What is Intraday Trading- Meaning and Basic of Day Trading (2024)

Intraday trading, which is also referred to as Day Trading, involves the purchase and sale of stocks within the same trading day.Share prices keep fluctuating throughout the day, and intraday traders try to draw profits from these price movements by buying and selling shares during the same trading day. Intraday trading refers to buying and selling stocks on the same day before the market closes. If you fail to do so, your broker may square off your position or convert it into a delivery trade. This kind of trading is always beneficial whether a person is an experienced trader or a beginner as the indicators and trends of the market will guide them properly.

How is intraday trading different from regular trading?

Aspect

Intraday trading

Regular trading (Delivery-based)

Definition

Buying and selling within the same day

Buying and holding for long term

Objective

Capitalizing on short-term price movements

Long-term growth or dividends

Position duration

Must be squared off before market close

Can hold shares beyond the same day

Ownership change

No change in ownership

Ownership changes from seller to buyer

Settlement

Same-day settlement

Settlement within T+1 day after transaction

Risk and reward

Higher risk due to market volatility

Less volatile, requires patience

Tools

Technical analysis, charts, indicators

Fundamental analysis, company research, financial statements

Basics of intraday trading

Day trading refers to buying and selling stocks on the same day. It is done using online trading platforms. Suppose a person buys stocks for a company. They have to specifically mention ‘intraday’ in the portal of the platform used. This enables the user to buy and sell the same number of stocks of the same company on the same day before the market closes. The purpose is to earn profits through the movement of market indices. Hence, it is also referred to as day trading by many.

The stock market earns you great returns if you are a long-term investor. But even in the short term, they can help you earn profits. For example, a stock opens a trade at Rs. 500 in the morning. Soon, it climbs to Rs. 550 within an hour or two. If you’ve purchased 1,000 stocks in the morning and sold them at Rs. 550, you would have made an incredible profit of Rs. 50,000 – all within a few hours. This is called intraday trading.

Additional read: Stock Market Timings

Intraday trading- features

On online trading platforms, you must specify if an order is specific to intraday trading. In that case, you take a position on the stock and close it within the trading hours on the same day. If you do not close it yourself, the position gets squared off automatically at the market closing price. You don’t get ownership of the stocks you buy and sell in intraday trading. The goal of intraday trade is not to own the stocks; it is to make profits by reaping the benefit of price movements during the day.

Leveraging:Leveraging means borrowing money from your broker to enhance your buying power and amplify the potential investment returns. For example, you can take the benefit of leverage in intraday trading to take a larger exposure while paying a fraction of the open position. There are terms and conditions associated with leveraging that your broker should get you familiar with to tap its benefits.

On online trading platforms, you have to specify if an order is specific to intraday trading.

You take a position on the stock and close it within the trading hours on the same day.

If you do not close it yourself, the position gets squared off automatically at the market closing price.

The goal of intraday trading is not to own stocks; it’s instead to make profits by reaping the benefit of price movements during the day.

Intraday trading indicators

  • Moving average: Moving averages are the most common and widely used indicator. It is the line on the stock chart which connects the average closing rates over a given period. If you are considering a more extended period, the moving average will be more well-grounded. Moving averages let you comprehend the underlying movement of price as most of the time price of a stock doesn’t move only in one direction.
  • Bollinger bands:Bollinger bands are a bit more advanced than moving averages. It comprises three lines - the moving average, an upper limit, and a lower limit. With all these, you can comprehend the underlying movement of the stocks better than just by moving averages.
  • Momentum oscillators: Sometimes stock prices move unrelated to the bullish or bearish market trends.
  • Relative strength index (RSI): This gets calculated in the index form, narrowing the RSI score ranging between 0 to 100. The index increases when the price of the stock rises and vice versa.

Additional read: What is Fear and Greed Index

Intraday trading vs delivery trading

Unlike intraday trading, if you buy a share but do not sell it on the same trading day, it is called delivery trading. In delivery trading, the stocks you buy get credited to your Demat. You hold it for as long as you want, for days, months, or years before selling it. Thus, you continue to have ownership of these stocks. In delivery trading, investors consider the long-term price movement of the stocks to book profits rather than their price fluctuations within the day.

Advantages and Disadvantages of Intraday Trading

Here are the advantages and disadvantages of intraday trading that you should be aware of.

Advantages of Intraday Trading

The trader can make profits based on the movement of the market price of the stocks.

The trader can avoid delivery charges.

If the trader doesn’t close the deal, the position gets squared off automatically, if it's set in the trading platform.

Disadvantages of Intraday Trading

The trader will not own the shares he traded for the day.

The trader incurs a loss if the closing rate is not conducive. If the market is unfavorable, he may have to forego profit.

Conclusion

In conclusion, intraday trading offers a unique opportunity for traders to capitalise on short-term price fluctuations within the stock market. Unlike delivery trading, where investors hold onto their shares for longer periods aiming for long-term growth, intraday trading focuses on gaining profits from the daily market movements without actual ownership transfer of the stocks. Although it comes with higher risks due to market volatility, it also offers potential for significant profits within a single trading day. Traders can use tools like moving averages, Bollinger bands, and other technical indicators to make informed decisions. However, they must also be aware of the disadvantages, such as the potential for losses if the market moves against their positions and the lack of ownership in the shares they trade. Ultimately, whether intraday trading is the right approach depends on an individual’s trading goals, risk tolerance, and market expertise.Top of Form

What is Intraday Trading- Meaning and Basic of Day Trading (2024)

FAQs

What is Intraday Trading- Meaning and Basic of Day Trading? ›

Intraday is shorthand for securities that trade on the markets during regular business hours and their price movements over a single day. Day traders pay close attention to intraday price movements and time their trades in an attempt to benefit from short-term price fluctuations.

