Risk Management Techniques for Intraday Traders

Risk Management Techniques for Intraday Traders

An intraday trade occurs when an asset is brought and sold on the same day. Despite its many benefits, this trading technique does come with a certain amount of risk. In intraday trading, you will face two major risks: excessive market volatility and leverage. This is why properly managing trading risks is essential.

A risk management strategy is a set of techniques that allows you to manage the various risks associated with trading. By implementing robust risk management plans, you can reduce losses arising from market moves contrary to your expectations. In this article, we will discover intraday trading tips to manage risk.

Risk Management Techniques for Intraday Traders

Intraday Risk Management Techniques

Position sizing, stop loss, trailing stop loss, and support and resistance are the most common intraday trading risk management techniques.

Position Sizing

A position sizing refers to the process of determining how much capital or how many units to invest in a trade. You can effectively minimise risk by choosing the right position size for a trade. Due to the widespread use of leverage in intraday trading, determining the right position size is crucial to prevent losses. For an intraday trade, experts suggest not using more than 20% of your total available capital for intraday trade.

Stop loss

To minimise risk, stop losses are one of the most common intraday trading tips. Stop loss trades involve placing a limit order at a predetermined price below your purchase price. Your stop-loss trade will be executed immediately if the asset moves against your expectations and touches the predetermined price level. It is ideal to set your stop loss between 5%-10% below your purchase price, depending on the volatility of the market and the asset you trade.

Trailing stop loss

Trailing stop losses are variants of traditional stop losses used to protect gains. Trailing stop loss orders are placed at a specific price or percentage below the current market price. The stop loss follows behind the asset as it moves in the direction you intended. As a result, if the asset suddenly reverses direction, the trailing stop loss would activate, realising accumulated gains and limiting further losses.

Support and Resistance levels

The key to good risk management in trading is identifying support and resistance levels accurately. A support level is a level below which an asset refuses to fall, while a resistance level is a level above which an asset refuses to rise.

By determining these levels, you can place a stop loss or trailing stop loss order accurately. In addition, you can use support and resistance information to identify important entry and exit points for intraday trading. For instance, a buy order would be placed near support, or a sell order would be placed near resistance if you expect the stock to bounce off these levels.

Tips for Risk Management

  • Invest in highly liquid stocks, usually large-cap stocks, as they are easy to buy and sell. Because of the high trading volume, large-cap stocks might also be less volatile.
  • Make sure you research before trading, set stop loss/take profit prices, calculate expected returns, and determine the amount to trade.
  • Stop loss prices shouldn’t be set based on the price at which you bought the shares.
  • Don’t use a fixed take profit and stop loss price for every stock. As an example, you could set a stop loss ten points away from the purchase price. Set no performance targets. You will only become anxious and make mistakes as a result.
  • Consider modifying exposure based on the probability of a trade’s success. It is usually recommended to have an exposure of 1-2%. Also, keep leverage to a minimum.
  • Review your past trades and learn from them.


Compared to long-term investments or even short-term trades, intraday trading carries a high level of risk. In addition to the inherent volatility of the stock, any new market development could cause wild price swings. It is necessary for a day trader to master risk management in order to be successful in the volatile intraday market. A crucial point to note is that risk management practices can only reduce risk and not eliminate it completely. Even with robust risk management plans, losses can still occur, especially if the market is volatile. As a result, it is important to assess the nature of the various risks involved and develop a trading risk management strategy that reduces them. If you want a hassle-free trading experience, consider using an online trading app from a reputable financial provider like BlinkX.

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