Jasper Roberts - Blog

Friday, 10 August 2018

What is Intra-day Trading and How to Trade ?



Intraday trading involves buying and selling of stocks within the same trading day. Here stocks are purchased, not with an intention to invest, but for the purpose of earning profits by harnessing the movement of stock indices. Thus, the fluctuations in the prices of the stocks are harnessed to earn profits from the trading of stocks.
An online trading account is used for the purpose of intraday trading. While doing intraday trading, you need to specify that the orders are specific to intraday trading. As the orders are squared off before the end of the trading day, it is also called as Intraday Trading.
Here are some few take away points to keep in mind while doing intraday trading:

Intraday Trading Tips

Intraday trading is riskier than investing in the regular stock market. It is important, especially for beginners, to understand the basics of such trading to avoid losses. Individuals are advised to invest only the amount they can afford to lose without facing financial difficulties. A few intraday trading tips will help you learn the art of trading. Know now more about intraday trading tips.

Intraday Trading indicators

When it comes to booking profits in intraday trading, you will require to do a lot of research. For the same purpose, you need to follow certain indicators. Often intraday tips are believed to be the Holy Grail; this, however, is not entirely accurate. Intraday trading indicators are beneficial tools when used with a comprehensive strategy to maximize returns. To get a detailed understanding of intraday trading indicators, and its effect on trading strategy, visit…


How to Make Profit in Intraday Trading

Intraday traders always face inherent risks that exist in the stock markets. Price volatility and fluctuating daily volume are a couple of factors that affect the stocks picked for daily trading. Ideally, Traders should not risk over two per cent of their total trading capital on a single trade to ensure the right risk management. However, the desire to earn higher profits often compels traders to risk more. In order to balance the risk taken, while achieving higher returns, here are some tips to follow:


In order to earn profits, here are some of the proven intraday trading strategies:

Opening Range Breakout (ORB):

This intraday trading strategy is widely used by professional traders as well as amateurs. To maximize the potential of this strategy, combining it with the optimum use of indicators, accurate assessment of market sentiment and stringent rules are recommended. ORB has numerous variations; some traders may opt for trade on large breakouts from the opening range and others choose to place their trades on the opening range breakout. The time window for the trades ranges between 30 minutes and three hours.

Mapping Resistance and Support:

Every stock price fluctuates within a range from the initial 30 minutes of the start of the trading session, which is known as the opening range. The highest and lowest prices during this period are assumed as the resistance and support levels. It is advisable to buy when the share price moves beyond the opening range high and sell if the price falls below the opening range low.

Demand-Supply Imbalances:

An important intraday trading tip for beginners is to look for stocks where drastic demand-supply imbalances exist and opt for these as entry points. The financial markets follow the normal demand and supply rules—price reduces when there is no demand for higher supplies and vice versa. Users must learn to identify such points on the price chart through research and studying the historical movements.

Opt for 3:1 Risk-Reward Ratio:

Traders, especially beginners, must understand the appropriate risk-reward ratio. Initially, finding stocks that provide a potential risk-reward ratio of at least 3:1 will be beneficial in earning profits in share market investment. This strategy will allow them to lose small while giving them the opportunity to earn big even if they have losses on most of their trades.

Relative Strength Index (RSI) and Average Directional Index (ADX):

Combining these two intraday trading strategies to find buy and sell opportunities can help traders earn profits. The RSI is a technical momentum indicator comparing recent losses and gains to determine over purchased and oversold stocks. The ADX is beneficial and used to determine when the prices are showing strong trends. In most scenarios, if the RSI crosses the upper limit, it is indicative of a sell trade and vice versa. However, when you combine the RSI and ADX, intraday traders buy when the RSI crosses the upper limit and vice versa. The ADX is used as the trend identifier to help users take their buy or sell decisions.

Intraday trading involves same-day trade settlements. Most traders try to achieve smaller profits through their trades. The golden intraday tip is to ride with the market trend to help make profits.

