Intraday trading is trading that occurs within the same day; it involves buying, selling and squaring off positions before the close of markets. This is why day trading needs traders who are active and execute strategies to square off their trades.
Intraday trading can be hectic and requires a trader to be alert and experienced to understand the markets. The techniques and strategies adopted for intraday trading are different from the methods used in long-term investing. The holding period for long-term investment can extend into several months or years and therefore fluctuations over the short-term don’t affect long-term investors. On the other hand, intraday trading helps leverage returns over a shorter timeframe.
Based on one’s risk profile and financial goals, a person can choose between the two. If you choose intraday trading, you would need some intraday trading ideas that will help you manage day trading efficiently. Here are some top intraday trading ideas:
The right time: One of the most widely known intraday trading ideas is to choose the right time to take a position – typically, it is suggested to take a position preferably after an hour of trading. Experts suggest taking a position between 12 and 1 pm.
Stocks and indices: Picking a stock and researching the company and sector may seem like the obvious thing to do but comprehensive research and keeping yourself updated helps a great deal. When you are an intraday trader and you have little reaction time, your ability to keep yourself updated about the happenings of a company and a sector will help you think on your feet.
You may consider picking a stock by looking for a connection between a stock and the index or industry. So, when an index or sector shows an upward trend, stock price may also rise in line. Also, stocks of certain sectors may be dependent on the movement of the dollar or rupee. It helps to understand the sector and the index of said sector when picking a stock.
Technical and fundamental analysis:There are two types of analysis a day trader should be aware of: technical and fundamental. While fundamental analysis is all about assessing the intrinsic value of a stock on the basis of factors such as external events, corporate earnings etc, technical analysis involves charts, patterns to predict future behaviour. The historical data is analysed to understand where the market is headed.
Liquid stocks:Yet another of the top intraday trading ideas is to pick liquid stocks which usually have high volumes. Because intraday trading is all about speed and timing, a high-volume stock helps you get out of a trade easily.
Stop loss: Make use of the stop loss feature that lets you sell a stock automatically if the price drops below a specific limit. Making use of the stop loss feature helps a day trader minimise any potential losses.
Booking profits:Just as minimising losses matters, booking profits also matter a great deal. It is ideal that a day trader sets a target that lets them trade without any fear but at the same time understand a limit so they don’t allow greed to take over. Identifying target and entry price before you place an order is one of the useful intraday trading ideas. By setting this target and entry price, you will avoid selling stocks at the slightest increase in prices. The target and entry prices will help you gain from a price rise.
Daily chart analysis:A key intraday trading idea is to take up time analysis by using daily charts to assess how stocks are performing on the day. These daily charts help a trader understand price movements at the short term. Daily charts can be 15-minute ones, five-minutes or even two-minute ones. Making use of these charts helps a day trader.
Momentum matters:A lot of intraday trading relies on momentum. As a day trader, you would need to find stocks that are on the move — some stocks move about 30 per cent each day. It helps to find them and catch the move to ride the momentum. The idea is to opt for sticks that move in a particular direction in a significant manner and in higher volumes than others. This is called momentum trading.
Picking a set of stocks:Trading in a select set of stocks and not over trading is also one of the intraday trading ideas you should keep in mind. This is because the market doesn’t necessarily trend always or in a manner that you can predict. By trading in a select set of stocks, you will bring in the much-needed discipline in trading.
Resistance levels: The level of resistance is the price over and above which a stock may not rise. The reason a share reaches this level of resistance is that there could be an excess supply of the share at that particular price in the market. As a day trader, it helps to track stocks that have broken resistance level and have moved upwards.
Moving against the markets:Don’t try to move against the market because predicting movements is hard even for professionals who have vast experience. If you notice that the market is moving in a direction that is not as per your level of expectations, you may do well to exit the position.
Staying with the current trend: Another of the top intraday trading ideas is to trade only with the current trend on a day. The market tends to move in waves and as a trader, you should be able to rise the wave. Take a long position in an uptrend and a short position in a downtrend. Intraday trends will not go on forever but some trades can be made before reversal happens. When the trend that is dominant begins to shift, you can trade with the fresh trend.
Having a proper strategy for trading along with comprehensive research helps a day trader carry out trades successfully. Another aspect to keep in mind is to never let emotions overrule any trading decisions. Similarly, it helps to steer clear of rumour and speculations while picking stocks. Also, experience and spending sufficient time to gain knowledge helps you over the long-term, so persist with your intraday trading with efficient risk management.