Intraday is one of the riskiest ways to invest in share market. As a trader, one should realize that there is no holy grail to any strategy. The only good advantage of intraday trading is that there is no overnight risk. A few well-known intraday strategies are:
Momentum-based trading strategy
As the name suggests, this strategy tries to capture momentum in either direction and is one of the most effective ways to trade. A trader can implement this strategy either in Nifty 50 stocks or index, the idea is to find liquidity in the scripts. For example, say the market opened flat, extended gains towards the previous day, and came down to break the day’s low. Once, it breaks the day’s low, a trade can go short with a stop loss of 1% of capital and capture returns up to 2x the risk.
This is a strategy when the market breaks a range after a long time. For example, a stock is consolidating between the range of Rs. 80 to Rs. 100 for 8 weeks. So, Rs. 80 becomes the support, and Rs. 100 becomes the resistance. Now, if prices break that range, with volumes greater than average volumes of the last one week, that shows the bullishness in a stock. One can go long with a favorable risk to reward ratio of at least 1:2.
One of the most popular strategies in intraday day trading is the mean reversion technique or pull-back trading. This means you are betting against a particular trend on the assumption that the market might reverse from a particular level. For example, if Bank Nifty is trading at 30,000 and 31,000 is a level from where it has reversed twice, a trader can short Bank Nifty at 31,000 in anticipation that it will reverse from with a risk to reward ratio of 1:2.
Pivot point trading strategy
It is one of the most famous intraday trading methods where the trader plots the range based on previous day data and calculates the support, resistance, and pivot point. Few tools like trading view, investing.com have those indicators pre-installed and trade can simply use them to break out. Say the market moves above the pivot point (central range for the day), a trade can go long on a 5-minute candle close, with stop loss as close below the pivot point and target as next resistance.
Moving average crossover trading strategy
This is one of the easiest methods for intraday trading. A trader plots a 20-day moving average and a 50-day moving average on a 5-minute time frame. Anytime, the 20-day moving average crosses the 50-day moving average, the trader can go long and vice versa.
The only holy grail in online share market trading is to manage your risk by way of position sizing. There are various strategies that have excellent results only because a trader is disciplined and manages his risk well. All you have to do is proper research and open trading account with a registered online broker. Trade wisely and be disciplined.