Different trading approaches for beginners
Quick decision-making is an essential part of intraday trading. You must learn to make up your mind in an instant. After all, this type of trading involves the purchase and sale of stocks in a single day. It is true that intraday trading for beginners is not exactly a cakewalk at first. You need to monitor the market actively and prepare the right strategies in keeping with your target. And it is important not to let your emotions take over.
The buying and selling of securities based on short-term price movements, as in day trading, is known as active trading. Strategies for this type of trading differ from those applicable to long-term trades or passive trading. Here is a look at some of the common active trading approaches. These should help newbies in online share trading to understand which approach is the right fit for them.
1. Intraday trading: This type of trading takes place within the span of a single day. The trader buys a position and then closes it off before the market shuts for the day. Traders take the help of technology-backed trading platforms to set stop loss and target prices. When the trading system detects such prices, it automatically closes the trades. When trading in this format, you will need to develop an in-depth understanding of the market.
2. Position trading: Though considered by most to be a long-term passive trading strategy, position trading is active in nature. The trader has to follow the price movements to cash in on daily and monthly trends. These trades typically last for several weeks before the desired target value is achieved. Position traders also use various technical parameters to set up the target price and stop loss points so as to avoid heavy losses.
3. Swing trading: Swing traders usually wait for the currently running trends to change. Here, the price of the stock witnesses volatility until the new trend sets in. Swing traders leverage this little window of unrest to buy stocks. After that, they wait for the new trend to set in so that they can sell their stocks at a profit. However, this is a risky strategy. The traders do not know for sure where the market will come to rest after the period of volatility. So, they need to conduct extensive background research before purchasing any stocks.
4. Scalping: This is the quickest trade that lasts anywhere from a few seconds to a few minutes. Here, traders usually buy the stocks at the bid price and sell it off at the ask price. These trades are small and fetch only small profits. To make money, traders have to carry out a number of trades in the course of one day. Often that number is in the hundreds. Since scalpers hold their positions for a limited time, the risk of a failed strategy is minimised. Also, they like to operate in a stable market where the prices are not likely to change vigorously. So, the bid prices remain the same or within the expected range. This enables them to make multiple trades one after another without the prices soaring.
If you are new to online share trading but have a high risk-taking capability, try your hands at intraday trading. It is wise to open an account with a reliable brokerage firm like Kotak Securities for added support. But always make sure to evaluate the risk potential of a trade and your own risk appetite before taking the plunge. It is wise to stick to your plan of action and follow the market closely. Along with stock market updates, you must also keep a keen eye on national and global events. Judge the risks and costs associated with the different trading strategies before you adopt them.