Intra-Day trading is a risky business. The use of margin or borrowed funds for intra-day trading is quite normal. This practice gives the trader the chance to make high profits and at the same time, the possibility of incurring huge losses is also high.

With the advent of the internet, intra-day trading which used to be indulged by professionals, experienced traders, financial firms, and speculators, has now become a common practice even among small traders.

Many wrongly believe that by becoming an intra-day trader and trading regularly, one can get a regular income.

To make people avail of their services, quite many analysts claim to have made near perfect daily prediction, and their clients have made huge profits by following their stock calls. How far these services can be relied upon is anyone’s guess because hardly 2% of those who do intra-day trade make money.

Strategies followed by intra-day traders

Traders follow many strategies in their attempt to make money.

Following the trend:

Irrespective of time frames, a strategy used, is to assume that prices that are rising will keep rising, and those that are falling will keep falling. A trader who follows the trend will buy a share that is rising in price or sells short a share when the price is falling by expecting the trend to continue.

Fundamental analysis

Fundamental analysis is another tool used by intra-day traders. The strategy is buying a share when a piece of favorable news is announced, or sell a share short in case of adverse news. But it is unlikely that many intra-day traders will fundamentally analyze a stock. Most traders just ignore the fundamentals and simply focus only on what would make the stocks react in short term.

Technical analysis:

Traders use technical indicators to predict the movement of price. Using technical analysis for intra-day trading is to make use of mathematical formulae based on previous price action for deciding when a share is likely to rise or fall.

DANGERS OF DAY TRADING

Most Intra-day traders blindly trade without any kind of plan concerning what stocks to buy and sell or when to trade in them. In most cases, a single day may not be long enough for making a profit.

Most of the data from fundamental analysis used by day traders are quite old in the sense that by the time they receive it to act upon it would be too late and action would have already taken by the market.

Intra-day trading in stock markets lures the traders in the same way as Las Vegas attracts gamblers. Normally a new trader will enter the stock market to hold shares for the short term. But, when they see the everyday fluctuation in the markets, they start believing they can make money out small movements by entering and exiting in a couple of days. As brokerage charges appear to be cheap, trading would seem to be an easy thing to do. They soon have a rude awakening when they start realizing that it is not easy as they thought when they end up burning their fingers. Finally, they would realize that it would have been very good if they had just continued with their original plan. This is something that happens every day.

As intra-day traders often use margin to leverage their trades, it will amplify both profit and loss. For those who are not experienced in trading, there is a huge risk of losing much more than one can afford.

CONCLUSION

Intra-day trading may look like investing, but it can turn out to be very emotional. It could provide opportunities to make profits from intra-day trading if one cannot take a disciplined approach to trade.

Intra-day trading is for those who can treat it like any other business. Here are some points for those who aspire to become intra-day traders.

• The first and foremost quality an intra-day trader must have is discipline.

• One should have fairly good knowledge about the functioning of the stock market and the trading platform with the ability to interpret the charts.

• The trader must be familiar with the various technical indicators.

• One must be associated with a good broker who can offer reasonable brokerage charges and provide prompt technical support.

• Like in any business, a certain sum of money needs to be set aside as capital for an intra-day trading business.

• Equip with proper hardware and software and a good internet connection.

• Develop a trading strategy, test it over some time and adhere to it religiously.

• Have a clear idea about the profit or loss that can be made in every trade.