The buying and selling of monetary bonds like share certificates, stocks and mutual funds and closing of all transactions of the day before the closure of market on that day’s closing hour is known as intraday trading or ‘day-trading’. Traders involved in such dealings are called active traders or day traders. This looks simple and easy without carrying forward any account. But one has to be very sharp and fast and on their feet the whole time. One advantage in day trading is one does not require much money to do the transactions. Many times the transactions do not last for more than a few minutes. Sometimes the stock brokers gives these traders discount on the trading fees due to the trading volume earned.
The day traders are mockingly called gamblers or bandits by the other traders as their business can be extremely profitable or a total loss. This is because of the fast nature in transacting and the rapid results. They can learn a few tips from the trading rules which could help them in surviving the odd day when everything is going wrong which are:
Homework: The day trader before the start of office hours should be aware of the economic and political scenario of that day, particularly the Global markets. There could be some drastic changes which could affect the share market. They should accordingly plan which scrip’s should be traded in. This is very important in the Indian stock market due to some scam or illegal activities always likely to be going on.
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Planning: The day trader should spend at least 1 hour in the evenings after the trading to review the day’s trend and again plan in the morning how they intend to transact for the day.
Schedule: The intraday trader should be in the trading exchange an hour early. In case of any sudden developments, there could be some heavy drops or rise in share prices which they had not anticipated earlier. They have to re plan accordingly.
Anticipate: The day traders may misjudge. They expect scrip to rise and buy them but instead the scrip falls. “Taking heat” is the term used when the trader makes such mistakes and loses money.
Patience: It is not practically possible to make profits from day one. They should not get disheartened at losses in the starting stages but be patient.
Timing: The intraday trader should be alert and quick in taking decisions. But hastiness may again lead to losses so here again the trader has to show their patience.
Discipline: The intraday trader should have self control. They should not get frustrated at the losses and act in a rash way which could lead to more losses. The traders should have the determination and persistence to control their feelings and act in a disciplined way.
Self Confidence: The day traders should have the confidence in their way of trading. Self confidence plays a major role in success.
Fear & greed: These are the two evils of trading and every trader should have the sense of avoiding them. Fear could make the traders lose confidence in them selves which is the worst thing that could happen. Fear also could make a trader slow and hesitant to act on time there by making more losses. Greed is just the opposite. It could make you over confident and act without thinking or waiting.
Set limits: The day trader should at the start of the day set themselves a certain amount as limit. They should stop trading for that day once they come to that limit.
Mistakes: While working online, the intraday traders could make some errors. Instead of buying the traders could say sell or vice versa thereby messing up the whole transaction and losing a lot of money.
Breakdown: The computers too can have a break down. If the system is jammed at the exchange the transactions are stopped but if the error is at the trader’s computer transactions continue and the trader stands to lose or gain.
So they have to be prepared for the worst.
The trader should note that patience and timing play an important role in the success of their intraday trading. If the traders follow the rules of trading, they would gradually climb the steps of success and become well known and famous day traders.