Intraday trading has gained popularity in recent times with online trading apps, easy & paperless account opening process, access to information and research and attractive brokerage offers. Intraday traders look at profit potential in a short time, with less capital and effort. However, you must consider below points with Intraday trading:
Risk appetite:
Intraday trading relies on market movements on a single day and can be prone to unexpected events, abrupt price fluctuations and sentiment based volatility. As a trader you must have a higher risk appetite to absorb sharp movements and even losses.
Price Target & Stop Loss:
Most trading apps allow you to place profit targets on your stock as well as a stop loss order. With limits placed on upside as well as downward price movement, you need not check the stock price every minute. The moment stock reaches target level, stock is automatically sold. Similarly if the price is falling, your loss is limited by way of a limit place on loss.
Trading allocation:
As a beginner, it is pertinent to allocate a fixed amount from your overall portfolio for Intraday trading. This will ensure you do not dip into all your savings for investments with higher risks. A balanced asset allocation will give you peace of mind and better returns from different instruments with different risk factors
Research:
As an equity trader, thorough research into a stock’s fundamentals, market movements, charts, patterns and models is essential. The better armed you are with market information, the better will be your trading skill and knowledge.
Available Time: Intraday trading involves being present during the market hours and track the movement of selected stock closely. An Intraday trader must have a couple of hours available for trading during the market hours to trade actively.