Principles for intraday trading
When a stock is moving upwards a trader gets excited and sometimes ends up adding stock. Trader should invest only to the extent of risk he is willing to take. His excitement about the rising stock may lead to panic moments within few hours of trade
Very often we observe that intraday traders go through a lot of emotional stress. Primarily they need to keep in mind that they have to act like robots and keep their emotions out of the trade.
Irrespective of emotions or psychology you need to have a set target and stop loss.
To overcome the emotional quotient (EQ) factora trader needs to follow certain rules or principles for intraday trading. Let us try to study and introspect them.
Always trade in liquid stocks. Liquid stocks are those in which there isnot much difference between the rate of buying and selling.
Keep away from stocks which are moving sideways and inliquid stocks also. Invest in stocks in which there is some kind of action. An inactive stock does not yield any profit.
In intraday always try to take small trades. When a stock is moving upwards a trader becomes excited and sometimes the trader keeps on adding stock.
Trader needs to keep in mind that he should invest only to the extent of the risk he is willing to take. His excitement about the rising stock may lead to panic moments within few hours of trade.
A trader should trade only after he has placed a stop loss also. This is technically called the principle of double trading where you buy a stock and also set a stop loss simultaneously.
Set a profit for yourself. Once target profit is achieved exit from the stock or square off and try not to become more greedy and wait for further uprise because you tend to lose what you have earned also. Lose less and exit.
Bearing a small loss is better than huge loss. So, exit from a stock with low risk rather than taking high risk.
Never try to follow the principle of averaging by buying more additional units of a falling stock. In intraday trading we should never follow the principle of averaging.
After stock selection try to be away from the noise. If you hear any news related to the stock just ignore it since you have already made a decision.
Any analysts view on this also should be ignored after you have invested. Prior technical study would be of some help, but once decision is made noise should be ignored.
Any trading day should never be treated in isolation. Factors like previous day's support and resistance play a key role in influencing the price of today.
Previous days price behaviour would be of immense help in stock selection.Religiously follow the above rules for successful intraday trading.
(The author is a homemaker who dabbles in stock market investments in free time)