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Intraday Trading Strategies Faq: Frequently Asked Questions

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Q1: What is Intraday Trading?

Intraday trading is also called day trading. This means trading on the same day. It is the process of buying and selling stocks on the same day, within the trading hours.

In trading terms, it would mean that all positions are squared off at the time of the closing and there is no change in the ownership of the stock, due to this trade.

Q2: What is the difference between Intraday trading and Regular trading?

The basic difference between Intraday trading and Regular trading is the timing of the delivery of the shares.

If it’s done on the same day without the change in ownership owing to the trade, it is Intraday and if it is done over a period in time, amounting to several days, it is Regular Trading.

Q3: Who should be taking part in Intraday Trading?

There is no bar to anyone from participating in Intraday trading. However, it is pertinent to understand the risks involved. Intraday trading is all about correct timing. Hence, you need to be glued to the screen to look for the exact time for a call or a put.

If you think you have the time to do that, go ahead. If you are into a day job and would occasionally want to take a peek, desist from intraday trading.

Q4: Who do I do Intraday trade with?

Selecting the correct trader or brokerage firm is of utmost importance. One of the first strategies to adopt, whilst starting intraday trading is to look for a suitable partner.

The ideal trading firm would be the one who will provide the relevant research and the technical support for you to succeed. Also, if you intend to increase the volume of transactions, firms with low brokerage rates per transaction would be an ideal foil.

Q5: How would I know which stocks to trade in Intraday?

Since it is an intraday trade, look for stocks with high liquidity. Remember, you do not have time to make a grandstanding. The positions need to be traded off by the time the market closes.

Hence, it is always recommended that large-cap stocks need to be traded with.

Q6: Why should one be a part of Intraday Trading?

Well for starters, it gives an insight into the fast pace trading world. Intraday trading is all about speed, precision mixed with pragmatism and patience. However, here are a few pointers that will tell you why Intraday trading is a beautiful thing to be a part of:

  • No other trade gives you as high a margin as Intraday trading
  • Because of the Higher margin, the return potential is high too
  • Almost every firm charge minimum brokerage charges to encourage intraday trading
  • For strategies to pay off, one does not need to play the long game.

Q7: How to detect the market direction?

This is one of the strategies that will never go old. For successful intraday traders, they must understand the market direction or trend. They do so by identifying the value area of the stocks they intend to trade-in.

In trading parlance, this is called the 80% rule.

A value area is defined as the price range where a minimum of 70 % of the previous day’s trade occurred. Once that has been fixed, observe how that area performs throughout the day.

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The trading rule says that if a stock opens at a lower rate than the value area and settles there for an hour, the probability of it entering the vale area gets even higher.

On the contrary, if a stock opens at a lower rate and settles there for an hour, it will fall into the value area soon enough.

Hence, the best strategy would be to take a short position in an around the value area, if the stock has opened at a higher value. Take a long one of the stock has opened at a lower position.

However, these are theoretical strategies. One needs to endeavour and research more about the complexities called share trading.

Q8: What if the 80% rule does not work?

As mentioned, the 80% rule is a theoretical strategy and has been observed across many trading sessions. To protect oneself from the 20% probability of the rule not working, get a stop loss to cover for oneself.

Q9: Is investing in IPOs a good strategy?

IPOs have their charm. However, they appear in the bull market. When everything seems to be hunky-dory and the share market is doing remarkably well. This is the reason why IPOs do not always provide a great profit.

The advice would be to look for those companies which have weathered the bear market. When the chips are down and the economy is barely surviving, to survive becomes the real test for companies.

That does not mean that IPOs do not give a good return. Research about the IPOs and the company strengths. If you find them to be attractive ventures, then go ahead and invest.

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Q10. If a stock goes down by 50%, how much more can it be expected to go down?

Theoretically, a stock can go down by 100% and become zero. However, before it reaches that level, it would ideally file for bankruptcy.

However, in such cases, where the company is sinking along with your investments in its stocks, it is better to change tack. Be wise and start researching more. Nothing is ever lost.

Q11. Which is more profitable, small caps or large caps?

Trading is a combination of agility and stability. Small caps tend to grow fast while large caps are those which have been stable for a long time. One has to fill the basket with a bouquet of stocks and not just a few.

One much also remember that the quality of the stock is irrelevant to the size of the company. Deep research will throw many such gems. However, in the long run, if invested wisely, small caps give a better return than large caps.

Q12. How long should one hold onto a prized stock?

Short answer, forever.

Long answer, nobody sells its most prized stock. It carries on giving returns over the years. Case in point, Coca Cola has been a stable company for a long time and does provide handsome returns to its investors year after year. It is this reason that has led Warren Buffet to keep being invested in Coca Cola, from the first time he invested in its share in 1980.

