Top Strategies & Tips for Intraday Trading

Top Intraday Trading Tips and Strategies

Intraday trading, also known as day trading, is about buying and selling shares on the same day to book profits. Read this article to find out how you can make the the most of your intraday strategy with a few handy tips.
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If you place an intraday order to buy or sell shares, you take advantage of the price movements on that particular trading day and square off your position before the end of market hours. The aim of intraday traders is to earn quick short term profits.

Many intraday traders tend to lose their money relying blindly on online tips. We don’t want that. What you need is a strong intraday trading strategy, and not merely tips for intraday trading.

Read below to know more:

Due to the high volatility of the stock market, most traders lose money in intraday trading. The traditional rule of thumb for intraday trading is not to risk more than 2 percent of your capital on one trade. Moreover, the risk of ignorance is greater than the market risk itself, especially for beginners. Here are some tips and intraday trading tricks on the Indian stock market that will help you.

  • Choose Liquid Stocks

Intraday trading involves buying and selling a set of shares on the same day before market closing, i.e., squaring off open positions. However, for the stock-exchange to execute these orders, there must be enough liquidity in the market.

Thus the first tip of the free intraday tips for today is to avoid small-cap and mid-cap stocks that may not be liquid enough. Otherwise, there is a high probability that your squaring off order may not get executed, forcing you to take delivery instead. Liquidity is one of the most important criterias you must check before selecting a particular stock to trade in.

Stocks with high liquidity trade at huge volumes which allows intraday traders to buy or sell larger quantities at ease

Further, avoid investing all your trading money in a single stock. Experts recommend diversifying your intraday positions across a handful of stocks. Diversification will help you balance your intraday trade strategy and minimize your risk.

  • Freeze The Entry And Exit Price

Many stock investors and traders suffer from buyer’s fallacy. They fall prey to misleading notions. This is when the buyer immediately starts having second thoughts and starts doubting their play. The trader suddenly feels that the stock selection was not as good as s/he believed while entering the trade position.

To avoid making such trading mistakes, all you need to do is follow the second free intraday tip – To decide the entry and exit price before taking a position. This ensures that you have an objective view and know the levels at which you will be buying or selling your trades..

You must know how to strategically plan your entry and exit without letting your emotions rule your decisions.

  • Always Set A Stop-Loss Level

Let’s understand this with an example.

Say you are an intraday trader. XYZ Ltd is trading at Rs. 550 per share and you expect the share price to rise further today. You decide to buy 100 shares of XYZ Ltd by investing Rs. 55,000.

But instead of going up, the price goes down to Rs. 500 per share. Within a matter of hours, you bear losses of a total Rs. 5,000 (Rs. 500 x 100 shares). When you invest in a share, the share price can either go up or down. It is quite possible that the share you purchase and take a long position in falls on the day you trade instead of rising.

Therefore, it is important that you decide how much loss you are ready to bear if the trade goes against your position. This acts as a safety net and helps minimize your losses. Most experts would suggest this is the most important tip for intraday trading you’ll ever get. Hence the third free intraday tip is to research intraday calls, which are buy and sell recommendations, and set a stop-loss level.

A stop-loss will help you manage your risk and must be followed by all traders. As the name suggests, it helps you stop your losses.

Continuing with the same example, if you had set a stop-loss at Rs. 540, the losses would have been limited to Rs. 1,000 only (Rs. 10 x 100 shares).

  • Book Profit When The Target Is Reached

Greed is every intraday trader’s enemy. Why, you may ask? It is because it only takes a few minutes for the market to switch sides, especially if the market is too volatile.

The secret to successful intraday trading lies in the high leverage and margins that traders enjoy. Leverage and margins help amplify profits (as well as losses). But the trick lies in not getting greedy once that target is reached. Don’t wait for the stock price to increase further if it has reached your target price.

Avoid falling into the trap, where you feel that the price will keep rising (or falling, if you short-sell). You must make trade decisions based on facts and strategies and not on how you feel a stock will perform.

If there is good reason to believe that the price is likely to move in the right direction, then adjust the stop-loss accordingly.

  • Always Close All Your Open Positions

The fifth free intraday tip for today is to always close all your open positions. Many intraday traders choose to take delivery of the shares if the stock price target they set at the start of the day isn’t met.

