Intraday trading, where traders buy and sell stocks within the same trading session, requires discipline, preparation, and a sound strategy. Unlike long-term investors who rely on fundamentals, intraday traders profit from small price movements throughout the day. Since the Pakistan Stock Exchange (PSX) offers ample opportunities for short-term trades with its volatility and active sectors, it’s essential for intraday traders to follow intraday trading tips and strategy for beginners to maximize their chances of success. In this chapter, we outline practical strategies and actionable tips that beginner and intermediate traders can follow to navigate PSX with greater confidence and success.

Why Intraday Strategy Matters

Intraday trading without a strategy is like sailing without a compass. Stock prices can fluctuate rapidly, and without a plan, traders are exposed to emotional decisions, overtrading, and heavy losses. A sound strategy helps in:

• Identifying the right entry and exit points.
• Minimizing capital risk.
• Avoiding impulse trades.
• Maintaining trading discipline.

Having a strategy doesn’t guarantee profits, but it ensures consistency and a logical approach to decision-making.

Core Intraday Trading Strategies

1. Momentum Trading Strategy

Momentum trading focuses on stocks that show strong price movement—either upward or downward—on high volumes. Traders enter positions once momentum is confirmed with technical indicators like volume spikes or breakouts.

PSX Example:
During the earnings season, if OGDC releases positive results and the stock opens 5% higher with increasing volume, a momentum trader may enter a long position early in the session to ride the continued upward movement.

Tip: Monitor PSX Top Gainers/Volume Leaders in the morning for momentum candidates.

2. Breakout Trading Strategy

This strategy involves identifying stocks that break above a resistance level or below a support level on high volume. A breakout from a range often indicates the beginning of a new trend.

How to Execute:

• Use price charts to identify consolidation patterns.
• Wait for breakout confirmation with increased volume.
• Set stop-loss just below resistance (for long) or above support (for short).

PSX Example:
If LUCK is trading between Rs. 500–510 for several sessions and breaks Rs. 510 with volume, a trader might buy expecting Rs. 520–530 intraday.

3. Reversal Trading Strategy

Reversal traders seek to capitalize on price reversals when stocks are overbought or oversold.

Key Tools:

• RSI (Relative Strength Index)
• MACD crossover
• Support and resistance levels

Stock Market Scenario:
A bank stock like HBL drops sharply due to overreaction to news. If RSI hits below 30 and starts rising, a trader could bet on a short-term bounce.

4. Gap and Go Strategy

This is based on stocks that open with a gap up or down due to overnight news or results and then continue in the direction of the gap.

Execution Steps:

• Identify pre-market gap-up stocks (news-based or corporate announcements).
• Confirm continuation with volume in the first 15–30 minutes.
• Enter the trade with tight stop-loss.

5. Scalping

Scalping involves making numerous trades throughout the day to capture small price movements. It’s suited for highly liquid PSX stocks.

Example:
Buying MLCF at Rs. 24.50 and selling at Rs. 24.65 multiple times during the day can accumulate small gains.

Warning: This requires experience and lightning-fast execution. Not suited for beginners.

Golden Tips for Intraday Trading on PSX

• Set a Daily Risk Limit: Only risk 1–2% of your trading capital on any single trade. If your total capital is Rs. 200,000, avoid risking more than Rs. 4,000 per trade.
• Avoid Trading the First 15 Minutes: The market opens with volatility. Let the initial jitters settle before jumping in.
• Use Stop Loss and Target Profit: A good risk-reward ratio is 1:2—aim to make at least twice what you’re willing to lose.
• Keep Emotions in Check: Don’t revenge trade after losses. Don’t become greedy after a few wins. Stick to your plan.
• Avoid Penny Stocks: Stocks priced below Rs. 10 are often illiquid and manipulated.

Risk Management in Intraday Trading

Risk is inherent in any trading activity, but managing it smartly is what separates a successful trader from a gambler.

• Position Sizing: Never put all your capital in a single trade.
• Avoid Overtrading: Only trade when there’s a valid setup.
• Diversify Across Sectors: If you’re trading 2–3 stocks a day, avoid trading all from the same sector like cement or banks.

Tools Every Intraday Trader Needs

• PSX Real-Time Data: Use the official PSX website or Azee Securities trading platform for live charts and tickers.
• Charting Software: Use platforms like AZEE Stock Analytics integrated with Pakistan market feeds.
• News Feed: Be updated with news that affects sectors or specific stocks (earnings, political news, etc.).

Common Mistakes to Avoid

• Trading on Tips/Whatsapp Groups: Avoid blindly following online "gurus" or rumors.
• Ignoring Volume: A breakout without volume is often a trap.
• Chasing Stocks: Don’t enter late into a rally, wait for a proper pullback or new setup.
• Skipping Research: Even for short-term trades, basic knowledge of the company and news is vital.

Intraday Trading and Tax in Pakistan

Capital gains on stocks held for less than 12 months are taxed differently in Pakistan. Intraday trading typically falls under this short-term category. As of the current FBR tax regime, it is advisable to consult Azee Securities’ compliance desk or a tax consultant for accurate reporting and taxation requirements.

Quick Recap:

• Intraday trading demands precision, discipline, and a well-thought-out strategy.
• Momentum, breakout, reversal, and scalping are key strategies used in PSX.
• Set risk limits, stop losses, and don’t let emotions drive your trades.
• Use reliable tools and real-time data to make informed decisions.
• Avoid overtrading, penny stocks, and trading without a plan.
• Stick to high-liquidity stocks and manage risk through position sizing.
• Always stay updated on taxation rules regarding short-term capital gains in Pakistan.

Get Started with Azee Securities

Ready to start your investment journey with Azee Securities? Open a Stock Trading Account and gain access to the Pakistan Stock Exchange (PSX). Let Azee Securities help you make informed decisions. Our expert advisors, advanced trading platform, and real-time market data ensure you stay ahead of the curve.

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