Time is a precious variable in our life. This is more important in share market. In share market, without an ounce of exaggeration, time is money. It is the time at which you buy a share or an asset class which determines the quantum of returns you may gain in the near or long-term. Buying a share of a company which has peaked in terms of valuation and expecting it to jump two times in a matter of few months is an exceptional event. It does not happen frequently in markets. You have to extremely alert and highly invested in companies in which you have put in your hard-earned money.
There are a large number of people who intend to make money almost every day. In market parlance, this is called intraday trading. There are people who do this. It is an alluring proposition. But it comes with experience. Not everyone can achieve it. You have to gather certain amount of wisdom. Only then, you can consider making money almost daily. Let understand certain crucial lessons which experienced investors can provide to beginners or the uninitiated investors who want to achieve what they achieve almost daily:
- Time is against you
If you are an intra-day trader, then you have limited time on hand. You need to act in a specific time-frame. If you are unable to do so, then you have to exit. Losses and transaction costs associated with can be a big dampener for a beginner. You do not have the luxury to carry forward your position to the next day in the market.
- A personal pact
Intraday trading can be successful if you have a rule-based approach to initiate trade and exit them. It is more difficult for a beginner to come up with such a strategy in the initial period of investments. Instead many beginners resort to instinctive trading, which generally is not rewarding.
- Discipline
In an intraday trading many individuals try to use broker funds or margins. This leads to leveraged positions. Lack of discipline or inability to operate without a rule-based system can destroy substantial amount of your capital. Each trade needs to be done with a clear stop loss. In the initial phase of trading you may not understand importance of stop loss clearly. But over a period of time, you will realise it is an important weapon which save you from huge loss of capital.
Trade execution can also be a challenge for many beginners. Hence it makes sense to start small and focus on positional trades and investments in the initial phases of trading. As you become more comfortable with trading, you can consider intraday trading. Even at that stage, you should start with paper trading. It gives an idea of what can go wrong. It also underlines the limitations of your trading system if you have one. After you have attained a certain level of comfort and experience in trading and understanding market cycles, then you can start trading intraday.