Want to know how to do intraday trading? Well you have landed on the right article
With stocks being a hot topic nowadays, you might have noticed the growth in advocacy to start investing in the market for the long term, from various sources.
But have you ever thought of earning from investing in the stock market on a daily basis instead?
If your answer is yes, or if reading the above question ignited your curiosity then you might want to know more about something called Intraday Trading.
The aim of this article is to help you understand the fundamentals and let you know how to start intraday trading better, so as to provide you with a head start into it
What is Intraday Trading?
In the domain of the stock market, traders make profits in several ways. One possibility is a long-term investment which is a slow process but has the potential to yield substantial profits.
Another option is to use a short-term plan that involves trading for rapid profits. Intraday trading is one such strategy. Intraday specifically means "within the day." So as the name suggests, it refers to trading stocks within regular trading hours in a single day.
You can purchase or sell shares in a short amount of time without having to go through the time-consuming procedure of obtaining real share certificates. Intraday trading is based on the notion of price movement.
When the price of a share is low you buy it, and sell it once the price rises. Ultimately, the difference between the two rates equals the profit gained.
How does Intraday Trading Work?
To know how Intraday Trading for beginners India works, the first thing one must do is specify “intraday”, on the platform they’re using to invest.
This lets the broker know that the user wishes to trade for a particular company's stocks on the same day, before the market closes.
Let's take a simple example of how profit is made by Intratrading. For instance, a stock that you wish to buy begins trading at Rs. 100 but quickly rises to Rs. 120. If 1,000 equities were purchased in the morning and sold for Rs 120 when the market closes, a profit of Rs 20,000 might be achieved in just a few hours.
Who are Intraday Traders?
Intraday trading offers huge profits and hence may appear quite appealing. However, it involves a bigger risk than the delivery segment. For starters, you must keep a close eye on the market and time your trades perfectly.
Second, to make the proper judgments, you must have a thorough comprehension of technical analysis on daily charts, as well as the time to conduct it.
Day traders often employ a variety of methods to maximize their profits. Among these strategies are:
- Scalping: This method aims to generate several profits on minor price movements during the day.
- Range trading: This approach relies heavily on support and resistance levels to make buying and selling decisions.
- News-based trading: This technique often takes advantage of trading opportunities that arise as a result of increased volatility caused by news events.
- High-frequency trading (HFT): This tactic employs advanced analytics to capitalize on minor or relatively brief market distortions.
How to do Intraday Trading for Beginners in India?
Step 1: To start with Intraday trading, you need to have a trading account. As only brokers are allowed to trade on the stock exchange, you need to open a trading account with one of the many brokerage firms available like Zerodha, Groww, Upstox, and many more.
Day trading, as previously said, is purchasing and selling stocks on the same day. Since your purchase and sell orders are balanced off on the same day, there is no exchange of shares.
Price volatility is used by day traders to generate profits.In general, they execute a huge number of deals, earning little profits on each.
Step 2: It is important to grasp the notion of a margin before creating a day trading account. Margin trading in the stock market refers to the practice of individual investors purchasing additional stocks than they can afford.
This enables them to trade in larger quantities. In India, intraday trading is also known as margin trading, and several stockbrokers offer this option. Margin trading entails purchasing and selling securities in a single transaction.
Overtime, many brokerages have softened their approach on the duration of time. The method involves an investor guessing the stock trends in a given session. Margin trading is a simple approach to making quick money.
With the implementation of digital stock exchanges, the once-specialised profession has now become accessible to even small-scale investors.
It is a straightforward procedure, wherein you can use a margin account to buy more stocks than you can afford at any given time.
The broker would lend the funds and keep the shares as collateral for this purpose.You must first request a margin account from your broker to trade with one. This necessitates paying a minimum margin to the broker in cash upfront.
If the trader loses the bet and is unable to recover the money, the broker will be able to retrieve some of it by squaring it off.
When you start an account, you must pay an initial margin (IM), which is a percentage of the entire traded value specified by the broker. Before you begin trading, there are three critical points to consider:
- First, you must maintain the minimum margin (MM) throughout the session, because the stock price might decrease more than expected on a turbulent day.
- Second, after each trading session, you must square off your position. You must sell your stock if you have purchased it. You will also have to purchase back any shares you sold at the conclusion of the session, if you sold them.
- Third, after trading, convert it to a delivery order, in which case you will need to retain enough cash on hand to buy all of the shares you acquired during the session, as well as pay the broker's fees and other expenses.
If even one of these stages is skipped, the broker will automatically close the trade.
Step-3: The next crucial step is to create a separate watch list with the shares you want to trade in for that day.
Step 4: The next stage in this procedure is to choose the stock you want to trade. After choosing the stock, we just need to enter the transaction on the ticket.
Trading Segments for Doing Intraday Trading in India
Intraday trading in equity, equity derivatives (commonly known as equity F&O), currency F&O, and commodity F&O are available in India.
