Intraday trading is considered the riskiest form of trading. To predict the price movement in a shorter time frame is a skill and you need to master it before entering this space. Because it is next to impossible to time the market.
Moreover, if you wish to enter intraday trading space, you need to start the journey with opening a Demat and Trading account with the broker.
Demat account meaning– it is used as safe storage space for tradable financial securities. They are stored and transferred in a digital or electronic format.
One should learn how to read and analyse the price trends by looking at the charts related to the stocks in regards to start trading online. This study is called technical analysis. In technical analysis, you will learn various intraday trading techniques which you can use to make a profit.
You can take up online/offline courses to learn technical analysis. Also, you can read books on technical analysis to study how legendary traders do intraday trading.
Here are some of the advantages and disadvantages of intraday trading-
Advantages of intraday trading;
- In this case, the capital requirement is less, as compared to delivery trading or positional trading.
- The liquidity is very high in this case. Because the funds are not blocked for more than a few hours. If the position is not squared off from your end, the broker has the right to square off the position.
- The brokerage fee is low as compared to the brokerage charged for delivery transactions.
- You can perform intraday trading without a demat as well. The trading account alone is required to do intraday trading.
Disadvantages of Intraday Trading;
- The risk of losing capital is higher as compared to delivery trading. Because the time frame to book profit or loss is shorter.
- It is a full-time job. You will need to concentrate on the price movement the entire day.
Who should start intraday trading?
Intraday trading is the best option for those who have an analytical approach to all the solutions. But most importantly for those who have sufficient time to track the market daily. The returns from intraday trading may sound promising and high, but it also carries several risks. Predicting price movement in the market is not an easy task. It requires years of experience to predict the market still, it cannot always be correct.
Therefore, a new entrant in the market should always focus on increasing the number of profitable trades rather than increasing the amount of profit. If you have a day job then intraday trading might not be feasible for you.
Approach Towards Intraday Trading
As a new entrant, you need to remember these few points to have a successful trading career:
- Avoid trading against the long-term trend. If the price is in a downtrend, never go long in that position.
- The first rule of trading is to never lose capital. Therefore, a trader should never let his/her profits go into loss. For that, you need to learn a concept called trailing stop loss.
- Always trade as per your budget and never extend your margin limit. Trade within your set limit and if you feel the prediction is going against your call, exit the position.
- The targets should be decided, as per the risk-reward ratio. The trader should always trade with a stop loss, else the risk of losing the capital increases.
Intraday trading is a skill. Therefore, before entering the trading space try to master this skill. You can start by paper trading, although it might not give you actual sentimental value that is there in the market, you will know the insights about taking the trade and how the price moves. After that, you can start with a small amount and find the right technique.
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