The newbies who are yet to test the waters of the stock market may have heard these jargons many times- Procter Gamble is a buy call with the target price 1288 and a stop loss of 1280. So, what does that mean? Well, the call is placed for intraday trading – a popular form of trading among investors.
Intraday Trading refers to the trading of stocks, ETF on that particular day. You can buy and sell the shares within a short period without having to buy the physical certificates. You purchase the certificate when there is a complaisant trend in the stock market and when the trend becomes hawkish, you can sell them. The difference between the two is the profit earned.
What are these intraday trading basics the new traders to know about?
Here, in this article, we will guide you about the intraday basics.
- An investor needs to have a keen eye on the market- Intraday Trading is not everyone’s cup of tea because an investor needs to have a prying eye on how the market operates. The investor should look at the overall sentiment prevailing in the market, and he/she should have a deep knowledge about the sectors, along with a grip over trading.
For example, if there is news that the rupee dropped by 64.57 in intraday trade then the investor should think what implications it would have on the stock that he/she has purchased.
- Choose the portfolio carefully– It is important to select the best-performing stocks that preserve capital while mitigating the risk. It is better to trade with a single stock at a time; it will help the investor to learn the ins and outs of intraday trading basics. Once you have gained confidence, you will have a better understanding how the market operates.
- Learn the jargons of intraday trading– There are several jargons that govern the intraday market like
- Breakouts– Breakout is a term used in the stock market that signifies when the stock breaks out above its earlier resistance level.
- Stop Loss– When you ask the broker to sell a share when it reaches a particular limit. This order is devised to inhibit the loss of the investor in a security.
- Candlesticks– It is a kind of chart in the form of candle that represents 52-week high, low or close for a particular period.
- Value area– You can pick the intraday stock based on the value area. The value area is a point where almost 70% of trade happened on the previous day. If the market opens below that value area and remains in that zone for two and half hour period, then there is 80% chance of filling in the value area. This small concept can help you to find the market direction and increase profitability.
- Check the leading newspapers for intraday prediction of trade-The leading newspapers can guide you about the stocks to pick based on their predictions. They can even guide you to the next step. Through their help, you can remain updated with the latest market news, views and cues. Apart from that, they will suggest you ways on wealth creation.
Intraday trade is a risky trade because the time horizon is small and is meant only for cash-rich investors or investors with a high-risk appetite.