Day Trading or Intraday Trading involves buying and selling of stocks on the same day within the market hours. Intraday is an age-old trading concept.
People who earn living by trading shares mainly opt for intraday trading. It is like a day job where you buy and sell shares and make a profit/loss for the day.
Intraday trading is considered to be one of the riskiest trading concepts because of various reasons. However, it is one of the most profitable businesses. Only if the person who is doing it is aware of the intraday concepts and the market pretty well.
In this article, you will read about the various aspect of intraday trading. We will discuss intraday trading in detail including the trading strategies, concepts, benefits, and many other details.
This article will tell you about the ways by which you can learn intraday trading. We will discuss the charts, intraday tips for the beginners. There will be many other details which one as an intraday trader needs to be aware of.
What is Intraday Trading or Day Trading?
Intraday Trading is not regular trading. Often people confuse Day Trading with regular trading while both are completely different. Intraday meaning is within the same day. It means that the position you take in the market at the beginning of the day needs to be squared off at the end of the market session for the same day.
For instance, let us assume, you buy 100 shares on Monday. If you are doing an intraday trade, then you will be selling these 100 shares within 3:10 pm on Monday itself. So, your position is squared off and there is no delivery of the shares to the next trading day.
In intraday trading, there is no chance of the ownership of the shares as the shares are bought and sold off within the same day. Since you are not holding on to the shares, the shares certificates are not issued and thus you do not get any ownership of the same.
Intraday Trading primarily depends on the volatility of the market. The share prices go up and down on the same day. The trader makes a profit out of this volatility. There are different strategies that are involved in intraday trading and it depends on the trader which one he or she chooses.
In the next segment of this article, we will be discussing those strategies and tips for intraday trading.
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Intraday Tips or Intraday Trading Strategies
Intraday Trading is risky and profitable at the same. As they say, you cannot achieve great things without a bit of risk in it. This phrase is quite relatable in this market, especially, when it comes to Intraday trading.
Intraday Tips shared by eminent traders and analysts depend on various aspects. They make use of the intraday charts, indicators, and other analytical tools. Here, are seven Intraday Trading Strategies which you can put to use to make your profits grow –
Momentum Trading Strategy:
The first of seven Day trading strategies that you must learn is the Momentum Trading Strategy. There are few stocks in the market that moves 20%-30% every day.
According to this strategy, your primary job is to find these kinds of stocks. The stocks that can make a big move. You can make use of the stock scanners. For finding these stocks, stock scanners are great. These stocks perform so well due to high volume (relative volume to be specific).
This is also for having no close resistance levels. These stocks mostly outperform the moving averages because of the same reasons. Thus, this strategy involves the momentum of the stocks in one direction with a high volume.
Gap & Go Trading Strategy:
There are price movements of the shares without any trading. The shares which have this kind of price movement are known as Gappers. So, for intraday trading, the GAP & Go trading strategy plays a great role.
As there are at least a few gappers found in the market on a daily basis. This gap in the price generates by factors like company announcements for earnings, press releases regarding new projects, and others that can benefit the shareholders.
For implementing this strategy, you need to find the gappers in the market. Usually, the gappers are mostly found in the early hours of the market. Once the equilibrium is set in the market, the gaps get filled.
After finding the gapper, you need to take a position in the minor trend’s direction. If you find the gap in the opposite direction of the minor trend, then take the opposite position and put a very strict STOP-LOSS.
Pull Back Trading Strategy:
In this strategy, you need to buy the weaknesses of security and sell the strengths of the same. If a share is trending up, then it needs to be pulled back which gives a low-risk opportunity for buying.
On the other hand, if a share is trending low, it will offer a selling ground with a low-risk profile. This strategy needs to be applied in an active trading session.
For this strategy, the previous day’s trading volumes are needed to be known and observed. It can be implemented after a breakout in the share prices as well.
Moving Average Crossover Strategy:
If you are a moving average loving trader, who always checks the moving average, then you must be aware of this strategy. This is a price crossover strategy whose base is the moving average.
