Intraday trading involves purchasing a stock when prices are low and selling it at a high on the same day. To make intraday trading successful, a trader needs to be able to identify the right positions and then make the right decision.

However, real-world intraday trading is much more complicated, especially in markets where sentiments are key drivers in buying and selling. A day trader has to be very careful as there is a very low error for margin, and a wrong call can lead to big losses. Hence, understanding how to create a day trading plan is crucial for all traders.

• Tailor your trading plan based on your skills, risk tolerance, and preferred approach to intraday trading, avoiding emotional decisions.
• Define specific entry and exit points, and follow strict risk management protocols to minimise losses and protect your capital.
• Keep up with global events and market trends while setting realistic expectations for profits. Maintain records to learn from your trades and refine your strategy.

If you too want to know how to create a day trading plan, here are the steps you need to cover:

Step 1: Be clear regarding your trading motivation and primary objectives

The first step is to have complete clarity regarding your objective. Answer the ‘why’, as it will be the foundation of all your future trading decisions. It will also be your guide when market situations are in flux and help you make the right decisions.

Step 2: Choose the trading approach you will take

Two approaches are widely popular when deciding on how to create a day trading plan,

• A fast-paced approach, where the trader will be on the lookout to book either a small profit or loss in a short span of time, usually minutes. The intention is to square off buying and selling by capitalising on minute stock prices.
• In this approach, a trader opens with a position in the first half and closes it by the end of the day. This method helps better gauge macroeconomic conditions and capitalise on any potential trends impacting the market or particular sector or industry.

Step 3: Make your checklist customised according to your requirements

A trader can get overwhelmed by too many signals before making a decision. To avoid confusion, it's important to find the indicators that work best for you. By using basic technical analysis, you can quickly spot the difference between a good and bad trade idea. Once you decide on the right number of signals that work for you, making decisions becomes easier without breaking your own rules.

Step 4: Be clear about your risk tolerance

Risk tolerance is the amount of risk you are willing and able to take when making investments or trades, and it is not driven by emotions. Long-term investors have ample time and patience for a stock price to move up, but intraday traders only have a few hours. Hence, it is important to assess your risk appetite and then decide accordingly.

Step 5: Set up a schedule of trading that also encompasses the frequency of your trade

In intra-day trading, the most effective method is to implement strategies that work well at a specific time of the day and then trade at the same time every day.

Step 6: Identify the conditions that would cause you to exit a trade

Most traders often focus on entry points and confluences without developing an exit plan for a trade. It is crucial that intraday traders also work on strategies or rules that will help them get out of a trade that is not working in their favour.

Step 7: Determine and follow rules for risk management (At both entry & exit levels)

Risk management will give you a macroscopic view of the overall pitfalls or risks that may be associated with a trade and the potential of losses. Make sure you have a risk management plan in place before starting intraday trading to protect your capital and minimise losses.

Step 8: Understand how charts are read

As an intraday trader, you will have to know how to read multiple charts that include line charts, bar charts, and candlestick charts. Candlestick charts are the most popular as they offer comprehensive information in an easy-to-understand manner. Similarly, there are one-minute charts and hourly charts that track performances every minute or hour.

Step 9: Acknowledge and understand market correlations

​​Historical market correlations, like the NYSE influencing the BSE, can guide future trading decisions by estimating market direction, though they're not guaranteed. Using these correlations with a solid risk management plan helps make informed, calculated trades.

• Intraday trading is fast-paced in nature. You must put your skills to the test first via paper trading before executing trades in real time.
• Try to stay away from trading if you are not at the best of your emotional or mental health, as irrational emotions can lead you to enter the wrong trades.
• Establish limits after carefully considering your risk tolerance on a single trade to minimise any chances for losses.
• Do not set unrealistic expectations for profit, and make sure your objectives are practical and achievable.
• Be aware of global events, government policies, and social changes to anticipate market movements.
• Do not try to mimic strategies followed by others; adopt techniques that suit your trading style.
• Always set protocols backed by data when entering or exiting a trade to stay away from any emotional decision-making.
• Maintain detailed records to learn from both your successes and mistakes, helping you refine your strategy over time.