In intraday trading, the trader will look to earn profits from the fluctuations in the stock market. The stock market is unpredictable, and fluctuations are quite regular. Day traders generally follow the principle ‘buy low, sell high’. They will buy the stock at a low price and sell it once it goes high, profiting from the upwards price movement of the stock.
When done correctly, intraday trading can be an effective way to earn substantial profits from the stock market. Along with this, a crucial part of earning good profits from intraday trading is to select the most suitable stock.
If you want to earn substantial profits from intraday trading, you can follow the steps listed below:
- Liquid stocks:
Liquid stocks are the ones that have a high volume trading through the day. These stocks can be quite optimal for intraday trading. You will get to purchase and sell large volumes.
- Medium-to-high volatility:
As it is intraday trading, your stocks should see a good amount of price movement daily. If you opt for stocks with less price movements, you will not earn good profits in a day. It is important to select the stocks which experience a price movement every day. It would help if you choose stocks that move at least 3% per day on average. Stocks with a medium level of volatility can be of great help to profit from intraday trading.
- Follow indicators:
A crucial part of day trading is the ability to predict the price movement in the short term. There are multiple indicators available that allow you to understand the stock’s performance in the market accurately. It would help if you learn how to use the indicators to help you read the chart well and consequently help you make profitable decisions.
What kind of stocks to choose for intraday trading?
In intraday trades, you need to square-off your position before the market closes. So, it is essential that you choose stocks that have enough liquidity for executing such trades. This is why many recommend high liquid stocks like large-cap stocks. This can also minimize the chances of your trades impacting the share price of the selected stock.
When to execute intraday trade?
Timing the market is crucial for intraday traders. Taking a position at the wrong time can be the difference between profits and loss.
Timing the market is crucial for intraday traders. Taking a position at the wrong time can be the difference between profits and loss.
Many experts suggest that it may be better to avoid taking a position within the first hour of the trading. This is because the market tends to be volatile during this period. You will find more such intraday trading strategies here.
How to get started?
It starts with opening a trading and demat account. If you already invest in the stock market, you may want to open a separate account for intraday trading.
You can then sign up for the right tools that help with intraday trading. It can also help with managing your taxes as intraday trades are treated differently as per the Income Tax Act.
Once you have the requisite tools and accounts, you can begin by looking at daily charts to identify trends in price movement. For this, you may need the support of various technical analysis tools. You can get access to these tools on trading terminals and software TradeSmart or KEAT ProX.
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