Best Strategies for Intraday Trading
Intraday trading is a riskier way to invest money in the stock market and is much different from what investors do in the stock market. As a beginner in Intraday trading, it is important to realize the basic and best strategies inside out to avoid any kind of losses and gain many profits in a shorter span. Meanwhile, a quick tip for beginners in Intraday trading is it is important to invest only as much as one can afford without disturbing the financial situation or conditions. In Intraday trading, either the investor is making good profit or good losses based on how well the stock market’s strategies and basics are used.
One of the best parts about Intraday trading is how well it lures investors to leverage price fluctuations. Invest and watch it; that’s it. But if the right strategies are not used and in the right way, intraday trading can result in losses.
Best Intraday Trading Strategies
- Momentum Trading Strategy Market trading needs one to invest in the right direction and at the right momentum, and it is all about Momentum trading strategy. Investors pick the right stock before making a significant change in the market trends and investing accordingly. The choosing of stock is facilitated by news reports related to the stocks that can make the graph go either upwards or downwards. An intraday trader’s role is to study such news before the market is available for the investment and then trade accordingly. An intraday trader needs to remember the data will either go upwards or go downwards depending on the external factors, and a quick decision is to be made in the form of investment. Based on the market direction’s speed, investors can hold the security for minutes, hours, or the entire day. Momentum trading strategy is great but requires speed in investments as soon as the news breaks out. Besides, how long the securities are held is completely based on the analysis of these market trends, which are to be followed closely and every day provided, the right decision is taken at the right moment.
- Reversal Trading Strategy One of the high and risky trading strategies, reversal trading, is not for beginners. As per this strategy, the investments are made against the trends. With the calculations and analysis, the trading will snap back and make a good profit. This strategy is highly not recommended for Intraday beginners as it requires a lot of experience and knowledge about the market. Besides, it is a difficult strategy as the investors need to correctly identify the pullbacks and their strengths. One of the supporting techniques in reversal trading strategy is the daily pivot which intraday traders use to focus on trading the daily low and high pullbacks.
- Breakout Trading Strategy In trading, timing is the essential factor, especially for intraday traders. In a Breakout trading strategy, timing plays an important role while making a trade decision. It involves identifying the threshold points when the stock prices rise above or falls below the specified time. If the trend continues to soar the prices above the threshold point, the investors consider long positions and buy the stock. On the other hand, if the prices fall below the threshold point, the investor considers short positions or sells the stock. The fundamental thought processing behind the breakout trading strategy is, if the prices cross the threshold points, they will be more volatile and continue the trend.
- Gap and Go Trading Strategy At times, it is common to find stocks that do not have pre-market volume and opens at a gap from the previous day. If the gap opens higher than the previous day, then it is called the gap up, and if it opens lower than the previous day, then it is called gap down. Such situations occur when news acts as a catalyst. Intraday traders look for such stocks and bet on them, believing the gaps will close by the end of the day. This strategy is great for one who wants short and quick profits but not much risk.
- Moving average crossover strategy Stock market trends are one of the hottest indicators of how the market performs, but there needs to be a differential point; one such is the moving average. When the values go above the moving average, it is known as the uptrend, and if the values are falling below the moving average, it is known as the downtrend. The key in moving average crossover strategy is to pick such stocks at the right moment. These can be worked upon with the help of the catalysts, such as news about the stocks directly or indirectly.
Basic Rules for Intraday Trading
Most traders, especially beginners, lose money in intraday trading because of the high volatility in the CFD market. Generally, losses occur due to fear or greed because, while investment is not risky, the lack of knowledge is.
Below are few basic rules for trading in intraday:
- Timing the Market
- Plan Investment Strategy and Stick to it
- Exiting the Position under Unfavourable Conditions
- Invest Small Amounts that Won’t Pinch
- Research and Choose Liquid Stocks
- Always Close All Open Positions
- Spend Time
Plan Investment Strategy and Stick to it:
Every time users initiate a trade, it is important for them to have a clear plan of how to do intraday trading. Determining the entry and exit prices before initiating the trade is crucial. One of the most important intraday trading tips is to use the stop loss trigger to reduce the potential loss on your position. Moreover, once the asset achieves the target price, users are advised to close their position, and not be greedy and expect higher profits.
Exiting the Position under Unfavourable Conditions:
For trades that provide profits and price-give reversal (price expected to show reverse trends), it is prudent to book the profits and exit open position. In addition, if the conditions are not favourable to the position, it is advisable to immediately exit and not await the stop-loss trigger to be activated. This will help traders reduce their losses.
Invest Small Amounts that Won’t Pinch:
It is not uncommon for beginners to get carried away once they make some profits during day trading. However, markets are volatile and predicting the trends is not easy even for seasoned professionals. In such situations, beginners can easily lose all their investments. This is why an important intraday tip is to invest smaller sums that a user can afford to lose. This will ensure individuals do not face financial difficulties in case the markets do not favour them.
Research and Choose Liquid Stocks:
Before commencing intraday trading, it is recommended to understand the basics of the stock market, and the fundamental and technical analyses. There is plenty of research available on the Internet and taking the time to read it will be advantageous. Moreover, there are hundreds of stocks that are traded on the equity markets and traders must trade only two or three liquid stocks. Liquid stocks are those shares that have high volumes in the intraday market. This allows traders to exit open positions before the end of the trading sessions.
Always Close All Open Positions:
Some traders may get tempted to take delivery of their positions in case their targets are not achieved. This is one of the biggest errors and it is crucial to close all open positions even if traders have to book a loss.
Day trading is not for professionals who are employed in a full-time job. Traders must be able to monitor the market movements throughout the market session (from opening bell until its closing) to enable them to make the right calls as required.