Angel Broking’s Angel Eye has charts and portfolio watch tools that helps in identifying trends, and thus helping traders to make better decisions. This will help traders to earn profits from Intraday Trading.


How to Choose Stocks for Intraday Trading

 

To succeed as a day trader, it is important to know how to pick stocks for intraday trading. Often people are unable to make profits because they fail to select appropriate stocks to trade during the day.

Tips to Choose the Right Intraday Trading Stocks:

Trade Only in Liquid Stocks:

Liquidity is the most important intraday trading tip while choosing the right stocks to trade during the day. Liquid stocks have huge trading volumes whereby larger quantities can be purchased and sold without significantly affecting the price. Generally, lesser liquid stocks do not provide traders the opportunity to purchase and sell larger quantities due to lack of too many buyers. Some traders may argue that illiquid stocks offer bigger opportunities with rapid price modifications. However, statistics show that volatile stocks show greater movements in a short period of time. Thus, most of the possible gains dissipate while the downside risk still looms. Nonetheless, the liquidity of the stocks depends on the quality of the trades placed by the traders. For example, a volume of 50,000 to 75,000 shares is sufficient if the trade is for 50 or 100 Rs; however, if the volume is few hundreds or thousands, volume requirements significantly become larger.

Stay Away from Volatile Stocks:

It is commonly noticed that a low daily volume of traded stocks or those where some huge news is expected move in an unpredictable way. Sometimes, the stock may show volatility even after the announcement of the big news. Traders are recommended to avoid intraday trading in such stocks. A few volatile stocks are in the mid-size segment while most stocks traded in the low-cap categories like S, T, and Z are highly chaotic. In addition to being volatile, these stocks have low daily volumes, making them illiquid.

Trade in Good Correlation Stocks:

An intraday tip for choosing the right stock is to opt for those that have a higher correlation with major sectors and indices. This means when the index or the sector sees an upward movement, the stock price also increases. Stocks that move according to the sentiment of the group are reliable and often follow the expected movement of the sector. For example, strengthening of the Indian Rupee against the Dollar will generally affect all information technology companies dependent on the US markets. A stronger rupee implies lower earnings for the IT companies and weakening rupee will result in higher export incomes for these companies.

Follow the Trend:

One of the most important intraday trading tips is to remember that moving with the trend is always beneficial. During a bull run in the stock market, traders must try to identify stocks that can potentially rise. On the other hand, during the bear run, finding stocks that are likely to decline is advisable.

Pick after Research:

Undertaking quality research is one of the most vital intraday tips that traders must always remember. Unfortunately, most day traders avoid doing their research. Identifying the index and then finding sectors that are of interest is recommended. The next step is to create a list of several stocks with these sectors. Traders need not necessarily include sector leaders, but rather identify stocks that are liquid. Technical analysis and determining the support and resistance levels along with studying the fundamentals of these stocks will help traders find the right stocks to profit through intraday / day trading.

Intraday trading has inherent risks; but speed plays a vital role in making all the difference. Earning profits through small price fluctuations during the few trading hours is not an easy task. Angel Broking Angel Eye helps to monitors stocks in real-time. Being browser-based, you can easily do online share trading from anywhere, without the speed being affected. The platforms helps in taking Quick decisions, thus enabling traders to book profits..

 
How to make profit in intraday trading

Intraday traders always face inherent risks that exist in the stock markets. Price volatility and daily volume are a couple of factors that play an important role in the stocks picked for daily trading. Traders must not risk over two per cent of their total trading capital on a single trade to ensure the right risk management. So here are a few tips shared to make profit in intraday trading.

Intraday Time Analysis

When it comes to intraday trading, daily charts are the most commonly used charts that represent the price movements on a one-day interval. These charts are a popular intraday trading technique and help illustrate the movement of the prices between the opening bell and closing of the daily trading session. There are several methods in which intraday charts can be used. Know about some of the most commonly used chart.

