InvestorQ : I understand that most people end up losing money in intraday trading. Why is that so? Is there a way by which I can be a sure shot profit maker in intraday trader?
Mahima Roy made post

I understand that most people end up losing money in intraday trading. Why is that so? Is there a way by which I can be a sure shot profit maker in intraday trader?

Dinesh C Nagpal answered.
10 months ago

First, there is not such thing as "Sure Shot" in markets - the very definition of markets is UNCERTAINTY as we invest/trade on probability of price movement based on fundamental or technical studies.

Second, traders who lack discipline - money, method & management tend to lose money in any time frame, be it intra or positional

Third, intra day concept is taking v high leverage and squaring of trades for small gains. Its a high volume low margin - yield set up. Since its bound by a time factor (square off between 9-3) it leads to many a times an anticipated trend not running as expected. However, there are many successful day traders who are fully aware when to enter a trade and when to sit out. THE DOCTOR DID NOT SAY YOU NEED TO TRADE EVERYDAY


Aditi Sharma answered.
2 years ago

There is really no royal route to geometry and there is no royal route to intraday trading. Don’t expect any sure short formula for consistent profits because there isn’t any. However, there are some habits that you can cultivate that can make you a much better intraday trader. Let us look at some such habits that can help you in your intraday endeavour.

Smart intraday traders primarily focus on risk: When you are running leveraged positions in intraday trading, managing risk becomes a lot more important. Successful intraday traders believe, and rightly so, that risk is what you can control, not returns. Hence that should be your focus. They set strict limits for capital depletion during the day, during the month and overall. Successful intraday traders also have the habit of ensuring that every trade is backed by a strict stop loss. They never get into a trading position without defining the maximum loss on the trade. They also make it a point to stay out when the markets become difficult to understand.

A good intraday trader is who can learn from mistakes: Successful intraday traders do make mistakes in trading; and in fact a lot of them. The difference is that they learn from the mistakes and do not repeat them. There are occasions when stop losses get triggered consecutively. Smart intraday traders make it a point to sit back and evaluate the core reason and take immediate corrective action. In fact, these traders strongly believe that even if money is lost in a trade the lesson should not be lost.

Smart Intraday traders focus a lot on flawless execution: How you actually execute the trade makes a lot of difference to your performance and this is more so in case of intraday trading. Smart intraday traders are quick to shift to a phased approach to buying when markets are volatile. They also use market orders and limit orders to optimize the trade price and get the best deal in the market. Smart intraday traders flawlessly use technical charts to minimize their risk by buying as close to the support levels and selling as close to resistance levels. Their focus is also on reducing execution and statutory costs to the bare minimum.

The positive risk return trade off matter a lot to smart intraday traders: Profit targets should be a function of the risk entailed in your stop losses. For example you cannot have a stop loss of Rs.5 and a profit target of Rs.4. That is a negative risk-return trade-off. Smart traders always ensure that the profit target in any trade is a multiple of the risk and calibrate their stop losses and their return targets accordingly. In fact, successful intraday traders use a favourable risk-return trade-off as a key criterion for trades.

Successful intraday traders ensure to chase realistic expectations: If you are trying to chase a 5:1 risk return trade-off then you are surely building castles in the air. Intraday trading is all about realistic expectations. Smart intraday traders are quick to appreciate that your returns are a function of risk. There is nothing like a free lunch in economics and there is nothing like a risk-free trade in the market. Successful intraday traders always set and mould their expectations as per the market reality.

They never try to beat the market: If you believe that you can be a successful intraday trader by taking a contrarian position in the market, then think again. You may occasionally succeed, but a truly seasoned intraday trader will always ride on the side of momentum. Successful intraday traders never try to predict or outperform the market. Their focus is purely to understand the underlying trend in the market and play the stakes accordingly. Humility is the key!

Good intraday trades operate with discipline and as per a trading plan: There is no successful intraday trader without discipline. Set your trading plan, keep a back-up plan of action and execute your trades. Discipline is not a skill or a quality. For successful intraday traders it is a habit and a way of life!