15 Powerful Intraday Trading Rules For Beginners
Intraday trading means that you trade within a day. When you trade intraday, you don’t have to keep your trading positions open for days, weeks or months. You can close your trading positions within a day or even hours. Intraday trading offers many benefits but it is also riskier than trading at other time frames. It requires special trading rules to manage the risks.
This blog presents the best intraday trading rules for traders. By implementing these rules, you can improve your trading performance and lower your risk of losses.
If you’re looking to get started in intraday trading, make sure you follow these rules to help you stay safe and profitable
These 15 short intraday trading rules will help you gain control of your trading. You can then control your losses, control your emotions, control your propensity to overtrade, and use the same trading rules that the pros use.
Here are top rules for intraday trading for beginners.
Rule 1: Invest in Knowledge To Drive Progress in the Right Direction
Trading in Intraday is risky as the market is highly volatile. But one can act smartly to earn some quick bucks. Intraday trading is different from regular trading. Traders need to have a practical approach. Emotional factors add up in earnings from intraday trading.
If you are planning to earn profits in the shortest time possible, then it is crucial to learn that there is no shortcut. You need to research before intraday investing. Moreover, intraday trading cannot help you become rich overnight.
Many stock market learners start day trading with an assumption to earn profitable traders. Which is nonviable and not real. Learning the stock market and intraday trading strategies is the key to smart investing. Day traders need to invest in learning the stock market. Thus, make well-informed trading decisions.
Rule 2: Employ a Flexible Trading Strategy
Investing strategies is the core of a trade. Always follow a specific trading strategy that suits your risk tolerance or schedule. Subsequently, you can use Uni-Directional Trading Strategies to generate a significant return. UDTS© comprise of 9 trading strategies based on technological analysis. The trading strategies mechanism of simplistic strategies for day traders, position traders, futures, and options.
Adopting a flexible trading strategy facilitates traders to make a better position to pick stocks. Without the need to incur the expense of changing course One of the best examples is UDTS© and MADE© trading strategies which teaches a common man to trade with accuracy.
Rule 3: Practice Paper Trading On the Strategy For 9 Days to Make New Resultant
Putting your money at risk is not a healthy day trading practice. Day trading beginners must practice trading strategies on paper before investing in real-time. During the course learn how to
- Find good trades
- Enter orders correctly
- Manage winning trades
- Cut losses
When starting with stock market investing, you want to see the effects. Before investing with real-money, test with paper trading. You can benefit from doing real trades before starting to use real money. Because the stock market for beginners is scary. And using real money in simulated trading gives you the opportunity to watch the markets. Thus, see how your trades would theoretically perform in real-time.
Furthermore, perform paper-trading for 9 days to get initial experience. Consider the net result of 9 days before using in the live market. Test new strategies and set up with a small amount of risk on each trade.
Rule 4: Preparation For Day Trading and Stock Selection For Intraday Trading
Many stock market traders fail simply because they rush in without homework. Trading is a professional endeavour. There is no easy money. Before the market opens, prepare yourself by selecting stocks. Some questions you need to ask a fortnight are:
- Performance of overseas stock market
- Performance of index futures in pre-market
- Economic or earnings data is due out and when
Whatever trading rule you use, label major and minor support and resistance levels of shortlisted stocks. Set alerts for entry and exit signals. Remember preparation can make a difference to performance.
Rules 5: Develop a Trading Psychology and Self-Discipline
Exercising trading discipline is a key money-making technique. A successful day trader possesses several skills. The ability to determine the stock price direction and the company’s fundamentals are two of them. But none of these two technical skills is as important as a novice trader mindset.
The psychological trading aspect is utmost important. Day traders intend to think and reach facts to make quick decisions. Moreover, sticking to their trading rules is widely considered to win.
Rule 6: Risk Only What You Can Afford To Lose
Intraday trading is risky. There is a high chance to lose money. As a beginner to day trading, set aside a surplus amount of funds that you can trade. This will ensure that you do not exceed the limit to investing. Setting yourself a trading budget is the best way to limit your investing.
