Intraday trading refers to a style of trading where traders buy and sell securities on the same day without carrying over positions from one day into another. By taking advantage of small price movements in highly liquid stocks or commodities, intraday traders make profits on an hourly or a minute-to-minute basis.
Now that you know intraday trading basics there are a few key steps traders need to take to start with it:
- Choose a trading account
The first step is selecting the right trading account. Intraday traders require an account that offers instant deposit and withdrawal of funds, live streaming quotes, and order execution. Various brokers provide intraday trading accounts that come with these features.
- Select a trading platform
Secondly, traders should choose a suitable trading platform. An intraday trading platform must have intrinsic charting tools, analytics, hotkeys, and order entry facilities. Ensure that the platform is flexible to fit your trading style
- Develop a trading strategy.
Successful intraday trading requires a sound trading strategy. Traders would need a strategy that finds ideal times to buy and sell by studying price charts and market indicators through technical analysis. Some of the common intraday strategies are breakout, reversal, range-bound, and momentum strategies. Test the strategy to determine its profitability.
- Set stop losses
Setting proper stop-loss orders is crucial when intraday trading. Stop losses automatically exit positions if the price moves against the trader by a pre-set amount, limiting potential losses. Determine appropriate stop-loss amounts based on volatility, account size, and risk tolerance.
- Start small
When first starting with real capital, trade small position sizes. Intraday trading requires quick decision-making and order execution. Trade small while getting comfortable with real orders. Gradually increase position size as you gain experience.
- Analyse performance
Analyse all trades at the end of each day, focusing on what went right and wrong. Identify mistakes and look for ways to improve. Track key performance metrics like percentage of winning trades, average profit per winning trade, and risk/reward ratios.
- Find a niche
Many intraday traders focus on a particular asset class or even specific securities to become experts in those markets. This allows them to better predict price movements. Common niches include tech stocks, high-volume ETFs, commodities, and foreign exchange pairs.
- Stay disciplined
Discipline is vital in intraday trading. Follow your trading plan, stick to your strategy, stop losses, and set profit goals. Don’t hold losing positions, hoping for a reversal. Don’t chase trades or overtrade out of boredom. Remain patient and wait for high-probability setups.
- Utilize chart patterns
Studying chart patterns like head and shoulders, triangles, flags, and wedges can help traders identify potential entry and exit points. Combine chart pattern analysis with indicators to improve the timing of trades. Always wait for pattern breakouts to avoid false moves.
In summary, how to start trading requires specialized skills and tools but can be rewarding for disciplined traders. By choosing the right account and platform, developing a defined strategy, managing risk properly, and analysing trades, beginners can build effective intraday trading skills over time. Maintaining discipline around your strategy, stops, and position sizing is key to surviving the volatility of intraday trading.