Every trader setting foot into intraday trading may have this niggling question at the back of their minds – is it safe to do intraday trading? Before you place your money into the world of the stock market, you may want to look into various factors that could impact your day trading routine. To begin with, it is crucial to understand that intraday trading involves purchasing and selling stocks on the same day, with the market working hours. The stock market can be highly volatile with fluctuating trends, and hence, it can be challenging to adhere to it every day.
To be a successful day trader, here are some vital intraday trading tips — you need to be strictly attentive to chart patterns and market trends. You need to plan and strategise before you enter the trade and before trends begin to reverse. At the same time, you need to exercise the right spontaneity when it’s time to exit your trade and close your position.
Although intraday trading may appear as a quick way of making profits, which is why it attracts a large number of traders, it needs to be performed professionally to ensure the safety of your trading. While you may receive great returns on investments, these returns also come with an equal proportion of risk. Entering the market without requisite knowledge and discipline is not safe. Even though you do not face overnight risks that come with positional trading, the extreme volatility of the market brings with it its own set of risks. Sometimes, the prices may swing drastically, beyond your expectations and could result in unanticipated losses.
To make intraday trading a safe experience, it calls for understanding, practice, expertise and rationale by the trader, that can come with commitment, patience and discipline.
As an intraday trader, you need to monitor your screen and employ technical analysis through updated online tools and software from reputed brokers such as Kotak Securities to make the right moves. It can take some time for a new intraday trader to build skills of analysing chart patterns and price volatility. By studying intraday charts and trends in depth, you will be able to discern movements based on pricing, trading range and cup depth.
Since intraday trading lies at the forefront of being risky, it calls for effective risk management techniques to be employed and implemented with discipline. Risk management techniques must be used by novices as well as seasoned intraday traders, as trading is never a safe activity. One has to keep in mind that the chances of losing one’s entire capital in a single trade can be equally high as the probability of doubling, tripling or even quadrupling your returns in the same day, is just as likely. Hence, it is strongly advised to risk only 1% of your available capital on any single trade.
To avoid inadvertent risks in intraday trading, it can help to
- Conduct thorough research before entering into a trade
- Follow a different and effective intraday trading strategy every day
- Make wise decisions while choosing stocks, preferably opting for liquid stocks
- Be aware of how much risk you are willing to take
- Book your profits without letting greed take over
- Make use of stop-loss that is the most efficient risk management technique in intraday trading
Intraday trading can be safe if you employ and follow risk management techniques in your trading activity. Even though, intraday trading is fraught with risk, and even though the allure of making tremendous returns is high, your primary objective must be to cut down your losses as much as possible during a given day.