What is intraday Trading?

Intraday trading, also known as day trading, is a form of trading where positions are opened and closed within the same trading day. Unlike long-term investing, which focuses on holding assets for long periods, Understanding the Intraday trading meaning is crucial for short term traders. intraday trading seeks to take advantage of short-term price movements of securities. While it can be highly rewarding, it also comes with its fair share of risks and challenges. Let’s learn what is intraday trading in India. This article will explore intraday basics, including strategies, intraday trading tips, and the risks involved.

Basics of Intraday Trading

For success, it is crucial to have a clear understanding of what is the Intraday trading. Individuals who engage in intra day trading focus on short-term price movements rather than long-term trends. They typically rely on technical analysis, which involves studying price charts, patterns, and intraday trading indicators to identify potential trading opportunities. It is essential to learn how to read and interpret charts and understand various technical analysis tools, such as moving averages, oscillators, and support and resistance levels.

For share market intraday trading, a trader needs to specify the stocks to mention 'intraday' trading. It will enable the user to buy & sell the same number of shares before the end of the trading session. And in case you forget to close your position, then you can convert it to delivery trade or else the broker will automatically.   

Key Features of Intraday Trading

Primarily, the delivery of intraday shares into a Demat account is not a part of day or intraday trading.

1. The trade must be settled on the day of the market.
2. Your broker also offers leverage based on SEBI regulations. 
3. Small price changes can result in larger gains if you invest heavy capital.

How to do Intraday Trading?

Let’s now understand how to do intraday trading. To do intraday trading you need to open a Demat account and trading account with a broker such as BlinkX. And then follow these points:

1. Trade High Liquidity Stocks: Because of their liquidity, intraday stocks—especially equity shares of small and mid-cap companies—are essential for trading. Significant volatility might arise from market swings. Examining 52-week high and low values can precisely determine whether an investor should take long or short positions.
2. Volatility: The best stocks for intraday trading often have medium to high price volatility. Market value swings of more than 3% should generally be avoided when engaging in intraday trading since there is a significant risk of losing money in the event of a negative decline in the stock market during an economic crisis. 
3. Strong Correlation: Purchasing shares that exhibit a strong connection with the benchmark index of a reliable stock exchange is advised in order to optimise capital appreciation when engaging in intraday trading. Because the index reflects the best-performing firms listed on the exchange, it permits significant price movement when its value changes. This criterion makes sure that share prices always trend higher, even in the face of extraordinary economic conditions.
4. Higher Trade Volume: Intraday investors might monitor a certain security's trade volume index to spot price swings. Increasing transaction volume might indicate either oversupply or excessive demand based on the success of the underlying firm. In these situations, returns on capital appreciation can be realised through both purchases and sales. 

The key is to have a trading plan, manage risk smartly and analyse your trades regularly to improve. Start small and keep practising. click here to read more about Intraday Turnover Calculation.

Advantages and Disadvantages of Intraday Trading

After knowing the meaning, here are some of the main benefits and some disadvantages of intraday trading.

Intraday Trading Strategies

Intraday traders often combine these tools to form strategies and make informed decisions in the fast-paced environment of intraday trading. Here are some strategies:

1. Momentum trading: This strategy focuses on identifying stocks with significant price momentum. Traders look for stocks that are making strong moves with high trading volumes and aim to ride the momentum for quick profits.
2. Breakout trading: Breakout traders seek to identify key price levels, such as support and resistance, and enter positions when the price breaks through these levels. Breakouts can signal potential trend reversals or the continuation of an existing trend.
3. Scalping: Traders using this strategy Usually have a high win-to-loss ratio but rely on small gains to accumulate profits.
4. Pullback trading: Pullback traders wait for a temporary price retracement within an ongoing trend before entering a trade. This strategy aims to capitalise on the continuation of the underlying trend after the pullback.

Intraday Trading Indicators

The stock market's price swings seem to be unpredictable and illogical. However, traders employ several statistical techniques to identify patterns in these price fluctuations and extrapolate predictions about future trends. Below is a description of a few indicators for intraday trading.

Moving Average

One technical analysis technique traders use to forecast price patterns is the moving average. It generates average price data over a certain interval and smoothes the price fluctuation graph. Traders may customise this interval to be any length of time—1 day, 10 days, 1 hour, 5 minutes, 1 minute, etc. Both short-term traders and long-term investors can benefit from it. It provides a more comprehensive picture of the continuous trend within the time range and evens out the short-term variations.

