When traders buy and sell securities within the same day to take advantage of price movements, it is called day trading. All positions close before the market closes in a day and traders attempt to make a profit from intraday small price movements. A trader can execute trade multiple times within the same day.
As you know, you need to open a trading account and Demat account to start online share trading. An advanced trading platform that can handle high trade volumes in real-time streaming and modify complex orders in quick succession is required in day trading. It will be provided by your broker.
It is a potentially lucrative but very much dangerous trading method for novices. Moreover, day traders are well-educated and well-funded diligent traders but can only survive with specialized trading strategies.
The following are the strategies that will help a trader to survive in the market at a profitable stage:
1. Scan the market to gain knowledge
Do your homework properly to be an informed trader. Along with the intraday trading procedures, traders need to keep updates of stock market news that affect stocks such as interest rate, the general market outlook, etc through reliable financial websites or news channels.
2. Start small as a beginner
As a beginner, it is always advisable to focus on a few stocks. It is easier to track and find investment opportunities with one or two stocks during a session.
3. Estimate loss and set aside funds
It is about how much a trader is willing to take the risk on each trade and set aside a surplus amount equivalent to it. It is suggested by successful traders to keep it less than 1% – 2% per trade. Let’s say you have a Rs.4,00,000 and are willing to take risk 0.5% on each trade, your maximum loss per trade is Rs.400 (0.5% * Rs.4,00,000).
4. Set aside time
Day trading is time-consuming. You can not limit it to your spare time only. Because it is a job and you do your job with perfection. You need to scan the market news and spot opportunities that can be available at any time during trading hours.
5. Do not fall for Penny Stocks
Deals and low prices can attract you but do not fall for penny stocks unless you find a real opportunity after your research. Liquidity is provided in such stocks but the probability to get a jackpot is often bleak.
Stocks trading under Rs.10 a share can be delisted from major stock exchanges easily and are only tradable over-the-counter (OTC).
6. Use minimum volatility hours
Traders just start to execute trades as soon as the markets open. Such actions contribute to price volatility, so avoid it. The middle of the day trading hours are comparatively less volatile.
An experienced player can identify and pick patterns in rush hours that go towards profits. But newbies may not be. Though the rush hours are full of opportunities, beginners should avoid them. Instead, observe the stock market and wait for the first 15 to 20 minutes after opening the market.
7. Follow and stick to the plan
“Plan your trade and trade your plan” – it is the tagline of successful day traders. Moving fast is the quality of successful traders but they move as per the already developed trading strategy and keep the discipline to stick to the strategy. They just don’t chase profits due to emotions.
8. Be practical and look for attainable profits
Many traders win up to 50% of their trades using strategies. A strategy does not mean being profitable every time but it can limit your losses every time. However, it ensures to bring more winners than losers using entry and exit methods to achieve attainable realistic targets.
9. Limit orders and limit losses
Determine the type of orders to enter and exit trades – market orders or limit orders?
Market orders are executed at the best price available at the time but don’t bring any price guarantee.
Limit orders guarantee the price but they do not guarantee the execution. However, limit orders trades are more precise at an executable order.
10. Stay away from emotions and be calm
Stock markets are full of volatility and test your patience. To be a successful day trader, be logical to govern your decisions by logic and stay away from greed, hope, and fear so that emotions do not affect your trading decisions.
All above are the tactics that should be shown in a trader’s executions that will definitely help you to become an experienced and profitable trader. You need a fast advance online trading platform as a day trader. Therefore, search for a stock broker with better facilities to open trading accounts.