9 Intraday Trading Strategies You Should Know

Intraday trading involves buying and selling stocks or other financial assets on the same day. Traders aim to profit from price fluctuations during the day, closing all positions by the end of trading hours. As an intraday trader, whether experienced or new, you experience volatility that investors might not. You are susceptible to higher risks since you complete entire transactions in a single day. However, as an intraday trader, you can also make high returns with the proper knowledge and strategy. 

To ensure you begin with a good understanding of the practice, here is an intraday trading guide with strategic recommendations and handy tips.

1. Choosing liquid stocks

In the stock market, "liquid" refers to how easily an asset or security can be bought or sold without significantly affecting its price due to ample trading volume. The intraday trading practice calls for a lot of liquidity in the market. Focus on trading in large-cap stocks and avoid penny stocks with poor fundamentals and below-average past performance.

Also, avoid intraday trading with only one stock and aim to diversify your position across a few stocks. This kind of diversification can help you achieve a balanced intraday trading strategy and mitigate risk.

2. Freezing the entry and exit price

While doing intraday trading, several traders fall for a buyer’s fallacy, due to which they immediately doubt their selection after buying a stock. The buyers begin to believe that they have not made a good choice, with such anxieties leading them to make hasty and wrong decisions.

You can avoid falling for this fallacy as a trader by deciding an entry and exit price before beginning the transaction. These pre-decided prices allow you to remain objective and avoid unnecessary doubt. 

3. Set a stop-loss level

When intraday trading, your chosen stock may fall instead of rising. In such cases, the pertinent question is how low you will allow the price to fall before selling the stock. Deciding on a price you consider a square-off position is an important tip to remember. This can help reduce your losses and act as a safety net. 

For beginners, the 3:1 ratio tip works well. Using this tip, you can set your stop-loss at a price three times lower than the price you would have closed at to book a profit.

4. Booking a profit when you meet the target

The leverage and margins offered by intraday trading make this practice attractive to traders. With intraday trading, you have the potential to earn high returns. However, it is essential to remember that you need to exit the transaction while booking a profit and not get greedy. 

Unless you have good reason to believe that the stock price will climb higher, it is better to exit once you meet your target.  

5. Close your open positions

One of the best intraday strategies to adopt is to close all your open positions, i.e. complete your transactions. Often, when the stocks fail to give the set target price, traders opt to deliver the shares. The transaction takes place the next day, hoping to reach the target.

However, altering the type of trading practice might not be a wise move. Since you bought the selected stocks for intraday trading, they might not present the desired results through delivery trading. Therefore, look at the strength of the stock and only then take the call to opt for a long-term investment. 

6. Do not challenge the market

Predicting the stock market is a tedious task. Based on your market analysis, you will often make decisions regarding the intraday trading strategy you wish to adopt. However, when you begin trading, the market may go in the opposite direction. 

You must avoid challenging the market and getting fixated on your analysis during such scenarios. A better option is to sell your stock once it reaches a stop-loss level. 

7. Research thoroughly

When you identify the stocks, you wish to trade in, make sure to research the concerned companies. Reading up about the company can help you understand how market conditions can impact the stock. You should also check for any events like mergers, acquisitions, dividend payments, etc. These events can keep you updated and help fine-tune your timing. 

8. Timing

Conducting your intraday trading transactions at the right time is of utmost importance. Many traders advise avoiding taking a position within the first hour after trading begins. This hour is perceived to be very volatile, and thus, several traders tend to take positions post-noon. 

9. Choose the right platform

It is of immense importance to choose a platform for intraday trading. HDFC Securities provides an intraday platform that allows you to trade online, via the app, or through call. It hires well-qualified analysts and offers daily tips to help you choose the right stock. This platform can be your one-stop trading solution at a minimal cost. Explore the intraday trading facilities at HDFC Securities by clicking right here.

Did you know that per the data by the noted brokerage firm, the number of Demat account holders in India is 148 million? If you’re looking to open a Demat Account? Click here to get started. HDFC Bank Demat Services offers a safe, online, and seamless mode to keep track of your investments. 

Do you want to know more about Smart Invest? Click here to read more. 

​​​​​​​*Terms and conditions apply. This information communication from HDFC Bank and HDFC SEC should not be considered a suggestion for investment. Investments in the securities market are subject to market risks; read all the related documents carefully before investing.