How to do Intraday Trading?

How to do Intraday Trading?

How to do intraday trading is the most common question. Let us explain the whole intraday trading scenario. It's a way to make quick profits from price changes. It's short-term and happens within one trading day. Intraday trading is sometimes known as day trading, as the name would imply. An intraday trader is someone who takes a stake in a stock for a day and makes predictions about whether the price of the stock will rise or fall. Leverage is a tool offered to intraday traders that increases their possible return on investment and lets them invest more than their available cash. According to SEBI's intraday trading requirements, traders must square off their positions by the end of the day, or their brokers will.

Intraday Trading Steps

  • To begin intraday trading, you must first have a Demat and Trading Account with a brokerage.
  • After that, you must deposit money into your trading account.
  • You need to select certain stock and evaluate it according to volume, liquidity, and other aspects. Next, you'll predict about whether stock values will rise or fall.
  • You must examine historical price patterns and performances after establishing a target buy and sell price for the stock.
  • After placing the order, you can use charts to carefully monitor price changes and study patterns in those moves.
  • You can also square off the position, or settle the transaction after you reached the target. You cannot carry forward your position in an intraday trade.
  • It is crucial to remember that since you will be trading with leverage, establishing a stop-loss is essential. In the event of an abrupt price movement against your position, this helps you minimise your losses.

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Table of Content

  1. Intraday Trading Steps
  2. Intraday Trading Strategies
  3. How to do Intraday Trading without margin?
  4. Intraday Trading Guide for Beginners
  5. How is Intraday Trading Different from Regular Trading?
  6. Advantages and Disadvantages of Intraday Trading

Intraday Trading Strategies

Planning is necessary before trading in the share market because there are several hazards involved, and most of them are related to day trading. Every trader must learn something new from intraday trading every single day. It's critical to develop an intraday trading plan based on your demands and objectives and follow it for a while.

  1. Momentum Trading: Trading in tandem with market movement is known as momentum trading. When trading momentum, traders purchase during a bullish run in the market and sell it when momentum wanes. News, announcements, and other sources can be used by traders to select a stock for momentum trading.
  2. Reversal Trading: A reversal trading technique, as its name suggests, provides you with an early warning when the current trend is ready to turn around. Many traders are given the chance to take full advantage of the circumstances. For even greater results, you may combine the technique with other indicators such as RSI and MACD. You may also search for certain candlestick patterns to combine & form new strategies.
  3. Breakout Trading Strategy: Trading a breakout strategy involves going over and beyond a predetermined boundary (support or resistance). This implies that traders will have a chance to go long if the stock price breaks its resistance level in a bull market.
  4. Gap and Go Trading: For those who want to short-sell, this is an excellent technique. There is an upward gap when the prices of a certain stock open higher than they did the previous day; a downward gap occurs when the prices open lower. This often occurs when specific news hits the market and influences stock prices.
  5. Intraday Trading Indicators: An important tool for determining the ideal entry and exit points for a trader is an intraday trading indicator. A trader can employ a wide range of indicators for intraday trading. 

Here are some intraday trading indicators.

  • RSI (Relative Strength Index) helps assess market trends as overbought or oversold. Optimal for intraday use between 8 -11 periods due to increased sensitivity in analyzing market conditions.
  • Moving averages assist in trend identification for intraday traders, aiding in selecting suitable stocks based on market trends.
  • Bollinger Bands gauge market volatility, fluctuating bands indicating varying market volatility. Ideal for intraday traders to make decisions based on market volatility changes.

How to do Intraday Trading without margin?

Most of the traders profit from leveraged day trading when it comes to intraday trading. Without a doubt, the majority of traders used the margin facility until September 2021 to increase their profits.

But it's now harder for traders to trade with large leverage after SEBI's new rules for intraday margin were put into effect.

This is because, under the rule, traders may now get 5x stockbroker leverage, instead of 20x or greater.

