Intraday stock trading is an exciting concept, which attracts many of the stock trading professionals. The interesting and motivating factor for attracting towards the intraday stock trading could be because one loves to see the instant profits from instant results all to be finalized on the same day. Yes, everyone profits and everyone wants the profits very soon, without wasting any time. As it sounds the most profitable trading, the same is associated with the risks. You can either end up the great difference in the profits or the same intraday transaction may end up with even no returns on the day. the most important thing that you should consider before getting ready for the intraday transaction is that you should mentally prepared for anything that could happen. If you think specific rules, before you jump into the intraday trading, fifty per cent there will be chances of ending up with the profits and the remaining part that may not be disappointing much.
Invest that you can afford to lose
There are two factors that decide the profit or loss of the intraday trading. The first factor is the expertise to predict the outcome or the value of the stock for a particular company, at the end of the day. The second factor that decides the profit or loss is luck. So, both of these factors are important to trade effectively with intraday a day trading. Though luck plays a minor role to decide the profit or loss, the primary factor is the expertise and experience to predict the future value of the stock, especially, at the end of the day.
Your prediction can be in your control. But the future of the company and its dynamics are not in your control. For instance, Satyam computer experienced its fall of shares to more than 80% in the month of January, in 2009 from 188 to 31 on the same day. Keeping such instances in mind, it is essential that you expect the best and at the same time prepare for the worst. Invest the amount that you are can prepare yourself to lose.
Intraday Trade only 2 to 3 stocks simultaneously
Every stock trader looks for a rich portfolio with a good number of scripts and stocks. If you do both the positional stock trading and intraday trading, that is fine. However, if you are looking for only the intraday trading, it is important that you deal with less number of stocks in hand. Though you can maintain close to 10 shares, through the watch list, do never go for those many stocks simultaneously. It could be dangerous that you may lose the sight of one and that may end up missing big opportunities to sell off the shares. It is always good to go with 1 to 2 or sometimes maximum of 3 stocks at any point in time so that you can trade safe and you would not fall into the problems as there will be no missing out the opportunities.
There is a total of five rules, and we have discussed the first two rules in the previous blog and let us talk the rest of the three here.
Go For Highly Liquid Shares
Though stock trading is not much different for the shares, you buy and sell. There is a considerable difference between liquid shares and other kinds of shares. It is always a better idea to go with the exchange of the file-based stocks, and extensive top stocks, which are fluid exceptionally. When you consider these shares, substantial volumes can be exchanged consistently. For the intraday trading, it is good to go with the highly liquid stocks, but do not go with the little top and mid-top shares, because the exchanged volumes of them are not considerably huge. Do not try to hold the stocks that are not touched by the purchasers, especially by the end of the day.
Monitor the watch list thoroughly
Intraday trading is not a single aspect of looking for the value of the stock and calculating the profit according to our number of shares. Apart from the stock value, there are many other factors that you should closely get updated with. For example, the stock splits, result in dates, mergers, dividends, etc. These factors may not tell you how much you are going to earn in the intraday trading. But will definitely help you out in understanding and predicting the future dynamic values of the stock. These factors, along with the additional specialized levels related to the stock can help you out to make a good analysis and also help you to predict the possible dynamics related to the value of the stock that you are intraday trading.
Make use of the stop losses
Stop misfortune is an important factor in the stock market, where you can set a limit of the price you are looking, while you are selling your share, in intraday trading, and of course in the normal trading too. However, it is important to be set in the intraday trading, because the values of the stock are very dynamic, and the value of the stock may change drastically if the market is very volatile. With the stop misfortune trigger, you can limit the misfortune of selling accidentally, at the moments, where the price falls down than what the price you have expected to sell.
For example, you have a good number of shares in the SBI at the price of 500 for each share. You decide that it is okay for you to go for the loss of 20 rupees for each share and the limit that you set for each of the shares can be of 480 rupees. So, you can set the stop misfortune at the price, 480 rupees. Later, even if the price of the share of the SBI tumbles and by chance, if it declines below 480, you are safe and you won’t be losing, because your shares are not sold, as the logic does not match.