If the price of a share crosses its moving average, it signals a change in the trend. If it cut the moving average from below and goes up, the trend is supposed to move up to and vice versa. So, if you are looking for that signal to invest or sell the shares of a particular company, you can use this strategy as well.
Breakout Trading strategy:
If you can just trade without thinking too much then this strategy is right for you. Break-out in the share market means the price of a share going up above the resistance and its own support level.
Here, the traders need to use the Volume Weighted Moving Average for understanding and making use of the breakouts. You need to trade aggressively and quickly, there is no time for waiting in the strategy. Here, traders need to identify the price level. This price level is the break-out trading level.
Once the break-out happens, then they need to identify the resistance level. Now when the break-out closes above the resistance level, the trade is completed. However, this strategy is risky as everyone gets after this stock.
Once the traders (major traders/bulk traders) get in the game, there is hardly any opportunity for the retail traders and investors to reap the profit.
Bull Flag Trading Strategy:
A Bull Flag is made when there is a hike in the price of the shares (strong hike). After the hike, prices reach a peak. It gets pulled back right after that and due to the highs and lows being almost parallel, the flag like the chart is created.
It takes time, and the traders need to be patient. After the flag is formed, traders mark one spot on the flag break. The other is marked on the upper trend line where the break is created for trending up the high of the flag.
In order to understand the flag and the trend better, traders use Bollinger Bands and similar technical indicators.
Reversal Trading Strategy:
It is a strategy that gives you the provision to enter the market near to the support of the share. In this strategy, you need to look for stocks that achieve very high highs or lowest lows.
However, the share prices must reverse the trends almost immediately as well. The idea is to sell at a high price while buying at the lowest price possible. For the same, a trader needs to close the long position. Then sell the shares to benefit from the decreasing price of the share and vice versa.
So, now you are aware of these seven strategies for intraday trading, let us discuss certain Day Trading Tips or Intraday Trading Tips with you in the next few segments.
List of Top Companies providing Intraday Facilities
How to make profits in Intraday Market?
In Intraday Trading, making a profit requires the right trading strategy and insights. You will find simple and effective trading strategies in most of the Intraday Stock Tips that are provided by the eminent analysts. Some of those strategies which can help you make a profit in the Intraday Stocks Today are –
Mapping Resistance and Support:
Resistance and support are the two most important things in intraday trading. Within the first thirty minutes of the trading session of the day, you get to know the opening range.
The highest and the lowest price in these thirty minutes is known as Resistance and support levels respectively. The intraday traders need to sell if the price drops below the support level. While they should buy if it surges up the resistance.
In intraday trading, analyzing the Risk to Reward ratio is very crucial. For making a profit in the market, often analysts and intraday traders say that at least 1:3 risk-reward ratio needs to opt for. It means that every one rupee you invest, you can earn three rupees on that.
Opening Range Breakout:
This strategy for intraday trading makes use of Opening Range Breakout. Most of the intraday traders use this strategy whether amateur or pro. If you listen to most of the Intraday calls, you will find analysts suggest this strategy.
You can choose large breakouts or stay within the range of the breakout. You can make combinations of indicators and other tools for making this strategy optimum.
Imbalance in Demand and Supply:
If there is Demand-supply disparity, the price fluctuates. You need to find stocks where this demand-supply difference is present.
Once you find these stocks, if the demand is higher than the supply, buy the stock and vice versa. You need to go through the historical charts and other information to get a broad idea before making the move.
Combining the Relative Strength Index (RSI) with the Average Directional Index (ADX):
RSI comes under the technical momentum indicator. It helps in comparing profits and losses against the shares purchased and sold.
The ADX is used for determining the trends and prices under strong trends. You can combine these two parameters and tools to judge the market and trend in it and use it for intraday trades.
Intraday Trading Tips or Day Trading Tips for Beginners
For beginners, the intraday market can be daunting if they do not have the proper understanding. Here are some of the most crucial Intraday Free Tips for beginners.
