A day trader attempts to earn profits through intraday strategies. Whenever traders see price changes for a given stock, they apply a wide variety of techniques to make their profit higher. If you are successful in identifying the opportunities in the stock market, it will be proved as the best option for high returns with small investments. Dematerialization in online share trading allows you to buy even a single share. You need to identify the right stocks for day trading.
Day traders select liquid securities that have mid to high volatility. They focus and capitalize on the current market trends only and isolate themselves from any surrounding noise in the market. Let us discuss intraday trading meaning, what intraday trading is exactly and what type of stocks a day trader should consider.
When a trader buys and sells the financial securities within the same trading session on the stock exchange, he is known as an intraday trader and his/her style of trading is called intraday trading. Day traders have to be quick in their moves.
In day trading, you can make profits irrespective of whether the stock market graph is up or down. Even when the market graphs are downtrend, you can make a profit. It is where experience and knowledge come into the light. Most of the time you have heard that the day trading is for experienced investors only who are capable enough to identify opportunities even in the down market. As a day trader, you require an advanced trading platform. Many Demat accounts offer low-cost brokerage solutions for investors across all categories.
Points to Be Considered While Selecting Stocks for Intraday Trading
Liquid stocks can be bought and sold whenever you want. You can buy or sell them in larger quantities without significant impact on its price. As you know day trading involves fast trade executions, so strategies are also dependent on speed. The main focus is on precise timing to enter and exit in the trade of high volumes. Liquid stocks make entry and exit easier.
Price movement is very important in day trading to earn profits. Day traders should prefer stocks that tend to move a lot. They can select stocks that tend to move 3-4% on a daily basis and that are going through large intraday moves.
3. Choose Business, Not Stock
You may get fascinated by a particular stock easily. Popular stocks may seem like profit guaranteed stocks but you should remember that day trading is based on specific strategies to make money than the popularity of stocks. If you do not understand the business, you may be unable to execute the best trade.
Day trading involves various disciplines that a trader must get used to before entering into intraday trading. Some of the day trading disciplines are as follows:
1. Consistent trading plan
Directionless trades will result in loss only. A smart trading plan is essential to trade in the long run because it is not easy to stay in the stock market with a success rate. Your plan will keep you on track. You will know exactly when to execute a trade to book profit, how to cut losses and where opportunities can be availed.
2. How much to lose
A day trader must trade with an amount that he can afford to lose. It is essential to determine how much per trade loss a trader is willing to take. Keep reserves that are extra from your expenses and trade with that amount only.
3. Follow strict stop loss
Be habitual of stop-loss. It is a must-have trait for intraday traders. Only disciplined traders can exist in the stock market. Using the stop-loss technique, you set a price limit to buy or sell a stock. When a particular stock reaches this specified price, the trade will be placed automatically. A good trading plan helps a trader to make emotion-free decisions.
Here you have seen that a trader should not flow with momentum emotions like fear, greed etc and need to stick to his day trading plans. They must follow specific traits and disciplines. Thus, intraday trading is meant for disciplined traders only.