Below are a few tips for intraday trading in Indian share market which will help investors in making the right decision:
Choose Two or Three Liquid Shares
Intraday trading necessitates closing positions before the trading session concludes. Therefore, it is advisable to focus on selecting two or three highly liquid large-cap shares. Opting for mid-size or small-cap shares may require holding onto them due to lower trading volumes, which can impact intraday trading strategies. By prioritizing highly liquid stocks, traders can enhance their ability to execute timely trades and effectively manage their intraday positions.
Develop an informed short-term trajectory beforehand and stick to it
Here are a couple of essential factors to consider when evaluating a short-term trajectory:
1. Predefine your entry and target prices: It’s important to establish your entry point and target price in advance. Emotions can often sway your decision-making once you’ve purchased shares, potentially leading you to sell prematurely even if the price experiences only a slight increase. By setting predetermined levels, you can avoid missing out on higher gains due to premature selling.
2. Take profits when the target is reached: Greed can sometimes cloud judgment, leading you to hold onto a stock for longer than necessary, thereby increasing the risk of price declines. If you choose to remain invested, ensure you readjust your stop-loss price to align with new expectations.
Implementing a stop-loss strategy can be beneficial, as it automatically triggers the sale of shares if the price falls below a specified limit. For investors engaged in short-selling, stop-loss orders help minimize losses in the event that prices rise unexpectedly.
Realign your strategy for intraday trading (as opposed to long-term investment)
While value investment focuses on fundamental analysis, day trading revolves around technical details. In certain instances, day traders may opt to retain shares if the target price is not achieved, hoping for a price recovery to recoup their investment. However, this approach is not advisable, as the stock may not possess the long-term potential for investment, having been acquired solely for a short duration. It’s important to consider the underlying value and prospects of a stock rather than relying on temporary price fluctuations when making investment decisions.
Research Your Wishlist Thoroughly
As prudent investors, we recommend creating a wish list of 8 to 10 carefully chosen stocks and conducting thorough research on each. It is essential to stay informed about corporate events like mergers, bonus dates, stock splits, and dividend payments, as they can significantly impact stock performance. Additionally, utilizing online resources to identify resistance and support levels can be highly advantageous. Lastly, acquiring a solid understanding of fundamental concepts and stock market terminology is crucial for successful investing.
Don’t Move against the Market
Experienced professionals armed with advanced tools often find it challenging to accurately predict market movements. Despite favorable technical indicators pointing towards a bull market, there can still be unexpected declines. It is important to recognize that these factors serve as indicators and do not offer guarantees. In the event that the market moves against your expectations, it is wise to exit your position to mitigate potential substantial losses. Intraday trading, with its higher leverage, can yield attractive returns within a single day. However, maintaining contentment and a disciplined approach are key ingredients for success in the realm of day trading.
Time the Market
Experts often recommend individuals avoid trading during the first hour, once the markets open.
Exit the Position under Unfavorable Conditions
When trades yield profits and indicate a potential price reversal, it is wise to secure the gains by booking profits and exiting the position. Similarly, if market conditions are unfavorable for a particular trade, it is recommended to exit immediately instead of waiting for the stop-loss trigger to be activated. By taking prompt action, traders can effectively minimize their losses and protect their capital.
Invest Small Amounts that won’t Pinch
It’s a common scenario for beginners to become overconfident after making initial profits in day trading. However, it’s important to remember that market trends are volatile and even experienced professionals find it challenging to predict them accurately. This unpredictability increases the risk of losing investments, especially for beginners. To mitigate this risk, it’s advisable to invest smaller amounts that won’t have a significant impact if lost. By doing so, individuals can avoid financial difficulties if the market doesn’t work in their favor. It’s also crucial to practice proper risk management by not risking more than two percent of the total trading capital on a single trade.
Map Resistance and Support
During the initial 30 minutes of the trading session, stocks typically experience price fluctuations within a specific range, which is referred to as the opening range. Within this range, the highest and lowest prices are considered as the resistance and support levels. As a strategy, it is recommended to buy when the share price surpasses the opening range high, and sell if the price drops below the opening range low. This approach helps traders take advantage of potential price movements and make informed trading decisions.
Always Close All Open Positions
It’s important for traders to resist the temptation of holding onto their positions if their targets are not met. One common mistake is to cling to open positions, even if it means incurring a loss. However, it’s essential to close all open positions to mitigate the risk, particularly the overnight risk associated with unforeseen events like a market crash in the USA or Europe. By prioritizing risk management and promptly closing positions, traders can protect themselves from potential adverse market conditions.