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Q13. Why is a stop loss necessary?

For starters, the stop loss has been placed to minimise losses. It is a trigger which gets activated when the minimum price gets hit. Anything below that will turn out to be a financial loss.

Q14. How to do intraday trading in angel broking?

Register oneself with Angel Broking. They are brokers from 1987 and provide their clients with the latest in market research and technology. They also have one of the lowest brokerages per transaction, primarily to encourage intraday trading.

Angel Broking provides an updated knowledge centre to all the site visitors explaining them about the nitty-gritty of the share market.

Q15: Which indicator is best for intraday trading?

Remember the four basics for Intraday trading:

  • Trend
  • Momentum
  • Volume
  • Volatility

The tools that will help you keep track of the above:

  • Moving Averages
  • Bollinger Bands
  • Relative Strength Index
  • Commodity Channel Index
  • Stochastic Oscillator

Q16: How to earn in intraday trading?

The maxim for earning quickly through intraday trading:

  • Select shares with high liquidity
  • A stop loss is a must. If you aren’t putting them, put them now
  • Stop being greedy. Keep booking profits. It’s the little profits that add up to become big
  • Buying and selling a stock at the correct position is all that differentiates between a great day at work and a could have been.
  • Read the charts. Look at the option chain. Study. Investigate. Trading is as much probability as it is knowledge.
  • Do not try to break trends and go against it. You aren’t playing long. This is a short trading session.
  • Select a few stocks and stick to them unless catastrophe appears. Do not swim with a huge number.

Q17. How to find stocks for intraday trading?

  • Liquidity is the major criteria for selecting any stock. How would you calculate liquidity?

Liquidity = Average daily volumes / Market capitalization

  • The volume of the stock
  • The Stocks of the day
  • Research about the Week’s movement
  • The ones which have shown an upward movement despite facing resistance are the ones you need to pick
  • Research well and select a few. Do not herd too many

Q18: How much money required for intraday trading?

Investing money is a form of risk and this differs from one individual to another. A small trader can begin with INR 5000 whereas a rich investor can start with INR 2,00,000. The more you trade, the more you grow in confidence.

It is also imperative to select a trustworthy brokerage firm who partners its clients throughout the session. Most brokerages provide intraday calls to their clients. There is no particular amount, to begin with.

Q19. What is intraday trading in Hindi?

शेयर बाजार में दिनभर शेयरों की ट्रेडिंग होती है। एक ही शेयर दिन में कई बार बेचा और खरीदा जाता है। अगर किसी शेयर को दिन में खरीदकर उसी दिन बेच दिया जाए तो इसे डे-ट्रेडिंग कहते हैं। इस खरीद और बिक्री के बीच का अंतर मुनाफा कहा जाता है।

Q20. How to use Renko charts for intraday trading?

Similar to the candlestick chart, the Renko chart is also originated from Japan. Renko comes from the Japanese word “renga”, meaning bricks. The Renko chart looks like a series of bricks. The chart going up will be shown in green while the one coming down will be shown in red.

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Renko charts solely focus on the movement of price. The best feature of this chart is that it is plotted only when there is a movement of a certain amount in price. This eliminates any distraction and makes it easier for the trader to focus more on the price stability and volatility of the market. 

Q21. What is the best time frame for intraday trading?

The best time frame for intraday trading is 1 hour. This is also known as the hourly chart. Also, depending on the style of trading, there are other chart types too which can cater to your needs.

Q22. How to make a profit in intraday trading India?

  • Research and choose a maximum of two to three shares which have high liquidity.
  • Decide the entry and exit points
  • A stop loss is a must to prevent maximum impact
  • Keep booking profits instead of being overtly greedy
  • Do not move against the market
  • Never stop researching

Q23: How to learn intraday trading?

The most important aspect of learning is to unlearn the myths surrounding the subject. Once you have an open mind, get ready to follow these strategies.

  • Simulate. Use the paper to read up the stock market. Create your scenarios. See how well your calculations have worked. Hone it further. By the time you start trading for real, you should have been able to reach a level of finesse.
  • Research and when you fail, research more. There is no alternative to knowledge.
  • One must be aware of the sectors and indexes pone wishes to trade-in. Every sector throws up surprises. Prepare to learn from them.
  • Be adaptable. Don’t dwell on losses on downtrends. Be creative. Start thinking out of the box.
  • As a trader, you must know where to draw the line. Overtrading is not just a fallacy it is a sin.
  • A trader is like a player. Once the day is over he or she packs up and leaves. That is a routine that must be followed. Having control over one’s emotions is of primary importance. Stay away from fear and greed and rest they say, is history.

Q24: What is the trigger price in intraday trading?

A trigger price is something you set with the Stop loss order. Once the trigger price is met, the Stop Loss will transform into a market order by the exchange servers.

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