In the world of stock markets and financial trading, one of the most talked-about strategies is Intraday Trading. For beginners and even some experienced investors, intraday trading can seem exciting, risky, and fast-paced—all at the same time. But what exactly is it? How does it work? And more importantly, is it for everyone?
In this detailed guide, we will explain what intraday trading is, how it works, the tools required, and how to get started safely and strategically.
What is Intraday Trading?
Intraday trading, also known as day trading, refers to the practice of buying and selling financial instruments—such as stocks, currencies, or commodities—within the same trading day. This means that all positions are squared off (closed) before the market closes on the same day. No positions are carried forward to the next day.
The objective of intraday trading is to profit from small price movements that happen during a single trading session. Traders use real-time data, charts, and technical indicators to enter and exit trades based on market trends and momentum.
For example, if a trader buys shares of Reliance Industries at ₹2,400 in the morning and sells them at ₹2,430 before the market closes, the ₹30 per share profit is an intraday gain.
Key Features of Intraday Trading
- Short Holding Period: Trades last for a few minutes to a few hours, but never beyond the same day.
- High Volume of Trades: Intraday traders often make multiple trades in a day.
- Margin Trading: Traders can use leverage (borrowed funds) to take larger positions with a smaller capital.
- Technical Analysis Based: Most intraday decisions are based on charts, patterns, and indicators.
- Risk Management is Crucial: Because of high speed and volatility, risk control is extremely important.
How Does Intraday Trading Work?
Intraday trading works on the principle of volatility and liquidity. Traders look for stocks or assets that move significantly in price during the day and have high trading volumes.
Here’s a step-by-step breakdown of how a typical intraday trade works:
Step 1: Select Stocks for Intraday Trading
Traders choose highly liquid and volatile stocks—those that move up or down quickly and are easy to buy/sell. Examples include popular large-cap stocks or trending companies with news or earnings announcements.
Step 2: Analyze the Market and Chart Patterns
Using technical analysis, traders study charts, trends, and indicators like Moving Averages, RSI (Relative Strength Index), Bollinger Bands, MACD, and candlestick patterns to determine entry and exit points.
Step 3: Place Buy or Sell Orders
Based on analysis, traders place orders using INTRADAY or MIS (Margin Intraday Square-off) option in their trading platform. A stop-loss and target price are often set immediately.
Step 4: Monitor the Position
After entering the trade, the trader closely monitors the stock movement. If the stock hits the target or the stop-loss, the position is exited. Alternatively, traders may manually square off the trade before market close.
Step 5: Square-Off Before Market Closes
All intraday positions must be closed by the end of the trading session (usually 3:15 PM in Indian markets). If the trader forgets, most brokers automatically square it off.
Types of Intraday Trades
There are two primary types of trades in intraday:
1. Long Trade (Buy First, Sell Later):
The trader expects the stock price to rise. They buy at a lower price and sell at a higher price within the day.
2. Short Trade (Sell First, Buy Later):
The trader expects the stock to fall. They first sell the stock without owning it and then buy it back at a lower price. This is called short-selling and is allowed only in intraday trades.
Advantages of Intraday Trading
- Quick Returns: Profits can be made within hours or even minutes.
- No Overnight Risk: Since all positions are closed same-day, there’s no risk from after-hours news or global market changes.
- Leverage Opportunities: Brokers offer margin, allowing traders to control large positions with less capital.
- Daily Learning Curve: Active trading helps build market understanding and skill quickly.
Disadvantages and Risks
- High Volatility: Prices can change suddenly, leading to losses.
- Leverage Risk: While leverage can magnify profits, it also magnifies losses.
- Emotional Stress: Requires fast decisions, discipline, and ability to control emotions.
- Brokerage and Taxes: Frequent trading leads to high transaction costs and tax liability.
Tools Required for Intraday Trading
To be successful, intraday traders need the right tools:
- Reliable Trading Platform: Fast order execution and real-time data are essential.
- Live Charts and Technical Indicators: Tools like TradingView or Zerodha’s Kite are popular.
- Economic Calendar: To track key announcements and news that may impact stock prices.
- News Feeds: Real-time updates on global and company-specific news.
Common Intraday Strategies
1. Momentum Trading:
Buying stocks that are moving strongly in one direction with high volume.
2. Breakout Trading:
Trading stocks that break out of their previous price range, often with strong volume confirmation.
3. Reversal Trading:
Identifying points where a stock may reverse its trend (from uptrend to downtrend or vice versa).
4. Gap Trading:
Taking advantage of price gaps that happen due to news, earnings, or overnight sentiment.
Tips for Beginners
- Start Small: Don’t invest all your capital in one trade. Begin with a small amount.
- Use Stop-Loss: Always place a stop-loss to limit your risk.
- Avoid Penny Stocks: They’re less liquid and more risky for intraday.
- Don’t Trade on Tips: Rely on your analysis, not rumors or random advice.
- Learn Before You Earn: Practice with virtual trading platforms before going live.
- Stick to 2–3 Stocks: Track and understand a few stocks well rather than many.
Intraday Trading Example
Let’s say a trader identifies HDFC Bank stock which opened at ₹1,500. Based on chart analysis, the trader expects the stock to rise during the day.
- Buy Price: ₹1,500
- Target Price: ₹1,530
- Stop-Loss: ₹1,490
- Quantity: 100 shares
- Profit if Target Hits: ₹3,000
- Loss if Stop-Loss Triggers: ₹1,000
The trader exits based on whichever price is hit first or before the market closes.
Is Intraday Trading for You?
Intraday trading is not for everyone. It requires:
- Time and attention during market hours.
- Emotional discipline to handle losses.
- Technical skills and continuous learning.
- Risk management to avoid major capital erosion.
If you are new to trading and cannot actively monitor markets, investing or swing trading might be better suited for you.
Conclusion
Intraday trading can be a rewarding but high-risk venture. It offers the thrill of fast profits and the challenge of real-time decision-making. However, the risks are just as high, and without a solid strategy and discipline, losses can accumulate quickly.
For beginners, it’s essential to educate yourself, practice with demo accounts, and trade with small capital initially. Whether you want to take it as a full-time career or just a side income opportunity, intraday trading demands respect, skill, and patience.
Start slow, learn every day, and focus more on consistency than big wins. In trading, survival and learning are the first milestones—profits follow.