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8 Challenges Intraday Traders Face in Indian Stock Market

intraday trading challenges

It is a very famous saying ‘No Pain No Gain’.

In the intraday trading markets, this ‘pain’ can come in many different forms. The pain can be of the losses you incurred due to wrong trades or the tough task of controlling your emotions and overcoming your biases. Your stock broker can also cause you pain and so can the market situations. All these pain points which an intraday trader faces are some of the most common challenges that intraday traders face in the stock markets. But, only by overcoming these challenges you can become a successful intraday trader. Let us discuss some of the major challenges below along with certain tips on how to overcome these challenges in day trading.

8 Challenges in Intraday Trading

1. Placing wrong order types

2. Getting stuck with wrong stock broker

3. Trading with untested strategy or not having a strategy:

4. Stick with Traditional Stock Market Trading

5. Jumping into intraday trading without knowing your risk appetite

6. Lagging behind on latest news

7. Trading against the trend

8. Listening to heart and not indicators and signals

1. Placing wrong order types

This is one of the biggest challenges that you are likely to face in intraday trading. Each different type of order in a trading platform has different features and uses. To know as to which order type is best suited for your needs is the key to gaining success in intraday trading. To buy or sell a stock at a fixed predefined level, there is a different order type, whereas, to buy the stock at the currently trading price you might need a different type of order. Market order is used to buy or sell the security at the market price, whereas limit order is used when you wish to buy the stock at the fixed level.

2. Getting stuck with wrong stock broker

You might have been attracted by the low account opening fees or the low brokerage while opening your first Demat account for intraday trading. But if your stock broker does not have a smooth mechanism of placing trades, transparency in maintaining PnL statement, technological assistance to help in trading, then you might be facing another very common challenge that intraday traders face.

In some cases, stock brokers also flout the SEBI guidelines and use the money deposited by clients for other purposes, which is illegal. Remember, the trustworthiness and compliance of a stock broker are extremely crucial and this applies equally for intraday trading and long term investing.

3. Trading with untested strategy or not having a strategy:

This is not an external challenge, but a challenge which you can easily overcome by the right approach. You have complete control over this problem if you are facing this in your trading. An untested strategy is nothing less than shooting in the dark. Intraday trading requires a lot of research and understanding of the markets which helps in developing the right strategy for you. If you do not have time for research, you can always take help of a certified investment advisor who will prepare a strategy for you according to your financial goals, risk appetite and personal aptitude.

4. Stick with Traditional Stock Market Trading

Old days are gone when trading was done by placing calls to your broker. People did not have access to latest technology in intraday trading, and often ended up losing out on major market movements which resulted in losses. Today, there are a lot of sophisticated tools and technology available in the market, which helps in lightning fast placing of orders in the fast moving intraday markets. There are even robots working in the markets which take advantage of price change occurring in microsecond, called high frequency trading or ultra-high frequency trading. As the world is moving towards faster and smoother technology, not being technologically up to date can be a big challenge for intraday traders.

5. Jumping into intraday trading without knowing your risk appetite

Not knowing the risk which you can take in the markets is a big challenge that you may face if you do not keep a check on your emotions. This challenge too can be overcome by being aware of your risk and trading within your limits.

If you do not know your overall risk appetite, you can get in touch with a certified investment advisor and get your risk calculated to know whether you should be trading in intraday or not. Many people who do not have the capacity to trade in intraday trading get attracted to the prospect of earning money and start trading which is wrong.

Intraday trading is a highly risky game and a person can lose all his earned money. Hence, a person should never trade with the money he cannot afford to lose.

6. Lagging behind on latest news

Markets react quickly to news and this gives many intraday traders the opportunity to gain profits. Any positive news regarding a company is bound to push its share prices higher. Negative news on the other hand is an indication of a company’s share prices falling. So if you are not able to keep updated with the latest happening around the world, then this is a challenge you need to overcome by subscribing to the fastest source of news. Newspapers cannot be trusted for the same, since the markets have already reacted to the news by the time it gets published and printed.

7. Trading against the trend

In intraday trading there is a concept which says ‘make trend your friend’, which means you should never trade in the market opposite to the trend. If the markets are going up, never place a bet for the falling markets and vice versa. Many people feel the urge to predict the opposite and bet on the same. But in intraday trading it never helps people make money.

Sometimes you may end up placing a sell order in a bullish market and a buy order in a falling market. This will only lead to loss and cannot be called wise.

8. Listening to heart and not indicators and signals

If you trust your intuition more than market signals than it is a huge challenge you have to overcome. While intuition or sixth sense helps a lot in life situation, the same cannot be said true for stock markets which give signals of their future movement in advance, While some of these signals or indications might not seem logical or might not be the exact prediction of the future course of the markets, they still are accurate a lot more than intuition.

Many traders face this problem and end up losing money in the markets. Hence, you should always place your mind over your heart when it comes to stock markets and follow signals of the market to ascertain it directions.

CONCLUSION

All these problems and challenges of intraday trading can be resolved if a person has a proper plan and strategy for investing in intraday markets. Right from researching about the process of trading to research about stocks sectors and order types and understanding behavioral biases in intraday trading which affect your trading pattern. Everything related to the markets requires, study, understanding and control to master the art of intraday trading.

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As On 30th April, 2020
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