What is Intraday Trading - Meaning and Basic of Day Trading

What is Intraday Trading ?

Intraday Trading for Beginners: Everything you need to know about Intraday Trading.

Intraday trading means buying and selling stocks on the same day. The main motive is to make a profit from the stocks you buy and not keep your money tied up for a long time to reduce risks. So, it’s about buying and selling quickly to make money and avoid long-term trading.

The Essentials You Should Know About Intraday Trading Normally, if you invest in stocks for a long time, you can make good money. But even in a little time, you can make huge profits. For instance, let’s say a stock starts the day at Rs. 100. Within a few hours, it goes up to Rs. 110. If you bought 500 stocks in the morning and sold them at Rs. 110, you would have made a super profit, all in just a few hours. That’s what we call intraday trading!

Faces of Intraday Trading

1. Intraday Trading Overview:

• when you’re using online trading platforms, you need to specify if you’re into intraday trading.

• Intraday trading is all about buying and selling stocks within the same trading day.

• If you don’t close your position by the day’s end, the system does it for you, based on the closing market price.

• Remember, the whole point of intraday trading isn’t about owning stocks; it’s about snagging profits from price changes during the day.

2. Leveraging in Intraday Trading:

• leverage is like asking some extra cash from your broker to supercharge your buying power.

• In intraday trading, this means you can take a huge position in a stock while only putting down a fraction of the total amount.

• But, be aware – brokers have their own rules and conditions for leverage, so make sure you’re familiar with them before taking advantage of them.

Intraday trading indicators

Moving Average: Think of this as a line on a chart that shows the average price of a stock over a certain time. If you look at a longer time, like several weeks, the line is more stable. It helps you see how the stock’s price is generally moving because prices don’t always go in a particular  direction.
Bollinger Bands: These are a bit fancier. Imagine three lines on a chart – one is the average price, one is an upper limit, and the other is a lower limit. Together, they give you a better idea of how the stock is moving compared to just the average line.
Momentum Oscillators: Sometimes, stock prices do their own thing and don’t follow the usual up or down patterns.
Relative Strength Index (RSI): This is like a score that goes from 0 to 100. When the stock price goes up, the score goes up, and when it goes down, the score goes down. It helps you figure out if a stock is getting stronger or weaker.

Benefits of Intraday Trading

Intraday trading has some positive things about it:

• Quick Profits: People who do intraday trading can make money fast in just one day.
  Easy to Buy and Sell: You can easily buy and sell things during the day because a lot of people are doing it.
• No Overnight Worries: With intraday trading, you don’t have to worry about what happens to your money when the day ends.

Risks and Challenges

But there are also things to be careful about with intraday trading:

• Losing Money: Sometimes, people  lose a lot of money, especially if they don’t have any experience before.

• Feeling Emotional: It can be really exciting, but it can also make people feel emotional, which can lead to making bad steps.

• Learning Takes Time: It’s not easy to learn how to do intraday trading well, and it can take a while.

How Intraday Trading Works

Intraday trading means you see how prices go up and down very closely. You use special tools and look at charts and numbers to make good choices about when to buy and sell. You also use things called market orders and limit orders to make your trades happen.

Common Intraday Trading Strategies

Intraday trading isn’t just one thing; it can be done in different ways:

• Scalping: This is about making mini trades quickly to take positive impact of tiny price changes.
• Day Trading: You buy and sell things within one day, not holding onto them for a longer time.
• Swing Trading: This is for short- to medium-term trading, holding onto things for a few days.

Intraday Trading Tips for Beginners

• Do Your Homework: Before you start day trading, make sure to study and understand what’s happening in the market right now, know the basics about the companies you’re interested in, and be aware of important things like how the country’s finances are doing.

• Start Small: Begin with a small amount of money and only use more when you get better at it. Day trading can be risky, so it’s smart to use money you can afford to lose, not your life savings.

• Keep Learning: Learn more about how trading works by reading, taking courses, and looking at good websites.

• Don’t Trade Too Much: The stock market doesn’t always follow a set pattern, so it’s best to trade only a few things at a time to avoid making hasty decisions.

• Keep Track of Your Performance: Day trading is always changing, so it’s important to keep a record of your wins and losses. This will help you figure out what’s working and what’s not, so you can make better decisions in the future.

• Use Indicators Wisely: When you want to make money in day trading, you should pay attention to certain signs or signals. But remember, these indicators aren’t magic – they work best when you have a good plan to make the most of them.

• Stay Calm: Try not to make decisions based on your feelings; it’s better to stick to your plan.

Intraday trading vs. delivery trading

When you buy a share and don’t sell it on the same day, it’s called delivery trading. In this type of trading, the stocks you buy are kept in your account for as long as you want – it could be days, months, or even years – until you decide to sell them. So, you basically own these stocks for as long as you keep them. In delivery trading, people focus on how the stock’s price changes over a longer time, not just within one day, to make their profits. It’s more about the big picture and not the quick ups and downs.

FAQ

1. How intraday trading works ?

In intraday trading, you either buy and sell a stock on the same day or sell it first and then buy it back the next day. Because you end the day with no stocks left, you don’t actually receive or deliver any stocks. So, intraday trading doesn’t impact your Demat account, which is where your stocks are usually stored.

2. What is the best time for intraday trading ?

A lot of people who know a lot about trading think that the perfect time for intraday trading is between 10:15 AM and 2:30 PM. This is because the wild swings in the market usually calm down by around 10 AM to 10:15 AM, which makes it a great time for quick trades during the day.

3. What are some intraday trading tips ?

• Select liquid stocks.

• Start and end your trades without any specific prices in mind.

• Always close any and all open positions

• Do not test the market.

• Thoroughly research your target companies

• Timing is everything

• Always set a point where you’ll stop trading if things aren’t going well.

• Once you’ve achieved your target, make sure to lock in your earnings.

4. How to Pick Stocks for Day Trading?

To be a good day trader, you need to know how to pick the right stocks to trade in a single day. A lot of folks don’t make money because they pick the wrong stocks. Picking the right stocks to make money in a day takes practice and skill, kind of like an art form.

5. How is regular trading different from Intraday trading?

The main difference between a regular trade and an intraday trade is what happens with the stocks you buy.
In intraday trading, you buy and sell stocks on the same day. So, when you sell, it cancels out what you bought earlier. This means you don’t actually transfer ownership of the stocks. It’s like borrowing them for a short time.
But in a regular trade, it takes several days or even weeks to complete. During this time, you get the ownership of the stocks you bought, and the ones you sold are taken out of your account. So, it’s a bit slower and involves owning the stocks for a longer time.