It is crucial to employ your funds in this situation if you want to maximize earnings even in the absence of margin funding. However, use caution and only use funds that you can afford to lose while trading intraday.

Intraday Trading Guide for Beginners

Before investing, novices in the stock market should attend to a few matters. Here are some beginner-friendly guidelines for intraday trading:

Small Start: It is advisable to avoid placing large wagers when you are just starting trading. Start with a few stocks, and as your expertise and abilities grow, progressively raise the trading volume and value.

  1. Avoid Emotions: Trading choices might be negatively impacted by human emotions. The two main factors that might be harmful to any deal are greed and fear. Logic and reason must be the foundation of trading judgements. An intraday trader must kill tension and maintain composure while keeping a close eye on the market.
  2. Stop Loss is a Must: Maintaining a stop-loss order is usually a good idea while trading. It assists in reducing losses when prices diverge from expectations.
  3. Perfect Entry and Exit: The current market trend determines an intraday deal. To optimize gains and avoid losses, a trader has to recognise trend patterns and strategically choose when to enter and exit the market.
  4. Research and Study: Before trading, it is recommended to carry out in-depth research and examine all the stocks you wish to trade in addition to the current state of the market. Additionally, monitoring your results—both profitable and unsuccessful trades—will assist you in learning from past mistakes and improving your trading strategy.

How is Intraday Trading Different from Regular Trading?

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

  1. No delivery of shares: When you trade regularly, you purchase equities and have them physically delivered to your Demat account. This indicates that the stock is fully owned by you. On the other hand, intraday trading enables you 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 ordinary 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 ordinary trading does not enable you to short-sell, intraday trading allows you to profit from declining markets.

Advantages and Disadvantages of Intraday Trading

Here are the advantages and disadvantages of intraday trading:  

Advantages of Intraday Trading Disadvantages of Intraday Trading 
Low Starting Capital Requirement: Intraday trading utilizes leverage, allowing traders to increase position size with less cash.Limited Time for Goal Achievement: Trades must be squared off on the same day, offering less time to meet objectives.
Potential for Higher Returns: Leverage enables traders to potentially earn more with available capital.Little Time for Recovery: Sudden adverse price changes provide minimal time for recovery, resulting in potential losses.
Opportunity for Short Selling: Intraday traders can speculate on declining prices by engaging in short selling.Risks with Leverage: Mishandling leverage may lead to significant losses despite its potential benefits.
No Lock-in of Invested Money: Funds are not tied up; traders receive their money back after the deal settles.Continuous Monitoring Required: Intraday traders need to actively analyze charts and patterns, requiring daily commitment.
Avoidance of Gap-Up/Gap-Down Situations: Trades are closed by day end, eliminating exposure to overnight market gaps.Ineligibility for Corporate Benefits: Intraday traders don't receive perks like voting rights, bonuses, or dividends.

Traders must note few considerations and guidelines for intraday trading should be made if you want to begin trading in the short term. You should be knowledgeable about technical analysis, have a trading account, and keep a close eye on the news. If done carefully, it's a terrific technique to get knowledge in the market from shorter trading sessions.

FAQs on How to Do Intraday Trading

Yes, beginners can start intraday trading by gaining knowledge through research, following a well-defined trading plan, practising on a demo account, and gradually increasing involvement as they learn.

Successful intraday traders possess traits like discipline, patience, a good understanding of market trends, the ability to control emotions, adaptability, and continuous learning.

Minimize risks by diversifying your trades, avoiding overtrading, using stop-loss orders, not trading based solely on emotions, setting realistic profit targets, and maintaining a strict risk-reward ratio.

Yes, intraday trading can be performed in various market conditions such as trending markets, range-bound markets, or during high volatility. Strategies may vary accordingly.

Consider factors like liquidity, volatility, news, price movements, and volume while selecting stocks for intraday trading. Focus on stocks with sufficient liquidity for easy trading.