What is Intraday Trading? Strategies, Benefits & Risks

Is it very difficult or as easy as many traders to make money within one day? 

This makes the decision-making process not that easy. Intraday is the same form of technique in which you can purchase a stock and, before the evening, you can sell the stock. 

Research by SEBI (Securities and Exchange Board of India ) indicated that more than 70 percent of individual intraday traders realized losses. This article will help you understand how intraday trading works and what the correct choice is for you.

Quick Summary

Intraday strategy is the method of acquisition and disposition of stocks within a day to gain immediate profits. Other traders charge low prices that are used to get money. This demands quick decisions, market awareness, and risk management. The market is closed before all the traders.

Our Focus in the Article

• What is Intraday Trading

• How to get started with intraday trading

• Types of Intraday Trading and their strategies

• Risk Management in Intraday Trading

• A common mistake is to use intraday trading

What is Intraday Trading?

Intraday trading refers to selling and buying stocks within a given day. You do not have any stocks to hold overnight. You have until the end of the market at 3.30 PM to close all your positions.

Consider it in the following way: You hire a car daily, you do not purchase it. Before evening, you use it and give it back.

The aim is to gain profit out of minor price variations that occur throughout the day. In contrast to long-term investment, when you keep stocks for months or years, 

Intraday trading is everything about fast trades, selling high (or low) in a few hours or even minutes. Any trade done is finalized before the closing of the stock market at the end of the day; hence, there is no stock held in the night.

What is the Best Way of Starting Intraday Trading?

Intraday trading can be an exciting venture to start; however, it needs tools, knowledge, and discipline. Compared to long-term investing, stock selection for intraday trading is a type of trading that concentrates on the short-term movements in prices - that is, each decision matters.

The following is a step-by-step list that will get you started easily and realistically.

1. What is the Stock market about? - Learn.

Know the operation of the stock market before joining intraday trading. Get to know what stocks are, how prices fluctuate, and how to buy and sell.

Other terms related to the common market, such as volume, volatility, liquidity, bid price, and ask price, should also be known. This fundamental knowledge will make trading seem more like guesswork without it.

2. Open a Trading and Demat Account.

In order to trade, you require a Demat account (where you will hold shares) and a trading account (where you will purchase and sell shares). The majority of brokers provide the two now. Select an honest stockbroker that offers:

• Fast trading platforms

• Low brokerage charges

• Quality research and technical Aids.

• Intraday trading margin or leverage.

Indian-based popular brokers are Zerodha, Upstox, Groww, Angel One, and ICICI Direct.

3. Select the Best Stocks to trade Intraday.

Not all stocks are suitable to trade daily trading. One of the essential intraday trading tips for beginners is to focus on liquid and volatile stocks, those that have high trading volumes and significant price movements.

Indicatively, the cases of Reliance, TCS, or HDFC bank are large-cap stocks that are usually traded since they can easily be bought or sold throughout the day. One should not stick to low-volume or penny stocks because they can lock up your money.

4. Know and Work with Market Indicators.

Not all stocks can be used to trade intraday. The stocks that you choose should be high liquidity and high volatility stocks, i.e., they rise and fall regularly and contain a high number of buyers and sellers.

 Here’s what to look for:

• Price Range: Stocks that would be priced between 100-2000 are the best.

• Trading Volume: At least several lakh shares traded a day.

• Sector News: These stocks tend to move as per recent news or performance.

Do not venture into penny stocks or illiquid shares, where there is very little movement of the price, and there is a possibility that you will be stuck with them.

5.  Establish Entry, Exit, and Stop-Loss Levels.

Much intraday trading is founded on the price patterns and the market action, and not the fundamentals of the companies. That is why technical analysis is your friend.

Start learning:

• Charts (Candlestick, Line, Bar)

• Moving Averages (MA) – to identify trends.

• Relative Strength Index (RSI) - to find out overbought/oversold levels.