How to Choose Stocks for Intraday Trading

To succeed as a day trader, it is important to know how to pick stocks for intraday trading. Often people are unable to make profits because they fail to select appropriate stocks to trade during the day. Choosing the right stocks to book profits is an art that you will learn with experience. For beginners, here get some tips to choose stocks for intraday trading.


Intraday trading is riskier than investing in the regular stock market. It is important, especially for beginners, to understand the basics of such trading to avoid losses. Individuals are advised to invest only the amount they can afford to lose without facing financial difficulties.
A few intraday trading tips discussed below should help investors in making the right decision.

Tips for Intraday Trading

Choose Two or Three Liquid Shares

Intraday trading involves squaring open positions before the end of the trading session. This is why it is recommended to choose two or three large-cap shares that are highly liquid. Investing in mid-size or small-caps can result in the investor having to hold these shares because of low trading volumes.

Determine Entry and Target Prices

Before placing the buy order, you must determine your entry level and target price. It is common for a person’s psychology to change after purchasing the shares. As a result, you may sell even if the price sees a nominal increase. Due to this, you may lose the opportunity to take advantage of higher gains because of the price increase.

Utilizing Stop Loss for Lower Impact

Stop loss is a trigger that is used to automatically sell the shares if the price falls below a specified limit. This is beneficial in limiting the potential loss for investors due to the fall in the stock prices. For investors who have used short-selling, stop loss reduces loss in case the price rises beyond their expectations. This intraday trading strategy ensures emotions are eliminated from your decision.

Book Your Profits when Target is reached

Most day traders suffer from fear or greed. It is important for investors to not only cut their losses, but also to book their profits once the target price is reached. In case the individual thinks the stock has a further possibility of rising in price, the stop loss trigger must be readjusted to match this expectation.

Avoid being an Investor

Intraday trading, as well as investing, requires individuals to purchase shares. However, factors for both these strategies are distinct. One kind adopts fundamentals while the other considers the technical details. It is common for day traders to take delivery of shares in case the target price is not met. He or she then waits for the price to recover to earn back his or her money. This is not recommended because the stock may not be worthy of investing, as it was purchased only for a shorter duration.

Research your Wish list thoroughly

Investors are advised to include eight to 10 shares in their wish lists and research these in depth. Knowing about corporate events, such as mergers, bonus dates, stock splits, dividend payments, etc., along with their technical levels is important. Using the Internet for finding resistance and support levels will also be beneficial.

Don’t Move against the Market

Even experienced professionals with advanced tools are not able to predict market movements. There are times when all technical factors depict a bull market; however, there may still be a decline. These factors are only indicative and do not provide any guarantees. If the market moves against your expectations, it is important to exit your position to avoid huge losses.

Stock returns can be huge; however earning smaller gains by adhering to these intraday trading tips & strategies should be satisfactory. Intraday trading provides higher leverage, which effectively provides decent returns in one day. Being content is crucial to succeeding as a day trader.



Intraday Trading Indicators

Be it a beginner or an established trader, following the basic intraday tips is a common practice before starting the trading day. However, your trading strategy changes with time, and the concurrent events play a huge role in its working. In order to maximize returns, it is essential to understand the market. For this purpose, there are trading indicators. Trading indicators are beneficial tools that are used with a comprehensive strategy to maximize returns..

Information Offered by Intraday Trading Indicators

  • The direction of the trend to determine the movement
  • The lack of or existing momentum within the investment market
  • Profit potential due to the volatility
  • Determine the popularity through volume measurements.
These are the vital pointers shared by trading indicators. These basic, but beneficial pointers help in assessing the market conditions and allow traders to take better decisions with respect to trade positions.

Useful Intraday Trading Indicators

  • Moving Averages:

    Traders often hear about daily moving averages (DMA), which is the most common and widely used indicator. The moving average is a line on the stock chart that connects the average closing rates over a specific period. The longer the period, the more reliable the moving average. This indicator will help you comprehend the underlying movement of the price, as prices do not move only in one direction. Stock prices are volatile and the moving average indicator smoothens the volatility to provide an understanding of the underlying trend of the price movement.

