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What is Intraday Trading?

Traders base their profits on different kinds of purposes. One may be a long-term investment which is a gradual process, yet may produce high returns. The other can be a short-term strategy which includes trading with quick gains. One such method is Intraday Trading.

Basics of Intraday Trading:

Intraday Trading Indicators

Traders often face difficulties with concurrent events occurring in Intraday Trading. Whether a person is an experienced trader or a beginner, looking at the trends and indicators is always beneficial for everyday trading. Let us look at some indicators :

How to choose stocks for Intraday Trading?

Choice of stocks is the first and the most vital step when it comes to Intraday Trading. After all, the money you put in is only worth the time if you get a return, otherwise, it is done and dusted.

What is a Cover Order?

A Cover Order is a special type of order through which the user can take an intra-day position and take advantage of extra exposure while being protected through a stop loss order.

The system will place two orders simultaneously: a market or limit order and a corresponding stop loss market order which would only get triggered at the specified stop loss trigger price. If the trigger price is hit, the stop loss order gets executed as a market order. The combination of both these orders being placed simultaneously is known as a Cover Order. Cover Orders help you limit any potential losses that could be incurred on a position.

Benefits of Cover Orders

Limited Risk and Maximum Profit: Due to the inherent way Cover Orders work, they help traders minimize downside risks and provide better control over risk management. Since there is always a stop loss corresponding to each trade, Cover Orders can help users trade in a more disciplined manner. Users can take advantage of the margin benefits as well, using the Cover Order facility to leverage their positions greatly while enjoying the benefits of a stop loss to protect them from downside risk. Overall, Cover Orders reduce downside risk but do not impose any limits on their returns.

How Cover Orders Work

A Cover Order is basically a two-legged order. The client needs to place a buy/sell order with compulsory corresponding stop loss order in the opposite direction.

Difference between intraday and delivery trading

What is Intraday Trading?

When you’re buying and selling of stocks within the same trading day, you’re indulging in Intraday Trading. In this course of action, stocks are purchased with the aim of earning profits and not with any objective of investment. This is done by harnessing the movement of stock indices, which means that the varied prices of the stocks are harnessed in order to earn profits from trading of stocks.

To participate in Intraday Trading, an online trading account must be set up with specific orders which are explicit to Intraday Trading. These orders are squared off before the trading day ends.

Advantages of Intraday Trading

Disadvantages of Intraday Trading

What is Delivery Trading?

Delivery trading is one of the most common trading methods in the stock market. Unlike Intraday Trading, delivery trading involves a more pronounced intention of investment than just trading opportunities. This is because the investors have it in mind to hold on to their stockholdings for a longer period of time.

In this process, there are no time constraints in the selling of stocks. As long as the stocks are delivered to the associated demat accounts, it is considered as a Delivery Trade. You cannot perform Delivery Trades without a demat account - since a demat account is where your stocks will be stored.

Advantages of delivery trading

Disadvantages of delivery trading

Intraday Trading v/s Delivery Trading

It is easy to conclude that Intraday Trading is usually completed within a day. This typically means that all the shares purchased in the day must be sold by the end of the day, before the closing of the markets. If these shares are not sold, they are automatically squared off at the closing time.

However, on the other hand, in delivery based trading, shares bought can be maintained for a longer duration for higher profit returns.While Intraday Trading gives the opportunity for low capital accounts and margin payments, delivery trading requires complete amounts for its transactions.

As an intraday trader, if one can judge and forecast the value of shares at short and small intervals, then Intraday Trading is a good idea. Nevertheless, there are many technical tools which assist in predicting short term price movements.However, if one thinks long term investing is better suited for them, and they are able to pick shares based on company’s intrinsic value and relatable assessments (such as the company’s fundamental indicators - like price-to-earnings ratio, book value and the like), delivery based trading can be considered as a better option.

Intraday Trading tips and tricks

When you buy a stock, it is up to you to decide what you want to do with it. You may keep it for the next decade if you like, or sell it on the same day. Both options have their own benefits, but if you’re going to be closing your position on the same day, there are some Intraday Trading tips you should know.

Tips and Tricks for Intraday Trading

It is advisable to look for liquid shares for Intraday Trading. As the trader needs to square-off their position at the end of the day, it is better to go for large cap shares. Otherwise, you might have to hold the stocks due to lack of trading volumes. Here are some more tips and tricks for intraday traders.

How to do Intraday Trading

In online trading platforms, when an intraday transaction is made, it has to be explicitly specified that it is an intraday transaction while placing the order. However, while buying, there is always an option to change it to ‘Delivery Trades’ later, before the market closes.In most of the trading platforms, the stocks bought under Intraday Trading are automatically squared off if they are not transacted as per rules before the day ends.

Guidelines and tips

There are plenty of things you should keep in mind before you begin Intraday Trading. In addition, we also have some items that you ought to have in good supply before you begin:

Intraday Trading steps

An intraday trader actively performs buy and sell transactions, sometimes even multiple times during the day, but ensures not to carry any of the open positions to the next day.

How to choose stocks for Intraday Trading?

Stock selection tips for an intraday trade

Intraday Trading is either a matter of luck, or of research and concrete decision making. If you fall into the latter category, you will have to decide on a few basic parameters for what the stock you plan to dive into, looks like. These parameters are –

How does a Day Trader Work?

A typical day trader who is serious about her work and earns her living through day trading has some qualities which makes her an expert in the field.

Let us observe some characteristics of a day trader:

Day Trading Strategies

Day traders use some strategies to make profits. A day trader must be flexible in using strategies, because as we already mentioned, the stock market is an unstable place. Here are some common strategies used by day traders:

Day trading for a living

There are basically two types of day traders - those who work for an institution and those who work alone. Most of the people who perform day trading for a living are those working for some institution.

Here are some of the reasons why most traders work with institutions:

Even though most day traders traditionally worked with institutions, with the advent of internet and light-weight trading platforms that provide real time information, individual traders can also become day traders.

Risk management in Intraday Trading

For trade to not be a wild gamble, a trader must know how to minimise risks. While traders don't have control over making profits, every trader can cut losses by formulating an intraday strategy to be followed beforehand. One has to know what shares to trade, how much to buy and when to sell before starting.

Risk management techniques

Determine support and resistance

Technical analysis should be used to determine which stocks to buy. Stocks fluctuate within price ranges, with the lower point of a price range called a support and the ceiling, a resistance. These price ranges and price points can be determined by observation of historical price movements. A share usually tends to rise near its support price and if it's near its resistance price, usually tends to drop in value. But this is not always the case as new market developments can affect the fortunes of stocks greatly. Stocks can go up beyond resistances or slip under multiple supports to settle into new price ranges. There can even be manipulation of share prices by deep pocketed traders, especially if the traded share is not so liquid.

Tips for risk management



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