Traders make a profit based on different types of purposes. One is a step-by-step process, but it could be a long-term investment that can still generate high returns. The other could be a short-term strategy that involves trading for quick profits. One such method or popularly known as intraday trading. In this blog, we will be covering the basics of intraday trading and intraday trading strategies.
How intra-day trading works
Day trading is the buying and selling of stocks on the same day which is done via an online trading platform. If a person buys shares in a company, he or she must explicitly state “daytime” on the portal of the platform he or she uses, this is how intraday trading works. This allows users to buy and sell the same number of shares of the same company on the same day before the market closes. The purpose is to generate profits from the movement of the market index. Also, many people call it day trading.
The stock market earns you great returns if you are a long-term investor. But even in the short term, they can help you earn profits. Suppose a stock opens a trade at Rs 500 in the morning. Soon, it climbs to Rs. 550 within an hour or two. If you had bought 1,000 stocks in the morning and sold at Rs 550, you would have made a cool profit of Rs 50,000 – all within a few hours. This is called intraday trading.
Indicators of Intra-day Trading
Due to concurrent events occurring in the stock market, traders often face difficulties, doesn’t matter if you’re a seasoned trader or a beginner in the stock market, referring to indicators always helps in making the right decision. These can work as day trading strategies and help in investing the right way.
- Moving average
Most traders rely on the daily moving average (DMA) of stocks. A moving average is a line on a chart that shows the movement of stocks over a period of time. These charts show the opening and closing prices of stocks. The minimum average line shows the average closing price of that particular stock at a given interval, helping to understand the rise and fall of prices and determine the stock flow.
- Bollinger Bands
Stand deviation of the stocks is shown using these bands. The moving average, the upper limit, and the lower limit are the three lines of the band. If you’re looking for the trading ranger of a particular stock the price variation can be located of that stock for a period of time which in turn helps you put your money on the basis of these observations.
- Momentum oscillators
Due to the changing situation of the market, the prices of the stocks have high volatility. Momentum oscillators help to trade in knowing whether the price of the stock will rise or fall. The range used for depiction is 1 to 100, whether a stock would further rise or fall, helping the investor in determining when to buy a particular stock. It also shows the right time to trade, thus helping the investor not to lose.
- Relative strength Index
This is an index format for all transactions that occur on a stock over a specific time period. The range is 1 to 100, which graphically displays when the stock is selling or buying at the highest price. The RSI is considered overbought above 70 and oversold below 30. In this calculation, the formula used:
RSI = 100 – [100 / ( 1 + (Average of Upward Price Change / Average of Downward Price Change ) ) ]
How to choose stocks for Intraday trading?
Choosing shares for intra-day trading is the most vital step. Now the question arises, how to choose stocks for intraday trading? The next section of the blogs will give you someday trading tips.
- Avoid volatile stocks: one trading strategy that we would tell the investors is to stay away from volatile stocks or stocks that look unstable. Of all the day trading tips, this is one of the most important intraday trading strategies, as there is no point in putting money where there are chances of not getting it back.
- Correlate stocks with geopolitical changes: Another important intraday trading strategy is to always invest in stocks that have a correlation with major sectors. If for that sector the index goes up, in return it will have a positive impact on the price of the stock. For example, strengthening of Indian Rupee against the Chinese Renminbi would affect the metal industries. This in turn will increase the income from exports thus affecting the stock price to go up.
- Research: We covered the basics of trading in our previous blogs that you can check here (link) we know that researching the market is most important before investing, thus this applies to day trading tips as well.
Intraday trading vs Delivery Trading
From this, it is easy to conclude that daytime transactions are usually completed within a day. This usually means that all shares purchased that day must be sold by the end of the day before the market closes. If these shares are not sold, they will be automatically closed at the end of the transaction.
On the other hand, in distribution-based trading, you can hold the purchased stock for a long period of time to increase the rate of return.
While daytime trading offers a low capital account and the opportunity to pay margin, delivery trading requires the full amount of the transaction. As a daytime trader, we recommend trading during the day if you can estimate and predict the value of your stock at short and short intervals. Still, there are many technical tools that can help you predict short-term price fluctuations.
However, we consider long-term investments to be more appropriate, and views related to the company’s intrinsic value (such as price-earnings ratio, book value, etc.), distribution-based transactions can be considered a better option. increase.