Technical Analysis for Intraday Trading: Strategies to Follow
There are more than 15 million intraday traders in India with a market size of over 4500 crores. A proper technical analysis for intraday trading helps the make the most of the market movements on a daily basis. There are thousands of DEMAT account holders who daily enter the world of intraday trading. Intraday trading is amongst the most practiced trade form in Indian markets.
The low requirement of capital clubbed with the instant returns have made intraday, the most practiced trade form. Intraday traders usually try to extract profits from small market movements. They buy stocks in huge quantities and a small price movement in the stock price creates a big difference at the bulk level.
However, intraday trading also has its own set of risks which are very high. Intraday trading requires quick decisions and executions which are usually not possible for everyone to make. It also requires to dedicatedly spare time until and unless you square off your position, because if the same is not done by market closing time, the broker automatically exits the intraday position at the time of market closure and at the price available at the moment.
There are certain strategies, which can be beneficial for every intraday trader, right from a noob to a pro. These strategies are also certified by SEBI and are thus legal to use:
Technical Analysis for Intraday Trading: Strategies to Follow
1. Technical analysis for intraday trading
You should make sure that the stock you are trading in is liquid enough which will make it easier for you to close and exit your position by the end of the day. A high liquidity stock means that there should be plenty buyers and sellers for that stock.
Trading in multiple high liquidity stock help you in squaring off your positions successfully at the end of the trading day. Since the movement in intraday trade is not usually much, you need to place large orders to book profits, which again require the liquidity to be good.
2. Right Tick Size of the best share based on technical analysis for intraday trading today
The gap between two orders in the order book is known as the tick size. The minimum gap in five paisa. So again, to ensure that the order is bought or sold at the right tick, there should be enough volume or liquidity in that stock. If the volume is not enough, the order can be executed several ticks away which can go against your plan or strategy.
A stock with low liquidity or low demand should be strictly avoided as long as your practicing intraday trading. Such stocks may be considered for delivery based trades, but not for intraday trading.
It is usually retained as a debt portion in your portfolio.
3. Own Your Trade
It is always necessary to know who owns a stock before trading in it as a part of technical analysis for intraday trading. Details of stock’s holding pattern are available on the BSE and NSE exchange. A closely owned stock, i.e. a stock with a very few operators like brokers having 70-80% share, can be highly volatile and thus can reduce your chance of having a successful trade. A stock should be always widely owned, which in turn helps in minimizing risks.
Knowing all the details about the stock is also a key aspect of technical analysis for intraday trading, as it helps you to plan your trades based on the ins and outs of the stock mentioned in the details.
4. Set a stop loss
A stop loss is a trigger which will automatically square off your position if it falls or rises below a specified limit. It is one of the most important factors in an intraday trade to minimize risk. As the name suggests, it helps to stop your loss after a specified limit. In a volatile market the stock prices can rise or fall sharply incurring huge losses. Stop loss helps you to limit your losses if the stock prices fall below a specified level, and for traders who short sell it limits losses if the prices rise above a specified level.
5. Achieving the target
You should always stick to your target initially set for a stock as a part of technical analysis for intraday trading. The time to close or exit a trade in case of intraday is very limited and thus you should be very quick and observant.
6. Momentum Intraday Trading Strategy
Intraday trading is all about momentum. You need to identify stocks before they make a big move and be ready to grab the movement as soon as it is made.
These strategies are usually beneficial either at the beginning of market hours or during the circulation of any news which can impact market behaviors. The stock should move with a significant momentum in one direction. This strategy usually has a profit to loss ratio of 2:1 and can make quick impact on your returns.
7. Gap Up Gap Down Strategy
There are times when there is a gap between the prices on the charts of a stock. These gaps are usually created when there is no trade in between an upward and downward price. Traders make the most of this gap by buying at the lower price and selling at the higher price.
If you are new to trading and don’t have enough experience of market trends or don’t know about technical analysis for intraday trading, it is better to take guidance from a SEBI registered investment advisor. There are various SEBI registered and renowned investment advisors like CapitalVia who can help you in guiding you with Intraday trading by providing research-based advice and levels for intraday trading. These strategies can be beneficial but whenever you invest or trade in the market your capital is at risk. It is always better to enter the market with proper research and guidance.
Author
CapitalVia
Pioneer in Investment Advisor