• MACD (Moving Average Convergence Divergence) – to get entry and exit timings.

• Levels of Support and Resistance- to learn of potential price reversal levels.

Trade on charts also enables you to get logical trade decisions and not emotional decisions.

6. Define Your Strategy

• Make up your mind before you put any trade on

• Entry Price: What will be the time you enter into the trade?

• Target Price: This is where you will make a profit.

• Stop-Loss: This is the level at which you will leave when the trade goes wrong.

Example:

In case you purchase a stock at 500, you can have a target of 510 and a stop-loss of 495.

This allows you to be aware of the maximum risk and reward expected even prior to beginning.

7. Demo or Paper Trading Practice.

Before using

In real money, trade on demo substances or paper trading applications. These are virtual representations of the market environment without the risk of financial investment.

The practice will assist you in understanding how the prices fluctuate, how quickly you must respond, as well as how to trade well.

8. Manage Emotions and Risk

Your trades can be ruined by emotions such as fear, greed, or excitement. The trade must always be planned and disciplined. Do not put all your money on one trade, but only a little of your capital.

Adhere to the 2% rule - you should never risk up to 2 percent of all trading capital in a single trade.

Also, do not run after the market or attempt to recoup losses immediately; it tends to bring about larger losses.

9. Keep Learning and Keep Up to Date.

There is a daily change in the stock market that depends on news, earnings, and the events that take place in the world. Read financial news, follow updates on the market, and continue to advance your skills.

Online trading communities are also available, and you can also learn certified courses on technical analysis and risk management.

10. Start Small and Grow Slowly

Begin your intraday trade with low investments. When you feel comfortable and assured returns, then you can gradually increase the volume of trade.

This is to remember: Long-term success is the key to patience, discipline, and mistakes.

Types of Intraday Trading

Intraday trading can be carried out in various forms depending on the style of the trader, their objectives, and the movement of the market. These are the primary ones:

• Scalping

Intraday trading is the fastest type, which is scalping. Under this technique, traders carry out numerous minor trades in the course of the day, and the holding period of a stock may just be a few seconds or a few minutes. 

The primary objective is to take a small price change, e.g., buying a stock at 100.10 and selling it at 100.30. The profit made in each trade is low, but the huge number of trades may lead to a good overall profit.

Scalawags normally use technical charts, volume data, and order flow to make immediate decisions. 

• Momentum Trading

Momentum trading is concerned with the identification of stocks that are experiencing a good trend, nd either an increase in value or a decrease in value. 

Traders are making trades when they observe a momentum, i.e,. A stock that is gaining momentum, which is due to news, earnings reports, or market trends.

Indicatively, when a firm records good profits, then its stock might begin surging sharply. A momentum trader enters the market on the uptrend and exits when the momentum starts to turn.

The determining factor here is timing, entering early and leaving before the move wears out its welcome. Some of the ways traders verify the direction of momentum include Moving Averages, RSI (Relative Strength Index), or MACD. 

• Breakout Trading

Breakout trading is founded upon the premise that once a stock price crosses a pivotal point (resistance (a ceiling) or support (a floor)), it will proceed with a strong movement in that direction. 

To give an example, when a stock has been stalled between 200 and 210 and then after days pass and the stock rises above 210, the breakout traders will interpret it as a buying behavior.

According to them, the new strength or weakness in the market is demonstrated in this breakout. The importance of stop-loss orders in this technique is that the prices occasionally break the level temporarily and revert to the previous level, or a false breakout.

Chart patterns such as triangles, flags, and rectangles are also employed by the traders to locate breakout opportunities.

• Reversal Trading

Mean reversion is also known as reversal trading and is concerned with identifying when a stock's direction is about to reverse. 

Traders seek an overbought or oversold market - a market in which the price has gone too far in a single direction and is probably going to correct itself.

An example is when the stock price has been falling and then it begins to pick up; then a trader will purchase it with the hopes of a recovery.

