Intraday trading is classified as a risky financial endeavor, contrary to the beliefs of lots of people, intraday trades are not all about the right strategies. A blend of favorable trades, risks management techniques, and the ability to not be dissuaded from your trading principles make up intraday trading. Some basic wrongdoings committed by people who trade within a day are overtrading to cover up for some incurred losses, averaging trade positions, and depending on tips. An intriguing fact is that lots of intraday traders, over 80 percent of them, lose money while trading within a 24-hour window. Several reasons are responsible for this unforeseen turn of events, one of which is using high lot sizes, or risking too much of invested capital. This is a classic case of account mismanagement, when a professional risks too much on a few trades, then losses are more bound to occur than profits.

A fundamental intraday trading rule states

A fundamental intraday trading rule states that traders/investors need to calibrate their risk to reward ratio, setting how much is willing to be lost in each position. In a single day, you can enter lots of positions or just a few positions, you’ll need to define the maximum amount you’re willing to lose in each to protect your balance. An amateur with little trading experience is prone to this error most times as he seeks to make more from just a few positions by risking too much capital. This course of action backfires 70 percent of the time because he didn’t evaluate his risk to reward ratio properly as he ends up losing all or most of his capital investments. As intraday traders, delete the option of staking too much from your capital, and investing lots of time in just a few trades. Add to your risks as the previous markets close, do not bombard your charts with many open trades, technically analyze, execute, and close a trade especially when your equity is low.

Preventing losses while excelling in intraday trading

When a trader fails to set certain market parameters like take profits and stop losses, losses are bound to be birth in those markets. To achieve success in this trading profession, there’s a need to maintain trading discipline, there must be no room for error or forgetfulness. Making profits is the end product of trading but it’s not the major objective, the core of intraday trading is how to manage risks efficiently. Ninety percent of the time you enter an intraday position with no predefined stoploss and take profit, you end up in a loss. Also when the structure of the trade is assumed and not fully understood, losses are imminent, as this is a major factor for a successful trade. Enter only a few markets you have mastered their structure, such as news, price graph, history, supports/resistance, doing otherwise is calling for losses.

For intraday trading, there is the trading plan and the trading journal, oftentimes these are the first things traders in this line of trading forgo. The ideas to which quote, chart, markets to ope for a particular day, and how to effectively execute trading for that day is the trading plan which is written in the journal. All trading disciplines are documented in the journal, but when a comes across other favorable markets, they tend to forgo these plans and dive into it. Some traders hope to feed their egos and want their analysis to be correct, losing focus on the profit-making goals. These and more are the factors leading to massive losses encountered in intraday trading.