Intraday Trading Details
Intraday trading is buying and selling of a particular stock in the stock exchanges on the same day. The main intension of intraday trading is to gain profits in short term without keeping the capital invested for a longer period of time. This method minimizes the overnight market mood change risks as you won’t be keeping the positions open and all the positions are closed before the market closure realizing both the profits and loses.
Intraday trading is an important part of daily large volumes of trade that is happening in stock exchanges. Many full-time traders do intraday trading to realize quick profits and exit the positions as soon as possible.
How to select the stocks for Intraday Trading
as the positions will be closed on the same day without carrying forward to the next day, you must select the proper stocks for trading during the day. Selecting non-suitable stocks will result in loses but nothing.
Higher volume of trading stocks
Stocks which are having a very high average trading volume are a suitable pick for intraday trading. This ensures that you are sure to get a buyer and a seller for the stock. You can check the stocks with large volume from this link
Having a higher trade volume must be criteria because if you select a stock which is having a very low trading volume, you may not find the buyers or the sellers at the price you wanted. And many a time having very low trading volume will make it difficult to close the positions.
Higher liquidity
Liquidity is a must condition for intraday trading. As having lower liquidity is difficult to perform intraday trading. Traders have to ensure that the stocks that they are selecting for intraday trading are having higher liquidity for making it possible to have a profitable intraday trading.
The cyclical variations should be carefully observed by analysing 52-week high and low values, as it gives a precise idea about whether an individual should assume long or short positions while investing.
Volatility
Volatility is another factor that has played an important role in intraday trading stock selection. Usually, stocks with medium to higher volatility are selected. Having higher volatility means there is a large price fluctuation and hence there is a chance of large loses but also if price moves in our direction, there are large profits. Usually, a beginner may select stocks which will have price movement around 3%.
Benefits
Many traders do intraday over long term investing because of the following benefits which the intraday offer
- Less risky: Intraday involves buying and selling the shares on the same day and hence investor can lose only a certain amount of capital as price move only a certain amount in a day. But if the money is locked in long-term investment for some time the price may fall largely and make the investor lose a large chunk of capital. and also the intraday has nothing to worry about any adverse overnight news which affects the markets sometimes worse.
- Reduced commission charges: Intraday will involve less commission and brokerage when compared to long term investing. In intraday the delivery expenses are not involved as the stock will be sold by the end of the day. Hence the overall commission is less in intraday trading when compared to long term trading.
- Higher Profits: Intraday user benefits from both buying the shares and short selling the shares. and hence Intraday traders non need to worry about the market movement either the market may be falling or the market may be in rising movement. in both the scenarios the intraday users can use strategies to trade and make profits. But for Long term delivery investing falling markets will cause a lot of loses.
- Liquidity: As the money will be locked by holding the shares, you will have higher liquidity. But in case of delivery investing your money is locked for the long term.
Risks in Intraday Trading
Though Intraday trading has its benefits, many users avoid doing intraday trading. And many recommend beginners to stay away from doing intraday trading. This is because of some of the risks that are involved in intraday trading. These are as mentioned below.
for intraday trading, there has to be a precise price movement prediction. A lot of things both technical analysis and fundamental analysis to be done. As al this combine make the analysis complex, even the advanced traders sometimes failed to capture the correct price movement and hance incur loses.
And also sometime the price may not actually represent the company valuation. For example, even if the financial results are good, the price may not rise intraday as expected by you. hence you may lose money even if the finances are good. But in the long run, the price will rise to represent the actual price based on company valuations.
And also market volatility may make intraday traders lose a large amount of capital, but the short term corrections won’t bother the long term investors. They are only interested in the long term price movement. But for intraday traders, the short term price movement will affect largely making loses to traders.
Responsible Trading
It is important that the traders has to follow specific discipline based on the market condition, and do not let the greed and the fear take away their capital.
Traders have to stick to their plan with a specific target and a proper stop loss to avoid loss. Ensuring a proper disciplined trading method will bring profits and reduce loses to the traders.