This may not be a good strategy. After all, the stocks were bought for intraday trading basis market trends and technical analysis of the stock movements. They may not be good enough for a long-term investment.

Imagine what would happen if a leading company declares bankruptcy post market closing and the stock opens with a gap down the following day. Investors holding the stock at the end of the day might not get a chance to exit their position and would thus have to take a hit on their portfolio.

Whereas, for an intraday trader, a company specific information released during the day can be processed during the same day. Intraday traders will have a chance to deal with the information impact in real time.

Post the market hours, the news would not affect intraday traders as they might have already squared off their position. It helps us eliminate overnight risk without blocking any capital.

So, before converting to delivery, look at the intraday calls and the fundamental strength of the stock.

  • Do Not Challenge The Market

It is near to impossible to predict market movements. Often, you may find that all the factors are indicating a bullish market. As usual, you may expect your target stock to rise. But, the market decides to disagree and the stock price does not rise.

Bottom line: Do not get married to your analysis. Fluctuation is the very nature of the stock market. If the market is not supporting your analysis, sell and exit your position as soon as it hits your stop-loss level. Holding on to the hopes that the market will act as you predicted it to can increase your losses.

  • Research Your Target Companies Thoroughly

Seventh free Intraday tip for today is - once you have identified a set of stocks to trade by going through professional intraday calls, make sure to research them thoroughly. In other words, do your own homework! Start with understanding how technical analysis can help you make better trading decisions.

Find out when any corporate events are scheduled for. These include acquisitions, mergers, bonus issues, stock splits, and dividend payments among others. These events could turn out to be as important as being up-to-date with the technical levels.

For example, momentum trading helps traders identify how strong the trend is in a given direction and its capacity to sustain itself.

Watch this video to understand the core principles of momentum trading where Mr. Prasenjit Biswas (CMT, CFTe - AVP, Research Derivatives) in the below video talks about the dynamics of momentum trading, the role of market sentiments, and how to identify trade setups along with various key variables you must consider.

  • Timing Is Crucial

Profits in intraday trading depend heavily on the time factor. One of the best intraday trading tips is not to take a position within the first hour of trading for the day. This is because volatility tends to be high at this hour. This leads to heavy rush and noise in the first market hour which ultimately leads to huge price fluctuations. Many experts prefer taking an intraday position between noon and 1pm.

To sum it up, to make the best of intraday trading, you must learn how to make the right move at the right time. The best way to master this skill is by being attentive to details, and trying to understand the market’s mood in the morning, noon, and close to closing.

  • Choose The Right Platform

The ninth trade free plan tip is to choose the right trading platform.

Intraday traders make frequent multiple transactions and accrue gains daily. As such, it is important for you to choose the right platform, one that allows for quick decision-making, execution, and charges minimal brokerage.

Generally, to execute an intraday trade, the intraday trade has to pay a brokerage which includes Securities Transaction Tax (STT), SEBI Regulatory Fee, Transaction Charges, Stamp Duty, GST on brokerage.

This might eat up a certain percentage of your intraday profit.

As we mentioned before, to become a successful intraday trader, you must be disciplined. What better way to become disciplined than by following rules?

The tenth free intraday tip for successful intraday trading is to follow intraday trading rules. If you are new to trading, then you probably just want to skip all the rules and fast-forward to making profits. We know, intraday trading is thrilling but is equally risky at the same time. You don’t want to lose your money in the first month itself, right? Hence, market experts recommend a few basic intraday rules for individuals.

For starters, they generally advise new traders to refrain from buying and selling stocks when the markets open for the day. That’s because company stocks are usually volatile in the first hour of the day.

Secondly, experts feel that new traders should invest in small amounts to test the waters. In order to beat the volatility of stock markets, it is also handy to have a predetermined intraday trading strategy and stick to it.

Intraday traders often decide to pick stocks depending on the volume of trading. Generally, it is better to pick stocks when the volume of trading is high. That’s because if the trading volume is high, prices usually move upwards too. Volume is nothing but the number of times a company’s stock is traded at a particular time.

Technical analysis is often used to identify short term trends and indicators. It helps traders understand the current market mood based on which you can strategically decide when to enter or exit a position with maximum gains.

A stock’s resistance level is a handy indicator too. Buying a stock when it breaks its resistance level and moves upwards is usually a good time to pick stocks.

