by Basics of Day Trading
Day Trading means buying and selling underlying assets which could be commodities, shares, futures contracts, and options contracts on the same day. The key term here is the same day which is known as Basics of Day Trading.
So for a trade to be called an intraday trade the buying and selling of the trade have to be completed within the same day.
What is the main objective of doing Day trading?
The main objective of doing this trade is to earn profit and exit the position. You are not going to have a positional or directional call in the market.
The main aim of doing this trade is just to take a quick profit and exit the position immediately.
The next important point is always to Avoid Fear and Greed in Day Trading:
What happens sometimes when you take a trade and have a target in mind but once the position starts reaching a target, you feel that the market would favor your favor.
So it is always advisable not to get greedy about your trade and when your targets are achieved exit immediately. So this is known as Basics of Day Trading.
Basics of Day Trading for Beginners
Intraday trading is generally for active traders not willing to sit at their desks throughout the day during trading hours. It is not for casual traders that I am gonna take one trade for a day and just not think about other trades in the market.
The important thing here is that you have to be active in the market throughout the day. So you will see the price action better and you’ll be in a better position to be able to take better trades to be able to spot better trades in the market than a casual trader and it’s always good was saying that the more time you spent on the market the market rewards you in a much better way.
Another point of consideration is that intraday trading is done in both cash segment and derivatives markets. It’s just for the cash market.
Even the derivatives segment like futures and options are traded in the intraday market also and it’s got very huge volume in the market. So this is known as Basics of Day Trading.
Few thumb rules for the Basics of Day trading?
This are the rules are followed by beginners and the experts in the market while doing Intraday trading are as follows:
- Choose liquid stocks: Always choose liquid stocks, never go for stocks that don’t have a higher range and which are not liquid by nature, by liquid what it means is this if you enter a position in the market there should have enough liquid in the market to exit without any trouble.
An important factor that you should consider while doing intraday trading is don’t get stuck in a trade or don’t get stuck in those shares or underlying assets which are not liquid by nature. liquidity is a very important factor while doing intraday trading. - Entry and Exit points: Always have entry and exit points in mind before doing intraday trading. never take a trade and then think about what I am going to do about it. Always have a plan for your trade before entering the market.
If I say buying the shares of XYZ company then this is my entry price this is the price which I want to keep a stop loss and this is my exit point.
If you have that sort of plan in mind you will not get confused when the market starts moving and you will always make better decisions and judgments about your trades. - Stop Loss: Always have a stop loss for your trade. This is very important. This is what I am saying in all the posts that whenever you are taking a trade you must have a strict stop loss in mind.
Beyond which you shouldn’t be willing to hold the market, if you do that you have a long and fruitful career in the intraday trading market. - Trading Mentality: Always have a trading mentality and don’t have the mentality of an investor now I will tell you what’s the difference between Investors and Traders.
A trader is someone who is looking for quick profits but an investor is someone willing to hold on to the position over a period of time. He is willing to grind it out and wants to have a consistent and sustainable return over time.
The objective of a trader is to have a quick profit and exit, which is why picking the right price is more important for a trader than an investor.
So always have a trading mentality and not the mentality of an investor in intraday trading. This rule is a very important trend that is your friend for intraday traders.
What happens if the market is going up and if you’re looking to trade means reversal trade. If you are looking to take trades that are against the trend of the market.
Then there are very good chances that you’ll always book your losses and not earn profit from them. So always take trade by keeping the trend in mind that if the market is looking bullish for the day then I will find an opportunity to go long.
If the market is looking very bearish for the day then I will find an opportunity to go Short.
Always try to find multiple trades in the market. So that if you get an opportunity to trade in the same stock multiple times then you can earn a good profit.
Intraday strategies of Day Traders
These strategies include:
- Scalping: this strategy attempts to make numerous small profits on small prices changes throughout the day
- Range trading: this strategy primarily uses support and resistance levels to determine buy and sell decisions.
- News-based trading: this strategy typically seizes trading opportunities from the heightened volatility around news events
- High-frequency trading (HFT): these strategies use sophisticated algorithms to exploit small or short-term market inefficiencies
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