Regardless of the daily fluctuations that take place in the stock exchange, you can seek specific price patterns during intraday trading to work them to your benefit. These price patterns can signal lucrative opportunities to traders who know what they need from the day’s trade. With the help of sound intraday trading strategies, you can make sense of the changes that take place in daily prices that would otherwise appear random. Through effective intraday trading techniques, you can benefit from trend indicators and earn a tidy sum at the end of the day.
As an intraday trader, you need to look into chart patterns and understand price action. This can help you discern when traders have gone long or short or have confined themselves. A situation such as this could cause a spike in price towards a specific direction when traders are pressured out of their trades. This is known as a trade setup and usually takes place when some groups of traders react to emotional points to cover their losses, or they have become too impatient.
If you are day trading with a reputed broker such as Kotak Securities, you can employ these critical strategies to improve your chances of receiving profitable yields.
- Trading with the market trend: Most intraday traders place a bet on trend reversals. However, what is the likelihood that a reversal in trend will take place every time? Since the probability of success is extremely low, it can help to trade based on the market trend rather than betting against the market itself. Most traders look to catch the top or the bottom and in doing so suffer significant losses.
- Use stock volatility to monitor your stop losses: You may want to filter stocks that are aligned with your money management, or alter your money management in such a manner that fits the behaviour of the stocks. For instance, if you have a firm money management rule that you will not lose out more than 1% in each day trade, that percentile becomes your fixed stop loss. But, since every stock has its own characteristics, some may possess the average volatility of less than 0.5% while others may have an average of 5% volatility every day. Thus, if you trade stocks with 5% volatility, and given your fixed stop loss of 1%, which is an un-viable position to be in, the chances of getting triggered are incredibly high.
- Defining your exits: Before you enter into a day trade, you need to limit and set your exit point. This move can help you in overcoming your emotions and make rational decisions. It is essential to know when not to trade as this can contribute tremendously to your profit and loss. Some days you may not need to buy and sell, while others may be beyond your control. If you notice a series of radical movements and stop losses, you may want to take a break from intraday trading, and observe market conditions, rather than furthering your losses.
Since a short timeframe can make it challenging to earn profits, using the strategies and tips mentioned above can help you profit better and cut down on your losses.