intraday trading meaning is same day purchasing and selling of a share (or vice versa). There is no delivery of shares while trading Intraday because the net position at the end of the day is zero. This is a significant characteristic of India’s rolling settlement system. However, most people ask that is Intraday trading safe? Let’s find out in detail.
Table of Contents
Introduction
An Intraday trader must be alert and on his feet each moment of his trade to ensure that things goes as expected and formulated, and he must be quick to leave the trade and cover his position if trends begin to turn around.
Intraday may look to a newbie to be a reliable and efficient way to profit, which is why it appeals to so many traders, but there is much more to Intraday than catches the eye.
Intraday delivers extremely high returns on investment, but it also has extremely high risks. Intraday trading is not for the faint of heart, particularly for beginners. Now let’s discuss the main point Is Intraday trading safe?
Is Intraday Trading Safe?
Intraday trading is not safe, particularly for beginners. Nevertheless, there are no overnight concerns, there are significant risks due to the market’s extraordinary unpredictability. Prices may change substantially and unexpectedly, resulting in surprise losses in Intraday trading.
Traders must keep a constant eye on their various screens and use technical indicators of stocks via tools and software to forecast and act on proper moves. Intraday traders require a long time to master the art of analysing price/volatility trends.
They examine intraday graphs and structures, recognising price sensitivity, trading frequency, and cup depth as indicators of volatility.
Because intraday trading is not without risk and entails a high level of risk, risk management measures are essential for intraday trading success.
Reasons why People lose money on Intraday?
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Trading style
You strike from the gun and deal like a cowboy. It’s a common misperception that intraday trading entails being aggressive and taking huge risk.
You’re not going to last long if you put all of your money into a single trade. In truth, intraday trading requires far more commitment than delivery buying.
You pay the full cost when you order for delivery, so you can bear to wait. Intraday trading, on the other hand, is leveraged, thus risk management is essential.
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Capital Limit
The second mistake most intraday traders make is trading without money loss restrictions. Limits on capital losses must be set at different levels.
You must explicitly specify how much size you are ready to expose in a day, a week, and over the course of your entire life.
For instance, if your fund is INR 5 lakhs, you can set a daily maximum loss aim of 4% and a total loss target of 20%. You must then quit trading and reconsider your approach.
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Targets
A major cause of losses is a lack of concern for stop losses and profit targets. When trading intraday, you need protection in both directions.
You require protection against large losses as well as the loss of profits. Stop losses and profit objectives are the greatest ways to deal with this.
Intraday traders who do not specify these limitations before placing orders are more likely to lose funds.
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Decision making
A major reason for losses is not being the decision maker for all of your bets. What exactly does this indicate? Traders usually depend on trading tips and ideas from the broking community.
In the situation of intraday trading, this does not function. You must learn to read charts and news flow for yourself. Analyzing charts is not rocket science and can be accomplished with a little extra effort.
Intraday trading requires a high level of customization, and off-the-shelf methods are sure to fall short.
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Contra calls
Many intraday traders make the critical mistake of attempting to outperform the market. You are not the same as a long-term investor if you trade intraday.
Long-term investors with a Buffettian mindset may afford to make market counter predictions. You trade intraday inside a six-hour timeframe as an intraday trader.
The greatest strategy is to analyze the overall market and follow it. As an intraday trader, the trend is your best friend. The market will always outperform you in the longer term!
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Ability to Respond
Intraday transactions frequently fail due to a failure to adjust to the shifting environment. The giraffe syndrome is named after the way a giraffe’s neck adapted to disappearing grasslands.
The market’s undercurrent is always shifting. Volatility may rise, midcaps may become more appealing, and sectors may lose favour, all of which might affect your intraday trading strategy. It all depends on you !
Things to consider before starting Intraday trades
Intraday volatility raises the stakes, and your entire investment could be lost in a single trade. The general rule is to risk no more than 1% of your whole money on any given trade.
The estimate is done by comparing the total available capital to the amount of the trade and the gap among the entry and stop-loss prices.
It is essential to invest only a small portion of total cash on any trade in order to avoid large losses and ensure longevity.
Intraday traders should utilise risk management measures to keep their capital secure, as it is well known that intraday trading is not safe and contains numerous hidden threats.
