Top 10 Intraday Trading Strategies & Tips for Beginners

Intraday trading is becoming popular among beginner traders in India because of its potential to deliver exceptional gains. However, it also involves considerable risks, which makes proper knowledge about intraday trading crucial. While theoretical content is abundant on intraday trading, intraday trading tips are barely addressed. 

In this blog, we will discuss the top 10 intraday trading strategies and tips for beginners.

Top 10 Intraday Trading Strategies & Tips

Venturing into something new will always be accompanied by the fear of the unknown. Needless to say, the realm of trading entails risks and even higher levels of risk if it is intraday trading. However, these risks can be reduced or avoided by mastering certain tips and strategies essential for success in intraday trading. 

1. Trading with the Trend 

Go with the flow. When you create trading positions in the direction of broader market trends, the risks are significantly reduced. Going against the market trend can cause significant losses as the market trend represents prevailing investor sentiment, which can impact your trading position in a specific security. This is how you do it: 

1. If the market trends are bullish, focus on buying stocks exhibiting bullish candlestick patterns. 
2. If the market trend is bearish, focus on stocks with bearish candlestick patterns.  

2. The 3:1 Risk Reward Ratio 

A favorable risk-reward ratio ensures that potential gains outweigh potential losses. Ideally, aim for profits three times higher than your risked amount to maintain profitability over time. For example, if you have a stop-loss of ₹500, then you should aim for a profit of ₹1500 on that particular trade. 

3. Prioritise Liquid Stocks 

Liquidity is crucial in intraday trading as it involves quick buying and selling of stocks. A slight delay in order execution can result in you missing a profitable trading opportunity. Liquid stocks help you with that as they can be swiftly bought and sold without affecting the stock price. 

4. Setting Stop-loss and Target Levels 

Set predefined exit points to protect your capital. Do it for each trade. If the trade moves against you, the stop-loss order helps you exit and reduce your losses automatically. On the other hand, setting a target level helps you lock in profits when the stocks reach a desired price. 

5. Using the VWAP Indicator 

VWAP (Volume Weighted Average Price) helps identify the average price a stock has traded throughout the day, weighted by volume. A price above VWAP signals a bullish trend, while a price below it suggests bearish momentum. When the stock price moves above VWAP, consider buying the stocks as it is indicative of a bullish trend. On the contrary, when the stock price goes below VWAP, consider selling opportunities as it indicates a potential bearish trend. 

6. Get hold of Key Market Hours

Intraday trading is often characterized by volatile market conditions. Traders look for increased volatility to make positions, as correctly predicting market direction during these times can help you make substantial profits within a short span of time. Identify the key market hours to ensure maximum profits. 

• The First Hour When the Market Opens 

The first hour after the market opens is subjected to high volatility. It is because the traders react to overnight news. 

• The Final Hour Before Market Closes 

The final hour before the market closes often witnesses an increase in volatility as traders close their existing intraday positions. 

Avoid trading in the afternoon as the trading activity decreases during the afternoon hours. 

7. Track Market News 

News regarding significant economic events or a specific company can impact your trading performance. Keeping an eye on the market news will help you anticipate sudden price movements and make informed trading decisions. 

8. Avoid Overtrading 

As a beginner, you will often be tempted to catch every market move. While it may seem fun and profitable initially, it may gradually affect your mental health and cause losses in the long run due to poor decision-making. It is advisable to resort to a disciplined approach and focus on a limited number of high-probability trades. 

9. Follow a Simple Trading Strategy 

The internet has information related to a wide variety of analytical tools and strategies that often overwhelm us. However, it is advised to design and stick to a simple trading strategy that uses basic indicators to analyze the price movements of your stocks. 

Here is a list of some of the beginner-friendly tools: 

1. Moving Averages (MA): Helps identify trends by smoothing price fluctuations. 
2. Relative Strength Index (RSI): This tool helps to measure momentum and identify overbought and oversold conditions. 
3. Moving Average Convergence Divergence (MACD): This is useful for spotting trend reversals. 

10. Maintain a Trading Journal 

Maintaining a trading journal will help you stay on track and monitor your progress. It also offers an opportunity for you to analyze your trades, hence leading to a more refined trading strategy. 

Here are some key points to include in your trading journal: 

1. Entry and exit points 
2. The logic behind trade and market conditions.
3. Target and stop-loss levels.
4. Trading performance.
5. Key takeaways or lessons learnt for the day

Read Also: Understanding Intraday Trading Timings

Conclusion

Mastering these above-mentioned best strategies and tips for intraday trading will assist you in building a strong foundation for intraday trading. Remember, intraday trading can be extremely risky, and it requires knowledge, patience, discipline, and a well-defined strategy to ensure long-term success. 

Frequently Asked Questions (FAQs)