership of shares isn’t a concern. This is the main difference between intraday trading and conventional trading.
Main Benefits of Intraday Trading
Intraday trading boasts many benefits that make it an attractive alternative to regular trading. With intraday trading, short-term price movements can significantly increase your profit-making potential. Even if individual profits are slight, you can rake in substantial returns by securing smaller profits across multiple positions within a single day.
Does regular trading carry too much risk for your liking? Intraday trading is a far more appealing prospect. As you’ll be closing all positions ahead of the market closing, you don’t need to worry about overnight risks putting a dent in prices and hurting your profits.
Although you’re operating within tight timeframes, intraday trading allows you to experiment with different trading styles and strategies. You can deploy all manner of techniques to turn a profit, whether that’s taking the route of technical analysis or making use of momentum trading.
Because you’re active during peak trading hours, you’ll also benefit from improved liquidity. This increased liquidity will bolster experienced traders, opening them up to more trading opportunities. While intraday trading does come with a learning curve, it’s by no means inaccessible to the beginner. Those who engage with intraday trading will gain valuable insights into risk management, market dynamics, and more.
What are the Drawbacks of Intraday Trading?
While intraday trading offers many enticing benefits, it’s not without risk. By design, intraday trading requires you to buy and sell frequently in a short period. If your emotions aren’t in check, this can easily lead to impulsive behaviour when making trades. Do this too often, and you can encounter more losses than you can realistically afford.
To make the right trading decisions and secure profits, you’ll also need to consistently monitor the market. While trading software and tools can be used for market insights, you’ll still need to commit a considerable amount of time and energy to this.
What’s more, intraday trading is best suited to those with some prior experience of trading. While it’s not completely impenetrable to the beginner, you’ll need to be armed with keen insights into things like market dynamics and have keen analytical skills to succeed.
How To Get Started with Intraday Trading
To start earning money from intraday trading, you’ll first need to open a trading and demat account. Your Demat account will hold shares and securities themselves, whereas your trading account serves as a way to buy and sell shares.
You’ll also need to select a suitable online trading platform. As well as allowing you to buy and sell, a good trading platform should let you modify and cancel your orders. You’ll also need sufficient tools to monitor your orders. Look for platforms that provide you with up-to-the-minute market data and technical analysis tools to help you make the best possible investments.
Looking for a reputable trading broker? With low minimum deposits and fast execution as standard, not to mention a wide array of trading tools, Exness is the ideal choice. Start here to begin intraday trading today.
How to Be a Better Intraday Trader
By taking advantage of same-day price movements, you can unlock a serious amount of profit from intraday trading. However, securing those big wins isn’t always easy. Does your intraday trading strategy need some work? Below are some handy trading tips to bear in mind, whatever trading strategy you’re using.
- Be Particular When Selecting Stocks
If you’re just starting out with intraday trading, you can mitigate risk by choosing high-liquidity stocks from established companies. With this kind of stock, price movements tend to be more stable and rarely suffer any significant fluctuations.
- Play it Safe with Stop Less Orders
Stop-loss orders are an effective risk management tool that can protect your profit margin if the market suddenly moves against you. Even if you’re an experienced intraday trader, they’re essential if you’re dabbling with particularly volatile markets.
- What Are Your Profit and Loss Targets
Setting price targets is a key part of any intraday trading strategy. If stocks perform as you want them to, you’ll need a benchmark to let you know when to sell. Likewise, you’ll need to know when to tap out and sell if trades aren’t going to plan. Price targets are crucial to developing keen trading discipline and cutting emotion-driven trades out of the equation.
- Study the Market and Follow the News
While many automated tools can provide you with useful market insights, any good trader also needs to be proactive when it comes to information sourcing. Following financial news is a must if you want to make a healthy living from intraday trading. Everything from upcoming elections to newly introduced fiscal policies can have an impact on trade prices and market fluctuations.
- Make Small Profits from Scalping
Although it requires a little more effort, scalping can be an effective strategy for securing a profit when intraday trading. Here, you’re buying and selling stocks from the same company many times throughout the trading day. Although individual profits are small, they’ll compound to give you a significant return.
Making a Profit from Intraday Trading
Even for those with extensive experience in trading stocks and financial instruments, intraday trading can be a dynamic and unpredictable enterprise. Success here hinges on having a keen insight into market trends and deploying the right strategies to capitalise on short-term price movements.
Admittedly, it’s fairly high risk compared to other types of trading activities. However, by utilising things like stop loss orders and deploying strategies like scalping, turning a profit is relatively straightforward. While it’s not the most beginner-friendly trading avenue, even a relative rookie can develop enough market insight and trading strategies to succeed.
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