What Is Intraday Trading? –Everything About Intraday Trading

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Those who trade in the stock market often have various goals in mind while investing. These goals can be categorized into two –long term and short term goals. Long term usually involves for a period for more than 1 year and short term may range from days, weeks or even months. Both cases are capable of producing high returns and it depends on the person ’s risk capacity and time given to the stock market.

Intraday Trading –What does it mean?

Intraday trading is the practice of buying and selling stocks the same day you purchase them. The advantage of doing so is with short-term profits, however, the risk is also in proportion. Suppose you buy 100 stocks at Rs. 300 and after a few hours the price of the stock goes to Rs. 310. Taking advantage of this, you decide to sell those 100 stocks on the same day and earn a profit of Rs. 1,000. This is called intraday trading

For quite a long time, trading in the stock market was considered cumbersome and only a few companies and talented brokers/professionals risked their money in the same. However, as technology progressed, phone trading and online stock trading have made it easier for the common man to enter the field of stock trading.

As of the present, you can trade stocks at the click of a button. This also makes it easier to indulge in intraday trading. So let’s understand intraday trading in more detail.

The Basics of Intraday trading

The basics of intraday trading are as follows:

1. You may mention that you are indulging in intraday trading to the stockbroker. In case you plan to use an online portal, you would like to activate the option or open an intraday trading with a broker like TradeSmart for intraday trading. Doing so makes sure that you are unable to carry the stock to the next day.
2. You don’t own the stock in case of intraday trading as such. Basically, you simply invested in the value of the stock and would bear the profit or loss for the transaction.
3. You cannot carry the stock till the next day. Once you buy the stock, you need to sell it by the end of the day. If you don’t sell it yourself, the stock will get squared off by your broker.
4. Intraday trading involves a much smaller risk than long-term investment in stocks. 

What should you consider before indulging in intraday trading?

Intraday trading isn’t for everyone. While intraday trading isn’t a gamble for reasons which we will see later, it still carries significant risks. Consider the following before indulging in Intraday trading:

• Discipline : Before you even think about entering Intraday trading, ask yourself whether you get carried by emotions or not. If yes, then don’t even think of opening the Intraday trading portal on your system. Invest in Intraday trading only if you are aware of financial management and will surely keep aside a part of the profit before reinvesting.
• Use of data analytics tools : Unlike a long-term investment in stocks, there was no way of predicting the Intraday value of stocks by simply looking at the charts. However, now, data analytics make it easier for people to predict Intraday trading. It still isn’t precise but could be very helpful.

• The right strategy : Everything else apart, the right strategy is important for Intraday trading. 
• Significant capital : Risk-taking isn’t for anyone and definitely not for those who don’t have savings. It would be a bad idea to indulge in such a high-risk investment if you don’t have backup capital like fixed deposits, some money in your account, etc.

Pros of Intraday trading

The advantages of Intraday trading are as follows:

1. The profit could be quite high if your prediction goes right.
2. You can save on delivery charges.

Cons of Intraday trading are as follows:

1. The risk is still very high and if you aren’t disciplined with your approach, you could lose huge sums of money.
2. You don’t really own the stock. You are simply trading in the value of the stock.
3. Even if you don’t want to sell the stock, it will get sold at the closing price for the day.

Intraday Trading indicators

With so many events happening simultaneously in the stock market, it can often become hard to keep track of what is happening. Hence there are indicators created to look out for that help in better analysis of the stock and bolster the decision of investing. Some indicators for intraday trading are

1. Moving Averages –Also known as daily moving average (DMA) it is a line on the charts that shows the behaviour of the stock overtime.The moving average lets you understand the movement of the price as the behaviour of the price is not in one direction
2. Bollinger Bands –It comprises three lines, the moving average, the upper limit and lower limit. With these you can observe the movement of the price within these ranges and decide accordingly.
3. Momentum Oscillators –Since the prices are determined by the market fluctuations, this makes the prices very volatile. To determine whether the price may rise or fall, a momentum oscillator is used.
4. Relative Strength Index (RSI) –This indexes all the trading that happens over a period of time. It ranges from 1-100 and shows when a stock was bought or sold at its highest. 

Intraday trading and delivery trading

Unlike intraday trading where you have to buy stock and sell it the same day, delivery trading is when you buy stock but do not sell it on the same day. Instead, you keep it in your demat for days, months or even years before you sell the shares. Thus you keep the shares for over a period of time and investors consider the price movement of stock for long-term to book profits rather than price fluctuations within the day.

Tips to do well in intraday trading

While there is no sure shot method of predicting the results in intraday trading, below are a few pointers to keep in mind before you start day trading

1. Don’t panic –Prices keep fluctuating throughout the day so don’t rush into buying or selling when you see a change if you want to achieve your goal. Keeping a cool mind and controlling emotions goes a long way in getting the desired results and you should already be prepared in knowing how much to risk and not to risk.
2. Be updated –You need to be constantly updated with the latest events that are happening in and around the country and with the particular company or industry you wish to invest in. This will help in determining the rise or fall in stock prices and can trade accordingly.
3. Use stop loss –Stop loss is a tool where you can limit the price of the stock and buy or sell it once it reaches a certain price.
4. Don’t have high expectations –Keep your expectations minimal and reasonable and don’t expect to make huge profits with minimal transactions. Rather it’s better if you can make modest profits from multiple transactions.

Conclusion

Intraday trading is a feature that a lot of traders use to make quick profits and is important to choose the right broker that offers the best features as per your convenience to conduct trading in a smooth and efficient manner. TradeSmart is one such broker which offers multiple facilities and also a free Premium Account so that you can venture into the world of trading with less cost and maximize profits.