What is the basic of intraday trading? ›

Buying and selling shares on the stock exchange on the same day are known as Intraday trading. As buying and selling happen on the same day, it is also known as day trading. The prices of shares keep moving up and down during the day, the trader makes a profit from the movement of the share price.

What is intraday trading vs day trading? ›

Intraday trades, also known as day trading, involve buying and selling a stock within a trading session, i.e., on the same day. If you do not square off your position by the end of the day, your stock can be sold automatically at the day's closing price under certain brokerage plans.

How does intraday trading work with an example? ›

Intraday happens on the same day before the market closes. For example if the stock opens trade at Rs 1000 in the morning. Soon it climbs to 1050 within an hour or two. If you had bought 1000 shares in the morning and sold at 1050 then you earn a profit of Rs 50,000.

What are the rules of intraday trading? ›

Understanding Intraday Trading Rules
  • Rule 1:Trade at a Specific Time Point. ...
  • Rule 2: Make Trades Based on Your Setup. ...
  • Rule 3: Gradually Increase Your Position. ...
  • Rule 4: Invest Only in Liquid and Volatile Stocks. ...
  • Rule 5: Get Your Trades Done by 3:30. ...
  • Rule 6: Monitor the Market Constantly. ...
  • Rule 7: Never Trade on Hope.
Apr 15, 2024

How much money do you need to start intraday trading? ›

There is no fixed amount to start intraday trading. You can start with any amount you want. If you are a new trader, then it is recommended to start small.

Which is the best day for intraday trading? ›

For instance, in addition to utilising the best time frame for intraday trading, another strategy is to keep the day of the week in mind. Monday afternoon is often a desirable time to make purchases on the market as it has historically tended to drop at the start of the trading week.

Which stock is best for intraday? ›

Intraday Stock list
S.No.NameQtr Profit Var %
1.Diamond Power188.99
2.Gulf Oil Lubric.37.41
3.Tata Motors-DVR372.94
4.Kalyani Steels-7.83
23 more rows

Which strategy is best for intraday trading? ›

There are several strategies for intraday trading; a few of the best ones are - Momentum trading strategy, Breakout trading strategy, Moving average crossover strategy, Gap and Go trading strategy, and the "risky" Reversal trading strategy.

Which trading is best for beginners? ›

Overview: Swing trading is an excellent starting point for beginners. It strikes a balance between the fast-paced day trading and long-term investing.

What type of trade is intraday? ›

Intraday trading, also known as day trading, involves buying and selling stocks within the same trading day. It's a fast-paced form of trading where investors aim to capitalize on short-term price movements in the market.

Which broker is best for intraday trading? ›

Zerodha, Upstox, Angel One, Sharekhan, Fyers are a few of the top intraday trading brokers that offer online trading at Rs. 20 per order flat brokerage charges. Among all, Zerodha is the best broker for day trading based on the following facts; Lowest Intraday brokerage charges at Maximum Rs.

What is the basic knowledge of intraday trading? ›

Intraday trading is a short-term trading strategy where traders aim to profit from small price fluctuations within the same trading day. Instead of holding positions for weeks, months, or years, as in long-term investing, intraday traders buy and sell assets the same day, sometimes even within minutes or seconds.

How many times can we buy and sell in intraday? ›

Additionally, there is no limit to the maximum number of times you can buy or sell a stock. You have to operate within the parameters set by FINRA if you're day trading, but you can continuously move in and out of a stock forever if you choose.

Who Cannot do intraday trading? ›

Gandhi further stated that a government servant is permitted to engage solely in long-term investments and is prohibited from participating in speculative or intraday trading.

Is intraday trading good for beginners? ›

Intraday trading involves buying and selling stocks within the same day , which can be a high - risk and fast - paced activity . As a beginner , it is recommended to start with an amount that you are comfortable with losing , as there is always a chance of losing money in the stock market .

How to practice intraday trading? ›

Intraday Trading - How to Get Started?
  1. Develop a Trading Strategy: Define your entry and exit points, target profit, and risk tolerance. ...
  2. Practice on Demo Accounts: Most platforms offer demo accounts with virtual funds. ...
  3. Seek Mentorship: Consider learning from experienced traders or coaches.
Jan 8, 2024

What is the formula for intraday trading? ›

Intraday Trading Formulae:

We need to add them up as: H + L + C = X Now, the derived value must be divided by 3: X/3 = P (which is called the pivot point) Then, multiply P with 2: X/3 X 2 = Y It is assumed that a stock moving above the pivot point is likely to continue its journey till the first resistance level.

Which is best for intraday trading? ›

List of High Liquidity Stocks For Intraday
NameSub-SectorDaily Volume
Vodafone Idea LtdTelecom Services630,732,734.00
Indian Railway Finance Corp LtdSpecialized Finance189,723,845.00
Yes Bank LtdPrivate Banks156,930,508.00
Bharat Electronics LtdElectronic Equipments82,231,249.00
6 more rows
6 days ago

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