In Stock Market Investors and Traders are defined differently although most of the people remain confused and use these terms interchangeably. People involved in Intraday Trading are referred as traders or day traders and those who put their money in stock market for longer period of time to earn profit later by selling the shares are called investors.
While investing in shares does not involve much risk, and one has to see only the fundamentals of the company in which they are planning to invest, intraday trading involves greater risk and the intraday trader has to see the technical view of the company. Here my tip to intraday traders is that they should be fast and quick at taking decisions during online trading sessions, as markets are very volatile and changes levels quickly.
There are certain rules which to keep in mind before starting intraday trading:
Choosing brokerage: While choosing a brokerage for intraday trading you should see their available markets, features of trading software, their market data feeds and their commissions and fees.
Choosing Market: Each of the markets have their own characteristics suited to different styles of trading. While choosing a intraday trading market best suited for you see the initial and maintenance margin requirements, tick sizes and values, and volatility (range of movement).
Which stocks to buy: In day trading one cannot just enter any stock. You should see two things in the shares you are planning to buy for intraday trading: liquidity and volatility. While liquidity refers to the volume of the stock it allows you to enter and exit at a good price, Volatility refers to the price range an intraday trader operates in. Thus volatility means greater profit or loss.
Some Do’s and Don’ts of Intraday Trading:
- If the share you are holding is in minus and the index is positive from yesterday then it should be cut and if intraday trend of index is in buy then one should buy a stock in which is in plus.
- It is not necessary that a stock which is strong today during intraday trading will remain strong tomorrow also, simultaneously if a stock is weak today might not be weak tomorrow.
- Keep up with the latest news, as the general psychology of public is to buy when good news is there.
- If US Markets have gone up overnight, then here in India markets in all probability will open strong, so one should be quite careful when buying stocks.
- Always invest in stocks which have high volume, these kind of shares are also called liquid stocks.
- Start with paper trading and then enter the real market when you start making profits on paper.
- Remain constant in volume i.e., if you are trading in ten lots of Nifty Futures then trade in ten lots only.
- And last but not the least Stop Loss is a must in Intraday Trading.
Thus these were some of the tips for the new entrants of intraday market or day traders.
