The buying and selling of equities can be lucrative if you plan your trades well. Depending on your trading preferences, you could hold stocks for the short-term or the long-term. Intraday traders carry out a very short-term form of trading. In intraday trading, the trader buys and sells the stock before the share market closes for the day. Thus, to be a day trader, you must follow the market closely and be ready to take calculated risks.
Day traders use a range of technical indicators to inform their intraday trading strategies. Some examples are simple moving average, relative strength index, rate of change, and so.
But like with any strategy, depending on a single indicator could be disastrous. You need to devise a plan based on your own experiences. The following intraday tips could help you trade better.
- Understanding stock trends
Assessing stock trends and identifying upward and downward movements are crucial for a sound investment. While a well-thought-out decision can bring you profits, a lapse in judgment makes you susceptible to huge losses. Trends can change very fast. A steady rise in prices can be followed by a rapid fall. Thus, you need to be alert, patient, and monitor the stock market very closely.
- Complete business early
Trading is most fluid when the stock market opens. Most of the movement actually happens during the first hour. In fact, the spiking of price happens during the first few minutes. But acting on it might be quite risky. The price stabilizes at around 30 minutes from the start. Whatever trend the stock has is generally established during this time. That is when trading is recommended.
- Fix your gains and losses
Before you start any type of trading, your goals need to be clear. This will help you avoid either over-optimism or scepticism. This would help you buy or sell at an optimal point and avoid erosion of paper profit. Any trader, particularly one engaging in intraday trade, needs to know when to enter and exit. The main aim is to keep the overall trade profitable. A stop loss of one-third of the set targets is common.
- Limited number of trades in a day
Intraday trades need a lot of attention and concentration. Even expert traders avoid multiple trades in a day. Intraday trading happens when the market is in its most volatile state. And, it is this volatility that is tapped for profit. One small lapse can lead to unnecessary losses. So, it is advisable to limit oneself to two to three trades in a day.
- Avoid intraday trading in news- or result-driven stocks
In a fluctuating stock market, predicting the behaviour of stocks is a very tough task. One way of trading in stocks is by reacting to company news or results. But depending on only one indicator or only news about the stock is not wise.
Summing it up
Trading in stocks may be a lucrative way of creating wealth. But most financial instruments are subject … READ MORE ...