In the world of trading, there are different styles of trading that people prefer according to their goals and preferences.
Some traders opt for long-term investing, while others prefer short-term and F&O trading.
In my previous article, I explained swing trading, and in this article, I will be discussing intraday trading.
You may have heard many traders saying that they only do intraday, but what exactly is intraday trading? Let’s explore and find out.
What is Intraday Trading?
“Intraday trading” means buying and selling stocks within the same day. The term “intra” refers to within or between something.
The ultimate goal of any trading is obviously to make profits.
So, intraday traders leverage the price fluctuations in stock within the same day to generate profits.
They buy stocks at a lower price and sell them at a higher price, at times making multiple trades to increase their profits.
However, all trades must be executed and closed on the same day during market hours, regardless of the outcome.
For Example: You buy 100 shares of XYZ company at Rs.200, and Sell it at 205. So the difference in points i.e. 5 points x 100 = Rs.500 would be your profit.
The trade would be squared off on the same day and the difference (profit or loss) would be adjusted in your trading account.
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Why Intraday Trading? Intraday Trading Benefits
(1) Taking Advantage of the Fluctuations (Quick Profits) !!
For traders, the price is the king. A stock keeps on fluctuating numerous times in a day.
So, they take advantage of this short-term volatility (upside-down) of the market, even multiple times, during the whole market hours.
These rapid movements give them opportunities to make quick profits!
(2) Leverage
Intraday traders get leverage from the broker on the capital they’re trading with. Leverage capital is just like borrowed capital.
So this allows traders to buy more quantity of shares in less capital for bigger profits.
The best part is that you can trade up to Rs.50,000 just with a capital of Rs.10,000 as most brokers provide up to 5x leverage of the capital. I use Upstox for trading.
But the downside to this is that with higher rewards, comes higher risk. Even the loss would be on the total leveraged amount you’re trading with.
(3) Profits from News and Announcements
Big news events and announcements can cause extreme fluctuations in the market till it digests the news and reacts to it.
So, intraday traders take the benefit of this big spike and fluctuations of the market to generate big money.
The big players and smart traders leverage the sentiments of the market to walk out with big profits. They – “Buy the Rumours, and Sell the News”.
(4) You can even Make Money by Selling Stocks
It gives you the flexibility to trade on both sides of the market, even when the stock prices are falling.
You can sell the stock first at your desired price and then buy it later to square off the trade. This is different from swing trading or positional trading.
(5) No Overnight Risk
They just trade intraday based on their analysis for the day and do not carry their positions or trades.
A sudden news or announcement can change the stock price tomorrow.
So in this, there is no overnight risk involved as they settle their trades on the same day itself.
(6) Low Entry-Capital
Due to leverage, it requires much less capital to do day trading than other forms like swing trading or long-term investing.
Golden Tip for Intraday Trading
Having a TRADING PLAN and maintaining a TRADING JOURNAL is the first step to becoming a professional intraday trader.
Best App for Intraday Trading
I use UPSTOX for all my trades!
You can open your FREE trading account on this if you’re looking out for a trusted broker.
Disclaimer: I’m not a SEBI registered advisor and content on this site is only for educational purposes. Kindly consult your financial advisor before trading or investing at your own risk.