Intra Day or Day Trading

No one knows for certain how many people are into day trading. But the numbers are unquestionably way up from ten years ago, thanks to the rapid penetration of online trading which has made buying and selling of stocks, easy, convenient and economical.

So, any guess on how many people are into day trading? Your guess is as good as mine but if I were make a guess or estimate, and were to additionally take into account those who trade online at home or between meetings at the office, and so on, one might well come up with a staggering number running into several millions. And, actually, that’s no surprise: technology, one would say, has made it all possible, and the lure of the periodic bull markets have made it irresistible.

Understand Day Trading

Day trading is where you make money buying and selling stocks, etc. during the course of a day, taking advantage of their daily price movements. Day traders end the day flat, with no open positions left after the market closes.

What makes people do intra day trading?

No open position at the end of the day

To avoid the risk of price gaps, namely any differences between the previous day’s close and the subsequent day’s open prices, day traders close all their positions at the end of a trading day. Because of this, they are not worried about the next day’s opening price. In other words, they sleep easy.

Brokerage is low in day trading compared to delivery

The commission structure in day trading is very low compared to trades taken on a delivery basis.

Increased Margin

Day traders can avail of as much as four times their equity as intraday buying power. (In some cases it is even more as in my case it is 14 times which allows me to plan even better though with caution.) Used wisely, this margin can potentially increase their profits quite substantially. But leverage, or margin, is a double edged sword; increased leverage makes day trading very risky, especially if one scores poorly on the three key attributes of discipline, risk management and money management.

Profit in either Bullish or Bearish Market

Day traders often take recourse to short selling to take advantage of declining stock prices. The ability to profit even when markets fall during the trading day can obviously be extremely useful, particularly during bear market conditions.

Why most people like Intra Day Trade?

The answer to this basic question is quite simple: To make money.

The Profit Potential

This is, by far, the most obvious reason. In Nifty futures, the quintessential day trader’s arena in India, market swings of over 100-point swing, it should be noted, translates to Rs. 5,000 per one Nifty futures contract, if caught in the right direction. That’s certainly a large enough sum, if you consider that the investment required to buy or sell one Nifty contract at 5,000 Nifty levels is less that Rs. 50,000 (Example given is an assumption and current market level might be different)

The Challenge

Yet another reason is the very challenge of the game. Many day traders derive considerable personal satisfaction from a venture that not only offers the potential of making good money but tests one’s mind and intellect, i.e. something which is challenging in itself.

Do Day Traders Lose Money?

There’s a popular belief that 80% to 90% of day traders lose money. That may perhaps be true. But many lose big because they lack the required discipline; the discipline needed to exit immediately when the price begins to move against them.

This post does not seek to elaborate on the psychological aspects of trading. Nor does it attempt to be a treatise on the kind of discipline required to make a successful day trader – and how to go about acquiring it. Still, it bears emphasis that a successful trader is one who not only has the “staying power” but is also endowed with a sense of calm and balance; not to act like a chicken with its head cut off, when the going gets tough – which is bound to happen again and again and happen at unpredictable times. Day trading has its rewards, no doubt, but the rewards come with risks attached. In order to keep the risk of the day trading in check, keep the following guidelines in mind:

·         Don’t Hurry, manage the excitement. Profit depends upon detached and disciplined execution.

·         Learn the numbers. The nature of price movement must get inbuilt deeply enough in you to allow spontaneous decision-making during the trading day

·         Cross- verify. Objective measurements must filter unconscious bias.

Do you require more assistance?

For extended help I have designed a checklist in excel which can give you a starting and exit points along with day high/low based on previous day’s price movements. I have made it optional for you to set your gain/loss percent based on which it will give you exit or stop loss point.

It’s free, so if you want leave your comment with your name and e-mail id and soon you’ll receive it in your inbox.