What is Intraday Trading?

Intraday trading involves buying and selling securities on the same day. A trader opens and closes their trades before market closes to benefit from day stock movements. The aim of this form of trade is to manage overnight risks that are associated with holding trades. Market participants monitor price changes throughout the day to identify potential opportunities. This article explores the fundamentals of intraday trading, its characteristics, considerations for traders, guiding principles, and additional relevant information. 

How To Do Intraday Trading? 

To start with intraday trading, investors need to follow this step-by-step guide: 

1. Open Trading and Demat account: To transact in intraday trading, a trader or investor has to open a trading and Demat account with a registered broker in order to sell or buy orders in the same day. 
2. Select Liquid and Volatile Stocks: Intraday trading works best with stocks that trade high volumes and have steady changing prices because they enable the trader to get in and out. 
3. Plan Entry, Exit and Stop-Loss Levels: The price of entry, target price and stop-loss must be determined in advance so that it can manage risk and prevent emotional decision-making. 
4. Apply Appropriate Order Types: Suitable order type such as market, limit, stop-loss, cover, or bracket orders, should be chosen according to the trading strategy in order to control the execution and the losses.  
5. Study Charts and Technical Indicators: Technical indicators, like candlestick chart and moving averages and volume indicators, will assist in determining the short term trends and trading opportunities.  
6. Monitor and Square Off Positions on Time: Before market closing, there should be active monitoring and squaring off of trades to avoid forced square-off or accidental delivery conversion. 

Key Features of Intraday Trading 

Intraday trading has several distinct characteristics, such as: 

• Short-term Trading: This method involves buying and selling stocks or other financial instruments within the same trading day. Positions are usually closed before the market closes to avoid overnight risk. 
• High Liquidity: Traders usually focus on liquid stocks, which often allows them to enter and exit trades quickly. High volumes of trades can help in relatively faster execution of orders. 
• Use of Margin: Brokers may offer margin for intraday trades, which can increase trade size but also raise risk. 
• Technical Analysis: Technical analysis involves using graphs and technical analysis tools like indicators to identify trends. Such techniques involve graph patterns, moving averages, and technical indicators for making informed decisions. 

Important Factors to Consider in Intraday Trading 

There are various reasons that can influence intraday trading. Individuals may consider these factors to make informed decisions. 

• Stock Liquidity: High liquidity generally allows easier entry and exit from positions. This makes transaction execution easy. 
• Price Volatility: Volatility in stock prices is an important consideration. Sudden fluctuations can result in different outcomes. 
• Index Correlation: Stocks with strong correlations to prominent market indices may exhibit certain price movement patterns. 
• Trade Volume Levels: Trade volumes indicate buying or selling pressure. Monitoring volumes helps understand market dynamics. 
• Planning and Risk Management: A clear trading plan is essential. Managing risk carefully and reviewing trades regularly helps improve performance. 

Advantages and Disadvantages of Intraday Trading  

Here are some of the benefits and disadvantages of intraday trading. 

Essential Tools for Intraday Trading 

These tools serve as essential aids for intraday traders by providing insights into price movements, trends, and potential entry or exit points for trades.  

Candlestick Charts 

Traders can identify key patterns, such as doji, hammer, engulfing, and shooting star, to make informed trading decisions. 

Indicators 

Technical indicators, such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Bollinger Bands, help traders spot potential entry and exit points by analysing historical price data.  

Key Principles of Intraday Trading 

Understanding certain principles can help traders effectively understand what is intraday trading in stock market and engage in intraday trading more effectively. 

• Timeframes and Planning: Traders operate within short timeframes, usually minutes or hours. A well-defined trading plan is necessary. This plan should outline entry and exit points, risk management strategies, and the overall trading approach. 
• Technical Analysis: Indicators are used by traders to identify potential opportunities. Technical indicators like moving averages, trend lines, and oscillators typically help traders in identifying market movements and decision making. 
• Volatility and Volume: Traders usually prefer markets with sufficient volatility and volume. Volatility creates price movements that can potentially be capitalised upon. Volume ensures liquidity and ease of executing trades. 
• Risk Management: Strong risk management practices are a necessity. Traders should properly determine their risk tolerance. Setting stop-loss orders can help limit potential losses. Practising proper position sizing helps protect trading capital. 

Tips to Follow for Intraday Trading 

Here are some free intraday tips that individuals can follow. 

• Thorough Market Analysis: Conduct comprehensive research regarding the existing market conditions and company fundamentals. Also, take a look at factors like national debt or currency movements to make informed trading decisions. 
• Invest Wisely: It is usually recommended to invest only the specific amount one can afford to lose. A person should not invest all their funds in intraday trading. 
• Avoid Overtrading: The stock market is unpredictable. So, trade on a limited number of stocks at a time rather than investing in numerous securities. 
• Track Performance: As intraday trading is quite risky, individuals should regularly evaluate the overall performance of their trades. This shall help them refine their trading strategies. 
• Intraday Indicators: Extensive analysis is crucial to obtain profits from intraday trading. Although some key intraday trading indicators are valuable, they should be used to enhance a strategy for better returns. Individuals should not consider them as a perfect solution to get considerable returns. 

Follow these tips for intraday trading and learn how to select intraday stocks to trade effectively. 

How is Intraday Trading Different From Regular Trading? 

Let’s understand how intraday trading is different from regular trading. This may help clarify the intraday trading meaning even more. 

Conclusion 

Intraday trading tends to be lucrative trading strategy for investors. However, a person should note that it requires solid knowledge and abilities to properly manage the volatile nature of the markets. The BlinkX trading platform allows individuals to maximise their trading potential and obtain an advantage in the fast-paced world of intraday trading. Download the stock trading app on the smartphone and begin trading in a hassle-free environment.