The first step in intraday trading is identifying the stocks to trade. Focus on stocks that are not too volatile. The second step is to determine the levels of entry and exit. These have to be set based on technical levels and monitored based on news flows. Finally, you need to place the actual intraday order, which must be accompanied by the stop loss and profit target at the time of order initiation itself.
Setting Out on the Intraday Trading Journey
Your existing equity trading is good enough and you can execute intraday trades in your existing trading account itself. The question is whether you require a demat account since intraday trading does not require delivery of shares. The answer is that SEBI regulations require that any form of equity trading cannot be done without a demat account. The only thing you need to remember is that when you place an intraday trade, clearly mention that it is an intraday trade as your will then be margined accordingly.
Steps to take before Intraday Trading
- You must begin by identifying a list of 10 stocks that you will trade intraday. What should be the criteria for selecting these stocks. Firstly, they must be companies with quality management so that there are no negative surprises for you. Secondly, ensure that these stocks are liquid enough to enable entry and exit without any risk. Lastly, these stocks must be high beta names that react to technical triggers and to news flows. That is when you make money! Above all, keep this list small such that you can closely track these stocks.
- Once the stocks are identified, you must set out the framework for trading intraday. Define the support and resistance levels where the stock can be traded long or short. Deicide on the stop loss levels and the profit target levels. Once the complete framework is set, only then you must venture to trade these stocks.
- Order placement is very important. Don’t jump in and buy or sell the stock. Check if you can get a better price in a market order or a limit order and then take a final call on order placement. After all, you only have around 5 hours to close out the position profitably.
- Profits and losses are part of the intraday trading game. When stop losses are triggered don’t spend time analyzing the stock. Stick to your discipline. When the profit target is achieved don’t spend time worrying whether the stock can give more profits. Discipline is the key.
- Ensure that all positions are closed out by you before the end of the day. Even if you have the ability to put full margin, don’t convert an intraday trade into a delivery trade. Keep it separate. Be very careful of open short positions because if you don’t close them it could result in short delivery and lead to auction losses. Keep a complete checklist of open positions and reconfirm it with your order book and trade book to ensure that there are not open positions.
3 Things to Ensure when you Start Intraday Trading
Success in intraday trading is contingent on a variety of factors including the market volatility, cost of trading and your trading strategy.
- When you are trading intraday, your cost of trading matters a lot since there are two legs to each trade on the same day. When you add up brokerage and statutory costs, the cost can add up to quite a bit and make a difference to your break-even. Ensure to get the best deal on brokerage to be profitable in intraday trading.
- There are 3 decisions in intraday trading viz. buy, sell, do nothing. You will find that quite often doing nothing in a highly confusing market is the best trading decision. You can actually save yourself even as other traders may be losing money in the midst of all the volatility and confusion. Use the volatility but stay out if the market is confusing.
- In intraday trading you are as good as your last trade and you must keep that in mind when you start intraday trading. The trick lies in learning from your bad trades and using it to better your future trades. What you can do is a lot more important in intraday trading than what you have already done.