The Basics of Intraday Trading
The Basics of Intraday Trading

Investing in share markets is a very lucrative option that has the potential to fetch you very high returns. Most people invest in stock market for long term for their retirement or contingencies or they invest in stock market for a little side income. However, many people invest in stock market as their livelihood and they buy and sell share within a day. This type of trading is known as Intraday Trading. 

What is intraday trading? 

Intraday trading is a type of trading strategy where stocks are purchased and sold on the same day. In this type of trading, the stock is not credited to your demat account. You either earn or lose the difference between the purchase price and sale price for the stock. The intention is to earn quick profits through this strategy. 

Before you begin intraday trading, it is important to have a demat account. For something as robust as intraday trading, it is better to open a demat and trading account with a reputed broker like Kotak Securities who can provide seamless back-end support as well as knowledge and learning on investment strategies. 

Basics of Intraday Trading in India: 

In intraday trading, you begin by picking a stock and taking a position on the stock i.e either buying the stock or selling the stock. Depending on the price movements, you can set an exit level for the stock and the maximum profit on the stock to capitalize on the movement. For example, if you go long or initiate a buy transaction on shares of Company A at Rs. 100, you can set a target of Rs. 104 when you book profits and a price of Rs. 98 when you exit the stock. If the price moves to Rs. 98, you sell the stock, and incur a loss of Rs. 2 per stock. If the price moves to Rs. 104, you can sell the stock and earn a profit of Rs. 4 per stock. 

It is very important to set the exit price and the price at which you will book profits on the share. Depending on this, you can pour in funds for investment. 

Intraday trading operates on the concept of margin. This means before you begin intraday trading, you need to deposit some funds with your broker. If you incur any losses, they will be met out of the margin. If you earn profits, it will be added to your margin. Most brokers do not allow intraday trading without having a minimum margin requirement. 

Intraday trading tips: 

Intraday trading is a highly specialized investment strategy requiring substantial amount of research and quick decisions. However, there are a few tips and tricks that can be used in intraday trading to make profits. 

  • Choose a liquid stock
  • Decide your entry point and the expected exit point
  • Determine a stop loss level where you will compulsorily exit the stock
  • Restrict the number of trades that you do in one day
  • Don’t get influenced by stocks that are in the news or under the radar
  • Make intraday investment calls in the initial hours of trade
  • Thoroughly research the company you want to invest in
  • Compulsorily close all open positions by the end of the day
  • Don’t bet against the market: Pick stocks and their movement not the movement of the market. 

Intraday trading can get quite costly since brokerage and STT is charged on both the purchase and sale transactions. However, brokers like Kotak Securities have introduced a free intraday trading option where intraday trading can be done for free. It is important to be sure of what you’re doing when you commit to intraday trading otherwise you can lose funds fast. By educating yourself, you can ensure your intraday trading strategies provide fruitful.

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