To determine turning points, reversal traders employ such tools as RSI, Bollinger Band, and candlestick patterns (like the hammer or shooting star).

Best Intraday Trading Strategies

Intraday trading refers to the selling and buying of stocks on the same day to get fast returns out of minimal fluctuations in the price. A trader must have intelligent tactics that will enable him or her to make quick and confident decisions to succeed.

1. Scalping strategy

The fastest intraday strategy is scalping. To be able to earn minimal profits out of slight price changes, traders purchase and sell a stock within seconds or minutes. Scalpers have a large number of trades within a day since each trade yields an insignificant profit.

This is effective with highly liquid stocks with movements in prices. Scalping requires acuity, decisions, and actions.

2. Momentum Trading

This plan is premised on the recognition of stocks that are performing well in upward or downward directions. The traders buy in when the price begins to trend heavily in a particular direction and sell when the trend begins to decelerate.

The momentum traders are news, earnings reports, and high-volume stock traders. The trick here is to catch the trend and not fight the market trend.

3. Breakout Trading

Breakout trading emphasizes stocks that cross major areas of resistance or support. As the stock price breaks and goes above the resistance, it tends to go further, and when it breaks and falls below the support, it falls further.

Breakout charts assist traders in identifying these levels and trading in them as they occur. This plan assists in getting in when large price fluctuations are anticipated.

4. Reversal Trading

In this approach, traders seek stocks that have fallen sharply in one direction and are likely to revert.

Indicatively, when a stock increases at a very high rate, it can drop very soon, and the other way round. 

Reversal traders refer to such indicators as RSI (Relative Strength Index) or moving averages to locate overbought or oversold markets. This is a tactic that should be patient and timely.

5. Moving Average Strategy

Moving average (MA) is useful in evening out the price information to determine trends. A short-term MA crossing a long-term MA is an indicator of a buy opportunity (golden cross). This acts as a sell (death cross) when it crosses below. This is an easy and trustworthy tool to allow traders to track the trend and evade fake signals.

Intraday Trading in Different Markets

Intraday trading involves selling and buying stocks (or other financial products) within the same day. You do not store anything overnight; everything is closed by the end of the market.

Consider it in the following way: In the morning, you purchase a toy for 100 rupees, and in the evening, you sell the same at 110 rupees. You make ₹10 profit, all in one day.

• Stock Market

Intraday trading is most likely to take place in the stock market, which is a beginner-friendly trading area. In this case, the stock brokers trade the shares of the companies that are listed in the stock exchange, such as NSE (National Stock Exchange) and BSE (Bombay Stock Exchange), within India.

Timing: 9:15 AM 3:30 PM (Monday-Friday)

Indicative of 100 shares of Reliance at 2500 and selling them the same day at 2520, you earn 20 profit per share.

Best For: Novices, since stocks are simple to follow, and much information can be found on the Internet.

• Commodity Market

On the commodity market, the traders do not purchase or sell company shares, but rather physical goods such as gold, silver, crude oil, copper, and natural gas. The objective is the same, that is, to purchase cheaply and sell dear during a single day.

Timing: It is dependent on the commodity. As an example, gold and silver may be exchanged till as late as the evening.

Examples: Buying gold at 50000 one kilogram and selling it on the same day at 50500 per kilogram, your profit is 500 per kilogram.

Note: Global news, weather, and economic data have the ability to influence commodity prices. To follow updates in the market, then.

• Currency Market (Forex)

Currency or forex market trading deals in the trading of currency pairs such as USD/INR, EUR/INR, or GBP/INR. Majorly, it is consumed by individuals who observe global trends and exchange rates.

Timing: 9:00 AM to 5:00 PM

Examples: You purchase USD when the rupee is weak and sell it when the rupee is strong. The profit is realized on small price differences.

Note: The currency market responds to the news of inflation, interest rates, or world events in a short period of time.