The first Intraday Strategies for the beginners or you may call it a tip as well is analyzing the time frame for trades. It is crucial for the beginners to understand when to take a position and when to exit from the same.
Intraday traders must take a position when the risk is low to maximise the profit. Intraday trading is trading according to the prevalent trend of the intraday market. So, beginners must follow the same.
If you take a position in the market, you need to decide your exit then only. You can exit the market once your desired price is achieved and you made a profit or the maximum loss that you can bear is reached.
Historical Price Analysis:
Historical price analysis is required in the intraday market as well. You should start with one stock and understand its risks, characteristics, and trends. This will help you understand how the stock price will move.
Discipline and Planning:
Discipline is a prerequisite in intraday trading. When you are new to this world, you must have a predefined plan. Yes, you need not be greedy but set some goals. This will save you from losses.
Setting stop-loss can save you from many loss-making trades. You need to understand the trading strategies for your trades and have a disciplined approach towards trading.
Understanding the value area is important. It is the range where more or less 70% of the trade took place on the previous day. There is an 80% probability of filling this area if the market opens around this value area and remains there for a 2 consecutive half-hour period.
You can make use of the Intraday Calls Today for your trades as well. As a beginner, if you are not sure of the stock price movement or need expert opinion then you can use the intraday calls provided by the brokerage houses and analysts in the market.
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How to Invest in Intraday Stocks or Day Trading Shares?
For fruitful day trading, you can follow these seven intraday tips –
Choosing the Right Intraday Stocks:
In intraday trading, you get only a few hours to make a profit. So, it is highly important to choose the right stocks. It is advised by most of the eminent intraday traders and analysts, that large-cap stocks are beneficial in intraday trading.
These stocks have high volume trading in them. This, in turn, increases the price movement and intraday traders get pace to make a profit. Apart from being large-cap stocks, the ideal intraday shares need to be liquid as well. Higher the liquidity quotient, you can generate more profit.
Stop-loss is a savior:
While high liquidity and large-cap shares are the ideal intraday stocks, but there is a downside as well. The prices can go either way and thus putting a stop-loss can save you from infinite losses.
Stop-loss orders sell the shares when the specified price is reached and thus cuts out the chance of further loss. It can be used in case of short-selling as well.
When the price increases beyond the anticipation of the trader, the system automatically buy the shares which were short earlier.
You are not investing:
When you are getting into intraday trading, make sure not to become an investor. Investing and day trading are similar as well as different in the approach.
While both require you to buy shares and sell them when you get the desired price. However, the shares which are good for the long-term might not be worthy enough for short-term investment.
So, it is recommended that you be an intraday trader seek stocks that are relevant for the intraday market and trade them and not invest.
Moving against the market is risky:
In the intraday trading arena, if you move against the market movement, you can land up in a huge loss. Though stocks can generate huge returns, however, if the market is moving against your anticipation and expectation, then it will be intelligent enough to exit the position.
There are times when all the technical indicators and analysts predict the market in a certain way but the market has some other plans. These are the times when you should move according to the market.
Price determination for entry and exit:
In the intraday market, it is important to set the entry and target price before you buy the shares. When you buy the shares, you must keep in mind a target price at which you will be selling the shares and square off your position.
If you see a minimal gain, which is not at par with your expectations, do not rush to sell the shares. You might lose on the maximum potential gain from the stocks.
While it is important to set the target price and wait until it is achieved, it is also important to book your profits when the same price is reached.
While selling the shares witnessing a nominal gain is not good for your trading business as you can generate more profit. Similarly, becoming greedy and not selling the shares when the target price is achieved, can be riskier as well.
Research is required:
While investors require thorough fundamental research for investing, the intraday traders need to thoroughly understand that technical factors as well as the basis of fundamentals.
You need to shortlist around ten shares whose every detail must be on your table. You need to understand the resistance and support levels, price trend and other technical details.