How to Avoid Losses in Intraday Trading?
People who want to know Is Intraday trading safe? should learn To avoid risks in intraday trading, keep the below points in mind :
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Analysis
While initiating a trade, an intraday trader must conduct significant analysis. He must be well-versed in both the sector or index in which he chooses to trade, as well as the particular stock.
Technical analysis assists in anticipating the movement of stock prices, and a thorough understanding of the firm’s fundamentals is also essential.
If the trader has done his homework, he will be mindful of what to anticipate and will act appropriately, as well as be ready for any unexpected situations.
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Strategy
In intraday trading, strategy is extremely important. The market controls whether a single or a group of intraday trading methods wins or loses.
A strategy may be effective for today’s market situations but it may not be effective for the following day’s market scenarios An intraday trader must be responsive and creative.
He must continue to practice the techniques and improve his skills, as well as constantly adapt to new challenges and modify his strategic choices.
In addition to being based on market situations, the intraday trading strategy to be adopted focuses on the traders’ specific trading approaches.
Some traders are quite proactive and make a lot of transactions every day, while others trade just on particular news events or trends that they have thoroughly analysed.
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Share Selection
To be as comfortable as practicable when trading intraday, it’s best to stick to liquid equities that trade in large quantities.
Intraday traders should also trade in equities that have a significant link with important sectors and indexes, and avoid risky stocks such as small-cap companies, which trade in tiny volumes and have unexpected price movements.
To stay alert in intraday trading, Trade only 1–2 large-cap liquid equities, and volumes should be kept in mind.
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Risk Appetite
Based on the Intraday markets’ fluctuation, an intraday trader should only risk as little as he is prepared to lose. Because of the market’s large swings, the complete amount can be lost in a single trade.
To be safe in intraday trading, the trader must maintain a reserve and avoid being washed away by market conditions and losing everything he/she has earned or owned.
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Profit Booking
A trader must let go of his desire in order to remain successful in intraday trading. An ambitious intraday trader may eventually lose all of the gains he made from the earlier trend in the hopes of gaining more profits. As quickly as the specified goals are reached, profits should be posted.
If a trader invests 1,000 per share in a share with a goal of 1,100 and a stop loss of 1,090 and the price rises to 1,120 he must take the profit and increase the stop loss to 1,110. This will assist in the protection of profits as well as the elimination of threats and losses.
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Stop loss
In intraday trading, this is the most successful risk management approach. To limit his damages and minimize significant losses, the trader must establish his exit strategy and place a stop loss before getting into a trade.
For example, if a firm’s stocks are acquired at 215 and a stop loss is placed at 200, the stocks will be immediately sold whenever the stock hits 200 or drops below this.
This protects a portion of the money and avoids further losses if the stock price falls under 200.
Note:
Intraday is not risk-free, and in addition to making money, an intraday trader’s real aim is to minimize losses.
Conclusion
You can now answer yourself that what is intraday trading, In fact, the protection of intraday improves with the trader’s expertise as he learns from his own mistakes. However. There is never a moment when intraday is risk-free because it is always exposed to market fluctuation.
This is all from our side regarding Is Intraday Trading Safe? Let us know your views in the comment section.
Other Interesting blogs related to how to do intraday trading?
Intraday Trading Books for Indian Market
Best Time Frame for Intraday Trading
How to choose stocks for intraday trading?
FAQ
what is intraday trading?
Buying and selling stocks during the same trading day is known as intraday trading. Stocks are bought here not to invest in, but rather to benefit from the volatility of share prices. As a result, swings in share prices are tracked in order to profit from share trading.
is intraday trading legal in india?
Yes, Intraday trading is legal in india, However, The margins change from time to time according to the guidelines of Securities and Exchange Board of India.
Is intraday trading profitable?
Yes, It is profitable if you trade after learning the basics and make a proper approach for trading with entry and exit.
Is intraday trading gambling?
No, not at all. Intraday Trading is not gambling. However, people who don't learn it properly and lose money in trading call it gambling which is not true.
is intraday trading haram?
Yes, Intraday Trading is prohibited in sharia law. However, most people don't follow the law and do intraday trading.
