NEWS AFFAIRS 7 : WHERE EVERY STORY HAS IT'S AFFAIR!
Last updated on September 4th, 2024 at 09:41 am
Intraday trading : When you buy and sell stocks or other investments within the same day. You start and finish all your trades before the market closes that day. The goal is to make a profit from the small price changes that happen throughout the day.
(Intraday trading involves buying and selling stocks within the same trading day, meaning you don’t hold onto the stocks overnight).
It’s risky because prices can change quickly, but it can also be very profitable if you know what you’re doing.
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Here’s a simple breakdown of the key points:
Benefits:
- Quick Profits: You can make money quickly by taking advantage of small price changes throughout the day.
- No Overnight Risk: Since you close all your trades by the end of the day, you don’t have to worry about price changes overnight.
- High Activity: There’s lots of trading action during the day, which can lead to more opportunities for profit.
Disadvantages:
- High Risk: Prices can be unpredictable in the short term, leading to potential losses.
- Stressful: Constantly monitoring the market can be very stressful and demanding.
- Costs: Frequent buying and selling can lead to high transaction fees, which might eat into your profits.
“Intraday trading means buying and selling stocks or other investments within the same day. You close all your trades before the market closes, so you don’t hold any investments overnight”. People who do this are called day traders.
Here’s how it works:
Buy and Sell: You might buy a stock in the morning and sell it later in the day, or sell a stock in the morning and buy it back before the day ends.
Profit from Changes: Day traders try to make money from the daily ups and downs in stock prices.
If you’re doing intraday trading, it’s important to set a target price and a stop loss right after you make a trade. A stop loss helps limit your losses if the price moves against you.
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Leverage in the stock market is like borrowing money from a bank to increase what you can invest.
Here’s how it works:
Using Leverage: Just like a bank looks at your financial situation to decide how much money to lend you, a broker looks at your current investments and cash to decide how much extra money you can use for trading.
Increased Buying Power: With leverage, you can buy more stocks than you could with just your own cash. For example, if your broker offers you a leverage of 10 times, you can buy stocks worth INR 1 lakh by only using INR 10,000 of your own money.
In short, leverage helps you invest more by using borrowed money, aiming to increase your potential profit.
Stock prices can change for many reasons, like how well a company is doing, its future plans, the state of the industry, or big news about the economy or the world. If bad news comes out after the market has closed, it might cause problems for stocks the next day.
Intraday traders, however, don’t worry about this kind of news because they only buy and sell stocks within the same day. Once the market closes, their trades are done, and they don’t have to stress about news affecting their investments overnight. They can relax knowing that their trades are complete for the day.
In regular trading, you usually buy stocks and then sell them later. But with intraday trading, you can also sell stocks first and buy them back later the same day. This means you can make money even when the market is going down, which is called a bear market.
Futures and options also let you profit from falling stock prices, but they often require more money to start with. So, if you want to try selling stocks first and buying them later in the day to make a profit, intraday trading is a good way to do it with lower capital requirements.
Intraday trading can be very profitable, but it’s also very risky. To be successful, you need to be very observant and have a good understanding of the market. It can be tough to get started, but it gets easier once you learn the rules.
Intraday traders usually use two main methods:
Price-Action Trading: This involves looking at charts and drawing lines to see where prices might stop falling or rising. This helps them decide when to buy or sell.
Technical Indicators: This method uses special tools and formulas, like RSI, MACD, and moving averages, to find trading opportunities.
Doing thorough research and understanding these methods can help reduce the risks involved in intraday trading.
Intraday trading is tricky and requires constant attention. Unlike long-term trading where you can leave your computer or phone, intraday trading needs you to watch the market closely throughout the day.
Even though you can set a target price and a stop loss to help manage risks, it’s not always reliable. Sometimes, a stock might hit your stop loss before reaching your target price, or it might fall just short of the target and then hit your stop loss. To avoid these issues and trade more effectively, you need to stay focused on the market’s movements throughout the day.
Stocks can show lots of ups and downs in very short time frames, like 1-minute or 5-minute charts. But if you look at longer time frames, like 30-minute or daily charts, the movements seem smoother and more predictable.
If you don’t like dealing with all the sudden price changes and want something more stable, it might be better to avoid intraday trading.
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