1. India's intraday equity trading
Intraday equity trading is the act of purchasing and selling stocks with the goal of holding them for less than a day.
You must close the deal before the end of the day's trading session (before 3:30 pm). To avoid any transactions being missed, your broker will usually urge you to square off any open intraday deals by 3:20 pm.
Intraday trading is available on shares of well-known businesses listed on the BSE and NSE. You should choose equities that are extremely liquid, which implies that trading for that specific stock is ongoing.
This is because when you day trade, you will always have a buyer and seller ready to deal with. Intraday trading is not permitted on exchange-banned stocks due to price manipulation.
They belong to the "T" category of stocks. Intraday trading on restricted stocks should be avoided at all costs due to their erratic price swings.
2. Trading in Currency Derivatives
Currency derivatives can be traded on the National Stock Exchange, Bombay Stock Exchange, and Metropolitan Stock Exchange in India. The currency market is open from 9 a.m. to 5 p.m.
Currency futures and options can be traded, and all contracts are cash-settled in Indian rupees.
Only four currency pairings are available for trading in India:
Dollar & Rupee (INR-USD)
Yen & Rupee (INR-JPY)
Euro & Rupee (INR-EUR)
Pound & Rupee (INR-GBP)
The RBI prohibits the trading of the remaining currency pairings on stock exchanges.
3. India's Equity Derivatives Market
Futures and options on underlying equities (known as F&O) are offered for intraday trading in equity derivatives.
On equities with substantial liquidity, futures and options are available. They are chosen from a list of top 500 equities with a high market capitalization and traded value by the stock exchange.
4. India's Commodity Trading
F&O allows you to trade commodity items such as metals, as well as energy products such as oil and gas, and agro-based commodities on an intraday basis.
MCX, NCDEX, ICEX, NMCE, and ACE are the exchanges where you may trade commodities F&O. MCX is the largest of these platforms.
Terms Used While Doing Intraday Trading in India
- Ask Price
This is the lowest price a potential seller is ready to take when dealing with, or exchanging securities. - Bid Price
It is the highest or most expensive price that a prospective buyer is willing to pay when dealing or exchanging certain security. - Bid-Ask Spread
The bid-ask spread is defined as the difference between the highest bid and the lowest ask.
- Bull Markets
A bull market is defined as the state of financial markets in which the values of traded securities are rising or are projected to rise.
Since the values of traded assets tend to rise and fall continually during the day, this intraday trading phrase is mostly used to denote long periods when major sections of security prices are rising. A bull market might continue for several months or even years.
- After-Hours Trading and Trading Hours
Trading is authorised for particular hours in the intraday trading market, namely from 9:30 a.m. to 4:00 p.m. Furthermore, the market is only open on weekdays, i.e., Monday through Friday.
Markets are typically closed on holidays, and if they are open for business on such days (exceptions apply), trading ceases by 1:00 p.m.
As a trader, you can trade before and after trading hours; but, you will find extremely low liquidity during those hours because most buyers and sellers do not deal after-hours.
- Market Order
A market order is a term used to describe an investor's request to buy or sell a stock at the best price obtainable in the current market. Typically, this request is made through an online brokerage platform or by alerting the brokerage service provider
A market order is typically regarded as the most dependable and quickest way to enter and exit a transaction.
- Limit Order
A limit order is a form of order that allows you to purchase or sell a security at a set price or a better price. When you make a purchase limit order, it would only be filled at the limit price you choose or a lower price.
Sell limit orders, on the other hand, are only executed at the limit price or a higher price. As a result, the limit order feature allows you to better manage the prices at which you trade.
When you place a purchase limit order, you ensure that you will pay that amount or less. However, the order's fulfilment is not assured, and your limit order may not be executed unless the security's price matches the order's requirements.
As a result, if the traded item does not reach the stipulated price, the order may not be completed, and you may miss out on a trading opportunity.
Limit orders may be placed immediately through your brokerage firm's online trading system, much like market orders.
- Margin
A margin is the amount of money that traders can borrow from their brokerage business in order to purchase shares or other assets.
It denotes the difference between the entire value of assets in an investor's account and the amount of money borrowed from the broker as a loan.
The act of borrowing cash to invest in securities is referred to as buying on margin. In this case, the buyer merely pays a fraction of the asset's worth, borrowing the remainder from the broker. In turn, the broker utilises the stocks in the trading account as collateral.
How to select stocks for Intraday Trading?
Stocks are classified as strong or weak based on their correlation with the market.
To be a successful intraday trader, you must first discover the correct stocks to trade. Once you've selected a few stocks, you may continue to observe and study them to spot trends. The patterns you notice define your entry and exit tactics.
Let's have a look at the process of selecting stocks for intraday trading:
- Liquid Stocks
Liquid stocks are those with a high volume of trading throughout the day. Finding liquid stocks is the single most significant requirement when selecting to trade intraday.