• Derivatives Market

The market of derivatives consists of Futures and Options (F&O). They are contracts that are subject to the value of a stock, commodity, or currency.

Futures: This is an agreement to sell or purchase at a given price in the future.

Options: Entitles you to purchase or sell, but not necessarily.

Example: You purchase a futures contract of Infosys with the anticipation that the price will go up, this is because if the price goes up, you gain profits.

Note: This is a more complex market where leverage is applicable, i.e., you can trade large positions using a very small amount of capital; however, this increases the risk as well.

Things to be Aware of Before Engaging in Intraday Trading

Before investing in intraday trading, there are things that one should remember.

During the day, trading may be exciting and also profitable; however, day trading involves more risks as compared to long-term investments. 

Several factors can make or break your success before you begin trading, and it is important to learn these few points. These are not mere tips in free trade, but are very necessary rules that every trader ought to have.

1. Understand Market Basics

You may want to purchase and sell stocks in one day, but you should have knowledge of the stock market. 

Get acquainted with the types of orders (such as market or limit orders), price fluctuations, and volume of trade. This basic knowledge is what beginners usually lose money due to the lack of such knowledge.

2. Have a Clear Trading Plan

Do not venture into the market blindly. Make decisions beforehand on what stocks to trade, where to get in, and where to get out, and the amount of loss you can take. Having a good plan makes you discipline yourself and not make emotional decisions.

3. Risk Management is Crucial

Always have stops to cushion yourself against massive losses. Intraday trading is a rapid trading, and the prices can change abruptly. It is prudent to put risk at 1-2 percent of total capital per trade. It is among the best trading tips that professionals using the free trading environment use.

4. Avoid Overtrading

Most of the novices attempt to generate profits by overtrading within a single day. This would result in emotional fatigue and needless losses. Concentrate on quality trades, and not quantity.

5. Keep track of Market News and Events.

The news about the company, the political policies of the country, and the situation in the world have a very strong effect on intraday prices. Monitor market news, financial releases, and economic news before trading.

6. Choose Liquid Stocks

Never choose stocks that have low trading volumes. Liquid stocks can be purchased and sold fast without significant changes in their prices, which is a requirement of intraday trading.

7. Control Your Emotions

The greatest adversaries of intraday traders are fear and greed. Always do what you plan to do, even when you incur minor losses. Prosperous merchants are those who make decisions based on strategy and not emotions.

8. Use Technical Analysis

Study how to read charts and interpret such indicators as moving averages, RSI, and MACD. These instruments are useful in determining entry and exit points more precisely. Most websites also offer free investment advice and practice accounts where you can do your practice first before investing in real money.

Risk Management in Intraday Trading

Risk management is considered one of the most crucial aspects of intraday trading. Regardless of the experience and confidence of a trader, a trader always has the possibility of losing money when the price fluctuates very fast.

Risk management is primarily aimed at keeping your capital in place to be able to trade longer and smarter in the market.

The following are some of the main tips that every trader must consider to achieve a more successful outcome in the intraday stock trading strategies:

1. Establish a Stop-Loss in Each Trade.

A stop-loss is your safety net. A price you set that your trade will automatically close, so that you will not make any more losses. 

As an illustration, when you purchase a stock at 200, you may have a stop-loss of 195. This implies that you will be at a loss of ₹5 per share. One of the strongest but simplest free intraday trading tips that can be used to safeguard your investment is the use of a stop-loss.

2. Risk a Relatively Low Percentage of Your Capital.

If you put all your trading on a single trade, do not risk it. The amount of risk that professional traders take in each trade is typically 1-2 percent of their overall capital.

It is because this way, even when one trade fails, you will have a sufficient amount of money to salvage and get back to trading.

3. Use Proper Position Sizing

Position sizing refers to the determination of the number of shares/contracts to purchase during a trade. It assists you in risk and reward balance. 

When a stock is volatile, trade in smaller amounts. It is an intelligent method to utilize the intraday stock trading strategies without taking the chance of incurring unwarranted losses on them.

