Intraday traders always face inherent risks that exist in the stock
markets. Price volatility and fluctuating daily volume are a couple of factors
that affect the stocks picked for daily trading. Ideally, Traders should not
risk over two per cent of their total trading capital on a single trade to
ensure the right risk management. However, the desire to earn higher profits
often compels traders to risk more. In order to balance the risk taken, while
achieving higher returns, here are some tips to follow:
How to Make
Profits in Intraday Trading
In order to earn profits, here are some of the proven intraday trading
strategies:
·
Opening Range Breakout (ORB)
·
Mapping Resistance and Support
·
Demand-Supply Imbalances
·
Opt for 3:1 Risk-Reward Ratio
·
Relative Strength Index (RSI)
and Average Directional Index (ADX)
Opening Range
Breakout (ORB):
This intraday trading strategy is widely used by professional traders as
well as amateurs. To maximize the potential of this strategy, combining it with
the optimum use of indicators, accurate assessment of market sentiment and
stringent rules are recommended. ORB has numerous variations; some traders may
opt for trade on large breakouts from the opening range and others choose to
place their trades on the opening range breakout. The time window for the
trades ranges between 30 minutes and three hours.
Mapping Resistance
and Support:
Every stock price fluctuates within a range from the initial 30 minutes
of the start of the trading session, which is known as the opening range. The
highest and lowest prices during this period are assumed as the resistance and
support levels. It is advisable to buy when the share price moves beyond the
opening range high and sell if the price falls below the opening range low.
Demand-Supply
Imbalances:
An important intraday trading tip for beginners is to look for stocks
where drastic demand-supply imbalances exist and opt for these as entry points.
The financial markets follow the normal demand and supply rules—price reduces
when there is no demand for higher supplies and vice versa. Users must learn to
identify such points on the price chart through research and studying the
historical movements.
Opt for 3:1
Risk-Reward Ratio:
Traders, especially beginners,
must understand the appropriate risk-reward ratio. Initially, finding stocks
that provide a potential risk-reward ratio of at least 3:1 will be beneficial
in earning profits in share market investment. This strategy
will allow them to lose small while giving them the opportunity to earn big
even if they have losses on most of their trades.
Relative Strength
Index (RSI) and Average Directional Index (ADX):
Combining these two intraday trading strategies to find buy and sell
opportunities can help traders earn profits. The RSI is a technical momentum
indicator comparing recent losses and gains to determine over purchased and
oversold stocks. The ADX is beneficial and used to determine when the prices
are showing strong trends. In most scenarios, if the RSI crosses the upper
limit, it is indicative of a sell trade and vice versa. However, when you combine
the RSI and ADX, intraday traders buy when the RSI crosses the upper limit and
vice versa. The ADX is used as the trend identifier to help users take their
buy or sell decisions.
Intraday trading involves
same-day trade settlements. Most traders try to achieve smaller profits through
their trades. The golden intraday tip is to ride with the market trend to help
make profits.
Angel Broking’s Angel Eye has
charts and portfolio watch tools that helps in identifying trends, and thus
helping traders to make better decisions. This will help traders to earn profits from Intraday Trading.
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