Trading within a specific day can be very risky, however can be very rewarding as well if it is done wisely. These often culminate in losses and being a new comer in the intraday trading in Indian stocks it is quite easy to do the following wrong things: Here are 5 common intraday trading mistakes that you should avoid:
Trading without a plan is a disaster in the making.
As for the performance, many beginning traders enter trading without any trading strategy. This often results in the trader making unsound decisions to buy or sell based on information from someone else or instincts instead of a clear plan. Before you enter any trade always define where and when you will enter and exit a trade, how many lots you will use and the risks/rewards ratio and other rules pertaining to the trade. If you are considering growing your business organically, then it is important that you adhere to the outlined strategy with a lot of precision.
Overtrading
Overtrading can be attributed to overconfidence or indiscipline in trading activity that involves higher number of trades than what is healthy for the firm. Speculating on every small price change or frequent trading will cost you trading charges and fees, even if your trades are earning you some profits. Make a maximum of 2-5 trades within the day and make sure that these have adequate analysis. It is quite unnecessary to be in the market all day through the working week. Here, it should be known that the familiar adage, ‘the less is more’ applies well in intraday trading.
Traders try to invest as much as they can per trade
This rule ensures that you are trading on the right position and that you have enough money to last for the long-term trades. The problem here is that once you expose yourself and make the wrong call while the account is in your favor, you find it extremely hard to get it back. For position sizing, it is always wise to practice good money management that corresponds with the size of the trading account and your individual tolerance to risk.
Failure to book profit
Another common error what many investors make is failure to book profit when they can, because they are conned into thinking that they will make more profits. Of course, if a certain trend persists, you can always go back in and get in on the stock again. It is also important to not marry a position or attempt to chase down unrealistic price levels. Limit losses and let profits run rather than waiting for that big trade which never arrives.
Discipline is something that is missing in the society of today
Lack of discipline includes several negative tendencies such as absence of stop losses, trading after the loss, holding the unprofitable positions, trading in the margin beyond the necessary etc. Developing discipline takes time but is essential. Avoid being bias when making decisions or constantly arguing when you are right. The same applies to rules; stick to proven ones and accept the fact that you will experience losses occasionally.
Conclusion
Hence, intraday trading is a challenge in the fast-moving markets since it entails a range of conditions that are peculiar to it. To sidestep common blunders of a novice in trading, it is best to approach trading with a strategy in mind, being wise in handling risks, getting profitable at reasonable points and keeping self-control at bay. It also helps immensely to take training courses focused specifically to the short-term trading strategies before compromising your own funds. There are several websites available for the online intraday trading courses for the Indian stock market traders where 5paisa is one of the platforms that provides some very useful intraday trading courses. If they are given proper direction and follow few precautionary measures, retail traders can win intraday trading consistently in the long-run.
