Intraday Trading

If you are a passionate trader who likes to make quick profits, then you will love intraday trading. If you are hearing the term for the first time, it will definitely excite you. In simple words, ID trading means buying and selling within a single day and making a profit before the market closes. It might sound very easy, but if you are new to the stock market, then you should understand the essentials of intraday trading first. 

This blog will contain everything you should know about this type of trading as a beginner. So let’s get started first, 

Understand Intraday Trading 

Intraday trading is also popularly known as day trading. As previously mentioned, traders must invest in stocks, commodities, or currencies and sell the instruments within the same day. This means the position won’t be held overnight, before the market closes traders will sell their holdings. 

Let’s understand for example, 

You buy “ABC” stock at 495 rupees at 11:00 a.m., but when it’s 2:00 p.m., the price rises to 502 rupees, and you decide to sell it immediately. This kind of trading is called ID trading. 

How Does Intraday Trading Work? 

To participate in ID trading, you must know the steps first. Here we are briefly elaborating for you. 

• Choosing Stocks

For intraday trading stocks which have significant volatility are always preferred. In most cases, people choose high liquidity stocks which are actively bought and sold in large volumes. Analyzing 52 weeks high and low provides crucial insight, and traders can easily make decisions for long and short positions. 

• Making A Target

When traders doID trading they always set profit targets and stop loss levels. SL or stop loss helps the traders to limit their loss by automatically selling that stock when the predetermined price is met. 

•  Conduct Technical Analysis

Doing technical analysis is quite an important part of ID trading if you want to make a profit. This analysis includes using indicators like moving average, relative strength index  (RSI), reading stock charts, and others. 

• Placing Order

Intraday traders must use stopless orders and limit orders to execute their trades without any major loss. 

• Monitoring The Market

 Doing only technical analysis is not enough here. Traders must constantly monitor the market once they place orders because the price changes rapidly. Aside from monitoring the prices, checking the charts trends and news is also essential because it can impact the stock movement. 

• Selling The Stock

At the end of the trading session, no stocks should be carried overnight. Traders should sell all the financial instruments by the end of the session. 

What Are The Key Features Of Intraday Trading? 

Before you start doing intraday trading, be aware of the key features first. 

1. As the traders capitalize on a very small price movement the chances of quick profit making is high. Aside from this if the trades don’t go as per plans, traders can experience significant loss as well. 
2. For intraday trading brokers generally offer margin trading which allows buying stocks with more than their capital. Due to this traders can gain profit but also it increases risk factors. 
3. As the time frame is short for trading, therefore, there is no chance of losing due to overnight market fluctuations.
4. Traders can’t ignore focusing on the market just like the investors. ID trading always requires active involvement. 

Pros & Cons Of Intraday Trading 

Just like any other investment intraday trading has also some up and down sites. Know them before you invest, 

The pros are, 

1. As the traders sell their stocks within the same day, there is no chance of any negative news affecting the stocks overnight. 
2. With intraday trading, traders get leverage benefits. 
3. As traders invest regularly so there is always a chance or opportunity to make profit. 
4. If the trading is executed properly it can provide profits within an hour or even within a minute as well. 

The cons are, 

1. For intraday trading traders have to go through high stress due to constant monitoring and quick decision making. 
2. If the traders don’t having a proper strategy or a good discipline, the risk of losing capital will always be there. 
3. Investors have to pay higher brokerage fees due to frequent buying and selling. Compared to long-term investment the brokerage fees are higher here.
4. Without knowledge, traders can’t make a profit from intraday trading. Knowledge regarding market trends, technical analysis, and price movement is essential here. 

Also, Check – Fiscal Deficit Explained

Wrapping Up,

Whether you decide to go for intraday trading or choose a long-term investment, to get a successful result in the stock market you need to be disciplined and knowledgeable. You should monitor news, charts, and others. Especially for beginners who are new to intraday trading, must be very wise before initiating the trading. 

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Disclaimer – This article is for educational purposes only and does not intend to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.