Intraday trading is an exciting equity trading method to beginners. There are many positive points one can highlight about intraday or day trading. Some of them are:
Does not matter whether the market is going up or down, you can make profit by applying proper trade strategy.
There is no need to take delivery of the shares
Every day the trading will be closed and the end result will be visible at the end of the day
You can purchase and sell shares work many times of your margin amount
Your money will be free at the end of market hours
You can make purchase or sell decision at any point of time
You can put limits for purchase and sale which may give automatics profit booking
Entire stock of shares will be traded automatically at the end of the day. That means if you forget to sell the shares, it will be automatically sold and amount will be realized before the end of trade session.
The advantages of intraday trading are many as mentioned above, but the dark point is, if you don't trade carefully, your entire money may lose within few days. It is not easy to recover money gone in share trading.
While doing intraday trading you may take the following precaution.
1. Gain knowledge before trading
If you are a beginner, please try to gain knowledge about shares from reputed portals or brokers. If you have an online account, trading tips are available there. You will also get some idea about share price movement every day. You can put bid on the basis of suggestion given by the expert team of your portal. But it is also not risk free.
2. Start with small amount
Intraday trading should be started with small amount at the beginning. You can try dummy transaction also by noting down the prices in your diary. E.g. Current Price Rs. 110/-. Your bid Rs. 108/-. Selling price Rs. 112/-. If it happened you can proceed with actual transaction.
3. Strictly put stop loss limit.
This is very important. Don't forget to put limit for automatic cover up.
4. Avoid auction
Before the closure time i.e. 3.00 PM you should sell the entire stock. If you allow it to go to auction sale or purchase, the selling or buying quantity will be at high volume and there will be definite loss.
5. Short selling
If you chose short selling and the share prices are increasing or decreasing suddenly, please cover up immediately. Sometimes it will result in giving you huge loss.
6. Never wait for long time
If you have purchased or short sell some shares and its prices are going in opposite director, don't wait for a recovery. Just cover it. Some time it may witness big crash or big increase. Further, the stock market is with high sentiments, any hint in change of government policy may also cause huge crash or increase in the share prices.
7. Control your greed
Book small profits and do more transactions. If you wait to sell the shares at any specific rate, it may not happen, and after some time the prices may go in opposite direction.
8. Don't make decision on the basis of online comments
On line comments may be misleading and may be from persons without sufficient knowledge. E.g. One person was giving comments every day for purchase of a particular share. Now the share price is at bottom and god knows where the commentator is.
9. Deal only in shares trading in big volumes
Some shares may show huge increase or decrease in price. But the volume will be very low. If you want to sell the shares, purchasers may not be there.
10. Do trading with maximum dedication
Intraday trading should be done with maximum dedication; otherwise part time traders will lose their full time earning.
11. Use spare money for trading
Don't use money kept for any purpose for trading. Sometimes your money may block for short or long period.
12. Take delivery of shares if you are in temporary loss if there is chance to improve price
Some time the market may fall for few hours or for few days due to misleading news and it may recover in short period. In this circum stance, it is better to convert the shares in to delivery mode and you can sell it later.
13. Try to avoid margin trading
If you chose to trade with margin, you may not be able to take delivery of the shares, in case of loss. So try to trade with money in your account, and not with margin.
14. Never trade with borrowed fund
This is to protect you from going to hell. If you trade with your money and you lose some part it is ok. If you trade with borrowed money and you lost it, you will be in big trouble.