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Beginner’s Guide for Intraday Trading

What Beginners Need to Know about Intraday Trading

Intraday trading is about buying and selling the stock on the same day such that the net position at the end of the day is zero. You can buy and sell the position or you can also sell the stock and buy it back before the end of day. Whatever the profits and losses in intraday trading; they are credited or debited to your trading account on the same day. Intraday transactions are closed out by the broker if the trader forgets to close it out. Since the net position is zero at the end of the day, there is no impact on the demat account of the trader as there is no delivery.

5 Things Beginners Must Know About Intraday Trading:

  • An intraday trade order entitles you to higher leverage. That means you can pay a small margin and take a large open position. But you need to ensure that you define it as an intraday trade at the time of placing the order itself. Ideally if you define the stop loss and the profit loss at the time of placing the order, then you can get still more leverage in the intraday trade.
  • When you are leveraged in an intraday trade, remember that it works both ways. If you have paid a margin of Rs.10,000 and taken a position of Rs.70,000, then your profits can multiply by 7 times. At the same time, your losses can also multiply by seven times. Hence stop losses are very important while trading intraday.
  • As a trader, you need to ensure that any open positions taken by you are closed out. If you leave it open, then your broker will automatically close all open positions after 3 pm at the available price. Remember that if the broker is not able to close the position due to technical issues, the loss will still come on you. Take responsibility to ensure closure of positions.
  • Intraday trading is not always going to be profitable. You will also make losses since you are trading within a time span of 5 hours and the price movement may not be favourable. What matters in intraday trading is not the profit or loss made in a single day but whether you are profitable over a period of time.
  • Learn charting and do not depend on outside calls and tips. You can just look at these ideas for reference but intraday trading is best done by reading charts on your own. Simple charts are enough to enable you to trading. You don’t need to be an expert in charts, you just need to be familiar with interpreting the charts.

How Beginners Should Go About Intraday Trading

Intraday trading is intrinsically risky and hence you need to be doubly careful when it comes to putting trades. Here are 3 points to remember:

  • Start intraday trading in a small way and then increase your order size and your order book gradually as you get more confident. If you risk too much in your intraday trades in the initial days, then any reverses will make intraday trading unviable for you. Start small, take calculated risks and gradually scale up.
  • Stick to your strategy. Before you get into a trade, create a framework about the price at which you will execute the trade, where you will put the stop loss, where the profit target will be set etc. Once the strategy is set you must strictly adhere to it. Don’t keep flipping between ideas just you because you find some idea attractive. Discipline is the key.
  • Keep your losses as small as possible. It is also referred to as the risk-return trade-off. In intraday trading, smartness lies in cutting your losses quickly when you find the trade going against you. The market is a great teacher and in intraday trading you must be humble enough to treat the market as your teacher and learn.
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