Intraday trading deals with buying and selling of stocks on the same day, during the trading hours that are stipulated by the exchange. Stocks are bought and sold in large numbers strategically with the intention of booking profits in a day.
What is intraday trading?Amit and Chirag, both trade in the equity share market. While Amit is an avid trader with Angel One, Chirag is a beginner and wants to know about intraday trading.
Intraday trading implies buying and selling securities on the same day.
Every day, the price of a security, say ABC Corp fluctuates. An intraday trader profits from this rise or drop of price which offers huge returns. Intraday traders also get the benefit of margin-funding, whereby they can transact up to ten times their account value which can potentially boost their gains.
Intraday trading poses a risk of loss but there are measures to limit losses.Whenever Amit trades intraday, he monitors the market closely and seeks advice from the Angel One team of experts. He also opts for stop-loss which may limit his losses (if any) to a minimum.
Like Amit, Chirag is now ready to trade intraday with Angel One.
How to Go About Intraday Trading
It is important to understand the fundamentals of intraday trading in order to make consistent profits. A good tip is to trade with the current market trend. If the market is falling, sell first and buy later, and vice versa. Make an intraday trade plan and stick to the plan. Set your desired profit and stop-loss limit. Do not be over-ambitious. Instead, book your profits at regular intervals. Maintain stop-loss levels. It helps you to limit your loss if the market does not perform. Also, choose highly liquid shares and trade in a small number of shares at a time, if you are not a seasoned trader.
Basic Rules of Intraday Trading
An unexpected movement can affect your investments in a few minutes. Hence, it is important to keep in mind a few intraday trading basics while carrying out intraday trading. Do not trade in the first hour as the opening range is established during that time. The fluctuations of this range can help to identify the intraday trend. Move with the market trend as it allows potential for a greater profit if the trend continues. Another basic rule is to fix entry price and target levels. Set a stop-loss limit so that your losses will be curtailed if the share drops. Also, withdraw if your desired profits are met. Stick to your plan and carry trade in a disciplined manner.
Things You May Also Like to Know
Who should participate in intraday trading?
An intraday trader typically has 5-6 hours a day to complete both buying and selling. So, it is apt for someone who is self-driven, knowledgeable, ready to take risks, and ready to trade with profit and loss limits.
What are self-generated intraday trades?
Self-generated intraday trading happens when the client places both buying and selling orders directly through the online platform.
Is there any limit for intraday trading?
No. you are only limited by your capital and ability to take a risk. If you opt for margin funding option, you can trade up to ten times your account value and increase profit opportunities.
What is timing for intraday trading?
In intraday trading, you need to take your position and square it off before trading ends. In equity markets, intraday trading starts at 9:15 am and ends at 3:15 pm.
However, the best time for intraday trading is one or two hours after the markets open. Most stocks create a price range within 30 minutes of trading and so, you can form your trading decision based on it.
Can I sell intraday-shares the next day?
If you don’t trade intraday-shares on the same day, they are delivered to your account automatically. However, it depends on the policy of the broking house. Some broking houses have classifications like intraday options and delivery options. That’s because they charge different brokerage for different categories.
Under the intraday category, shares selected for day-trading will automatically get sold at 3:00 pm.
What is the intraday cash limit?
It measures the limit of your exposure in the market.
You can trade during intraday trading for the value of cash in your account. If you have funds to buy shares, you can hold stocks for long and short terms.
Which chart is the best for intraday trading?
It is a good practice to look for confluence in different charts to base your trading decisions. Popular intraday charts used by technical traders are,
- Line charts
- Bar charts
- Bar and Candlestick charts
- Candlestick charts
- Tick charts
- Renko charts
- Volume charts
- Point and Figure charts
Which time-frame is the best for intraday trading?
You must select a time frame based on your trading style. You can choose from a 60-min chart, daily chart, 15-min chart, and even a tick chart. However, most traders use the 1-hour time frame to decide their position.
What is the cut off time for intraday transactions?
The cut-off time for intraday trading is given at 3:10 pm to 3:15 pm. Traders can start trading as soon as the market opens at 9:15 and continue trading throughout the day until 3:15 pm.
Can I hold intraday-shares?
You can hold intraday shares until the closing hours of the day. After that, the shares will automatically square off or will get delivered to your account. You need to ask the broking house about their policy regarding intraday shares.
What happens if I don't sell intraday shares?
The shares in your intraday account will get squared off automatically at the end of the trading day. Or, get delivered to your DEMAT account, based on broking house’s policy.
How can I know my intraday trend?
Technical traders use multiple trading indicators and charts to understand market sentiment. If you are a new trader, it will take you some time to develop a workable trading strategy, for that you’ll have to research the market in detail.
How can I make consistent profits using intraday trading?
Most traders have a straight and simple goal – to make consistent profits. The best day trading strategy you can implement to achieve this is to buy when the stock moves above the Opening Range high and sell when the stock moves below the Opening Range low. In the first 30 minutes of day trading, each stock creates a range, known as the opening range. The fluctuations of this range are taken as support and resistance. If the stock movement is observed to cross the Opening Range high, then it is advisable to buy. Similarly, you can sell when stock movement is observed below the Opening Range low. This strategy can give you consistent profits if done with discipline, proper assessment of the market performance and optimal usage of indicators.
What is the difference between buying stocks on intraday basis and delivery basis?
Intraday trading, as the name suggests, is trading stocks within trading hours in a single day. Many new investors and traders are keen to know about how intraday trading works. To begin with, you buy shares when the price is low and sells them when the price is high, thus taking advantage of the price movement. You can use real-time charts to identify these price movements and make profits. On the other hand, if you purchase and hold shares overnight, then you take delivery of shares. This is known as delivery trading. In the delivery method, stocks are transferred to your demat account. You can sell these stocks for either a short-term period (maybe next day) or after a few weeks, months or years. The benefit of intraday trading is that the cost of brokerage is low compared to delivery trading. Also, you receive margin profits the same day as opposed to delivery trading.