Be Money Aware

Intraday trading is a type of investment strategy in which shares are bought and sold on the same day. It doesn’t matter whether the shares are bought first or sold first. What matters is that both the purchase and sale transaction has to happen on the same day. The basic requirement for intraday trading is to have a demat and trading account with a reputed broker like Kotak Securities who can provide adequate support to your trades.

Basics of Intraday Trading

In Intraday trading, the chosen share is traded on the same day. This means there is no actual transfer of shares or funds. The trader earns or loses only the difference between the purchase price and sale price of the shares.

However, to do intraday trading, it is essential to maintain a margin with the broker. Each broker has their own rules for margin balances in line with the Stock Exchange rules on the same. The number of shares you can purchase for a particular stock depends on the margin requirements for the particular stock. Some volatile shares have a margin of 1 which means 100% of the funds need to be deposited with the broker before trading. A higher margin multiplier will mean a higher amount can be traded for the given balance.

Any profit or loss on intraday trades is added or deducted from the margin amount.

Intraday trading strategies

Intraday trading is a highly specialized form of trading. It should not be undertaken without adequate research into the stock that has to be traded. Without following a fixed strategy or without adequate research, you can lose you Some intraday trading tips are:

• Choose a liquid stock:

One of the most important intraday trading tips is to choose a stock that is liquid. A liquid stock is a stock that is traded often in the market. By choosing such a stock, you can ensure that you can close out your open positions with ease.

• Research price movements:

The whole basis of intraday trading is to profit from the difference in prices. Without researching the price movements of a stock and its tendency to move up and down, you can incur losses in your trades. It is better to take positions once you know the direction in which the shares will move.

• Execute trades early:

One intraday strategy is to execute your trades immediately once the market opens. A majority of the traders enter the market as it opens and major fluctuations are seen in the initial hours of market trading. This, however, depends on the price movement for the particular share or shares.

• Fix an entry price and an exit price:

This is the most important tip for intraday trading. It is very important to decide a price to enter the stock and a price at which you will book profit on the share and exit it. By setting these targets, you can be assured of a profit. Many brokers offer a facility to set these limits in the trading account which means the trade will get executed when the share meets the entry and exit requirements.

• Decide the maximum loss on the trade:

It is also supremely important to decide to what extent you can bear loss on the trade. Setting a stop loss means deciding the price at which you will compulsorily exit the share. This restricts losses in case the share price moves downward.

• Restrict the number of trades:

Making several trades each day can spread your focus thin and can cause losses. It is better, especially while beginning with share trading, to limit the number of trades you take.

• Close all open positions by the end of the day:

An intraday trader earns from the difference in purchase and sale prices for a stock. Since all open positions are closed, no stock or fund transfer is involved. In case your system does not automatically close trades, you should ensure all open positions are closed so that you don’t have to invest the funds into the share.

To avoid the high cost of brokerage involved in intraday trading, you can look at trading products like Free Intraday Trading by Kotak Securities which almost eliminate any brokerage charges on trades. Using such tools can help you improve your profits.