Intraday trading is the practice of making several trades on Stock Exchange within a day. The intraday trading involves a short-term price movement within which active traders make money and sell their position. The active traders keep performing this process in a loop for an entire day based on their speculation for buying, selling and short selling of stock, commodities or currencies. But it is easier said than done!
It is not an easy task to forecast the future price movement; therefore, traders generally rely on a technical analysis that provides historical patterns of the asset’s price in a sophistical chart system. The companies’ media announcement to its listed stock exchange and the coverage by news platforms also form an important source of information for investors’ decision-making in intraday trading.
The higher risk levels are always associated with the possibility of higher returns.
Pros of Intraday trading:
Take benefits of the volatile market: While trading in intra-day, active traders can make a huge profit during the volatile market conditions. Any macro-economic factor or the industry related information can have an immediate impact on the share price of the company which brings in massive price movement. In such a situation, punters can follow the trend and spot their trade accordingly to earn a decent profit within a few hours.
Do not need to lock-in the funds for a long time: To play safe side one needs to invest their funds for medium to long term. But in intraday trading, the trader does not require to engage their capital for more than a day time which provides them with a higher level of liquidity to make frequent trades.
Intraday trading can be taken up as full-time employment: Considering the amount of profit and that too the period in which it has been earned, it often interest the traders to take-up intraday trading as full-time employment. It makes you the boss of your own decision providing a handful of opportunities to meet out the day to day financial requirement and make money from money.
The stock market game has always been a risky affair, and the play of intraday trading is at utmost risk where most of the traders get their hands burnt.
Cons of Intraday trading:
It more often works as a ‘trap’: Once you lose money you wish to get it back, and it's then when you invest again where is always a possibility of losing it again. That means many a time intraday trading becomes a trap where the trader gets addicted to gambling with the only objective to recover its losses.
No fixed income: Traders who choose intraday trading as their full-time employment often miss to consider the variable or no-income factor. There are no guaranteed returns, and investors end up paying from its pockets. It also leads to mental and physical stress conditions among traders and their related persons.
High Risk: There is excessive risk attached to the practice of intraday trading. The trader may undergo substantial losses which are mostly overlooked at the time of taking an investment decision. The risk also emerges when investors trade casually without analyzing the potential profit positions and other key market determinants.
To earn a decent profit from intraday trading, it is always advisable to trade with ‘stop-loss’ which provides you an opportunity to limits your losses to the extent you decide.
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