Intraday trading is the toughest part of share market trading. It is known to be a very risky trading style. Most of the people who have just entered the stock market want to try their hands on intraday trading. Today in this article, I will discuss the best intraday trading strategy that you should use to get the maximum profit in the stock market.
The intraday trading strategy involves a lot of stress and risk as compared to positional or swing trading. Not only that, the emotions are very high when you do intraday trading. The failure rate in intraday trading is very high as compared to positional trading.
Intraday Trading Strategy
What one should do in such a situation is to follow the strict rules while doing intraday trading. If you follow these rules then the chances of losing are very less. Following are the rules that you should stick to when as a part of your intraday trading strategy.
Trade without Emotions
When you are doing intraday trading, you must know that you are competing against the fast-running machine. You have to trade like. a robot when you are a day trader. What does that mean? It means that you have to kill your emotions. You should not have any emotions while trading. Emotions like taking revenge trading, trying to recover the loss, having a strong bias on the market should be avoided. So if you want to become a good intraday trader, you should avoid such emotions and trade like a machine.
While going for intraday trading, you must decide your profit & loss numbers. Once you hit either of them, you must exit the market without any second thought. The whole purpose of intraday trading is to gain a fixed profit or lose a fixed loss. You should not deviate from this, which means if the position is going against you, you should book a loss and exit your position immediately.
Decide a Target
Before you start your day, fix the target for your day, whether it is a profit or loss. Deciding on a target at the beginning of the day is very important. Not only that you decide a target is enough, you have to stick to your target no matter what may come. It requires a different mindset. This is very crucial if you want to become a good intraday trader.
We take target for everything in life, like for our dream job, marriage, dream house, a vacation, etc. So why not take target for your stock market transactions. Most of the day traders have the daily target for the profits. But you know what professionals do? They have a target for the loss for the day, and that is their first priority.
That means, before the day starts, they decide this is my today’s maximum loss could be. If they hit their loss target, they quit the market for the day. They don’t try to go for another trade to recover the loss. Most day traders make this mistake. They will go for another trade to recover the loss. The stock market is risky, but you can control the risk by keeping strict stop loss on a daily basis. So in a nutshell, decide your exit before you enter a trade is a key to success in the intraday trading strategy.
Treat It As Your Business
Treat stock market trading like a business. Just imaging that you are running a restaurant business. To run it successfully, you need to initially invest money into it. Without this initial investment, you can’t do business. Likewise, stoploss in stock trading is like your investment in the stock market. Some time you may lose your money but some times you may earn more than that.
Take a calculated risk as you are taking in doing any business. Before starting any business, you must have decided the profit margin on your investment and calculated the ROI (Return on Investment). Same as that you must decide the ROI on the money invested in the stock market. Decide the return on your investment and do not try hard to overachieve that return. If you do so, you may lose the profit you have earned and will go into the losses.
Most people take unrealistic targets for profit. They want to earn 100% or 50% profit in stocks within a day or few days. The stock market doesn’t work like that. If you are one of them, I am sure that you will lose money in the stock market. Do not target unrealistic profit from the stock market. Now you must be thinking what is a realistic profit target? My personal belief and experience say that anything between 20% to 30% is a good realistic profit target from the stock market.
Don’t Over Do
As I mentioned above, decide the realistic target for your intraday trading. You should have a monthly, weekly, and daily target for your trades. The monthly target should be divided into weekly and weekly will be divided into daily targets. It is as simple as that. Once you have achieved your daily target, do not try to go for another trade to earn extra profit for the next day.
This applies even if the day is a bull run in the stock market. There will be an opportunity every day in the stock market. Do not have a FOMO (Fear Of Missing OUT) mentality. Go slowly and steady in the market. Rule number one – Emotion, works here. You have to control your emotion while doing intraday trading. If you follow this mantra, you will never lose your money and will have high confidence while taking a trade in the stock market.
It is not a 9 to 6 job that you have to keep on taking trades one by one until 3:30 p.m. What is important here is the high probability trade rather than the quantity of the trade. Remember, No trade is also a trade. In intraday, the lesser the better.
Become a Deaf During the Market Hours
Don’t ever take a trade based on the tips or news you heard on the TV or social media. There is a bombarding of information on the internet which makes you confuse. Rather, research on your own or trust the information from a reliable source only. This source should not be more than 1 source. A large number of sources will make you confuse and will have an impact on your trade decisions.
If you follow the news on Twitter or Facebook, then you are likely to get distracted and that will have an adverse impact on your trade decision. These news sources can influence your trade decision in a big way. People like you and me are thinking that the person on Twitter is highly experienced and let me follow his/her tips. There will be too much noise on social media, so it is better to refrain from social media during trade hours.
I would recommend refraining from social media all the time. There are so many so-called ‘market gurus’ available on social media to make you confused. Imagine, if the person giving tips on social media has such great knowledge, then why the hell he/she is giving tips to people and not become rich by applying those tips to his/herself? Their main business is to generate revenues from their followers on social media. So the takeaway here is, do your own analysis and follow that. Don’t listen to the market noise, especially social media.
Maintain Your Trade Records
As you should treat your trading as a business, you should keep all the trading records with you. Nowadays it is very easy to keep a track of all your trading records as most of the brokers are now giving an online statement for your trading. You should periodically check the statement to see all the profits/losses and various charges applied to your trade transactions.
This is important to know the actual profit/loss after considering the various government and brokerage charges. These charges may eat up a good portion of your profit. So your actual realized profit is lesser than what you have anticipated. It is thus, advisable to keep a track of all your trade transactions and check them periodically. Some brokers like Zerodha are providing trades at a very nominal brokerage.
It will also help you to do an analysis of your trades like, last month how many total trades you have taken, and what is the success ratio against that trades. What is the risk-reward ratio, Which are your most profitable days and why? Doing this analysis will give you insights into the outcome of your trades. This will help you to make an informed decision on your future trades.
If you want to become a successful day trader, you should follow the above intraday trading strategy. This will help you to get a higher success ratio in your intraday trading. These rules are self-implied by me when I used to do intraday trading. Currently, I am not doing any intraday trading instead of I am taking only positional trading in the cash market. There are pros and cons of intraday trading, but still, if you wish to do intraday trading then you should follow this strategy for a higher success rate.