Intraday trading basically refers to placing trades for both open and close in one session. The aim is to capitalise on short term movements in the market rather than buy a trade and hold on to it for the long haul. There are a number of securities that you can perform intraday trading with, including forex, futures, options and stocks, and you may be quite surprised by just how much the market can move within just a few hours.
While anyone can get started with intraday share trading – all you really need to get started is the knowledge on how to trade shares and a trading account – it’s best suited to those that have time to sit by their computer or mobile device throughout the day. You’ll need to have the time available to keep a close eye on your trades in order to know when to sell.
Want some intraday share trading strategies for beginners? Keep reading.
Look for Medium to High Volatility Stocks
In order to make money on day trading, you need to be willing to purchase stocks that are rather volatile. This is the opposite advice that most people give to new traders, however, if you purely purchase low volatility stocks, you won’t make much money at all as the day goes on; in fact, you’ll probably end up losing money due to brokerage fees. Stocks that move by at least 3% per day or worth keeping an eye on, as are those that move by more than $1.50. Both of these filters will give you different stocks to look at.
Trade Weak Stocks in a Downtrend and Strong in an Uptrend
Weak stocks tend to have a greater potential for profit when the market is falling. However, it is worth noting that some industries and stocks could prove weak for weeks or even months at a time. Likewise, when market futures and indices move higher, you want to look for stocks that are more aggressive than the futures. These stocks provide more potential for profit as they tend to move the market higher.
In order to choose the best stocks to purchase for intraday trading, make sure to look at those that correlate with the NASDAQ and S&P 500 indexes. By looking at these indexes, you can isolate the stocks that appear to be specifically strong or weak. These are the ones that you want to invest in.
Cash Out Regularly
When you perform intraday share trading, the amount of time you have available to trade is limited. Therefore, if you’ve invested in a trade that is moving in the opposite way to what you want it to, don’t be afraid to cash out and move on to something new. If you follow the market trends, you should be able to tell instantly when it’s time to sell a stock and exit the trade. Again, this is why being able to stay close to your computer or mobile device throughout the day is important. Fail to do so and you could miss the exit point and therefore lose money.
Avoid Playing When the Market Stalls
The market won’t always trend, and on days like this, it’s best not to get involved in intraday share trading. Being unable to establish which way the market is trending is very risky and it’s likely that any stocks you do purchase won’t move enough to be able to make you a profit. If you do still want to get involved, one strategy that you can look into is range trading. This basically involves looking for stocks close to – but not right at the – top or bottom of a trend and purchasing those that come with a reward higher than the risk. It’s not the easiest strategy for beginners to understand, however, so we recommend avoiding it until you have more experience to spot the best trades.
If you have the time and patience to monitor the stock market throughout the day, there’s no reason not to get involved in intraday share trading. It can be confusing at first but if you trade with a good beginner platform, it should begin to make more sense. Hopefully, the tips above will help you achieve success.