Intraday trading, as the name implies, is a type of trading in which shares or assets are bought and sold within the same trading session.
Intraday trading is becoming more popular nowadays, all thanks to the evolution of retail investment. With the right strategy, intraday trading gives quick and handsome profits. The principles of an intraday trading strategy are based on capitalizing on frequent and sometimes minor price movements. A good intraday strategy is only effective after thorough technical analysis, practical execution, the use of indicators, and proper risk management.
When it`s about intraday trading, there are some basics that you need to keep in mind before putting your money into it. If you are taking the help of any stock market broker or doing it on your own, you must know these basics:
Basics of Intraday Trading:
Choose liquid and volatile stocks. When it comes to intraday trading, always go with liquid commodities such as gold, silver, and so on. And opt for highly volatile stocks, which fluctuate rapidly in a short period of time. Start your investment with small steps, only invest the amount that you wouldn`t regret losing. Lastly, be patient and consistent. Consistency and Patience are the keys to being a successful intraday trader.
Here are 4 key strategies to follow if you are a beginner:
1. Movement Trading Strategy
Intraday trading is all about catching fluctuations in the market at the right time. This fluctuation is known as momentum. This momentum is caused due to two factors- Fundamentals ( earnings, new projects, etc.) and Technical ( without fundamental backup) breakout. These types of stocks can move above the Moving Average in high volumes without any resistance. The traders in the Movement Trading strategy tend to choose stocks that move in a single direction in high volume. This strategy is best suited for the early trading hours of the day.
2. Moving Average
This is a trend reversal strategy where the prices go above or below the Moving Average. This strategy is also known as the moving average crossover strategy where crossover above the moving average is an uptrend and crossover below the moving average is known as a downtrend. Hence, it is advised to go long in an uptrend and go short in a downtrend.
3. Break out
This strategy for intraday is a little risky. Traders use this strategy when the price has broken out beyond its resistance and support. The breakout is caused in terms of volume. With the right knowledge of resistance and support, traders can enter and exit quickly.
This strategy is best for Forex Trading. It profits off minor price movements and is done by high-frequency traders. The foundation of the entire trade is based on small price changes. It is a risky method of trading, hence it is advised to keep a stop loss in every trade.
In conclusion, with proper research and risk management, traders can have a successful strategy. However, it is always advised to seek professional services from a stock market broker/agency as a beginner. You can save time and money by following their advice and expertise.