Tips for stock market trading (Beginners).

Tips for stock market trading (Beginners).

What is intraday trading in stocks and for whom is it meant for?

Intraday trading refers to buying and selling stocks of companies over the exchange on the same day. This is why people also refer to it as day trading. Intraday trading is very common among the sell-side stock traders. Even individuals can trade by themselves after opening their Demat account. 

Intraday trading has made people millionaires, however, intraday trading is not for everyone. People with full-time employment cannot track the market continuously and therefore it is not suitable for them. The name itself makes it clear that one needs to sit all day in front of one's computer screen and keep track of the market movement.

If you are new to intraday trading and are looking for a few basic tips, here is a list for your understanding:

1. Be updated: The most basic requirement for being a day trader is to keep yourself updated with the latest news about companies. Try to skim through 3 to 4 newspapers before starting to trade. Market sentiments are very much affected by breaking news about the company and the interim financial results of the company.
2. Keep trading corpus separate: Day trading is very risky and it is very easy to lose all your money in the markets. You should aim to keep funds for trading separately and also be mentally prepared that you could lose all your money. It is recommended to keep the corpus separate otherwise you face financial difficulty in your daily life which is not what an investor wants.
3. Detailed research of few stocks: The best way to make money from the markets is to gain in-depth knowledge of few stocks than trading many stocks without knowledge. Usually day traders, choose 7-9 stocks and research almost everything about those companies from historical financial statements to latest product development if any. Keeping yourself updated gives you a lot of confidence and you don't just gamble in stocks. A narrow view is better than an overview in the day trading practices.
4. Fix a buy and exit position: One should not just buy anytime you feel like and sell anytime. Try to figure out when the stock is at the lowest and try to buy close to that price and sell at a target price. You can also short-sell, wherein you sell first and buy later. Usually, you will find many websites online that recommend the bid and ask price for the stock. Having a pre-planned price data makes your job easier.
5. Use the stop-loss facility: The stock market has the stop-loss facility which is actually a trigger which sells the stocks you hold if the price falls below a specified limit. You are free to set the specified limit. This function helps you to minimize the losses. Emotions start playing a role in day trading, but in order to prevent emotions from overpowering us, stop-loss is a very powerful tool. In the case of short-sell, stop loss helps minimize losses when the prices rise beyond your expectations.
6. Stay away from penny stocks: Penny stocks are those stocks which trade at a very low price, typically Rs.10, Rs.5 or even lower. These stocks are very risky and they usually don't meet the stringent regulations the stock exchanges have. They can be delisted from the exchange anytime and carry very low market capitalization. So, until and unless you are very sure about these stocks, you should not trade in them as they have lower liquidity as compared to good stocks.
7. Don't be greedy: Stock market is very volatile and has many surprises on the way. Many people who lose money in the stock market is due to fear and greed. Those who fear that market may go down, buy stocks very late and those who are greedy, sell stocks very late in expectation of making even higher profits. Always, try to sell at a target price. You should hold the stock after the target price only if you are very sure of a market uptrend.
8. Market order vs limit order: You have the option to use market order or limit order. In the case of a market order, you enter and exit trades at the best possible price at that time. However, there is no price guarantee for the trades. In the case of a limit order, you set a buy and sell price, therefore enter and exit trades are done at desired prices and therefore there is a price guarantee. However, there is no guarantee for the order to get executed if the set limit is not reached.
9. Exit when the market moves in the opposite direction: Even after setting bid and ask price, one might find that the market is moving in the opposite direction of what you had thought of. In that case, you should exit from all the stocks in order to minimize the losses due to the wrong prediction.
10. Learn a bit about technical charts: Day traders use Intraday trading charts to find the movement of a particular stock. Some examples of intraday technical charts include hourly charts, 15-minute charts, 5-minute charts, 2-minute charts, tick trade charts, etc. Tick trade charts help you to analyze every trade that gets executed on the exchange A basic learning of these charts would help you make more apt price prediction.
11. Be realistic and stay calm: You need to be prepared that you can't be right all the time. You might expect the market to uptrend but it may go down. Amateur investors should try to risk small amounts and learn from their trades. After trading for a few months, one starts getting the hang of trading and can expect a 60% success rate. You should always stay calm when trading and not take decisions in a haphazard manner.

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