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Intraday Trading

5 STRATEGIES FOR SUCCESSFUL INTRADAY

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By Angel One | Published on 10th February 2021| Read this in:English हद ુજરાતીಕನ ಡதமி

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As a stock market trader, you must have often wondered: how to do

intraday trading? Well, intraday trading involves purchasing stocks and
selling them the same day to make financial gains. Rather than considering
factors such as delivery dates, demat, and so on, you are just required to
square off your open position before the end of the day’s trading session.
But, intraday trading is not as simple as it seems. You have to consider a
range of factors for getting good returns. As a thumb rule, you must
understand that intraday trading is subject to more market volatility as
compared to regular investments in stock markets. Also,  you must suitably
assess your risk appetite before commencing your trading journey.

Here’s a list of five strategies for successful intraday trading.

1. Understand the basic techniques of intraday trading:

Here’s is a list of the basic techniques for intraday trading:

Do your research: Before purchasing the stocks of a particular

company, do comprehensive research to gauge the vital parameters,
indicating the strength and weakness of the company.
Risk-management and risk-reward ratio: As a beginner,
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always invest only the amount that you can afford to lose. Among the
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basic intraday trading strategies is to invest in stocks that have a risk-
reward ratio of 3:1. This will allow you to lose the amount that would
not pinch, while simultaneously providing the opportunity of receiving
good returns. Another risk-management technique is to avoid
investing more than 2% of your total trading capital on a single trade.
 Select liquid stocks: Rather than investing in several small and mid-cap
stocks, you can select a few large-cap stocks. These stocks don’t have
issues of liquidity as they are traded in higher volumes. Conversely,
purchasing small or mid-cap stocks might force you to hold on to
them, because of the comparatively lower volume of trade.
Time the market: Once you purchase the stocks, market experts
suggest avoiding trading in the first hour of the trading session. You
can take opening positions from early afternoon and square your
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position by 1 pm to balance the price movements between the
opening and closing hours.
Avoid emotions and pre-determine returns and risks: Another basic
technique for intraday trading is to determine your entry-level and
target price beforehand. You must avoid making impulsive and
emotional decisions, no matter what. Once you reach the target price,
immediately square your position. To avoid emotions altogether, you
can assign the stop-loss level on your trade beforehand. This will allow
your transactions to automatically close if stock prices fall below the
pre-decided levels. You can then start afresh with a new plan while
suffering minimal losses.

2. Use intraday trading time analysis:

The second in the list of intraday trading strategies is to carefully analyze the
daily charts. Daily charts illustrate the price movement between the opening
and closing hours, in a day’s trading session. You can analyze the price
fluctuations between short-term and medium-term through the daily charts.
For intraday trading, you can study a range of charts, like the 15-minute
chart, five-minute chart, two-minute chart, and tick-tack chart (line charts
representing every executed trade).

3. Follow sound intraday trading strategies:

The third in the list of intraday trading strategies is to follow credible

strategies. You can follow the techniques given below:

Making use of the Opening Range Breakout (ORB) to map resistance

and support:The opening range is the fluctuations in stock prices -
whether high or low-after the beginning of a day’s trading session. The
period for ORB can range from 30 minutes to 3 hours.
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various positions, after identifying the highest point, assumed as
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resistance, and the lowest point assumed as support. While using the
ORB for intraday trading, you must remember that when a stock
moves upward from the breaking range, the prices are likely to remain
bullish. Conversely, a downward trend can imply a bearish price. You
 can use this intraday trading strategy, in tune with other market
indicators.
Look for demand-supply imbalances: This intraday trading strategy is
used to identify stocks, with considerable imbalances between supply
and demand, and use them as entry points. You can identify these
points on price charts, after assessing the historical price movement.
Use Relative Strength Index (RSI) along with Average Directional Index
(ADX): While RSI is a technical indicator used to identify over-purchased
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and over-sold stocks, the ASI is a trend identifier to aid traders in their
decisions to purchase and sell. Combining both can help you make
informed intraday trading decisions.

4. Understand the difference between investing and trading:

The fourth in the list of intraday trading strategies is to understand the

difference between investing in stock markets and intraday trading. Both
trading and investment require different strategies. For instance, as a
diligent trader, you must close all open positions, the same day, irrespective
of the target price being reached or not. But investments in stocks require a
long-term approach, and prudent investors are seldom affected by short-
term market volatility. While investing in stocks requires a more
fundamental approach, intraday trading is more technical.

5. Remember that the market is unpredictable:

The last in the list of intraday trading strategies is to remember that intraday
trading involves a  high measure of risk. Even if you are a seasoned trader
with cutting-edge tools, you cannot predict the price movement with
absolute certainty. At times, despite the technical indicators predicting a
bullish market, the prices can fall, resulting in bearish trends. If the market
moves against your expectations, remember to exit your position
immediately.

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