There are three ways to earn money: via work, through business, and by making mindful investments. The third option, Investments, generates a huge cash flow. Although investments look simple, benefitting from them takes a great deal of knowledge and experience.
Property, FDs, fixed interests, stock market investment, and Intraday trading are among the most common types of investments, which are frequently chosen by people to maximize the return on their investment.
Many investors are hesitant to participate in intraday trading for a variety of reasons, the most important of which is safety. Intraday trading provides a very high return on investment, but it also has a very high risk.
These tradings are not for the faint of heart, especially for those who are new to it. Now let’s talk about the major issue: Is intraday trading safe? Before we go into all of the risk considerations, let’s define Intraday Trading.
What is Intraday Trading?
In the realm of finance, the term “Intraday Trading” refers to “trading within the day.” The word is an abbreviation for securities that trade on the stock exchanges during regular business hours. These assets include stocks and exchange-traded funds (ETFs).
The term intraday also refers to the asset’s highs and lows during the day. Intraday trading includes taking long or short positions in securities and closing them before the trading day finishes.
Intraday trading tools and strategies are fundamentally different from long-term investment tools and approaches. The Intraday price changes are especially important for short-term or day traders who want to execute numerous trades in a single trading session.
Intraday trading necessitates the participation of two parties, one selling, and the other buying stocks. The market is extremely volatile, and gains are not contingent on the market rising. Even when the market is in a decline, you may benefit.
A day trader may profit regardless of whether the market is rising or falling. As a result, selecting the best stocks for intraday trading entails extracting the present market trend from any background noise and profiting from it.
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Things to Consider Before Starting Intraday Trading
Intraday trading is also known as rapid profit among traders, and it is appealing to everyone. Unfortunately, this trading method is not as straightforward as it appears. Before engaging in intraday trading, one must first learn the trading secrets. As a result, some of the key factors to consider before beginning intraday trading are listed below.
- Intraday trading is all about protecting the investment, as trading is all about determining how much risk one can tolerate. First, decide how much of a loss you’re willing to accept on a general and per-trade basis. Intraday earnings will inevitably follow if you can prevent your investment from draining beyond a certain point.
- Learn all about stop losses in great depth. Stop losses are necessary for most trades, but they are necessary for intraday trading. Without proper knowledge of stop losses, it’s possible to wind up with uncontrollable Mark to Market (MTM) losses.
- The majority of the time, traders do not research or examine their prior performance, which is crucial. Keep track of your victories and losses and analyze them at the end of the day. Keep a comprehensive record of the deals that went well and those that did not. And the easiest method to accomplish this is to keep a notebook to track what went wrong and what may have been done better. It will greatly assist you in your quest to become a long-term trader.
Also Read: How not to Lose Money in Stock Market?
Reason People Lose Money in Intraday Trading
Intraday trading is, without a doubt, a high-risk practice. Despite popular belief, this trading is not about having the correct ideas and making the perfect transactions. It’s far more about risk management and sticking to the trading discipline. Here are some of the most common reasons why traders unknowingly lose millions of dollars in this daily trading.
- Investing excessively in a small number of trades.
- Having insufficient knowledge of the trade structure
- Instead of learning to trade on your own, you’re relying on advice.
- Failure to adhere to stop-loss and profit-targeting discipline
- Not taking an overall look at the market.
- Ignoring the trading plan and the trading notes.
Although Intraday Trading is one of the easiest ways to earn money from the share market, it comes with its costs. Intraday trading is highly volatile, carries a lot of financial risks. Intraday trading is risky for beginners because they lack information, experience, and risk tolerance. Beginners are advised to do their research and daily analysis of the stock market, before trying their luck in Intraday Trading.
The risk of intraday trading decreases as the trader gains experience and learns from his mistakes. Because intraday trading is constantly vulnerable to market fluctuation, there is never a time when it is risk-free.