Bone Up: Beating The Bulls In A Day

Breaking down the concept of day trading for a better understanding.

- Anagh Pal

First things first – day trading is not the same as investing. As the name suggests, it basically means entering and exiting the trade on the same day, one or multiple times. It is a very risky game for newbies and requires a very well sought out strategy in order to make it work.

“Trading in stocks, commodities or currencies entails initiating a buy or sell position and closing that position by way of profit or loss over a period of specified time. However, in day trading, the trader initiates a long or short position and has to close the same within a short span of the trading day. He or she will be executing various positions during the course of the trading hours for that particular session with the key objective of closing all positions before the day or trading session ends,” pointed out Amar Singh, Head Advisory, Angel Broking.

Who is day trading meant for? To answer this question we must first understand what day trading requires. “Day Trading requires continuous monitoring of the movement of stocks and indices in the market. As and when profit is captured on the intra-day movement of stocks and indices, they need to close their position(s) of stocks and indices immediately,” said Pritesh Mehta, Senior Vice President, YES Securities.

Day trading is something which requires a lot of knowledge and practice. Mehta said that professional and certified traders with an understanding of stop loss, risk-reward ratio and other concepts tend to excel in day trading. “This activity requires dedication and focus from individuals; they also need to make decisions on their toes. Any individual with zero or little understanding of equity markets should refrain from day-trading. They should ideally invest in mutual funds through the SIP route,” he added.