Intraday trading refers to the practice of opening and closing all trades within a given day or trading session. It is also called day trading. Why traders confine themselves to this timeframe for trading commodity futures, stocks, or foreign currencies is to seek profits from the short term ups and downs of the market that are averaged out over days and weeks. While a stock may go up 1% in value over a week the same stock can easily move up and down in similar increments several times within a trading day.
The Benefits of Intraday Trading
The main benefit of intraday trading is that a day trader can choose, enter, manage, and exit several trades a day using a variety of day trading strategies and earn profits several times while a swing trader working over several days waits to set up one profitable trade. Using a rules-based system such as we teach at DayTradeSafe, day traders can achieve consistent results day after trading day. There simply is more total volatility which means more potential profit in taking many short term trades than in waiting to trade a single larger market move.
The Risks of Intraday Trading
The first risk of intraday trading is the same risk that all traders and investors have. Fear and greed drive market sentiment and traders must exercise discipline in choosing, entering, managing, and exiting their trades in order not to let these twin demons take away all profits. Another risk is that a day trader may be tempted to force trades when there is not sufficient opportunity. In this case a trader spends money on fees and commissions while not generating trade profits. Their “overhead” in terms of fees and commissions may be more than their trading profits!
How to Get Started With Intraday Trading
At a very minimum anyone interested in intraday trading needs to practice trading in a simulated setting. Using a trade simulator, a beginning intraday trader can practice using real historical data. A good rule of thumb is never to risk any money in trading until you understand how to use your trading platform, have developed a workable strategy, and are routinely generating “paper profits.” The best approach is to learn from a pro like at DayTradeSafe so that you are a benchmarked professional trader.
How to Make Money With Intraday Trading
The point of day trading instead of trading over longer intervals is that a day trader can enter and exit trades in such a way as to profit from short term market movements lasting hours or even minutes. Trades make profits when they learn how to spot a short term opportunity in commodity futures, foreign currency pairs, or stocks using technical indicators, choose an appropriate strategy, set their stop losses, and exit their trades when they achieve a reasonable profit. Successful intraday traders do this again and again and the profits accumulate.
Tips for Successful Intraday Trading
Day traders can potentially place several trades during a given trading session. If they are trading stocks they run the risk of being a pattern day trader which affects how much of a margin they need to maintain with their broker. Stock day traders also have an issue with deducting losses (yes, every day trader has losses as well as gains) on their taxes. Many choose to trade commodity futures simply on the basis of deductibility of losses and the pattern day trader issue (which does not exist in trading commodity futures).
Things to Keep In Mind When Doing Intraday Trading
One of the great things about intraday trading is that when opportunities present themselves one can enter and exit the market several times a day. When the market does not present opportunities for day trading profits the day trader will not be forced to watch an open trade the could as easily go bad as remain good over days or weeks. In other words, a day trader goes to work, makes their money, and then takes the day off. For many traders, this type of trading causes fewer ulcers and less stress than trading where risk persists even when one is not at the trade station.
Mistakes to Avoid in Intraday Trading
The first mistake to avoid in intraday trading is jumping in before you have the skills and before you have built a workable system that reliably makes money. The second is letting fear and greed drive your trading. Both of these can be remedied by learning day trading at DayTradeSafe where you will learn how to choose, enter, manage, and exit your trades with discipline using an exclusive mechanical system that provides the framework for success.