Best Intraday Trading Strategies & Rules

Are you Searching for the best Intraday Trading Strategies on the internet? If your Anwer is yes then this blog is for you. because in this today’s blog we will discuss the best intraday trading strategies, rules for intraday Trading, Intraday trading tips, etc.

Intraday Trading

Intraday trading simply means buying and selling stocks on the same trading day before the market closes. If you fail to do so, your broker may square off your position or convert it into a delivery trade.

• This is also known as Day Trading. Share prices keep fluctuating throughout the day, and intraday traders try to gain profits from these price movements by buying and selling shares during the same trading day.
• This kind of trading in some ways beneficial, whether a person is an experienced trader or a beginner, as the indicators and trends of the market will guide them properly, but not necessarily.

Basic Rules for Intraday Trading

Before going to do any intraday trading, here are some of the rules for intraday trading you need to consider, otherwise you might lose your money.

1. Select and Research Stocks

• For an intraday trader, it this a must to identify the right stocks to trade in. Once you have identified a selection of stocks, you can then monitor and analyze these further to identify trends. So, let’s look at the first step of the process of how to choose stocks for intraday trading.

2. Invest a small amount of capital

• If you are a beginner and start investing in intraday trading, then it’s always advisable by the experts to start with a small amount of capital.
• Most beginners think that they can make a lot of money in trading, but data suggests that most intraday traders lose their money.
• 70 percent of traders don’t last beyond the first year, and 95 percent of traders stop trading by the third year.
• That’s why you have to start with small capital to use it for your learning, and with time, your knowledge will grow, so your trading strategy will also grow.
• After a certain amount of experience and knowledge, you can then gradually increase your capital.

3. Before investing, decide on a target and a stop loss

• A stop-loss order is used by traders to limit their loss or lock in a profit on an existing position. Traders can control their exposure to risk by placing a stop-loss order.
• Experts always recommend using a stop loss to prevent losses or book a profit in a certain position.
• For example, a trader may buy a stock and place a stop-loss order with a stop of 15% below the stock’s purchase price. Should the stock price drop to that 15% level, the stop-loss order would be triggered and the stock would be sold at the best available price. Same strategy with the profit.

4. Close your position before the market closes

• As we already learned, intraday trading is on the same day, so we have to be aware of the closing time of the market.
• In India, the stock market timings for trade are basically divided into three segments:

• Pre-opening session : 09:00 AM – 09:15 AM
• Normal session : 09:15 AM – 03:30 PM
• Closing session: 03:30 PM

Therefore, book your profit or book your loss and square off before closing the market.

5. Learn about technical analysis

Technical analysis is the study of the patterns in charts and statistical figures to understand the market trends and then pick stocks accordingly.

it’s Sounds complicated? Here is a simpler definition.

• One day the share price is up, the next day it may be down. But over time, if you look at the stock price’s movement, you may see trends and patterns emerge.
• The study of these trends and chart patterns in stock prices is called technical analysis of a stock. When you learn technical analysis of stocks, you will understand the major role that technical indicators play.
• By studying this, you can predict the movement of the stock price and, according to that, you can make your strategy.

Best Intraday Trading Strategies

One of the best parts about intraday trading is how well it lures investors to leverage price fluctuations. Invest and watch it; that’s it. But if the right strategies are not used in the right way, intraday trading can result in losses. Some intraday strategies are:

1. Momentum strategy

• Momentum investing is taking advantage of market volatility in short-term positions in stocks going up and selling them as soon as they show signs of going down. The investor then puts their capital into new positions.
• In this case, the market volatility is like waves in the sea, and a momentum investor is sailing up the crest of one, only to jump to the next wave before the first wave crashes down again to make his profile.

2. Breakout strategy

• A breakout is the price movement through an identified support or resistance level. A breakout is the stock price moving outside a defined support or resistance level with increased volume.
• Breakouts can occur on both high and low volumes, but the higher the volume, the more significant the breakout.

3. Scalping strategy

• Scalping is the type of trading that specializes in profiting off of small price changes and making a fast profit off of reselling. Scalping requires the trader to have a strict exit strategy because one large loss could eliminate the many small gains the trader worked to obtain.

4. Moving average crossover strategy

• A moving average crossover is a point on a chart where there is a crossover of the shorter-term or fast-moving average, above or below the longer-term or slow-moving average.
• Moving average crossovers can help traders identify patterns of trend, including the direction in which price may be trending, where a potential entry point can be made, and if the potential of the trend is there to end or reverse.

5. Pull back trading strategy

• A Pull-back trading strategy is that you want to wait for the price to “pull back” during a trend to provide you with a better entry price.
• When the market is moving upward and you anticipate that the move will continue, you want to enter a trade for the lowest price possible. Pullbacks help you find such opportunities.

6. Pivot Point strategy

• A pivot point is a technical analysis indicator, or a calculation, used to determine the overall trend of the market over different time frames.
• The pivot point is simply calculated by the average of the high, low, and closing prices from the previous trading day.

Important things to remember

CHOOSE LIQUID STOCKS

Liquid stocks are those stocks that have a large volume of trading throughout the day. One of the most important criteria when choosing to trade in intraday trading is to find liquid stocks.

This is important for two reasons:

• You can buy and sell in large volumes without impacting the trend you want to benefit from.
• The trades you want to make have the potential to be executed quickly. Because intraday trading depends on precise timing, avoiding any delay in execution is paramount to success.

CHECK MARKET VOLATILITY: MEDIUM TO HIGH

• Intraday success depends on daily price movements. If you end up trading stocks that do not have a sticky price, you will not find an opportunity to trade them profitably.
• Therefore, you have to select stocks that experience a price movement almost every single day.
• You can also filter the stocks based on movements either in percentage terms or the rupee value of the stock. This filtration can give you different sets of stocks.
• Experts suggest choosing stocks that move at least 3% per day on average. Other experts prefer stocks that move by at least Rs.140 on average for success.

FOLLOWS INDICATORS

• To succeed in intraday trading, you must be able to correctly predict the price movement in the short term.
• To improve your chances of success, an intraday trader must first identify the stock market trend and then attempt to ride the waves of that trend.  For example, if you want to trade stocks from the IT sector, choose stocks that show a strong correlation with the INR vs. USD movement.

TRADE WITH THE TREND

• Most traders prefer and recommend trading intraday with the trend. This means an intraday trader has to identify the stock market trend and then try to ride on these waves of trend.
• This can be done by conducting an intraday trading time analysis. For example, if you see a new market trend so you also have to analyze for these trends to trade in.

STRONG STOCKS VS. WEAK STOCKS

Experts divide liquid stocks into strong stocks and weak stocks.

• Strong Stocks: are ones that move in the same direction as the market but more aggressively. For example, if the market rises by, say, 2%, then a strong stock tends to rise higher—say 3%-4%.
• Weak Stocks: in contrast, tend to rise and fall at a slower pace than the market.

Experts usually prefer strong stocks in an uptrend market trend and weak stocks in a downtrend market trend to lower the possibility of loss.

But remember, it’s always better to avoid trading when there’s a weak or no trend in the market. After all, the stock market is not always trending. Sometimes there is no trend. When that happens, consider being patient and wait for the markets to trend again.

Frequently Asked Questions

Conclusion

Trading is exciting as well as you can make a lot of money only if you do it with a strategy. So, as a beginner, start with a small capital, learn from your mistakes, use a good strategy, and gradually increase your capital.

Note: Day Trading is riskier. You must have a learning attitude and patience to master this money skill.