Hello, traders! Welcome to my blog where I share my insights and tips on how to make money in the stock market. Today, I want to talk about one of the most exciting and challenging forms of trading: equity intraday trading.
Equity intraday trading is the practice of buying and selling stocks within the same trading day. You can take advantage of small price movements and leverage your capital to generate profits. However, it also involves a lot of risks and requires a lot of discipline and skills. If you are not careful, you can lose a lot of money in a matter of minutes.
That’s why I want to share with you some common mistakes to avoid while doing equity intraday trading. These are based on my own experience and learning from other successful traders. By avoiding these mistakes, you can improve your chances of making consistent profits and minimizing losses.
Mistake 1: Not having a trading plan
A trading plan is a set of rules and guidelines that you follow before, during and after each trade. It includes your entry and exit points, your risk-reward ratio, your position size, your stop-loss and target levels, your trading strategy and your market analysis. A trading plan helps you to trade with discipline, logic and confidence. It also helps you to avoid emotional and impulsive decisions that can ruin your trades.
Without a trading plan, you are trading blindly and randomly. You are more likely to chase the market, overtrade, revenge trade, cut your profits short and let your losses run. You are also more likely to deviate from your strategy and make inconsistent decisions. This will lead to frustration, stress and losses.
Therefore, before you start trading, you should have a clear and detailed trading plan that suits your personality, goals and risk appetite. You should also review your trading plan regularly and update it according to the changing market conditions.
Mistake 2: Not following your trading plan
Having a trading plan is not enough if you don’t follow it. Many traders have a good trading plan but they fail to execute it properly. They either ignore their rules or break them intentionally. They let their emotions, ego or greed interfere with their rationality. They think they know better than their plan or they try to outsmart the market.
This is a big mistake that can cost you dearly. By not following your trading plan, you are exposing yourself to unnecessary risks and reducing your edge. You are also undermining your confidence and trust in yourself and your system. You are making yourself vulnerable to emotional swings that can affect your performance.
Therefore, once you have a trading plan, you should stick to it religiously. You should follow your rules without hesitation or deviation. You should treat your trading plan as a contract between you and the market. You should respect it and honor it. If you find yourself breaking your rules frequently, you should stop trading and review your plan. You should also work on your psychology and discipline to improve your adherence to your plan.
Mistake 3: Not managing your risk
Risk management is one of the most important aspects of equity intraday trading. It is the process of controlling the amount of money you are willing to lose on each trade and on each day. It also involves diversifying your portfolio, hedging your positions, using stop-loss orders and trailing stops, adjusting your position size according to the volatility and liquidity of the market, etc.
Risk management helps you to protect your capital, limit your losses, preserve your profits and survive in the long run. It also helps you to cope with the uncertainty and unpredictability of the market. It reduces your stress and anxiety levels and improves your mental state.
Without risk management, you are gambling with your money. You are taking excessive risks that can wipe out your account in a single trade or a single day. You are exposing yourself to catastrophic losses that can damage your confidence and motivation. You are also increasing your emotional attachment to each trade which can cloud your judgment.
Therefore, before you enter any trade, you should always know how much risk you are taking and how much reward you are expecting. You should never risk more than 1-2% of your account on any single trade or more than 5-10% on any single day. You should always use stop-loss orders to exit your trades when they go against you. You should also use trailing stops to lock in your profits when they go in your favor.