Intraday trading, commonly known as day trading, is a strategy oriented towards quick profits realised through stock market fluctuations. Contrary to traditional investing, where stocks are held for months or years, intraday trading focuses on buying and selling stocks on the same day to benefit from short-term price movements.
Many traders are drawn to intraday trading due to its profit potential. However, discipline, strategy, and specific market knowledge are required to achieve that. Hence, this guide will help you understand how to make money in intraday trading and other related details.
Understanding Intraday Trading
Intraday traders purchase and sell financial products such as stocks, futures, or options during the same trading session to profit from short-term price swings. By hardly holding positions overnight, traders lower their exposure to long-term market risks. High leverage is frequently used in this trading strategy, enabling traders to manage more considerable holdings with less money.
Market volatility is essential for intraday trading success since price fluctuations present profit opportunities. Traders depend on charts, indicators, and patterns to make well-informed judgements, so technical analysis is essential. Because intraday trading moves quickly and minor price changes can result in huge wins or losses, keen decision-making abilities are crucial.
Is Intraday Trading a Good Way to Make Money?
Intraday trading is a good way to make money, and to understand how intraday traders make money, read below:
- Intraday trading involves much less risk since the purchase and sale of securities are made within a single day. Thus, it does not allow for much exposure to the immense price fluctuations seen with standard trading.
- The process also has lower brokerage fees because no delivery charges apply, so the transaction cost is lower than regular trading.
- When done skillfully, there are better chances for profits from intraday trading because of the attempt to capitalise on every small price movement. Another factor is the possibility of short-selling and earning profit in bearish markets.
- Another vital aspect is liquidity, as the funds are kept at hand easily since the capital is not blocked in long-term investments. This peculiarity gives the same possibility, making a profit from market volatility in both bullish and bearish trends.
- Investors can buy low and sell high in rising markets or short-sell to gain from falling prices. By using effective strategies, intraday traders can maximise their returns and retain financial flexibility, becoming a preferred choice for active market participants.
Ways to Start Earning from Intraday Trading
To understand how to earn from intraday trading, read the pointers here:
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Open a Trading Account
You need a trading account, often opened alongside a Demat account, to begin intraday trading. A trading account makes it easier for you to purchase and sell stocks and move money to your bank account, whereas a Demat account keeps shares electronically. In intraday trading, shares are bought and sold within the same session and never credited to the Demat account.
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Select a Trading Platform
Different trading platforms offer order execution capabilities, charting tools, and real-time market data. These platforms make it easy for traders to purchase, sell, change, and keep an eye on orders. As an alternative, you can trade offline with a stockbroker, but the advice of the broker will affect your trading choices.
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Use an Intraday Calculator
In most cases, online trading sites offer intraday or brokerage calculators. These calculators allow traders to enter trade details, such as share quantity and market price, and calculate costs, such as brokerage fees, SEBI turnover charges, transaction fees, GST and stamp duty.
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Place Your Intraday Trade Order
Using a stock trading platform, traders may place real-time orders whenever they feel like buying or selling a share. Understanding the prevailing market trends, trading charts, and buyer-seller behavior is important for successfully achieving the intraday trading goal.
Top Intraday Trading Strategies to Maximise Profits
To understand how to earn more money in intraday trading, traders can use different strategies based on market conditions. Here are 5 best techniques to consider:
- Momentum Trading: Momentum trading focuses on stocks experiencing strong price movements due to factors such as news, earnings reports, or market trends. Traders tend to buy high-momentum stocks and then sell them before momentum weakens to gain profits.
- Scalping: It is the practice of making several minor transactions during the day to profit from minute changes in price. For this approach to be successful, quick decisions and trade execution are necessary.
- Breakout Trading: Another well-liked strategy is breakout trading, in which traders sell when a stock falls below a support level or purchase when it rises over a resistance level. This approach performs well for volatile equities with significant directional fluctuation.
- Range Trading: Stocks that fluctuate within a specific price range are best suited for range trading. Profiting from anticipated price fluctuations, traders use this method to purchase around support levels and sell near resistance levels.
- Moving Average Strategy: Traders can find trends and possible entry or exit opportunities using the moving average approach. When a short-term moving average surpasses a long-term moving average, it signals a potential buying opportunity.
Essential Factors to Consider Before Earning Money in Intraday Trading
Now that you know how to earn money through intraday trading, here are a few factors to consider while opting for this trading option:
- Learn Intraday Fundamentals: Do extensive research before making a stock investment. Avoid allocating more than 2% of your funds to a single trade and use risk-management techniques such as a 3:1 risk-reward ratio. Select large-cap stocks that are liquid for more seamless transactions. Establish stop-loss settings to avoid trading on emotion.
- Use Time Analysis: To monitor price changes, examine daily charts such as 5 and 15-minute charts. For improved decision-making, these aid in identifying short and medium-term trends.
- Use Proven Methods: To determine resistance and support, use the Opening Range Breakout (ORB). For improved trade insights, identify demand-supply imbalances and make use of indicators like the RSI (Relative Strength Index) and ADX (Average Directional Index).
- Know Trading vs. Investing: Investors have long-term strategies, whereas traders settle positions daily. While investment is based on fundamentals, intraday trading is more technical.
- Acknowledge Market Uncertainty: Market moves are unpredictable, even using technical instruments. In the event that prices go against your expectations, always be ready to exit trades.
Final Words
Overall, intraday trading presents intriguing opportunities for traders possessing the necessary knowledge, self-control, and risk management abilities. Although strategy and experience determine how much money intraday traders make, it is always suitable to have a detailed understanding of how to make money in intraday trading. Novices should begin with modest investments, work on their technical analysis skills, and exercise risk management for a better result.
Also, if you want to improve your intraday trading skills, explore the insights and resources available at Torus Digital for guidance.
