Intraday trading has always facinated stock market traders due to its feature of active involvement and fast results. It is just like a 20-20 match, where excitement is always alive. However, there are ground rules which trader should follow before taking off with intraday trading.
1. Trade with an amount that you can afford to loose as it carries more risk than investing long term in stocks.
2. With intraday trading, you need to square off your positions before market close so always select highly liquid shares. Any positions left at the end of the day get converted into delivery.
3. Take exposure in very few scrips say 2-4 only at any give point of time as it will be easy to track them. Generally intraday trading in stocks moves with market mood or the specific news expected in that stock so tracking is more important than diversification.
4. Select your stocks after studying the basic news about the same like corporate actions (results, dividends, splits, bonuses, mergers, etc) and the market sentiments.
5. Basis your expectations, ascertain the entry price and target levels. You may also use pivot levels for the same.
6. Never forget the stoploss. It will help you to limit your losses by removing the emotional quotient from your trading and brings in discipline.
7. Often people with loss making positions becomes a long term investor however their research does not support that. So cut off your losses for the day and start afresh next day. Do not convert yourself suddenly from trader to investor.
8. Remember, Its a game of greed and fear so overcoming both will make you earn money. Book profits when ascertained targets are met.
9. Do not go against the stream, no need for doing that. When you cannot beat them follow them. So unless you have substantial money to change the trend of the market, don’t fight with the market trend.
10. Last but not the least, keep your targets within the range. Smaller the target, more is the chances of achievement. Generally, traders keep it 3 times the total charges on the trade which means if the cost of making a transaction (brokerage etc) is Rs. 20 then target may be of Rs.60 and stoploss of 40. So every profit making tade will yield you Rs.40 and every loss making with take away Rs.40. As such even with 60-70% accuracy, you will end up making money.
Happy Trading !!!
