Stock market trading is an art which needs to be learnt and practiced with diligence.
For any kind of trading that people do it is the hard earning of the investor which is exposed to a certain amount of risk which needs to be evaluated carefully before making the investment. No investor however smart or experienced cannot with certainty say that the market would move in a certain direction in a particular time frame. There is a feeling of uncertainty attached to the environment of the stock market. New investors need to learn investment styles which include intraday trading as well. Intraday trading techniques are unique and need to be taught systematically to the new traders.
Understanding the concept
Intraday trading is not for people who get emotional with their investments. It is basically for minds which are active and alert. They invest with the intention to earn profit. People need to understand that day trading is an investment strategy and does not ensure that people would earn huge sums in a small time frame. There are no shortcuts to earning money through this strategy and this mode of investment is also based on real time research made by the investor.
Understanding the concept of profit and losses in intraday trading
In intraday trading the understanding of the market is of paramount importance. The trader needs to understand the fact that to make profit through trading the trader needs to have a macro and micro analysis of the economy and the market respectively. Understanding the major macro factors like the government policies, interest rate of the banks, employment conditions in the country, etc. are some of the major factors which have an impact on the overall functioning of the market. Micro factors include understanding the sectors which are currently performing and choosing stocks from them by looking at the individual Profit and Loss statements of the company, balance sheet and analyzing their policies helps in choosing stocks for investment. Since the world is a global village now, it is important to understand the performance of certain sectors and stocks at the international market as well.
Trading with a Practical Outlook
Intraday trading is for the practical investor as mentioned above who is putting across his hard earned money for earning a premium from investment in stocks. Emotions need to be put aside and the investors would need to buy and sell the stock immediately as the situation demands. In a bullish market through intraday trading the investor needs to buy and sell stocks a few times throughout the day to earn profits. In case of a bearish market the investor needs to short sell and buy the stocks at lower prices to earn profit.
The intraday trading is all about multiple trades which an investor makes through the day and generates a small amount of profit in each transaction. Many times the trader is unable to predict the movement of the market which might result in losses for the trader. Under the circumstances the investor uses the option of stop loss to limit the amount of loss. This usually happens when the investor is not able to predict the direction in which the stock would move and there is a reversal in the movement of the stock. In intraday trading the trader needs to square off his position before the end of day irrespective of the fact he has a loss or earns a profit for the day.
Choosing liquid shares
In intraday trading the investor needs to square his position before the trading day ends. Therefore it is best to invest in liquid shares which have high buying and selling in the market. These are usually large cap shares which can be liquefied due to its high sale and purchase. An investor can be caught up if he invests in small or mid cap shares. Therefore while squaring off the investor might have to hold on to the shares because of low trading of these stocks.
Choosing the Right Entry and Exit Points
While placing a buy order the trader should verify and determine the correct entry point and the target price before buying a particular share. People might get influenced by the market movement and the different factors which ensure the movement of stocks. In case the stocks move to a certain level and the trader feels that it might again go down, he can sell the stocks before it reaches the target price and settle for lower profits. However the traders who are experienced study the market more closely and clock highest profits before closing the deal.
An investor should understand that he should be satisfied when his investment reaches the target price and he should happily book profits for the same. Too much greed can take away the profit and the happiness out of trading. Just in case the investor wants to still keep himself invested he should readjust the stop loss option before booking the trade.
To understand the intricacies of intraday investment and start on the right foot, get yourself enrolled as a student with Share Market Profile and learn the art of investing and taking calculated risk on your investment and savings. Share Market Profile runs an online course for new investors and traders to equip them with the best of tricks for earning a premium on their investment. To know more about their courses log on to their website www.sharemarketprofile.com