Before you enter the fast-paced world of intraday trading, learn about how it works. Seasoned day traders have to take quick decisions to turn a profit in the course of a single trading day. That’s because trading positions need to be opened and closed before the end of market hours.
The short time window could make intraday trading for beginners seem tricky. But once you’ve had some practice, developing a winning online share trading strategy will be easy. A key step for beginners is deciding how much to invest. Let’s take a look at how to go about this.
How much to invest in intraday trading
To trade on the stock markets, you need to have a trading corpus in place. You can use this as capital to buy securities on a day-to-day basis. Here are some pointers to help you get started:
No minimum capital requirement
In general, there is no minimum capital requirement to start trading in India. Shares sell for as little as Rs 10 on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). So, you do not need to invest lakhs of rupees to begin online share trading as a day trader.
However, stocks often trade in round lots of 100 shares. Buying a smaller number of shares may not always be possible. Or, you might incur high commission costs, which could hurt your bottom-line. Take this into account when setting aside your trading capital.
Start small
Some experts suggest starting with a small stock investment of Rs 500 to Rs 1,000. The advantage of starting small is that your losses remain manageable. If you were to lose thousands of rupees at the start of your day trading journey, you could get discouraged from returning to the stock market.
But there is no reason to limit yourself to this small range. Say, you come across a stock that is a little more expensive. If you have done the technical research and the price is likely to move in your favour, go ahead and invest in it. When you close your position at the end of the day, assess how the trade finally unfolded.
Manage your risk
Experienced day traders know the importance of risk management. As you find your way in the stock market as a beginner, resist the urge to throw all your money behind a single stock. If the stock topples in the course of the day, you could lose your entire capital.
A better approach is to place no more than 1–2% of your trading capital in a single stock. This allows diversification of your trading portfolio. If a stock performs badly, your loss from it will be limited. And your other positions that have performed better will push up your earnings for the day.
Other considerations
Brokers often charge commissions, which could eat into your profits. You can reduce the impact by shopping around for deals. For instance, Kotak Securities offers a Free Intraday Trading facility that comes with no brokerage charges.
Your broker may also require you to maintain a minimum trading account balance. This minimum balance could serve as a buffer during the ups and downs of day trading. But you should look around for a broker that offers accounts on favourable terms.
Summing up
Once you commit to a suitable investment strategy, check if you have the essential trading tools in place. When it comes to intraday trading for beginners, it helps to open an account with a broker that gives you access to robust trading platforms, research, and charting tools. As things fall into place, put together your trading strategy, shortlist your preferred stocks, plan entry and exit points, and run your analyses. It’s time to start trading!
