Can intraday trading be profitable?
Intra-day trading is basically taking positions (buying and selling) within the same trading day. This is usually done multiple times across the day, and if executed correctly with the right strategy, can be profitable.
It’s important to know that trading and investing are, in my opinion, completely different activities, although they may involve the same instrument. I’ve covered a few differences in this article here, if you want to read more.
I’ve done intraday trading for the past 7 years, and below have summarized 8 key principles which should form the cornerstone of every intraday trading plan
- Start at a comfortable capital size
It’s important to trade at your comfort level. This is especially critical for beginners, because it helps you to understand yourself as a trader and test your strategies. Apart from the need to obviously be prudent with your finances and capital, one of the greatest benefits is that this means you only risk losing a sum where your potential losses are bearable. This helps you to take emotions out of the picture (see point 4 below), and execute your plan with clarity.
- Be prepared to lose the battles to win the war
Even the best traders don’t profit from every trade, so it would be completely unrealistic to aim for a 100% win rate. Trading is not about winning in every single trade, but about ensuring that your plan is structured so that even when you lose on some trades (which you definitely will), overall, you still will make a profit. Ultimately, the aim must be that across a period of time (one day, one week, or one month), all your trades cumulatively reap you a respectable gain.
- Mentally aside resources – time and money
Trading can be both mentally and financially draining. If you don’t set barriers, you might find yourself spending too much time, and too much capital, trying to “chase” winning trades. By setting aside a fixed period of time (eg. 1hour in a day), and a fixed amount of money, you give yourself clear boundaries to operate in, and prevent yourself from getting too drawn in and sucked in.
- Take emotion out
Many traders make the mistake of “getting angry” with the market when they make a losing trade, or “feeling lucky” when they start to have a winning streak. Likewise, many traders either cut their losses too slow, or take profit too fast, because of arising emotions in seeing their positions move. Emotions can cloud objective judgment based on facts and indicators, so, as far as possible, try to remove any emotions from the equation and trade based on your plan.
- Win by losing small
This is the real magic formula to being profitable in intraday trading. You make profits not by winning big homeruns, but by losing small. Once you learn how to limit your losses, there is a much higher probability that you will start to become profitable.
- Have a plan, and stick to it
Spend some time to build a plan which works for you. How many hours a day? What capital size? What target gain? What stop loss limits? A lot of hard work should go into formulating a battle plan before you start the day, and spend some time properly working this out. Once you have this, and start trading, stick to it. If it’s not working, stop and then re-evaluate.
- Test your indicators, then trust them
There are a ton of indicators. Candlesticks, head and shoulders, MACDs, RSIs, etc. After trading for 7 years, one thing is remarkably clear to me – not all indicators work for all plans, and not all indicators work for everyone. While indicators are based on objective and statistical figures, the honest confession everyone needs to stand up to is that you may not fully understand how they work, nor may they work for you given your personality/emotional profile. Test your strategies constantly, and find a few good indicators that work for you, and then trust them when you start trading. If they don’t work, go back to the drawing board, and try again.
Across my seven years of trading, I’ve experimented with multiple technical indicators, and I’ve settled on four, simple understandable indicators which me as a part-time trader, given (1) the limited time I trade; (2) my capital size, and (3) my targeted returns.
- Master a few good battlefields
There are many instruments that can be traded. Forex pairs, indexes, options, futures, individual counters. Choose one you have some background of, understand, and focus on that. It’s usually a lot more profitable than trading across multiple ones.
So is it possible to be profitable in intraday trading? Yes it definitely is. Ultimately, it boils down to a few factors, the key one being that your plan has to work for your specific context. Read more, research more, test more, and with great practice, I guarantee you that you will make it work.
Good luck in your trading!
I’m on a journey to try to make knowledge and education more accessible and affordable, and to sieve out the noise in an age saturated with information. Practicing lawyer by day (I specialize in working with clients in the technology industry), and aspiring technology educator by night. I’ve built up sustainable sources of income spanning across an income-generating portfolio, intra-day trading, and investment in businesses, and continue to help individuals to discover their own sources of alternative income.