What is Intraday Trading? Best Example & How to do it 2021
When you enter the stock market, you will witness many people via YouTube videos & other social media platforms encourage you to do Intraday Trading. However, in starting the stock market, beginners don’t have an idea about Day Trading and they are completely unaware about what is Intraday Trading?
Let’s discuss Intraday Trading in detail with examples, how does it work & Is intraday trading profitable?
What is Intraday Trading?
Intraday Trading means buying and selling stocks within a day before the stock market gets closed. Day trading is another term for intraday trading. In Intraday trading, You need to close all your open positions on a daily basis.
Intraday Trading required significant experience and knowledge of different types of indicators & Trends. Day Trading offers instant profit or loss depending on whether trades which you have initiated go right or wrong.
Let’s checkout an example to understand what is intraday trading properly.
Intraday Trading Example
Let’s take an example of HDFC Limited, you heard some good news is coming about the stock. So in the morning you bought the 30 stocks of HDFC at INR 2356 with a target of INR 2400 & stop loss of INR 2320. There can be four situations of profit and loss.
Situation 1
Things can go as per your trading experience and stocks can hit your target of INR 2400. In this case you can book a profit of INR 1320 (2400–2356=44 x 30 =1320).
Situation 2
Stock starts falling from your buying price & hits the stop loss within an hour. In this case you can book a loss of INR 1080 (2356–2320=36×30 =1080).
Situation 3
Sometimes stocks can remain range bound on either side. It means they don’t hit the target nor the stop loss. In such cases you need to close the Intraday position near to your buying price only.
Mostly this kind of trades are considered no profit no loss. However, Brokerage charges are still applicable to it.
Situation 4
The last scenario is to average a position which you have taken earlier, this kind of practice requires huge experience & not recommended to the beginners. In this case people buy or sell more quantity after making an initial position.
This can be done to reduce the losses or to get extra profit on the existing Intraday trade.
Intraday Trading Timings
You can open an intraday position in the equities that are accessible for intraday trading on both exchanges ( NSE & BSE)starting at 9:15 a.m. There are only a few shares in which intraday trading is not permitted.
While most online brokerage firms require you to close your intraday position by 3:20 p.m. All trades under the equities intraday and F&O intraday will be squared off if not closed between 3:20 p.m. and 3:25 p.m.
If you don’t square off your position, brokerage services may charge a penalty of INR 30 to 50 for each order.
How does Intraday trading work?
The primary concept is to take advantage of short-term price fluctuations in the stock market. The markets are volatile on any given day, which means they vary in both directions.
Intraday trading is based on benefiting on little price swings and attempting to generate small profits on both the buy and sell sides.
While there are no hard and fast guidelines, the basic rule is to stay in stocks with a lot of liquidity and that fluctuate a lot in reaction to triggers.
You aim to purchase low and sell high in intraday trading, or sell high and then buy low again. The fundamental rule of trading hasn’t changed.
Major Advantage
When placing an intraday transaction, you must first specify that it is a MIS trade, which means it is intended for same-day square-up. If you choose CNC trade, you will be required to pay the whole purchase price upfront.
If you place an intraday trade using a MIS order, you will benefit from lower brokerage and bigger margin. In intraday trading, for example, you can receive 2 times leverage.
That means that you can trade up to Rs.2 lakh in shares with a Rs.1 lakh Fund.
How to Select Stocks for Intraday?
When it comes to Intraday Trading, picking stocks is the first and most important stage. After all, the effort and money you put in are only worthwhile if you get a return; else, it’s all over.
So, how do people make sensible stock selections? Let’s take a closer look.
It is always better to steer away from anything that appears to be unstable. Why put your money into something that may never give it back to you?
As a result, it’s a good idea to keep an eye on stock performance and consider trading over potentially steady companies.
It is preferable to invest in stocks that are linked to large industries. If the sector index rises, it may have a favourable impact on the stock price.
The iron industries, for instance, would be impacted by the appreciation of the Indian Rupee against the Chinese Renminbi.
As a result, export revenue would rise, and stock levels would rise. Choosing stocks while having such market conditions in mind would be extremely beneficial.
The initial steps of trading include looking, evaluating, and comprehending. Unless you have a lot of luck on your side when trading, nothing goes smoothly without appropriate calculation.
Because luck isn’t always on your side, it’s always a good idea to do some research before you trade.
Being a lone wolf is n’t always preferable to following the herd. Look for the market’s overall movement or the companies that have piqued the most traders’ interest.
When the market goes up, traders must seek for stocks that are rising, and when the market drops, traders must hunt for companies that are falling.
Originally published at https://profitmust.com on December 2, 2021.
