Day trading keeps gaining mainstream attention around the globe. But you may wonder why? In India, day trading is a widely used short-term trading strategy because it allows the traders to earn higher returns due to small price movements. The best part of day trading is that there is no cap on traders for buying and selling securities. They can open and close their positions unlimited times throughout the trading day.
In day trading, you have to open and close all your positions on the same day. Therefore, squaring off your position is very important in the concept of day trading. If you are looking to start day trading but cannot do it just because of the lack of knowledge and fear of losing money or self-doubt, you are at the right place. After reading this article, you will be equipped with the knowledge and confidence you are looking for to embark on your trading journey.
We, the PrimeFin team, have compiled this day trading guide for beginners so that they can start their trading careers right away. So let’s dive deep into day trading.
What is Day Trading?
Day trading, also known as Intraday trading, is a process of buying and selling the asset classes within a trading day before the market closes. There are various financial instruments that you can buy or sell in day trading. This strategy differs from the buy-and-hold strategy in multiple ways. Unlike buy-and-hold strategy in long-term investment, the purpose of day trading is to make quick gains due to price fluctuations.
There will be no change of ownership of securities in this trading strategy. Most people think that day trading is a domain of only professional traders and financial organisations. But this is not true. Today Intraday trading is equally accessible and efficient for each person. But, you may wonder, how?
With the evolution of mobile trading platforms due to technology in the 21st century, an average person can also successfully analyse the market trends and indulge in day trading. For example, PrimeFin mobile trading app allows you to monitor the price movements and your position so that you can easily navigate through the comfortable trading environment with us.
How does Day Trading work?
Day trading seems very lucrative, and many people think it is a “get rich quick scheme”. Well, let us burst this common myth about day trading. This short-term trading strategy won’t make you rich overnight. It takes time and consistency to learn and furnish your skills to earn higher returns through intraday trading. You have to learn to conduct the technical analysis to reach your maximum potential.
Now, what is technical analysis? It is a method of looking at the market trends and price movements through past market data. It helps you to identify the range of entry and exit positions accurately. You can efficiently conduct the technical analysis using the free analytical toolkit provided by PrimeFin.
As you know, day trading is slightly riskier than traditional stock market investing; you may want to apply the trading techniques to avoid potential losses successfully. To successfully manage all the risks and avoid losses, use the day trading strategies discussed later.
If a stock begins trading at Rs. 400 but quickly rises to Rs. 420 in a few hours. In just a few hours, if 100 shares were bought and sold for Rs 420, a profit of Rs 2000 could be made. This is how day trading works.
What can be traded?
Mainly stocks and forex currency pairs are traded in this style of trading. But traders can buy or sell any financial instrument, including cryptocurrencies, commodities and index funds. Day trading occurs mainly in foreign exchange and stock markets due to their high volatility. As a result, the shares and currency pairs are subjected to intense price fluctuations. The particular reason for this circumstance is day trading.
PrimeFin offers very tight spreads, an essential component of day trading because it is the difference between the bid price and ask price. Tight spreads mean this difference is very low that would be highly beneficial for day traders. The difference between the bid and ask price is mentioned in pips.
Whether you trade currency pairs, shares, cryptocurrencies or commodities, PrimeFin is dedicated to providing you with low spreads and a user-friendly trading platform with multiple tools and indicators for a comfortable trading environment.
Day trading for Beginners
Till now, you have learned the basic idea of intraday trading and how it works. So you get a clear overview of this trading strategy, but as a beginner, you want to know how to start. To build a successful day trading career, you have to start with low capital and manage the risks side by side.
The very first step is to open a trading account. With PrimeFin, you have various options of trading account types: Silver, Gold and Platinum trading accounts. But we like to suggest that a silver trading account is suitable and well-efficient for a beginner. You can fund your account with no trading commission on your initial minimum deposit in the silver trading account.
But before you embark on your trading journey, there is a step that you would like to follow is sign up for a free demo trading account provided by PrimeFin. A demo account is the best way to simulate the day trading and build your confidence for live trading in actual market conditions. In addition, you can get familiar with the technical analysis along with trading tools of the MetaTrader 4 (MT4) and Webtrader trading platforms.
A demo trading account offers you free capital for practice trading. You can improve your skills by quickly accessing the global markets through one-touch operations and trading in any asset class by looking at market trends or price movements.
Day trading Strategies
There are several day trading strategies that you can follow to take your trading to the next level. You must select the stocks carefully while day trading. Do not run behind big names and try not to be driven by market sentiments. Go with the plan by understanding what works best for you and stick to it.
Here are the key day trading strategies that can help you to grow your returns on a large scale. But also be aware that no strategy can offer you guaranteed success.
1. Reversal trading strategy
Reversal trading strategy is also known as trend trading. In this strategy, traders are required to invest against the trend. You have to find the pullbacks properly on the basis of a detailed understanding of the market and trades. This strategy is slightly challenging for beginners, but they can attain it by practising it thoroughly.
This approach mainly focuses on high pullback trading. In this strategy, you have to look for extreme highs and lows, so when the price trend reverses, you can open a long or short position to take advantage of market fluctuations.