Bollinger Bands

A more sophisticated technical analysis tool called the Bollinger Band assists traders in determining whether stocks are overbought or oversold. It has three lines. Two lines at two standard deviations in both the positive and negative direction from the first line, which is the 20-day simple moving average line, are in it. The bands tend to expand in more volatile markets and contract in less volatile ones.

Relative Strength Index (RSI)

A technical analysis technique called the relative strength index (RSI) looks at current price fluctuations to determine if a company is overbought or oversold. Its value varies from 0 to 100. Generally speaking, an RSI number above 80 indicates an overbought situation, while a value below 20 indicates an oversold one. When the stock price rises, the index rises as well, and vice versa.

Moving Average Convergence Divergence

The trading indicator MACD determines whether a trend in stock price movement is about to reverse or continue. It is calculated using the difference between the slow-moving average and the fast-moving average. A histogram used to represent MACD indicates whether the momentum of a trend is high or low (bearish or bullish).

Alternative Trading Methods

Investors who are hesitant to engage in intraday stock market trading have access to a variety of trading strategies, including: 

Standard Trading

With the help of this trading strategy, investors may hold stocks in a variety of firms for a long time and profit from dividend payments and capital growth. However, trading through a brokerage business is necessary, and brokerage fees only account for a small percentage of total revenue. Brokerage companies are a reliable alternative for first-time investors since they frequently offer guidance on successful investable stocks.

Momentum Trading

Momentum trading aims primarily to increase capital. Securities with strong future growth potential are bought by investors, but market volatility suppresses the values. Investing techniques based on relative or absolute momentum can be used to choose stocks of firms that are underperforming, either relative or absolute.   

Swing Trading

Swing trading uses short-term investing tactics to make financial profits, similar to momentum trading. In these situations, volatile equities are the focus, and acquired shares are liquidated as soon as a significant shift in price is observed.

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.

1. Candlestick Charts

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

2. 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

To engage in successful intraday trading, it is essential to understand and adhere to some key principles:

1. Timeframes and trading plans: Intraday traders operate within short timeframes, usually minutes or hours, and must have a well-defined trading plan. This plan outlines the entry and exit points, risk management strategies, and overall trading strategy.
2. Technical Analysis: Traders use various technical indicators, such as moving averages, trend lines, and oscillators, to identify potential trading opportunities and make informed decisions.
3. Volatility and Volume: Intraday traders usually prefer to trade in markets that have sufficient volatility and volume. Volatility allows for price movements that can be capitalised upon, while volume ensures liquidity and ease of executing trades.
4. Risk management: Effective risk management is quite important in intraday trading. Traders should properly determine their risk tolerance, set stop-loss orders to limit potential losses and practise proper position sizing to protect their capital.

Risk Management in Intraday Trading

Successful intraday trading needs proper risk management strategies which shall protect your capital and also minimise the potential losses. Some important risk management techniques include:

1.  Setting Stop-Loss Orders

A stop-loss order with a broker allows you to sell a security if it reaches a specific predetermined price level, helping traders control risk and avoid making emotional decisions.

2. Using Proper Position Sizing

Traders should properly determine the appropriate position size based on their risk tolerance and trading account size, ensuring that a single trade does not pose a significant risk to their overall portfolio.

3. Applying A Risk-Reward Ratio

The risk-reward ratio is the ratio between the potential profit and potential loss of a trade. Traders should aim for a favourable ratio to ensure that in the long run, successful trades outweigh the failed ones.

Tips to Follow for Intraday Trading

Here are some free intraday tips that you can follow.

1. 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.
2. Invest Wisely: It is always advisable to invest only the specific amount you can afford to lose. Don’t invest all your funds in intraday trading.
3. Avoid Overtrading: The stock market is unpredictable. So, trade a limited number of stocks at a time rather than investing in numerous securities.
4. Track Performance: Asintraday trading is quite risky, you should regularly evaluate the overall performance of your trades. This shall help you refine your trading strategies.
5. 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. You should not consider them as a perfect solution to get considerable returns.

Following these share market tips free for intraday trading shall help you to make the right decision and trade effectively.

How Is Intraday Trading Different From Regular Trading?

Now that you have a good idea about Intraday trading, let’s understand how it is different from regular trading.

Conclusion
Intraday trading is a very lucrative trading strategy for investors. However, you should note that it requires solid knowledge and abilities to properly manage the volatile nature of the markets. Understanding intraday trading is critical for anybody wishing to actively purchase and sell stocks on the same trading day to profit from short-term price swings. The BlinkX trading platform allows you to maximise your trading potential and obtain an advantage in the fast-paced world of intraday trading. Download the stock trading app for your smartphone and begin trading in a hassle-free environment.