In Intraday trading, traders buy and sell stocks within the same trading session and cannot carry forward to the next without squaring off the positions. If the market condition changes and goes against the trade, a day trader may have to bear heavy losses. Therefore, this is a risky zone. Day Trading is generally the area for expert traders and more complicated for new users. One of the main reasons that make intraday trading complicated for new users is a lack of proper knowledge to make informative decisions. Let us discuss more reasons that make intraday trading complicated.
1. Absence of a trading plan
Day traders need to be disciplined. There cannot be successful day traders without discipline. Firstly, as a day trader, you need to set your trading plan and execute your trades according to it. For online trading, you must have a solid and focused plan for trading in stock market.
2. Chasing unrealistic expectations
An individual participating in stock market must have realistic expectations. If you are placing trades with the expectation of 5 times return, it is like building castles in the air. Trade with small amount of funds and expect decent returns will be the smartest move. Remember there is nothing like a risk-free trade. Have a realistic approach as per the market as its highly volatile in nature.
3. Trading without stop loss
One of the biggest mistakes is to place a trade without being habitual of a stop-loss strategy. Stop-loss is a must for every day trader in order to minimize the losses and save the invested capital. Profit target should be a function of the risk involved in a trade which is possible with a stop loss strategy only.
You cannot set a stop loss of Rs.6 and a profit target of Rs.5. It will be a negative risk-return trade-off because the profit target is less than the loss. You need to make a positive trade with a positive risk-return ratio.
4. Attempting to beat the market
A new user may take a position against the market in the hope of becoming a successful trader because of lack of knowledge. But it may be proved a wrong move to take an opposite position in the market. Their focus should be on understanding the market trend and take position accordingly instead of outperforming the market.
5. Focus on profits primarily than managing risk
Managing risk is a lot more important for day traders. In day trading, you can manage risk and not returns. Set strict limits for capital to be used in a trading session as a day trader. You can define the maximum capital and maximum loss for every trade. Every trade should be backed by strict stop loss.
6. No lesson from mistakes
No one can be a successful intraday trader without learning from past mistakes. What successful day traders do is evaluate the core reasons for past mistakes and take immediate corrective action. Make sure you do not lose on the lesson after losing a trade.
Thus, what a day trader can practice is –
- Stick to the Trading Plan.
- Use stop-loss.
- Start Small.
- Devote time to understand the day trading strategies.
- Be realistic about returns.
- Avoid taking positions just after opening the market because a new user can not handle such a volatile time in the stock market.
- Set aside funds for day trading that you are ready to lose.
How to start trading in India: To enter the stock market in India, you need a demat account and trading account. Find out a suitable stockbroker for you and open online brokerage accounts to start online trading.
Knowledge is Power
In the stock market, every participant whether an investor or a trader must focus on increasing the knowledge of trading. The answer to the question of how to start trading in share market is by being clear on fundamentals even before opening your brokerage accounts. Follow reliable financial websites. Look at the latest events in the stock market that affect stocks. Do your homework to make the trading less complicated. At least keep yourself informed about the stocks in the news. If someone does not have knowledge of basic trading procedures, do not hesitate to seek help from your stockbroker.
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