As per data collected from trading platform analysis, 80 to 85% of intraday trading brokers are subject to losses for over a year. The data further stated that due to the quantum of losses over 70% of the day, traders quit this form of trading in less than a year.
Typically, lack of trade discipline, trading against the market, and no limit on capital are among the primary reasons for incurring losses under the trading type. Regardless, traders can minimize the scope of incurring losses and generate more profit in intraday trading by crafting suitable trading strategies.
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Tip to generate profit in Intraday trading
By using the following few tips, one can formulate the required strategies and maximize earnings through intraday trading accordingly.
Adopt risk management strategies
Traders must make it a point to limit losses by determining the quantum of loss they can weather. Typically, it is recommended that losses should not be more than 2% or 3% of the capital or 20% of the aggregated profits. Traders should keep these numbers in mind and adopt suitable risk management strategies.
To develop a well-rounded plan, one should gain a fair idea about the level of risk he/she is willing to take, the amount of capital depletion he/she can bear, and most importantly, the anticipated risk-reward ratio.
Follow the momentum
Individuals who intend to partake in an intraday form of trading must move with the market trends. For instance, when the market is bullish in temperament, traders should consider getting in for the long run.
Conversely, when the market shows bearish tendencies, they may choose for the shorter route and allow stocks to bottom out.
Determine the accurate price
Before proceeding to place a buy order, individuals must determine their entry-level and target price. It will help them grasp attractive opportunities and allow them to sell units to accrue higher gains and not because of a nominal increase in price.
However, traders must consider booking their profits when their desired target is reached. Also, they should be flexible about the profit target.
Opt for liquid stocks
Intraday trading is all about securing open positions before the end of a particular trading session. Resultantly, financial experts recommend traders to choose two or three large-cap shares which are relatively more liquid.
Such shares tend to attract more buyers and sellers, thus boosting the stock price volatility. Such volatility is thus conducive to generating profits. Often, parking funds in small or mid-size caps lead to extended holding periods due to low liquidity or trading volume.
Don’t forget to research
Though the potential for generating returns is high in the case of intraday trading, there is also substantial scope for incurring losses. To make a profitable decision, individuals should conduct thorough research and pick shares they wish to invest in beforehand, including all the associated pros and cons. Subsequently, traders should track price movement and factor in liquidity as well as volume before trading.
Follow the do-nothing strategy
The do-nothing strategy emphasizes on requiring traders to sit out when the market is volatile or too confusing. Meanwhile, they should draw a full-fledged plan regarding the ways to make the most of a recovering market or when the intense volatility subsides.
Other than these, traders should pick stocks that mirror the movement of the market. For instance, they can opt to trade when NIFTY raises some stocks. Regardless, most stocks do not move with the market, and hence traders must be careful when scrutinizing them.
Also, intraday trading brokers must inculcate the habit of evaluating and recording trades, as well as assess past performance. Doing so, they will be able to identify shortcomings or acknowledge smart strategies and improve them for future endeavors.
Also, by choosing a registered depository participant to open a trading account, individuals may avail additional tips to maximize profits from this type of trading
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