Trading is no longer a sport for the select experts. With developing technology, and the facility of online trading accounts, trading has become accessible to a larger part of the global population. An average investor can participate in trading transactions according to his budget and risk appetite.
However, trading comes with its own share of challenges and requires time before one can make long-term trading investments. Hence, new traders are often advised to first adopt intraday trading, or day trading as it is popularly known.
What is Intraday Trading?
The primary goal of a trader is to capitalise on the rising and falling prices of securities, be they stocks or commodities. Some utilise this volatility of the market and trade for the long-term, others for a relatively shorter term. In intraday trading, this trading process takes place entirely within a single day.
Intraday traders buy and sell securities within a day, hence the term ‘intraday’. In most cases, intraday trading is done to take advantage of high liquidity in stocks and make the most of any small movements in prices within the day. Like long-term trading, intraday trading follows the same principle of buying low and selling high. The major difference is that they conduct these transactions within the time span of one day.
Requirements for Intraday Trading
The premise of intraday trading seems simple. However, there are several individuals who conduct professional intraday trading in a full-time capacity. This is because intraday trading, like all forms of trading, requires a specific set of factors to achieve success.
- – Market Knowledge: Since the time span of intraday trading is so short, a trader with an extensive knowledge of the market will always have an edge. It is important to begin with at least a fundamental understanding of the behaviour and patterns of the market. Moreover, it is also important to keep conducting research for your intraday trading
- – Business Plan: Venturing into intraday trading with a well-formed business plan is the best strategy forward. This plan should help the trader outline their financial goals, decide on markets they want to target, and determine how they would reinvest their capital.
- – Technological Tools: In today’s age, intraday trading has become a convenient option for many. For intraday trading one simply requires a computer or laptop, a quick and reliable internet connection and your choice of trading platform.
- – Broker: Intraday trading is typically facilitated by brokers, who charge the trader a small fee or a commission in exchange for their services. Finding the right broker can make all the difference in your intraday trading and it is ideal to find a brokerage firm that can extend full support whenever you face a trading issue.
Tips for Intraday Trading
Once a beginner trader figures out the concept and basic requirements of intraday trading, all that remains is to start making trades live on a trading platform. The goals and strategies of intraday traders differ widely from one to another. However, there are a few common intraday trading tips that are considered to be useful for all beginners:
- – Familiarising yourself with the specific nature of a market is key to trading success. That is why it is best to concentrate your trading efforts on one or two markets at most.
- – Pick your market on the basis of the amount of capital you have. Typically, the currency market requires the least amount of capital to trade, while stocks require slightly higher capital amounts.
- – It is also useful to start small and focus on one or two stocks during one of your trading sessions. It is easier to find the right trading opportunity when you have fewer stocks to focus on.
- – Find the right time for your intraday trading and follow that routine religiously. For instance, the best time to trade stocks is about 1-2 hours after the market opens and an hour before it closes.
- – With time and experience, work on formulating a proper intraday trading strategy and keep implementing it. The key to intraday trading is to find a strategy that works for you and keep repeating it to maximize profits.
With the advent of technology and popularity of trading platforms, intraday trading has become a viable option for many potential traders. In fact, for most beginners , intraday trading can serve as an excellent entry to the practice of trading.
For intraday trading, one needs to have a basic understanding of fundamental trading concepts. Moreover, one must also seek to fulfill certain basic requirements. Most importantly, however, it helps to do a fair share of research and practice before going live with your intraday trades.