Article

5 Intraday Trading Tips For Beginners

31 May 2019

How to go about intraday trading in a consistent manner? There is no sure shot answer to this, but in the long run simple rules make the difference between a good trader and an outstanding trader! Here are five rules you can look at.

Be clear on what you will trade and when you will trade

Create your online trading stock list first. This should never be more than 10-12 stocks as that is what you can veritably track on a regular basis. The cardinal rule is to not trade in the midst of a volatile market. Intraday trading is best done when the direction and momentum of the market is predictable. If you keep triggering stop losses at regular interval, it not only distracts you but also demoralize you as an intraday trader. What logically follows is that intraday trading is largely about protecting your capital and you have to protect your capital at various levels. You must focus on how much loss you are willing to take overall and on a per trade basis. That is the first discipline.

Stop losses and profit targets are the fuel that fire intraday trading

A stop loss is like insurance in intraday trading irrespective of whether you are trading short or long. Never trade intraday without a stop loss. In the absence of stop losses, you may end up holding positions with unmanageable MTM losses. When you are an intraday trader, you cannot take overnight risk even if you can afford to wait. That means you must not only decide the stop loss but also the profit target well in advance. A risk-return trade-off of 3:1 or 2:1 is understandable but 1:1 is just not acceptable.

Be careful of how much leverage you can afford

Quite often you will find brokers offering you much higher leverage even up to 10-15 times your margin. Be careful because your leverage must be decided based on what you can afford and not what the broker is willing to offer. When you leverage yourself on margins keep an eye on your worst case loss. Don’t stretch yourself to a point that your losses become unaffordable in the event of any black swan occurrences.

Be diligent about how you trade and why you trade

This is something a lot of intraday traders do not fully appreciate. Keep a record of your wins and your losses and evaluate at the end of the day. This sounds pedestrian but you will gradually realize its importance. Use a scrap book to analyze what you did wrong and what you could have done better. Over a period of time, this process helps you become a better intraday trader.

What you trade also includes what research and information to use and how to use it. Keep a tab on the news, otherwise you are likely to fail as an intraday trader. Evaluate the flow of corporate actions and results announcements. You should know about your shortlisted companies well. Even intraday traders need to have a hang of what the company is doing and how it is performing. Above all, be your own technical chartist and evaluate F&O data like OI/PCR/IV etc. All these are important inputs for intraday trading.

Good trading mettle is proved when you make losses

Like in any business, your skills as an intraday trader are best tested when you are in losses. Here are a few basic rules to remember.

  • Never panic when you are trading intraday and incurring losses. When you panic, you subsidize the other trader who does not panic.

  • Don’t rue over losses, they are part and parcel of intraday trading. It is good to look back and analyse, but take it in your stride.

  • If someone tells you they are consistently profitable in trading, they are either God or a liar. You don’t have to be either of them. Losses are part of the course.

  • If it is too good to be true, then it is probably not true. If your position has yielded attractive profits within an hour, book out. Don’t test your luck for too long. Never try to recover losses by overtrading.

There is not much complexity about intraday trading. It is just about getting the nuts and bolts in place. The rest will follow!

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Beginner's Corner

5 Intraday Trading Tips For Beginners

31 May 2019

How to go about intraday trading in a consistent manner? There is no sure shot answer to this, but in the long run simple rules make the difference between a good trader and an outstanding trader! Here are five rules you can look at.

Be clear on what you will trade and when you will trade

Create your online trading stock list first. This should never be more than 10-12 stocks as that is what you can veritably track on a regular basis. The cardinal rule is to not trade in the midst of a volatile market. Intraday trading is best done when the direction and momentum of the market is predictable. If you keep triggering stop losses at regular interval, it not only distracts you but also demoralize you as an intraday trader. What logically follows is that intraday trading is largely about protecting your capital and you have to protect your capital at various levels. You must focus on how much loss you are willing to take overall and on a per trade basis. That is the first discipline.

Stop losses and profit targets are the fuel that fire intraday trading

A stop loss is like insurance in intraday trading irrespective of whether you are trading short or long. Never trade intraday without a stop loss. In the absence of stop losses, you may end up holding positions with unmanageable MTM losses. When you are an intraday trader, you cannot take overnight risk even if you can afford to wait. That means you must not only decide the stop loss but also the profit target well in advance. A risk-return trade-off of 3:1 or 2:1 is understandable but 1:1 is just not acceptable.

Be careful of how much leverage you can afford

Quite often you will find brokers offering you much higher leverage even up to 10-15 times your margin. Be careful because your leverage must be decided based on what you can afford and not what the broker is willing to offer. When you leverage yourself on margins keep an eye on your worst case loss. Don’t stretch yourself to a point that your losses become unaffordable in the event of any black swan occurrences.

Be diligent about how you trade and why you trade

This is something a lot of intraday traders do not fully appreciate. Keep a record of your wins and your losses and evaluate at the end of the day. This sounds pedestrian but you will gradually realize its importance. Use a scrap book to analyze what you did wrong and what you could have done better. Over a period of time, this process helps you become a better intraday trader.

What you trade also includes what research and information to use and how to use it. Keep a tab on the news, otherwise you are likely to fail as an intraday trader. Evaluate the flow of corporate actions and results announcements. You should know about your shortlisted companies well. Even intraday traders need to have a hang of what the company is doing and how it is performing. Above all, be your own technical chartist and evaluate F&O data like OI/PCR/IV etc. All these are important inputs for intraday trading.

Good trading mettle is proved when you make losses

Like in any business, your skills as an intraday trader are best tested when you are in losses. Here are a few basic rules to remember.

  • Never panic when you are trading intraday and incurring losses. When you panic, you subsidize the other trader who does not panic.

  • Don’t rue over losses, they are part and parcel of intraday trading. It is good to look back and analyse, but take it in your stride.

  • If someone tells you they are consistently profitable in trading, they are either God or a liar. You don’t have to be either of them. Losses are part of the course.

  • If it is too good to be true, then it is probably not true. If your position has yielded attractive profits within an hour, book out. Don’t test your luck for too long. Never try to recover losses by overtrading.

There is not much complexity about intraday trading. It is just about getting the nuts and bolts in place. The rest will follow!