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What is Intraday Trading? – Basics, Indicators, and More

Intraday Trading – The point of intraday trading is simple; it is the process of buying and selling shares on the same day before the market closes. The goal here is not to invest per se, but to trade for quick profits by tracking the movement of stock indices. Therefore, changes in stock prices are closely monitored in order to profit from stock trading.

The most significant thing to keep in mind when trading intraday is to indicate the appropriate orders for intraday trading; if you don’t, your broker may flatten your position or turn the trade into a delivery.

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Intraday Trading Basics

As mentioned, intraday trading, also referred to as “day trading” by many traders, is the buying and selling of stocks on the same day. It can be riskier than investing in the regular stock market. Therefore, it is extremely important that traders, especially beginner traders, understand the intricacies of trading techniques in order to avoid losses.

So how does intraday trading work? Suppose a person buys certain shares of a company, and first of all, he must specifically indicate “intraday” on any platform used for investing. This tells the broker that the user intends to trade shares of the same company on the same day until the market closes.

If a certain stock opens a trade at Rs 600 but jumps to Rs. 660 in a couple of hours. If 1,000 shares were bought in the morning and sold at Rs 660, the profit would be Rs. 60,000 will be done immediately in a few hours.

Intraday Trading Indicators

Whether a person is an experienced investor or a beginner, it can be difficult for them to deal with multiple events happening at the same time during day trading. Thus, observing trends and indicators can be of great help in intraday trading in India. Here are some indicators that can be used during day trading:

Moving Average

The term “averages” is taught in school and we all have learned it. The term “moving average” is just an extension of it. A moving average is a trend indicator, which is represented on charts as a line that shows the behaviour of a stock over a certain period of time. These charts represent the opening and closing rates of a particular stock. The middle bottom line on the chart shows the stock’s average closing speed over that interval. This helps to deeply understand price fluctuations and determine the movement of stocks.

Bollinger Bands

It is also one of the most popular technical analysis tools that shows the standard deviation of stocks. It has three lines: moving average, upper limit and lower limit. These lines represent the band or range of volatility in which the price of a particular stock rises or falls. These movements in the price of a stock over a period of time help locate price movements and you can invest with these observations.

Impulse Oscillators

Stock prices depend mainly on the market situation and are very volatile. Momentum oscillators help a trader know if a stock will go up or down over a given period of time. It choices from 1 to 100 and indicates whether the stock will continue to rise or fall. This, in turn, helps the trader determine the right time to buy a particular stock.

Relative Strength Index (RSI)

The Relative Strength Index is a momentum indicator useful in technical analysis. It deals the degree of change in the price of a stock over a given period of time. It also ranges from 1 to 100 and graphically shows when a particular stock is bought or sold at the highest price. When the RSI is above 70, the market is said to be overbought and oversold when it is below 30.

The formula used for this calculation is:

RSI = 100 – [100 / (1 + (Average Gain/Average Loss))]

How to Choose Stocks for Intraday Trading?

To understand how to day trade, it is important to identify the best stocks to day trade when making such investments, as this carries relatively higher risks.

Choose Highly Liquid Stocks

Liquidity is the main feature of intraday stocks, without which such trading would not be possible. Stocks of small and medium-sized companies can be easily bought and sold, and they also experience high volatility due to market fluctuations.

Cyclical changes should be closely monitored by looking at the 52-week highs and lows, as this gives an accurate indication of whether a person should be a long or short while

Investment Volatility

The best intraday stocks tend to have medium to high price volatility. In general, intraday trading should avoid fluctuations in market value greater than 3%, as there is a high probability of incurring losses in the event of an unfavourable fall in the stock market during

Economy Strong Correlation

It is ideal for buying intraday stocks that have a high correlation with the benchmark index of a well-known stock exchange. Therefore, significant movement in stock prices can be observed when the value of the index tends to fluctuate.

