Intraday Trading – a simple guideline for stock market beginners

“What is intraday trading?” is the most commonly asked question by every beginner in the stock market. The meaning of intraday trading is simple – a transaction initiated to either buys or sell, just for the day. Therefore there is no outstanding or delivery position of any kind pending at the end of the day for the next day.

In Indian stock market intraday trading happens between 9.15 AM to 3:20 PM (For Cash and FNO) and Currency trading happens between 9.00 AM to 4.20 PM( It varies from broker to broker).

In addition, if a trader punches trades in a particular segment and didn’t close his position by end of the session. So, all the trades shall automatically square off by the Broker at the end of the day.

A charge for intraday trading is different for different broking firms. It actually depends on what kind of stockbroker you are trading through.

image of intraday trading

What is Intraday trading?

Intraday trading is speculation in shares, securities, specifically buying and selling financial instruments within the same trading day. In the case of day trading, the trading is done strictly only within a day; such that all positions are closed before the market closes for that trading day.

What is the intraday trading example?

Let us have a very simple example of intraday trading. Now assume, a trader buys 1000 shares of Tata Motors on 10th July 2018. Again the same trader then sells these shares on the same day before the closure of the stock markets. So, the trader squares off his position in the same trading session. This is called intraday trading or Day trading.

How intraday trading is different from regular trading?

The only difference between a regular trade and intraday trade lies in taking the delivery of the stocks.
In intraday trading, you have to square off your positions the same day. Therefore, your sell order offsets your buy order. So, there is no transfer of ownership of shares.

In other hands, a regular trade gets settled over a span of days. So, the trader gets the delivery of the shares he bought. Similarly, while he sold the shares move out from his Demat account.

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Is it safe to do intraday trading?

For a beginner, intraday trading may look like a safe and quick way to make profits. That’s why it attracts many traders. But there may occur a high risk due to the extreme volatility of the market. The stock prices may swing widely, beyond expectations, and may lead to unanticipated losses.

Intraday trading is always at the top of the risk spectrum. An intraday trader needs to be attentive for every single minute of his trading Span. Market experts always suggest using a stop loss. You need to revise your trading position to make sure that everything goes according to plan. As soon as the trends begin to reverse, you have to be spontaneous enough to exit from the trade and close his position.

For intraday trading to become safe, it takes a lot of expertise, experience and market research. All of these come after years of practice and dedication. To become an intraday trader; you must know how to analyze a stock fundamentally and technically. Nowadays, intraday traders continuously monitor their selected stocks in multiple screens and use technical analysis through tools and software to predict correct moves and act accordingly. It takes a long time dedication for intraday traders to develop the skills to analyze the price-volatility patterns.

Can we make money in intraday trading?

Many of the traders start day trading with an expectation that it will generate good money by making profits with just a single trade. Intraday trading does not help anyone to become rich overnight. Practically, this is not possible and not real as well.

But it is possible to make money in intraday trading. As per the experts to make money in day trading; the traders need to have a practical approach. In share trading, the emotional factor plays a really important role in earning profits. Yes, it is true. Intraday traders need to put efforts for months so that they can know the share markets to generate good profits. If you want to make money in the shortest time possible, it is important to understand that there are no shortcuts and you can earn good money with market research, experience, and patience.

image of intraday trading

What are the benefits of intraday trading?

These are very important benefits of intraday trading in respect of a trader in the stock market.

  • Brokerage in intraday trading is very low. The brokerage in intraday trading is almost 1/10th in comparison to positional trading for most of the leading broking firms. Nowadays, there are lots of broking firms that offer zero brokerage for intraday trading as well.
  • Intraday trading prevents overnight risk.
  • Intraday traders have dual opportunity to make profits in a single trading session. Here you can purchase and sell the stocks on the same day to generate money. Again, other is by short selling and covering the position later in the day.
  • The intraday trader has the advantage of cash liquidity. This provides you the opportunity to take new positions in new stocks each day. Again, you get the advantage of free capital in hand to meet your daily personal needs.

What is the margin in intraday trading?

Margin means limit. In the share market, margin trading refers to a process where an individual trader buys more stocks than they can afford to. Margin trading also refers as Margin Intraday Square-off (MIS). This is an exclusive feature for intraday trading, and it involves buying and selling of share in single trading session.

For example, you are a trader, and you want to buy 1000 shares of company X. This company X is trading at Rs.50 per share. Therefore, if you use a full cash position; then the total value of the transaction is Rs.50,000. Now, let us consider your brokerage firm provide a 10% margin on MIS. So, you can buy the same stock through MIS where the margin of 10% is applicable. Thus, the total required amount for the transaction would be 10% of Rs.50,000, i.e. Rs.5,000. So, if you have Rs.5,000 in your trading account, you can trade for the 1000 share of company X.

How much money do I need to do intraday?

We know that every business needs capital. So, you have to bring in your money to invest in the share to start a day trading. But it is always recommended to transfer that money to your Demat account for day trading business which is left with you after keeping aside funds. As well that not required for your daily needs, not for any emergency use to transfer your Demat cum trading account.

Now, the question is what should be the minimum amount to start an intraday trading. Actually, the quantum of money depends on person to person. A new trader can start with a capital of 5000 to 5 lakhs. It’s all up to him. But intraday trading in never recommended for newbies. So, for experience always start with small amount say 5,000 – 10,000 for some days. Later on, if you are gaining confidence and also earning some profit doing day trading, you can increase the capital. Intraday trading is always risky, and risk capacity differs from person to person. So any trader needs to take the risk as per their capability.

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