Intraday trading which we also called as day trading, it’s a trading method where investors buy and sell stocks on the same day. The idea is to benefit by capitalizing on modest price swings in the market.
Assume an investor purchases 100 shares of stock in the morning at a price of 50 rupees per share. If the stock price climbs to 52rs per share later in the day, the investor will have made a profit of 200rs (2rs per share x 100 shares).
Intraday trading can be stressful because the market is unpredictable, and the stock price might always move against the investor. Some investors, however, may make a career from intraday trading with rigorous study and a sound trading plan. Intraday trading requires a large amount of time and attention because positions must be monitored on a regular basis during the day.
Strategies For Intraday Trading
- Scalping: This approach involves making a large number of trades throughout the day with the intention of making tiny profits on each trade. Scalpers often maintain positions for a few seconds or minutes and rely on technical indicators to identify short-term market trends.
- Momentum trading: This approach entails buying equities that are trending up and selling stocks that are trending down. Momentum traders find companies that are expected to continue their trend using technical indicators such as moving averages, the relative strength index (RSI), and volume.
- Breakout Trading: This approach entails picking stocks that are trading within a range and then waiting for them to break out of that range. Breakout traders often purchase when a stock breaks above a resistance level and sell when it breaks below a support level.
- News-based Trading: This approach involves trading equities based on news announcements and occurrences. A favorable earnings report, for example, may drive a stock to climb, whilst a bad news event may lead a stock to fall. Fundamental analysis is used by news-based traders to assess the influence of news on stock prices.
- Contrarian Trading: This method entails taking positions that are diametrically opposed to the current market trend. For example, if most traders are optimistic about a stock, a contrarian trader may enter a short position in expectation of a market reversal. Technical and fundamental analysis are tools used by contrarian traders to spot probable market turning points.
Pros and Cons of Intraday Trading
Pros:
High Profitability: Intraday traders have the opportunity to make large profits by capitalizing on short-term market movements.
Intraday trading involves buying and selling assets on the same day, allowing traders to quickly transform their investments into cash.
Flexibility: Intraday trading allows traders to change their positions based on market circumstances and trends throughout the day. No Overnight Risk: Because intraday traders do not hold positions overnight, they are not exposed to overnight risks such as news events or market gaps.
Cons:
Intraday trading is a high-risk activity with great volatility and uncertainty. Traders may lose their entire investment or more.
Intraday trading needs a high level of expertise, knowledge, and discipline to execute well. Traders must be able to analyse market patterns, identify entry and exit locations, and successfully manage risk.
Intraday trading can be emotionally demanding since traders must make quick decisions and manage their emotions in a fast-paced and uncertain market environment.
Time-consuming: Intraday trading takes a significant amount of time and attention, as traders must closely watch markets and be present during trading hours. Intraday trading entails buying and selling shares frequently, which can result in large transaction costs such as charges and fees.
