Correct investing decisions will help you obtain the maximum amount of returns from your investments. Many investors have done it in the past. Further, several people continue to gain profits by investing in stocks. There are different strategies one can adopt to earn profits. While some investors believe in value investing, others try to get instant profits. Value investing involves buying undervalued assets and holding them for a long time. Investors put their money in fundamentally strong securities. The aim is to get returns from capital appreciation in the long term. Then there are strategies like intraday trading where traders buy and sell stocks in short intervals for making quick profits.
Intraday trading is indeed quite popular. Many people implement this trading strategy on a regular basis. However, it is a bit risky. The main component of intraday trading is anticipating the price movement of stocks. As you might know, predicting stock prices is no easy job. Even experienced traders fail at times. So, it is crucial to understand how intraday trading really works. However, let’s first take a closer look at what is intraday trading.
What Is Intraday Trading
Unlike long-term value investing, intraday trading does not involve only buying fundamentally solid assets. So, there is no effort to identify stocks on the basis of their financial performance. However, in this type of trading, you observe their technical performance on the price chart.
Simply defined, intraday trading involves buying and selling securities on the same trading day. In other words, it is squaring off your trades before the day ends. This means that a trader will buy a stock when the share market opens in the morning. However, he will not keep the stock overnight till the next day. Rather, he will sell it before the closing hours of the stock exchanges. So, in day trading, the traders do not take the delivery of the security they purchase. Instead, they place a square off position (a sell order) for it.
Strategy Used to make profits: The whole idea of intraday trading revolves around the key factor of price action. The change in prices of securities throughout the day is known as price action. The prices of securities constantly keep fluctuating in the trading hours. This is due to various factors like demand and supply, performance reports, news related to the industry sectors, economic and political environment etc. Those who carry out intraday trading, try to cash on these price differences of securities. Even minor price changes are vital in intraday trading. Although the difference may be very less, one can accumulate good profits with continuous trading. Most day traders wish to gain big from these small-small profits by trading on a regular basis.
How Intraday trading works
Now that you know what is intraday trading, let’s learn how it works. As mentioned earlier intraday trading is purchasing and selling assets on the same day. A day trader will try to buy stocks at less price and sell when their price increases. To put it in another way, it is all about making correct trades at appropriate times. That is why intraday trading is a short-term trading strategy. It requires intense market analysis and trading skills. It is important to time them properly to gain from your trades. Timing the trades in probably the biggest aspect of day trading. Placing entry and exit positions in a trade is key to making profits. One must learn it for smart trading.
So, if one cannot place his orders at the appropriate time, he may lose out on good opportunities. Then, the other crucial aspect of intraday trading is predicting trends. Engaging in intraday trading demands a good sense of market movements. One must be able to anticipate how individual stocks as well as the overall market may perform. Only then can he capitalise on slightest price fluctuations. Experts say that following trends is the best strategy to carry out intraday trading. In bullish markets, it is wise to choose stocks which may rise. Inversely, in bearish markets go with stocks whose value will drop. Remember, intraday trading is more suitable for volatile market conditions. Since price changes are frequent, you get more opportunities.
Intraday trading requires traders to buy and sell stocks on the same day. The aim here is to extract profits from price fluctuations of stocks. For intraday trading you must acquire the requisite skills. One has to analyse the market and place his positions perfectly. Day trading also requires advanced indicators and tools. Once you learn the basics choose a good platform that offers useful tools for day trading. Firms like Share India provide modern and powerful tools on its online share trading app. You can start intraday trading on it and get complete assistance.