5 Mistakes to Avoid While Doing Intraday Trading
Stock market investment and trading is one of the most lucrative means for earning returns. With various strategies available, investors can further improve their chances of earning better profits. Intraday trading is one such strategy that involves buying and selling stocks/shares on the same day to generate exponential returns. Intraday trading offers an opportunity to generate easy and fast profits but poses various risks that traders must be aware of. Traders make various mistakes in intraday trading that they must avoid which have been listed below:
- No proper research
A beginner investor or trader with no knowledge about the stock market investment process and intraday trading must first educate himself about the various aspects. Intraday trading involves extensive research and understanding of essential concepts that every beginner and experienced investor must understand. Proper research is essential in identifying the best stocks for the application of intraday trading as well. Investors must educate themselves with the concept of intraday trading and opt for intricate research. They must even clearly define their financial and investment plan before opting for intraday trading. The maximum investment loss and risk-taking capacity must be clearly defined. A proper financial plan must be laid out as well.
- Overtrading
Another mistake investor’s make while opting for intraday trading is over trading which leads to loss of the capital outlay in a short span. With no knowledge of intraday trading and its intricate aspects, traders may take multiple buy-and-sell trades for single and multiple stocks in a single trading session. This, in turn, increases the chances of incurring losses. Investors must, therefore, avoid panic buying and selling of intraday trades which can lead to a loss of the capital invested.
- No understanding of the technical indicators
Intraday trading is all about the identification of various technical indicators that help traders identify the direction in which the future trade may move. Beginner traders without any knowledge of technical indicators opt for intraday trading and spend a huge amount on transaction expenses which leads to losses. Traders must learn about technical analysis and indicators like crossover, relative strength index, and rate of change, divergences, and many more.
- Unmindful of risks
Traders even make the mistake of entering an intraday trade without any proper risk management strategy. Without a defined risk management plan, such as setting stop losses and diversifying their portfolio, traders often incur losses in intraday trading. Investors must, therefore, define risk management strategy and plan allowing them to trade within a particular limit.
- Relying on luck and emotion
Investors especially beginner traders rely on their luck and emotion before opting for intraday trading. Instead of using research and technical analysis, traders place intraday trades based on emotion or recommendations from non-trustworthy financial advisors. Investors must, therefore, learn the virtue of patience and use reliable trading methods and strategies for employing intraday trading.
Conclusion
Intraday trading offers opportunity to generate profits, however, traders must learn from their mistakes and opt for a reliable and more standardized approach to stock market investment. With complete research and the use of a reliable online trading app, traders can use intraday trading and other strategies for safe and profitable investments.