Being up-to-date with daily news and market events is very important for intraday traders. In most cases, company’s stock prices rise on the back of good news. It is also handy to keep a tab on the top gainers and losers of the week. They can tell you how different stocks have been performing over a particular time period.

Read More: how to choose stocks for intraday

Intraday Time Analysis

The twelfth free intraday tip is to do an intraday time analysis. Intraday traders frequently use daily charts to gauge how different stocks are performing on the same day.

Daily charts are the most commonly used charts which help traders to figure out short-term stock price movements.. Some of the popular daily charts used by traders include the hourly charts, 15-minute charts, five-minute charts and two-minute charts. It all depends on what time period the trader wants to analyze.

Most of the new intraday traders treat charts as generic time-based information. Do not make such mistakes. In fact, your first step before trading should be to learn how to read these day charts and interpret them correctly.

These charts come with a lot of sub-divisions, which when analyzed thoroughly, can help you decide a strong trading strategy. They help traders to analyze the short and medium term time trends.

Learn Technical Analysis

Though this might not sound like an intraday tip, learning the basics of technical analysis is a must if you want to understand the game of trading intraday.

Don’t jump into the water just because it sounds fun and thrilling. You must have some basic understanding about the various technical indicators. These indicators which will make you smarter traders and ultimately bring more profits.

For example, the Relative Strength Index (RSI) is another technical tool that can help evaluate which way the stock prices can move. If the RSI of a stock is above 30, it sets off a potential ‘buy’ signal as it suggests that the stock is undersold. If it is above 70, it indicates that a stock has been overbought and sets off a potential ‘sell’ signal.

Risk-Reward Ratio

The risk-reward ratio, also known as the RR ratio, compares a trade’s potential profit to its potential loss. It uses the difference between a trade’s entry point and stop-loss order to gauge risk and the difference between profit target and entry point to find reward.

RR Ratio = (Entry point - stop loss point) / (Profit target - entry point)

How to Make Profits in Intraday Trading? Some intraday trading tips to make money are:

  • Formulate a rule book: It is one of the foremost intraday trading tips for beginners. Create a rulebook that sets guidelines for how much capital you are willing to invest, the losses you can bear, the risk-reward ratio, etc. Narrow down on industries you want to target for a profitable trading experience.

  • Restrict trading to limited stocks: Among several intraday trading strategies include restricting your trading to limited stocks. Don’t open too many positions.

  • Put a stop-loss order: One of the prudent intraday trading techniques involves setting up a stop-loss order for every trade. It helps you plug your losses at a certain level.

  • Define your profit goals: It’s easy to get carried away by emotions in intraday trading. You must keep emotions under control and define your profit goals. If the stock has reached that level, book profits and exit.

  • Choose the right trading platform: One of many prudent intraday trading tricks involves choosing the right trading platform with all the tools you need to make the right decisions.

A Last Word

The secret to becoming a successful intraday trader lies in your own temperament. How you take charge of your emotions and stick to your trading strategies with tactical adjustments when required. Once you master your trade play, you can even consider becoming a full-time day trader.

Frequently Asked Questions in Intraday Trading

Intraday stock tips include choosing liquid stocks, freezing entry and exit prices, setting a stop-loss level, booking profits once targets are reached, and thoroughly researching your target companies.

A few of the best intraday trading strategies are momentum, breakout, moving average crossover, gap and go, and reversal trading.

If you follow day trading tips and have intraday skills, you can earn 5000 in intraday trading.

Momentum Strategy is the most successful intraday trading strategy.

Trend-following strategies are the safest and most profitable trading strategies when executed correctly. As trends develop over weeks and months and may last for years or decades, they perform best when used over the long term.

There is potential for traders to earn as much as Rs. 1 lakh a month or even more if they have the right strategy and know how to use free intraday tips.

Intraday trading timing is from 9:15 am to 3:30 pm on days when markets remain open.

Factors affecting intraday trading include stock liquidity, news flow, and the overseas market, among others.

If intraday target is not achieved, several investors book share for delivery. However, this is not one of the good intraday trading tricks. Ensure to close all your open position before the end of the trading session.

If you want to hold shares on a delivery basis, you need a Demat account. However, if you want to trade in future and options, you don’t need a Demat account.

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