How to do Intraday Trading?

Intraday trading is a trading style where traders buy and sell security on the same trading day to capitalise on a short-term fluctuation in stock price. The trader needs to square off all positions before the closure of the market, ensuring that there are no overnight holdings. The intraday trading steps involve opening a trading and Demat account, selecting liquid stocks, analysing price trends, and placing trades. This article explains how to do intraday trading in India. 

Intraday Trading Steps  

Let’s understand how to start intraday trading with the steps below: 

Step 1: Open a Trading and Demat Account 

Open a Demat and trading account through a registered stockbroker to start intraday trading. Once the selection of an appropriate broker is done, deposit the funds in the account to start trading. 

Click Here: Open a Demat Account 

Step 2: Select the Stock 

Choose a particular stock and analyse it on the basis of the factors like liquidity and other essential parameters. Determine whether the stock price is expected to increase or decrease. 

Step 3: Assess Price Trends 

Set target buy and sell prices for the selected stock. Analyse past performance to understand the trends. 

Step 4: Place the Trade 

Place the order and keep checking the price fluctuations. This may help identify market trends. 

Step 5: Set Stop-Loss 

Place stop-loss as one of the key safety measures while trading. One can place it according to their target and risk tolerance. 

Step 6: Square Off the Positions 

All the positions will be squared off because intraday positions cannot be carried forward to the next trading day. 

Intraday Trading Strategies 

After understanding how is intraday trading done, let’s go through some of the essential strategies 

• Range Trading: This strategy involves buying and selling on the basis of support and resistance levels and range-bound trading. 
• High-Frequency Trading: It involves using complex algorithms to leverage micro-windows of market inefficiencies through fast execution of trades. 
• Scalping: Scalping involves capitalising on various small price fluctuations within a trading day, which requires quick execution and effective risk controls. 
• News-Based Trading: This strategy involves taking advantage of market volatility that results from news, which offers opportunities to capitalise by entering and exiting the market accordingly. 

How is Intraday Trading Different from Regular Trading? 

There are certain ways that intraday trading is different from regular trading. 

1. No Delivery of Shares: When an investor trades regularly, equities are purchased and physically delivered to the Demat account, indicating full ownership of the stock. On the other hand, intraday trading enables one to hold a stake in the stock but not to own it outright. 
2. Buy & Sell on the same day: The amount of time that each type of transaction takes is another area of distinction. While regular trading has no time limit and allows the investor to hold the stocks for as long as they choose, intraday trading occurs within a single day. 
3. Short Selling: While regular trading does not enable short-selling, intraday trading allows one to capitalise on declining markets. 

Alternatives to Intraday Trading  

The following are the alternatives to intraday trading: 

• Swing Trading: In this trading style, the positions are usually held for several days or weeks, which may be suitable for those who want to diversify but do not want to trade on a day-by-day basis. 
• Traditional Style of Investment: Long-term investing involves identifying the intrinsic value of the company. Such investments are made based on thorough analysis and require patience. 
• Robo Advisory: Auto investment platforms utilise machine learning algorithms that identify possible investment opportunities. They develop investment ideas according to an individual’s risk tolerance and investment goals. 

Risks of Intraday Trading 

The risks associated with intraday trading are as follows: 

• Market Volatility: Intraday traders may face sudden and unpredictable price fluctuations. Even minor unexpected movements can trigger stop-loss orders or result in losses that may result in loss. 
• Leverage Amplification: Many traders use leverage to increase their exposure. While this can increase profits, it may also increase losses. A minor negative movement in leveraged positions can significantly impact returns. 
• Time Pressure: All positions must close before market closure, typically within hours. It has a very limited time to recover its losses or allow positions to turn profitable. 
• Liquidity Constraints: Trading illiquid stocks creates difficulty entering or exiting positions at desired prices, thereby increasing loss potential and execution challenges. 
• Psychological Stress: The fast pace and constant monitoring requirements may lead to emotional decision-making, including panic selling or overtrading attempts to recover losses. 
• Technical Analysis Limitations: Intraday trading heavily relies on technical analysis and historical patterns. However, markets can fluctuate unpredictably, and technical signals may fail, leading to unexpected losses. 
• Transaction Cost Accumulation: The recovery of losses or gaining profits may lead to overtrading, resulting in higher transaction costs and increased risk exposure without potential returns. 
• Regulatory and Operational Challenges: Trading certain instruments like zero-day-to-expiry options introduces additional operational and margin risks, requiring continuous monitoring and risk management systems. 

Disclaimer: All investments are subject to market risks, economic conditions, regulatory changes, and other external factors. Returns are not guaranteed and may vary based on market performance and investment tenure. Investors should assess their risk tolerance and financial objectives, conduct their own research, and consult a qualified financial advisor before making any investment decisions. 

Conclusion 

Intraday trading offers opportunities to benefit from short-term market movements but demands discipline, risk control, and continuous monitoring. Understanding the process, strategies, alternatives, and associated risks is essential before getting started. Choosing the right platform also plays a crucial role, and using a reliable stock trading app can help traders execute, monitor, and manage intraday positions more efficiently.