Always remember, losing money is traumatic. Using opulence is a virtue of putting hard-earn money at risk. For instance, if you have a budget of Rs. 4,00,000 use the money for day trading. Do not use money from personal savings.
Rule 7: Do not Allocate 15% of your Total Amount on Single Trade
Allocating 15% to single trade is a general concept. Even though it’s called ‘rule’. Never allocate more than the amount you can afford to lose. The rule is important as it underlines the fact – not all trades will be successful.
It doesn’t mean that 85% of your trade will result in a loss. It just means that you shouldn’t expect to reap significant profits from every trade you make.
For instance, your trading budget is 1 lakh, then your single trade should be limited to Rs. 15,000 only.
Rules 8: Invest in at least 6 Trades both Buy and Sell
As day trading beginners, it is available to focus on buying 6 trades of both buy and sell. With few stocks, tracking and evaluating opportunities is easier. If you trade in a large number of stocks, you may miss out on chances to exit at the right time. However, it is not important to trade in the proportionate number of buy or sell trades.
Rule 9: Quantity Should Be Less If Stop is more than 1.5% Increase
A stop loss is a predetermined amount of risk a trader is willing to accept with a single trade. Always keep the quality less if the stop loss is 1.5% away from CMP. If it is more than 1.5% then you can increase the quantity.
This rule helps traders to limit theory expertise during a trade. Using a stop loss can take some trading emotion out. Ignoring stop loss is bad practice. Exiting with 1.5% of stop-loss, thereby having a losing trade, is a good trading practice. Because it falls within the trading plan rules. Thus, protective stop loss ensures both loss and risk are limited.
Rule 10: Exit If The Price is Reach Stop Loss
Knowing when to stop trading can be tricky for an emotional trader. An ineffective trader is one who is unable to follow a trading plan. External distraction, lack of physical activity, poor habits etc contribute to the problem.
Always exit from trade if it each stops loss. This is important to exit at stop loss from the fast-moving market where stock prices can change rapidly.
Rule 11 & 12: Caution When Stock Gap Up/ Down or Event Day
Take precaution when intraday trading stocks in Gap Up or Down. A gap is an area on a chart where the stock price moves sharply. During the traders to play safely. There are several ways to take advantage of Gaps. Identifying its type can often trade with a high probability of success.
Similarly, events on the economic calendar require precaution in intraday trading. This is often overlooked by traders. Establishing an economic calendar instills discipline and anticipates playing around with the trades in future.
Rule 13: Treat Like a Full-time Job
Intraday trading is a full-time business. It requires complete attention. In order to be a successful day trader, one must approach trading as a full-time business. And not a hobby or a part-time job.
As a part-time job, intraday trading is no real commitment to learning. Besides, it can get expensive trading. As a full-time job, ensure you research and develop trading rules to maximize business potential. As a full-time day trader, never lose your traders. Intraday trading is paragon to 9 am to 6 pm full-time job.
Rule 14: Avoid One-on-One Strategy and Choose Last Resultant
Do not judge the stock on the basis of the other trade. For instance, if a single trade reaches stop loss, that does not mean that another stock will also reach stop loss.
This means your trading rules are poor and require revisions. Day traders remain focused on learning more with each day. Setting realistic goals is an essential part of keeping trading in perspective. If a trader has a small trading account, he or she should not expect to pull in huge returns.
Rule 15: Don’t Carry Your Losses To Next Day
An intraday trader should always be beware of overnight risk. The key here is to stick to knitting. Carrying positions overnight runs the chance of losing money. Thereby, your trade may not be equipped to bear the cost.
However, you can carry the profit trade to the next day, but not losses.
Checklist Intraday Trading Rules
Intraday trading involves quick decisions. It is important to have a checklist of rules that you can go through every time before placing a trade. This checklist helps you to get out of bad trades quickly. Let’s look at the top rules that are useful for intraday traders.