Since the benchmark indices consist of shares of major publicly traded companies, fluctuations can be assumed to move in an upward direction, barring economic anomalies. Therefore, subject to this rule, the capital gains from intraday trading will be substantial.

Higher Trading Volume

Day traders can track the trading volume index of a particular security to determine price fluctuations. A higher trading volume index reflects excessive demand or supply, depending on the company’s core business. In such cases, capital gains can be realized both through purchase and sale transactions and through purchase and sale transactions.

Benefits of Intraday Trading

Day trading stocks have the following advantages:

Opportunity to Earn a Stable Income

While day trading is a bit risky, the profits that can be made from it are significant. By creating a properly structured investment strategy and trading just a few hours every day, you can easily create an alternative source of income.

Low Commission Rates

Stockbrokers charge a nominal commission on intraday stock transactions because there are no shipping costs when transferring the securities in the investor’s name. Taxes on stock transactions, trading fees, service tax, etc., are included in brokerage fees and such deductions reduce the investor’s income.

As a general rule, brokerage fees for intraday trading in stocks are one-tenth of the amount charged for standard trading.

Bigger Benefit

Day trading is known to generate great wealth for investors, provided precise investment strategies are applied. Capital gains in a rising stock market can be easily achieved. In the event of unfavourable market conditions, day traders use the short-selling method to make a profit.


Another advantage of intraday trading is that all invested financial resources can be quickly returned at any time. It is not locked through an asset purchase transaction. This preserves the investor’s liquidity to meet any personal needs.

Capital Gains due to Market Fluctuations

Investors can benefit from day trading in both rising and falling markets, depending on the investment strategy adopted in such situations. Capital gains in a bull market can be achieved by buying and selling publicly traded securities. In the event of a stock market downturn, profits can be made by selling short financial instruments.

Associated Risks

An investor must have extensive knowledge of the complex workings of the stock market to earn adequate returns. This may seem overwhelming to a novice investor looking for capital gains. In such cases, it is important to select the securities of the respective companies for which accurate financial statement analysis is required.

Market volatility plays a big role when it comes to intraday trading.

Alternative Intraday Trading Methods

Investors wary of intraday trading in the stock market can choose from a variety of trading methods, such as:

Standard Trade

Under this trading method, people can invest in shares of different companies. This is usually done over a longer period, where investors can benefit from both capital gains and periodic dividend payments.

However, such trading must be done through a brokerage house where percentages of the total profits are deducted as payments. Since periodic returns are received on investment securities, brokerage fees consume only a small portion of total income. In addition, many brokerage firms offer advice on the most profitable investment securities on the market, serving as a stable investment option for novice investors.

Impulse Trading

Capital gains are the main goal of momentum trading. Investors buy securities that have a high potential for future growth, but prices are limited by market fluctuations. Relative or absolute momentum investing strategies can be implemented in which stocks of companies that are underperforming can be selected, either in a relative or absolute sense.

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Intraday Trading – Frequently Asked Questions

What are the changes between intraday trading and delivery trading?

Answer The main difference between intraday trading and delivery trading is the delivery period of the stock. If it is done on the same day, it is called intraday trading, and if it is done within a certain period of time, it is called delivery trading.

Which indicator is better for intraday trading?

Answer Four fundamentals of day trading to keep in mind:

  • Trend
  • Impulse
  • Volatility
  • Volume

For intraday trading, you can choose any of the indicators listed in this article.

What is a stop loss and why is it important in day trading?

Answer A stop loss is a trigger that is activated when a stock reaches its minimum price. This is necessary as it can help minimize financial losses.

How to find stocks for intraday trading?

Answer Always choose stocks with the best liquidity as this is the main selection criteria for any stock when day trading.

How much can I start day trading in India?

Answer There is no set amount to start day trading. You can also start with as little as Rs. 5000 and if you have enough savings, day trading can also be started with a large amount like Rs. 2,00,000. However, keep in mind that you have to choose a real broker for this.

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