Secrets of becoming a successful Intraday Trader
Nowadays online trading is gaining popularity through the internet advertisement. As per the advertisement, anyone can earn tremendous return on their investment from the first day. But is it so simple? Being an Equity analyst, I’ve watched a peculiar mentality among the general people about intraday trading. They believe that if your luck favours then you’ll be a millionaire within a year or not then all your money will be washed out. But the fact is not so.
Like any other job, intraday trading also follows some rules and method. If you follow these then you’ll earn good profit. But of course! Not 100% return in a month!!
Here in this article, I’ll discuss some inevitable rules of day trading, if you follow these by your heart then none can stop you to gain good profit in longer term.
1.Control your emotion:
The first and foremost rule to be a successful intraday trader is to control your emotion. Be stick on the trading plan. Don’t be greedy or don’t make panic.
If you are physically ill or sad or depressed then don’t do trading until you feel fit. Otherwise, you may lose the trade. You must learn to manage these limiting/distracting moods before you manage your trades.
You believe or not, more than 50% of the intraday traders became unsuccessful as they couldn’t control their emotions.
2.Choosing the Right Stock:
Select Highly liquid and moderate to high volatile stocks for trading. Before starting your trading career, select 3 to 7 stocks for trading and carefully watch their movement for minimum 1 month and do paper trading. It’ll be better if you also check the previous price movement of those stocks. Liquidity will help you to trading with lower spread price and volatility will help you to take advantage of price movement and earn more profit.
Don’t trade on any other stock which is not in your list.
3.Entry and Exit Rule:
Before starting your trading, prepare a notebook for entry and exit rule for every stock. If you carefully watch then you’ll notice that one particular stock gives buy signal on some selected ways. Follow these and write down these watch report. This entry rule may be depending on candlestick pattern or signal on any indicators.
The buying signal will also give you the target, follow that and sell on target. Never be greedy. If the stock moves beyond your target then stay apart from that stock for that day.
4.Never ever trade on credit:
Before starting your trade, you should have enough capital. This requirement of capital for starting day trading may vary from country to country. Please check this with your broker.
Most of the day traders take huge position against the margin, it is one of the reason of failure.
Normally brokers allow the day traders to take position 4 times on his deposited cash and this leads to lose money.
5.Never take position on too many stocks:
Being a new intraday trader, always try to keep your positions on 1-3 stocks at a time.
6.Keep High win/loss ratio:
Even After giving your 100% effort and concentration you will not be able to close every trade in profit. Even the most experienced and the knowledgeable trader also can’t do his all trade right.
So, keep patience and try to keep a high win/loss ratio.
Like- if you have decided to close your profitable position with 1% return then quit from your non-profitable position with a loss of 0.5%-0.6% .
Further, this win position and the loss position should be in a ratio of 2:1.
7.Don’t miss out the first hour trading:
In most of the time, first 30minutes after opening the market is the highest time of earning good amount money.
Because, generally, within the first 30 minutes the primary trend of the stock is decided.
If there is any specific good/bad news of a security before opening the market then this first 30 minutes of trade will give you the high/low for the day.
8.Always keep an eye on the news:
Before starting your trading for the day, take a look at that day’s special news, economical news and the political news, especially the news on the stock on which you are going to do trade and while trading stay connected with the live news.
If there is any special political/financial event on that day like the budget or declaration of monetary policy then try to avoid day trading for that day because market may fluctuate heavily on that day even beyond your calculation.
9.Keep a Track Report:
If you want to be successful in longer term as an intraday trader then maintain your track records in a excel sheet or in a notebook. Try to keep the below mentioned information:-
• Security Name
• Entry time
• Buying Price
• Entry Rule
• Exit Rule
• Selling Price
• Selling Time
• Profit amount
• Profit percentage
• Remarks (if any)
10.Never repeat the same mistakes:
Being a new trader, you may do some mistakes but try not to repeat them. Write down your mistake in the “Remarks” column of your tracking report. The mistakes may be like the following:-
• Not selling the stocks after reaching your
• Taking too much position on margin.
• Taking position more than 2-3 securities at a time, etc.
11.Set aside your Profit:
The last important rule is saving your net profit. After deducting all the possible charges, set aside your net profit. After every day trading, you transfer your net profit in your bank account.
If you do not set aside your profit , then after a week , your risk capital will increase and you may take a large position beyond your control level and which may lead you a heavy loss taking back all your profits.
It’s not possible to become a successful intraday trader in a single day. It’s depending on your knowledge on stock market and following the rules by heart. It will be better if you try to educate yourself on basic technical analysis. There are numerous free materials on internet and many good courses on e-learning websites, like- udemy, skillshare, etc. I have also one course specially on this area :”How to become a successful day trader“. Get 50% off on this course by clicking on the link.
Start learning and watch the movement of the stocks, it’s important.