Spend time on the actual monitoring and execution
Engaging in day trading is not recommended for professionals who have full-time jobs. It requires constant monitoring of market movements from the opening bell to the closing of the session in order to make timely and informed decisions. Therefore, individuals who are occupied with their regular employment may find it challenging to dedicate the necessary time and attention to day trading effectively.
Monitor Intraday Trading indicators
In order to maximize profits in intraday trading, conducting thorough research is essential. This involves following specific indicators that can provide valuable insights. While some may consider intraday tips as a foolproof solution, it is important to note that they are not a guaranteed path to success. Intraday trading indicators, when utilized as part of a comprehensive strategy, can be helpful tools in maximizing returns. It is the combination of research, analysis, and strategic decision-making that leads to successful outcomes in intraday trading.
Intraday Time Analysis
In the realm of intraday trading, daily charts serve as a widely adopted tool for tracking price movements on a day-to-day basis. These charts offer valuable insights into the fluctuation of prices from the market’s opening to its closing. They are highly popular among intraday traders and facilitate a comprehensive analysis of price trends within a single trading session. Various methods can be employed to effectively utilize intraday trading charts. Here, we present some commonly utilized charts specifically tailored for intraday trading in the Indian stock market.
How to Choose Stocks for Intraday Trading
In order to thrive as a day trader, it is crucial to master the art of selecting stocks for intraday trading. Many individuals struggle to generate profits because they fail to choose the right stocks to trade. Day trading, if not approached with caution, can have severe consequences on one’s financial stability. The allure of quick and substantial gains can be tempting, but without sufficient knowledge and understanding, intraday trading can be perilous. Inherent risks are inherent in stock markets, and intraday traders must navigate factors such as price volatility and fluctuating daily volume when selecting their trades.
Opening Range Breakout (ORB)
This popular intraday trading strategy is utilized by both experienced traders and beginners alike. To fully leverage its potential, it is advisable to complement the strategy with effective use of indicators, precise evaluation of market sentiment, and adherence to strict rules. ORB encompasses various approaches, with some traders focusing on significant breakouts from the opening range, while others prefer trading the opening range breakout itself. The trading timeframe typically spans between 30 minutes and three hours.
Demand-Supply Imbalances
An important intraday trading tip for beginners is to look for stocks where drastic demand-supply imbalances exist and opt for these as entry points. The financial markets follow the normal demand and supply rules—price reduces when there is no demand for higher supplies and vice versa. Users must learn to identify such points on the price chart through research and studying the historical movements.
Opt for 3:1 Risk-Reward Ratio
It is crucial for traders, especially those new to the market, to grasp the concept of a suitable risk-reward ratio. In the beginning, focusing on stocks that offer a minimum risk-reward ratio of 3:1 can be advantageous in generating profits from stock market investments. This approach enables traders to limit their losses on unsuccessful trades while providing the potential for substantial gains, even if the majority of their trades result in losses. By adhering to this strategy, traders can aim for consistent profitability in their trading endeavors.
Use Relative Strength Index (RSI) and Average Directional Index (ADX)
By combining the RSI (Relative Strength Index) and ADX (Average Directional Index) indicators, traders can effectively identify buy and sell opportunities to earn profits in intraday trading. The RSI measures the momentum of a stock by comparing recent gains and losses, indicating whether it is overbought or oversold. On the other hand, the ADX helps identify strong price trends. When these two indicators are used together, traders can buy when the RSI crosses the upper limit and sell when it crosses the lower limit. The ADX acts as a trend identifier, assisting traders in making informed buy or sell decisions. This strategy enhances the accuracy of intraday trading and boosts the potential for profitable trades.
Conclusion
Intraday trading offers same-day trade settlements and traders aim to generate smaller profits from their trades. One valuable tip for successful intraday trading is to align with the market trend, as it increases the chances of making profits. At our platform, we provide powerful tools like Angel Eye, which includes charts and portfolio watch features. These tools assist traders in identifying market trends and making informed decisions, leading to potential profits in intraday trading. It’s important to note that intraday traders face inherent risks in the stock market, such as price volatility and fluctuating daily volume. To manage these risks effectively, it is advisable not to risk more than two percent of your total trading capital on a single trade.