2. Momentum trading strategy
Investing in stocks that have high momentum can make you a successful day trader. First, you should develop the ability to identify the stocks with significant momentum. Then, you must pay painstaking attention to such stocks. The movement in these stocks can be seen around 20-30% daily. The price of the stock can move upward or downward.
You have to make a correct judgement and make your move before the stock price changes. Traders are required to monitor the markets to apply this trading strategy successfully constantly. This applies to every trader who is interested in day trading stocks. This strategy yields excellent results when the market news breaks out, and the trade volume is quite heavy at the beginning of the trading day.
To make a correct judgement while using this strategy, you can use PrimeFin trading tools under favourable trading conditions.
3. Scalping strategy
A scalping strategy is another form of short-term trading strategy. The scalping can be day trading, but all trades under day trading are not scalping. The only difference between these two is the difference in time frames. Scalping has a timeframe of a few hours, minutes or even seconds.
It is a trading style where traders take advantage of the small price movements. The trick lies here is not present in making a considerable profit through large movements over individual trade. Instead, traders actually focus on a large volume of trades to accumulate the number of small earnings through small price movements.
These small earnings create a large chunk of profit throughout a trading day. You can make most of the scalping trading strategy, but you must constantly watch the market and focus on a thorough technical analysis.
4. Pull back trading strategy
First, you have to identify the ETF with an established trend in this trading strategy. Focusing on the stock with the long-term trend is a significant part of this trading strategy. The aim here is to generate profit from the short pullbacks instead of what we have learnt in the reversal strategy. Both approaches look similar, but they are pretty different from each other.
If the stock price is subjected to a pullback and witnessing upward trends, it would be a buying opportunity for traders with low risk. Now they wait for the pullback losses and then sell it to earn profit. Then, they buy it and generate profit when the stock price witnesses downward trends and loses the pullback.
5. Breakout trading strategy
Breakout trading strategy is one of the most common trading strategies among day traders. When the stock price rises above the specified level called resistance, you have to buy the stock, and when the price falls below the specified level called support, you have to sell the stock or short the position.
This is one of the easiest strategies that a beginner may follow to thrive and gear up her/his trading career. This strategy revolves around the high volume of trades. It would be immensely better if you focus on the strategy with keen observation of moving stock prices around support and resistance levels.
6. Use stop orders
Stop orders play a huge role in day trading. Stop orders or market orders are the tools that can automatically close your position before the price falls below a certain level. Traders use this strategy to avoid significant losses from their trades. The stop loss can close your position any time before the market closes when the price tends to fall below a certain level.
It is a great way to protect your funds from massive losses and is the most popular technique among day traders.
7. Use these top patterns and technical indicators for technical analysis
To successfully carry out the technical analysis, you need important indicators to identify the correct entry and exit levels for day trading. The essential technical indicators are Bollinger bands, moving averages and momentum oscillators. It also depends on how to read the Candlestick chart for day trading. Candlestick Charts is a great tool to identify the price movements of an asset.
Traders use Bollinger Bands to identify average closing rates and upper and lower limits. These bands show the three lines of these components. The lines also represent the volatility range of the price movement of stocks. Bollinger Bands hold the mean values.
Moving Averages indicator is a part of the Bollinger bands. Moving averages are the lines on the stock chart showing the variation of stock prices over a period of time.
Momentum oscillators are helpful in identifying whether the stock will rise or fall in a particular period. The oscillators are not related to the bullish or bearish trends of the market. So it would be easier for the trader to determine the right time to enter the market. In addition, it helps traders to understand the market sentiments through which they can ensure about the potential risks and make moves accordingly.
There are multiple ifs and buts when it comes to day trading. But you should not focus on them if you are willing to take risks and become a successful day trader. The whole game of intraday trading is all about applying trading strategies correctly by monitoring the market trends and price movements. Please be aware of the associated risks as well as we have already discussed that no strategy can guarantee success when it comes to intraday trading.
The only thing that you should focus on is furnishing your skills and developing your knowledge around the concept of day trading. And you can implement this through constant practice using a demo trading account provided by PrimeFin. A demo account is the best way to learn and practice to get ready for day trading.
As the markets are subjected to high volatility and intraday trading yields high rewards, it is also subjected to more significant risks, so people make so much fuss about it. PrimeFin offers all trading conditions, tools and platforms with no deposit commission required for day trading. If you are an Indian resident, open your trading account and demo account now with PrimeFin. Learn more at PrimeFin.
s day trading profitable in India?
Yes, day trading is one of the most profitable opportunities for traders in India. You can trade with a well-regulated broker to successfully start your day trading career.
How much money do you need to start day trading in India?
There is no fixed initial minimum amount to start day trading. You can start with just Rs. 2000 only. It depends on your risk appetite and how big a position you are willing to take.
Is day trading possible in India?
Absolutely, apart from the buy-and-hold strategy, you can successfully generate high-profit margins through day trading in India. In addition, there are other short-term trading strategies like swing trading, position trading and scalping, which are widely used in India.
How can I become a day trader in India?
You can successfully become a day trader in India by opening your trading account with a highly regulated broker like PrimeFin. You can just start with a minimum amount like Rs. 2000 to start day trading in India. You can use the demo account provided by the broker for simulation for practice trading.Open account