What parameters to consider while Intraday Stock Trading?
Now before we go into the parameters for intraday trading one must have the basic knowledge of intraday trading.
What is intraday trading?
In an intraday trading a trader takes a position of either stocks or indices or futures or commodities for a very short period of time depending upon the time frame one chooses and covers the position within the same day and not carry the position for another day irrespective of profit or loss.
In intraday trading one can go either long or short, long means buying at a lower rate and then selling at a higher rate, short means first you are selling a stock at a higher rate and then buying it at a lower rate.
Is the trader novice or experienced in trading?
How much knowledge a trader has in the technical indicators such as support levels, pivots, resistance levels, etc before they take an intraday trade. A trader should be able to analyze a situation where to book a profit or where to exit with a loss by placing a stop-loss order.
How many years of experience the trader has?
Intraday trading requires quite an amount of experience about stocks, price action, and its movements.
Is the trader well versed in online trading?
In intraday trading each individual trader has their own strategies that they know through their own experience and knowledge skills, money management techniques, and risk-reward ratio. One should be able to know the previous day's close, candlestick patterns, moving averages, and other technical indicators
It is always better to start with paper trading and gradually get accustomed to it and make consistent profits before making an actual trade. Intraday trading can be done in cash, futures, or in commodities. One needs to know when to book profit or how much they are able to take a loss. Each day is different. If the trader is comfortable with trading and has the above basic knowledge one can consider intraday trading.
For intraday stock trading the below parameters are to be considered
Intraday trading is not as easy as it seems.
For any trade one must not forget to place a stop-loss order which one should be able to bear without losing one's hard-earned money by having a big drawdown.
The trend is the friend: Always trade with the trend
If the market is bullish select a bullish stock with volumes and trade long.
If the trend is down select a bearish stock and trade short.
Timing is also important and price action is not always linear there are always whipsaws and on should be able to judge the movement of the stock and trade.
Usually for long trades one buys at support and sells at resistance and for short trades sells at resistance and buys at supports.
Selection of a time frame and time of the day is very important some may trade for 15 minutes, 30 minutes, one hour or two hours depending on their experience and skills, capitalization, money management, etc. and stick to it irrespective of the outcome.
Studying the chart movements days support levels, pivot, resistance levels, moving averages, close of the previous day, open, high, low, average and volumes, the trend of the day, stochastic, MACD, RSI indicators will help to choose and pick the right stock to trade.
It is always better to select a liquid stock for intraday trading.
All trades cannot be winners so stop is a must.
Before entering a trade one must have an idea of where to place a stop-loss order.