4. Avoid Trading with Emotions

Poor decisions are usually made when it comes to emotional trading. Fear, greed, or impatience will cause you to go in or out of trade at the wrong time. Adhere to your trading plan, trade within your risk limits, and trade on the basis of analysis and not on feeling.

5. Diversify Your Trades

Never invest everything in a single investment or industry. Invest in a limited number of stocks, diversification. The loss may be offset by other trades, even when one of the trades goes wrong.

6. Keep Track of Your Trades

Keep a journal of your trades, where you keep a record of the daily trades, entry points and exit points, profits, and losses. Looking back at your previous performance would enable you to know your mistakes and work better on your strategy. This is regarded by many professionals as one of the best free intraday trading tips that can be used to be successful in the long term.

7. As A Tracker of Trends and News in the market.

Market direction can very easily shift when there is some unexpected news or event. It is a good idea always to watch high-profile announcements, company earnings, or global market news.

Risk management is an essential tool for adapting your trades according to the current trends.

Common Mistakes to Avoid in Intraday Trading

Trading within a day can be lucrative, given that one does it prudently, but most beginners lose money due to the repetition of the same mistakes.

The awareness of these frequent mistakes is the initial step in improving performance and gaining confidence in the market.

These are some of the key points to keep, as well as some of the intraday stock tips and free intraday trading tips to help you.

1. Trading Without a Plan

This is one of the largest errors that traders commit when they decide to venture into the market without an adequate plan. Before any trade is made, you must always make decisions on your entry point, target profit, and stop-loss. A clear plan ensures that your emotions are kept in check and that you make rational decisions even in volatile market conditions.

2. Ignoring Stop-Loss

Most traders do not put a stop-loss, hoping that the price will go their way. This can escalate a minor loss into a giant loss. A stop-loss is one of the best free intraday trading tips that you should always adhere to to safeguard your capital.

3. Overtrading

Selling excessively within a day might be stressful and unnecessarily costly. Rather than pursuing all the minor price fluctuations, go after a handful of good trades. Always in mind, successful traders are concerned with accuracy, and not volume.

4. Following Tips Blindly

It can be unsafe to depend on the advice or even market rumors of other people. Rather, conduct independent research and study of your own trade and research. Intraday stock tips may be used as a guide, but it is worth confirming them by using techniques or price patterns.

5. Allowing Emotions to guide Choices.

Two emotions that destroy the trading discipline are fear and greed. Do not purchase when prices are going up and sell when they are going down. Be patient and stick to your plan and your strategy.

6. Ignoring Market News

The intraday prices fluctuate rapidly in relation to company announcements, changes in the budget, or world news. A lot of traders do not pay attention to such updates and suffer losses. Always be informed, always keep updated with the news, it is a very easy but effective way of having free intraday trading tips that every trader ought to exercise.

7. Trading without Due Diligence.

Without the knowledge of the market fundamentals or technical analysis, it is dangerous to venture into intraday trading. Study chart patterns, indicators, and market behavior before making an actual investment. Begin with little and tangible experience, and build confidence.

Intraday Trading Tips for Investors

Get to know basic and practical intraday trading techniques to exploit day-to-day market fluctuations. For beginners looking to improve, exploring free trading tips can also be very helpful.

Intraday trading rules :

Guide by the most important intraday trading principles to trade wisely and control risk. Apply good intra-day stock trading techniques to identify high-speed profit-making. 

You must always plan your entry and exit points, keep disciplined, and learn free tips of intraday trading in order to improve your performance day in and day out.

Conclusion

Intraday trading is so lucrative as we have discussed above. The most important thing to note is that before using it to make money, one must know the strategy of Intraday trading.

Monitor stock market news and market trends. It can enable you to make wise decisions when the right time comes, and it helps increase your chances of succeeding in the fast-paced world of Intraday trading.

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