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Thursday, September 10, 2015

Top 5 Intraday Trading Tips

This post is a collection of my best intraday trading tips to help you make money on your intraday trades.

1. Pick high volume counters


For all intraday trades, always bet on counters that are generally traded in high volumes. This is primarily because in low volume counters, even a handful of investors betting in the opposite direction as you could cause you to lose a lot of money. Such a situation is easily avoided in high volume counters where the price movement will be determined by the overall market sentiment.

2. Set small achievable price targets.


The secret of making big money through intraday trades is to buy in lots and set small achievable price targets.

Consider the following example:

You buy 100 shares of Company X for intraday trades @ Rs. 100 and yourself a target of Rs. 105. In case the price hits Rs. 105 at any point in time during the day, you make a profit of Rs. 5 x 100 shares = Rs. 500

On the contrary if you buy 500 shares of Company X @ Rs. 100 and set yourself a target of Rs. 101, your target profit would still remain the same i.e Rs. 1 x 500 shares = Rs 500.

However, a price movement of Rs. 1 is more easily achieved and in high volume counters, hitting the target could be a matter of minutes.

Note that in intraday orders, you only need a fraction of your traded value as margin in your account.

3. Set a limit order for square off


Once your intraday trade order is executed, set a square off target by placing a limit order with your target price.

Continuing with your previous example, the moment your buy order @ Rs. 100 gets executed, you place a square off sell order (limit order) @ Rs 101 (i.e our target price).

The moment the share price hits Rs. 101, your sell order will get executed and the profit credited to your account. This saves you the trouble of having to remain glued to your computer screen waiting for the target price to be reached.

4. Use stop loss trigger


Use a stop loss trigger for your intraday trades to minimise losses in case the stock prices make a rapid move in the direction - opposite to the one you are betting on.

5. Its NOT about fundamentals


When it comes to intraday trades, company fundamentals don't matter much. The price movement is heavily influenced by current events. For example, the announcement of a company bagging a major contract could send the company stock prices skywards. Similarly, disappointing quarterly results could result in a steep fall in price. It is important that you do your homework right before picking up a stock for intraday investing.

I hope you will find the above intraday trading tips useful. Happy investing!

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