Intraday trading is indeed one of the many ways to earn steady income in the stock market. However, stock markets are highly volatile and often prove to be very risky for some intraday investors. Therefore, if you want to minimize this loss in the stock market, you need to follow all the tips listed below. These tips will not only help you in minimizing your losses but will also help you in thinking clearly while doing intraday trading.
Remember To Use Stop Loss
The very basic and golden rule to prevent losses in Intraday trading is by placing a stop-loss order. There are times when you place your order to gain a certain amount of profit and do not place a stop loss on your order. A stop loss is the most important instrument that can save from huge losses in the stock market.
The ideal stop loss should be in a 1:1 ratio with your expected return. For instance, if you are aiming to make 10 rs profits with 200 rupees in stock, set the stop loss at 190 to prevent any significant losses during the trade. However, this rule does not apply to everyone, and you should always put a stop loss based on your risk capacity and the amount of capital that you have to invest in the market.
Learn The Market Before Trading
A new stock trader should start their journey in the market by getting a good intraday trading guide for beginners. This guide will not only help them in analyzing the stocks but will also help them in minimizing their losses in the market. Never invest your money without a proper plan. And if you are unable to figure out a plan, abstain from trading on that day.
Don’t Stand Against The Tide
Some traders tend to do the opposite of what the market is doing, thinking that when everyone makes a loss, they will be the one on the brighter side. Therefore, you should always adapt to the market conditions. If the market is bullish, ride the bull and pick good quality stocks that will give you profits. Whereas, when the market is bearish or is getting corrected, preserve your capital and invest it when the market moves downwards.
Don’t Trade On Emotions
While executing a trade, your profit or losses might either excite or irritate you too much. These feelings may lead to some irrational behavior that you might regret in the future. Therefore, always be practical and accept your losses, and leave the trade. Whereas, if you are making a significant profit, be satisfied with your gains and quit your positions.
Once you have good control over your emotions during an intraday trading session, you will minimize most of your losses. This is the reason many traders often see trading as a technical as well as emotional game.
Book Profits
In stock trading, one should not become too greedy and always make money in small steps. Once your stock meets your expectation, take it out and don’t pin your hope of getting higher returns, as the market is always volatile, and you may end up losing some money too. Similarly, always respect the stop loss and once it hits, take a back seat and invest another day in the best time frame for intraday.
Moreover, you can also divide your capital into small trades to minimize your losses. When an overpriced stock takes a fall, it takes away a large corpus of your intraday investment. But if you have distributed your money over multiple small trades, even if you face any losses, some other trade will be there to compensate for your losses.
Set Your Limits
In trading, you do not need to invest your entire money in one day. As we know that markets are volatile, and thus, dividing your money in small bits will reduce your chances of incurring huge losses in one day. Sometimes a trader makes a small profit, and out of excitement, invests more money into the market and ends up losing them instead of making gains. This is precisely the habit that you should try to control when you are in the stock market.
