Day trading involves the purchase and sale of a security within a single trading day. It uses margin money and short-term trading strategies to capitalize on small price movements in highly liquid stocks .

Our Philosophy of Intraday Trading

Successful traders commonly quote the phrase: "Plan the trade and trade the plan." Just like in war, planning ahead can often mean the difference between success and failure.

Setting Stop-Loss

A stop-loss point is the price at which a trader will sell a stock and take a loss on the trade. This often happens when a trade does not pan out the way a trader hoped. The points are designed to prevent the "it will come back" mentality and limit losses before they escalate. For example, if a stock breaks below a key support level, traders often sell as soon as possible.

Setting stop-loss is often done using technical analysis, but fundamental analysis can also play a key role in timing.

• Stop losses should not be closer than 1.5-times the current high-to-low range (volatility), as it is too likely to get executed without reason.


• Adjust the stop loss according to the market's volatility. If the stock price isn't moving too much, then the stop-loss points can be tightened.

Diversify and Hedge

Making sure you make the most of your trading means never putting your eggs in one basket. If you put all your money in one stock or one instrument, you're setting yourself up for a big loss. So remember to diversify investments—across both industry sector as well as market capitalization and geographic region. Not only does this help you manage your risk, but it also opens you up to more opportunities.

You may also find yourself a time when you need to hedge your position. Consider a stock position when the results are due. You may consider taking the opposite position through options, which can help protect your position. When trading activity subsides, you can then unwind the hedge.

Downside Put Options

If you are approved for options trading, buying a downside put option, sometimes known as a protective put, can also be used as a hedge to stem losses from a trade that turns sour. A put option gives you the right, but not the obligation, to sell the underlying stock at a specified priced at or before the option expires.

The Bottom Line

Traders should always know when they plan to enter or exit a trade before they execute. By using stop losses effectively, a trader can minimize not only losses but also the number of times a trade is exited needlessly. In conclusion, make your battle plan ahead of time so you'll already know you've won the war.