5 intraday trading tips that can maximize your profits

 Intraday trading strategies are used by investors to conduct trades on a day to day basis. As a consequence, itraday traders are prone to a higher volatility as compared to the long-term investors. But if you have the correct knowledge, you can reap serious profits whilst doing automated trading. .

If you are starting off into this new domain of trading, it's natural that you would want to learn tricks of the trade. However, you should keep in mind that merely tricks and tips wouldn't do the job as you need good intraday trading strategies as well to maek the most of your experience at the intraday trading market. Let's take a look at some of the guidelines that you should follow in order to maximimze your profits and minimize your losses.

Go for liquid stocks

You must be well aware of the fact that intraday trading encapsulates the idea of buying and selling stocks on the same day. But you must also keep in mind that for the exchange to execute these orders, there needs to be a certain level of liquidity in the market. Therefore, you must avoid small-cap and mid-cap stocks as they're not very liquid. If you do not pay attention to this, your squaring off order might not get executed, and you could be forced to take the delivery in its place.

Diversify your stocks

Ask any investor who has existed in this market long enough and he'll tell you that it's a mistake to invest all your capital in a single stock. A better option is to diversify your investments across a number of different stocks. This will minimize your risk as you wouldn't stand to lose everything if one of your stocks fall.

Define and set entry and exit price

There's a widespread phenomenon in the market known as the buyer's fallacy. What it basically means is that the stock investors sudddenly end up having a quick change of mind once they've bought a stock. People are emotional and they may regret their decision for undue reasons. You can avoid falling into this trap by setting up entry and exit price before you take up a position. This will ensure that you maintain an objective outlook and do not fall victim of emotional mood swings.

Set a stop loss level

This is, perhaps, the most important intraday trading tip that you could ask for. Setting a stop loss level is a simple but very efficient way of minimizing your losses. This is how it works: imagine that the stock that you've bought keeps falling instead of rising on the day of the trade. Stop-loss allows you to set a benchmark after which you'd square off your position on that particular stock. This acts as a safety net and protects you from having to suffer serious losses.

 

If you are just starting out as an intraday trader, it could be beneficial for you to adopt the 3:1 Risk to Reward Strategy. Under this strategy, the stop loss price that you should set should be 3 times lower than the price at which you'd be willing to book profit.

Booking profit after reaching the target

Fear and greed - both are your enemies in the stock market. Just like you shouldn't be too scared of taking risks to earn rewards, you also shouldn't become too greedy! While leverage and margins can help you maximize profits, they can maximize losses as well. Therefore, you need to be careful and not get greedy. Do not fall into the trap of assuming that the price would keep on rising (or falling, in case you're short-selling). But if all the signals indicate that the price would definitely rise, then it is up to you to decide what you shouldn do.

Remember to close your open positions

There are a number of intraday traders, who prefer to take the delivery of the shares if they do not meet the stock price target that they'd set for the day. This isn't really the best strategy in automated trading, as the stocks that you had bought were bought for intraday trading and they may not work well for you if you go for long-term investment.