In the regular stock market, intraday trading stands riskier than investing. Several traders, especially novices, end up losing money in trading due to the high volatility of the stock markets. As per convention, a trader must avoid risking above 2% of their total trading capital on one trade to ensure appropriate risk management in this kind of trading. It is crucial for beginners to learn the basics of intraday trading to avoid losses.
Intraday Trading Strategies
To get an advantage from short market fluctuations, traders prefer certain intraday strategies for a broader trading plan. Let us explore some of the most effective strategies for trainers to make better decisions and gain maximum benefits.
- Reversal trading strategy
When a trend reversal is imminent, it stands as a highly effective trading technique for traders. Under this strategy, you must use technical indicators and candlestick charts to analyse if a particular trend in the market might reverse during a particular trading day. When the signs point to an impending reversal, you must enter trade positions and invest in intraday stocks for today. As it is a high-risk strategy that functions against the present market trend, ensure to use stop-loss orders in order to limit the risk.
- Momentum trading strategy
Momentum trading is the best strategy when there is a clear trend in the stock market. This trading strategy is effective if there is a strong price momentum in a specific direction. You can utilise it to invest in the best shares to buy today that align well with the direction in which the market is trending strongly.
- Scalping trading strategy
When used right, scalping is a highly successful strategy in the volatile market. As there are several small yet frequent price fluctuations, performing intraday trading that provides large profits might be impossible. However, with this strategy, you can perform multiple trades with each having the potential to provide small gains.
- CFD trading strategy
CFD trading lets traders take advantage of price movements without even owning the assets, through leverage to control bigger positions with smaller capital. It allows trading across short selling and various markets.
- Gap and go trading strategy
This trading exploits price gaps at the open market, driven by earnings reports or news. Traders monitor gaps that come with high volume, short positions on downward moves or long positions on upward momentum. The success of the strategy depends on volume confirmation and swift action.
- Pivot point strategy
This strategy stands as a valuable tool to identify resistance levels and critical support, especially in the stock market. Breakout and range-bound traders get to implement this strategy for determining exit and entry points. A pivot point offers a potential inflection point where the market sentiments transform from bullish to bearish or vice versa.
Conclusion:
Intraday trading includes same-day trade management and settlement. Several traders try to achieve smaller profits using their trades, and others look for the best shares to buy for long term. The golden tip to successful intraday trading is to ride with the market trend to generate profits. However, intraday traders always encounter risks that are present in the stock markets. Fluctuating daily volume and price volatility are the major factors affecting the stocks chosen for intraday trading.