  • Bollinger Bands:

    This intraday trading indicator is one step ahead of the moving average. This band comprises three lines—the moving average, an upper limit and a lower one. All these are representative of the stock’s standard deviation, which is nothing but the amount by which the price increases or decreases from its average. This provides traders an understanding about the stock’s trading range.

  • Momentum Oscillators:

    Stock prices move up and down. There are short-period cycles that are unrelated to the bullish or bearish market trends. In such cases, it is easy for day traders to miss out on such changes, which is when the momentum oscillator is beneficial. This indicator is depicted within a range of 0 to 100, and is advantageous when the price has achieved a new high or low, and one wants to determine whether it will further rise or fall. In other words, the momentum oscillator helps to understand when the market sentiments are undergoing modifications.

  • Relative Strength Index (RSI):

    The RSI is one of the useful intraday trading tips to compare the share price’s gains and losses. This information is then formulated in an index form, which further helps in narrowing down the RSI score ranging between 0 and 100. This index increases with price rises and vice versa. Once the RSI increases or decreases to a specified limit, you can modify your trading strategy.


Intraday Trading Time Analysis

When it comes to intraday trading, daily charts are the most commonly used charts that represent the price movements on a one-day interval. These are beneficial for analyzing short and medium-term time periods; however, some traders may use these for long-term analysis. The thumb rule states that usage of daily charts is used for analysing periods exceeding six weeks. They help in assessing stock movements in a better way, thus giving clear picture about stock performance. This helps in planning the trading strategy effectively.six weeks.

Intraday Trading Charts

These charts are quite popular in the trading world, they help to illustrate the movement of the prices between the opening bell and closing of the daily trading session. There are several methods in which intraday charts can be used. Below are some of the most commonly used charts while intraday trading on the Indian stock market:

  • Hourly Charts:

    These charts depict the price movements of a particular stock for a specific period of time. These include detailed information within the confines of a single trading day. Each candlestick or bar is representative of the opening, closing, high, and low of every hourly interval for the time period being analysed. These are generally used for short-term trades, which last from a few hours to a few days.

  • 15 - Minute Charts:

    These show the opening, closing, high, and low price movements at 15-minute intervals for a particular stock. The 15-minute charts are often used for day trades lasting from an hour to a few trading sessions.

  • Intraday Five-Minute Charts:

    This is one of the most widely used charts by traders. It represents the price movements of the index or stocks over a particular period of time. Every bar on the chart represents the opening, closing, high, and low of five-minute intervals during the chosen time frame. These charts are frequently useful for quick scalps lasting from several minutes to several hours during a trading session. This kind of chart is also used by long-term traders to identify and select the most efficient entry and exit points while initiating trades over a longer period of time. Using the intraday five-minute chart for long-term share market investment can be a beneficial intraday tip for longer period investors.

  • Two-Minute Chart:

    This is another intraday chart that is popular among stock market traders. This type of chart often depicts the price movement over some hours on the same trading day. Each candlestick shows the opening, closing, high, and low at two-minute intervals during the selected period of time. These charts are most beneficial for day trades or scalping, which can range from some minutes to several hours during one trading session.

  • Tick-Trade Charts:

    These are line charts representing every trade that is executed on the stock market. While using these kinds of charts, traders need to bear in mind that time is of no essence and every point on the chart represents an actual completed trade. In case the markets are illiquid, the chart is depicted as a flat line. Highly liquid market charts show constantly moving ticks. The chart is beneficial while intraday trading in tracking every executed transaction with a line across time, which moves up or down to immediately show the upward or downward movement in the stock price. The tick charts are used by traders for scalping and to keep track of ‘out of money’ trades that need correction.
Based on the traders’ perspectives, market conditions can change, also depending on the period of time being analysed. To be successful, analysis of the accurate time period is important and is a vital intraday trading tip that must always be borne in mind
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