Intra-day trading – 4 mistakes to avoidby Pankhudi Dave Head Finance Manager
Intra-day trading, as the name suggests is a term used to refer to the process of purchasing and selling stocks within a single day of trading. You purchase stocks with the intension of earning profits by harnessing the stock indices movement. Here, the purpose is not to stay invested for a specific period of time but to earn profits within a single day of trading. Most investors rely on intraday trading tips provided on business channels and forums to make their daily investments. But if you are not aware of how this type of trade works, you may end up booking major losses. So, here are 4 mistakes day traders should avoid.
1. Booking early profits and holding on to losses
Most intra-day traders are guilty of making this mistake. They are always either in a hurry to book profits or end up holding on to losses. This is because emotions (such as fear and anxiety) end up playing a huge role in this fluctuating trading market. You need to keep your emotions in check and trade with a calm mind. Instead of letting your emotions overwhelm you, you should set both, target and stop-loss, before purchasing or selling any stocks in day trades.
2. Buying/selling stocks based on tips and rumours
News channels, business websites, newspapers and even friends and family are guilty of speculating the stock performances. Business news channels call in experts to provide tips and predict trades on any given day. If you stay glued to these mediums, there is a good chance that you will be tempted to trade based on tips and rumours. Remember, that no-one can predict the movement of stocks. So don’t let shouting anchors on news channels be the source of your investment decisions. Instead, you should take the task of understanding how trades work into your own hands and learn to self-trade.
3. Risking too much money on a few trades
One of the most important intraday trading strategies revolves around calibrating your risk exposure. You need to determine the maximum risk you can take in a single trade, within a day as well as on your overall capital. Risking too much of your capital, energy and time on a few trades can impact a sizable portion of the capital amount invested, especially in case of unpredictable fluctuations, that impact your investments negatively.
4. Not understanding how the trade is structured on a fundamental level
For a trade to be deemed successful, several factors are involved. These include facts such as the historic performance of the stock, the news stories surrounding it, corporate announcements made by a company and its price trajectory. The support and resistance level of the stock is another factor on which the success of a trade is dependant. These things together form the fundamental structure of a trade. If you are interested in day-trading, you need to understand the structure of every script you are invested in, in as much detail as you can. This is one of the main reasons why you should only invest in a limited number of stocks.
A good investor knows that trading involves a lot of patience. You need to spend adequate time in the stock market in order to book a profit. Intra-day trading, especially, is more risky than regular share trading and if you are not prepared for how it works, you can end up suffering a huge loss. You also need to research intra-day trading strategies before you begin investing.
Created on Sep 26th 2019 03:46. Viewed 229 times.
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