Intraday trading in India is seen as a gamble in the stock markets. Often people link experiences in intraday markets or stock markets in general with one’s fate and fortune, claiming that only the fortunate people can earn money in the stock markets. However, this is not true.
There are many hidden secrets which make intraday traders successful. These trade secrets helps them get a better understanding of the markets and plan their trades accordingly. You too can learn intraday trading secrets from the people who are much more experienced and seasoned in this business.
In this article, we will cover some of these points for you which will help you in understanding what is it that intraday traders know, which helps them make money?
1. Square off Your Position Without Telling
2. Markets Controlled by Big Players
3. Sentiment Driven
4. Not always find ‘logic’
5. Professionally Traders Can Successful
6. Stoploss can Prevent from Failure
7. Making lot of Money
8. Focus on All Stocks
In the intraday trading segment, it is your stock broker who places the order for the buying and selling of the stocks on your behalf. Most stock brokers do this on a fixed margin which is a small percentage of the total order size you are placing.
However, if the margin you have paid is depleted due to loss in the trade and you are not able to pay additional margin, your stock broker may square off your trade without telling you.
For example, you purchased shares worth Rs. 100 by paying a margin of Rs. 10 and the share price falls below Rs. 90. In such a case, you will have to pay additional margin to cover up for the loss. If you do not have additional money to pay as margin, your stock broker will sell the stock at a loss i.e. at rs. 90 even if your analysis says that the prices will bounce back.
While it is an illegal practice to deliberately influence markets and cause deliberate fluctuations in the stock markets, it is true that big players who have a lot of money invested in the markets can manipulate the markets. This is done through ‘operators’.
When big players such as some big brokerage houses or parties who have a huge sum invested in the markets want to manipulate the markets, they take help of many small sized brokers or traders.
For example, a big broker wants to push up the price of a particular stock ABC to get profit for a major client. The broker will ask his ‘operators’ to buy the stock of the company ABC thus spiking the demand for the stock, which leads to its prices going up overall.
There is no sound rationale for the increase in prices of the ABC company. A seasoned day trader can identify such a sudden increase and stays away from it, since there are chances that the big broker, who has caused an increase in the prices, will sell it at higher price, thus leading to sudden drop in the prices.
A major difference between intraday trading and other forms of trading is that there are strong sentiments at play in the intraday trading markets. If the trading community is apprehensive about the economy, then the markets will fall. If the community is confident about the future, then the markets will rise. This affects the markets highest on days when a major event is expected to happen. For example, election results.
Intraday traders always place their bets on the markets before the event occurs to make use to the sudden volatility. This taking of position shapes the sentiment of the markets and the economy in general.
For example, if the stock markets are moving upward before the budget speech, it means that the people are expecting positive news. And if the budget speech is positive for the trading community, the stock markets will continue their upward journey. If not then people will immediately exit their positions, fearing a fall in the markets and stock prices.
As intraday trading is highly sentiment driven, it is not always possible to find logic in the stock markets. Markets defy logic at many times as traders become indecisive on whether they should buy or sell a stock. When this happens, there cannot be any prediction as to in which direction will the markets move. Even technical analysis, which is used in intraday trading, requires three indicators to give a definite buy signal or sell signal for any stock. Hence, a seasoned intraday trader must be prepared to deal with such illogical movements of the markets,
Very few people who trade in the intraday trading understand that say trading also requires the same amount of time, energy and understanding as running a business would require. Just like there are multiple factors which affect the performance of a business, there are many factors which influence the stock markets. You need to understand each and every aspect related to intraday trading and consider it as a full time job rather than just something to be done off hand. When intraday traders do not take their work seriously, it leads to losses.
A stop loss limits the loss that you may incur if the prices of the purchased security move in the opposite direction that the desired one. Many people underestimate the importance of placing a stop loss. Especially in intraday trading where the trading happens on a margin, not placing stop loss can be inviting failure. You should never skip this important and crucial step of placing a stop loss to your trades.
While trading in the intraday markets, it is important for you to understand that you cannot earn a huge amount of money in a single day. You have to remember that the markets will open the next day and give further opportunity for trading. However, you must never overtrade beyond a certain limit or capacity. You should have affixed capacity for intraday trading and should not go beyond it.
While you might be tempted to place trade in a small company which is not popular but has a good growth chart, it might not be wise to do so. The secret to successful intraday trading is picking the right stock which has the required liquidity and volatility to ensure that you are able to buy as well as sell its stocks. There should be buyers in the market, when you want to sell and sellers in the market when you want to buy. Stock which does not have sufficient quantity of buyers and sellers is not a good stock for intraday trading and you should stay away from such stocks.
Mastering intraday trading by understanding all these small things about the trade can help you master this art and make substantial profits in the intraday trading. A certified investment advisor who gives you recommendations on the basis of research ensures that you understand this minute information about the trade and become successful.
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