This is crucial for two reasons, number one is that you can purchase and sell in huge quantities without disrupting the trend you wish to profit from. The second reason is that the deals you set up have a good chance of being performed fast.
Since intraday trading relies on accurate timing, minimizing execution delays is critical to success.
- Stocks having Medium to High Volatility
Day traders profit only when the market moves in the direction they predict. Traders may incur losses if the price changes against their expectations. They can place more intraday orders and profit from favorable price movements if the stock price is volatile.
However, if the fluctuation is too significant, buying highly volatile companies might be detrimental. Although there is no norm, most intraday traders like equities that move between 3% and 5% on a daily basis.
- Follow the Trend
While some traders specialise in counter-trend plays, the majority of traders prefer and suggest intraday trend trading. In other words, an intraday trader must first detect the flow of a stock market trend before attempting to take any rash decision.
This may be accomplished by intraday trading time analysis. If you notice that the market is increasing, for example, you might look for stocks that allow you to acquire long (purchase) positions.
In a declining market, on the other hand, traders might try to locate and take short positions where they can. The fact of the matter is to stay away from market challenges.
- Following Market Trends
Markets tend to go upward or downward depending on social, political, economic, and other reasons. Stocks and markets have a positive or negative connection.
This means that stock values might rise or fall in response to market movements. As a result, keeping this correlation in mind while trading stocks for intraday trading is critical.
Tips & Thumb Rules in Intraday Trading for Beginners
Intraday traders, whether skilled or inexperienced, are exposed to volatility that investors are not. Since you execute all of your transactions in one day, you are more vulnerable.
However, if you have the right information and approach, you may make a lot of money as an intraday trader. Here is an intraday trading guide with strategic ideas and hints to guarantee that you have a thorough knowledge of the activity right away:
- Choosing liquid stocks:
Intraday trading necessitates a high level of market liquidity. As a result, it is critical that you trade in large-cap companies while avoiding small-cap or mid-cap equities. - Set a stop-loss level:
When you trade intraday, the stock you choose may decline rather than rise. In such instances, the critical question is how much are you willing to let the stock price go before selling it.
A key point to remember is to choose a price at which you must square off your position. This intraday trading method functions as a safety net and might help you limit your losses. - Freezing the entry and exit price:
While trading intraday, several traders fall into the misconception that they quickly rethink their decision after purchasing a stock. This pre-determined pricing enables you to maintain objectivity and eliminate unneeded uncertainty.
- Do a Thorough Research:
When you've decided on the stocks you want to trade, make sure you research the firms involved. Reading the information on the firm will assist you in determining how market circumstances may affect the stock.
You should also keep an eye out for events like mergers, acquisitions, dividend payments, and so on. These occasions can keep you informed and assist you in fine-tuning your time.
- Booking a profit when you meet the target:
Intraday trading has the potential to produce significant gains. Yet, it is important to realize that you must leave the deal while still making a profit. - Timing:
It is critical to conduct intraday trading activities at the correct moment. Many traders recommend that you avoid making a decision during the first hour of trading.
This is because the first hour is thought to be extremely volatile, as such many traders prefer to place positions afternoon.
Conclusion
After reading this complete guide to Intraday trading, you might have a good idea about what it is and how to trade intraday, along with various insights regarding what kind of segments are available.
Now you may take it a step further and begin your journey in Intraday trading if you found these facts and information helpful.
I hope you liked our article on how to do intraday trading, if you have any comments or suggestions do share them in the comments below.
frequently asked question
1. What is the Intraday Trading Procedure in the Stock Exchange?
Intraday trading, often known as day trading, is when you purchase and sell stocks and other financial assets on the same day.
To put it simply, intraday trading means that all positions are squared off before the market closes, and there is no change in share ownership as a result of the trades.
2. What are the Websites for Learning Stock Trading and Investment?
Some of the popular websites to Learn Stock Trading and Investment are:
- Investopedia.com
- Karvyonline.com
- Zerodha.com
- Groww.in
- Nerdwallet.com
- Stocktrader.com
- Wealthsimple.com
- TradeBrains.in
- Stockbasket.com
- AngelBroking.com
3. Which chart is best for intraday trading?
These days, several intraday trading charts are employed. Some of the best ones are:
- Line Charts
- Bar Charts
- Volume Charts
- Tick Charts
- Points & Figures Charts
- Candlestick Charts
- Renko Charts
4. What time is best for intraday?
It is crucial to carry out the intraday trading activity at the right time. Many traders advise against making important decisions within the first hour of trading since it is regarded to be very volatile. As such, they prefer to place trades in the afternoon.
5. Which app is best for intraday trading in India?
Some of the most used and popular mobile applications in India for intraday trading are:
- Zerodha Kite App
- Groww App
- Angel One App
- Upstox App
- ICICI Direct App
- Axis Direct App
- IIFL Markets App
- Kotak Stock Trader App
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