Apart from the technical factors, you need to know about their corporate events, mergers, stock splits if any, payment of dividends and other fundamental details.
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How to do Intraday Trading or Day Trading?
If you are wondering how to do intraday trading, then you are in the right place. To know how to do day trading, you need to follow these below-mentioned steps.
Choosing the Right Brokerage House for Intraday Trading
- Brokerage charges affect your profit and loss from intraday trading a lot. So, choosing the right broker is a necessity.
- You need to shortlist a few brokers who suits your pocket. For this, you can search online and shortlist a few.
- You have to check their brokerage plans, products and services they offer and other hidden charges if any.
- Once you select the brokerage house, you can open your account with it.
Opening Demat Account with a Brokerage House
- You need to open an account with a brokerage house to start trading.
- Brokerage houses provide a two-in-one account. This type of accounts includes a Demat and Trading account.
- To open the Demat account, you need to either visit the online site of the brokerage house or their offices.
- You have to fill the Demat application form.
- Once you submit the Demat application form, your application will be initiated.
- You need to upload or submit documents like – PAN, AADHAAR, and other documents for verification and KYC.
- After the verification of the documents submitted, the brokerage house will process your application further.
- You will receive the login credentials of your Demat and trading account on your registered email id.
Downloads and Login
- After you have the login credentials with you, you can logon to the website of the brokerage house.
- There you will find the trading terminal they offer.
- Download the trading terminal software and install the same on the computer or laptop that you use for trading.
- You can also use the mobile application or the online trading platform. However, for intraday trading, the terminal is the best option.
- Choose stocks that you want to trade after a thorough analysis.
- You have to buy and sell the stocks on the same day since it is intraday trading.
- Any number of shares you can buy as per your investment budget
- You have to square off the positions before the day trading session ends.
How to choose Intraday Trading Stocks or Day Trading Stocks?
There are five rules for choosing the right Intraday Stocks and they are as follows –
Too much Volatility is not good for intraday traders:
While volatility is the game-changer for the investor, for intraday traders, stocks being too much volatile can affect the profits. It is recommended to the intraday traders to not trade stocks which have low volume and when the company is about to announce some big news or things as such.
It is because the stock will not only be volatile before the big announcement but it can be so after the announcement is made. In the low-cap segment, the stocks which are traded are very chaotic and it is not possible for a day trader to gauge their movement. If the prices go south then your investment will be at stake.
Liquidity is the key:
All eminent analysts, intraday traders and others who work in the day trading segment advise the day traders to trade shares which are highly liquid. The liquid shares are readily bought and sold in the market.
They have a huge volume of trading as well. It is beneficial for the intraday traders to trade these shares as the huge volume makes decent changes in the price which can be turned into profit by the intraday traders.
Correlation plays a crucial role:
While choosing the right Intraday Shares, check whether they share has a great correlation with its sector indices or not line check the Intraday Nifty Charts for the same sector and the share together.
This will give you the idea of whether the price of the share moves along with the movement of the sector or not. Intraday traders can trade shares which have a good correlation with the sector and industry.
Research before Stock Picking:
There is no single list of good or bad shares for the intraday segment. You need to create a list of your own by carrying on thorough research according to your investment ideas and budget and other criteria.
So, you need to check which shares suits your investment budget and those criteria and shortlist a few. Then you need to carry on technical analysis on all those stocks you have selected.
After thorough research and analysis, you must choose the shares you want to invest in. Here you need to keep in mind certain fundamental factors as well like dividend and stock splits and others.
The trend is important:
While choosing stocks, you need to be aware of the trend of the market. If the market is in bull-run, look for the stocks which are on the rise and vice-versa.
As mentioned above in other points as well, intraday traders must go with the flow of the market and not against it. So, you need to trade shares whose prices are moving according to the market movement.
How to read Intraday Trading Charts?
For intraday trading, you need to make the most use of technical tools and one such important tool is Intraday Trading Charts. You need to understand and analyze these five Day Trading Charts for your everyday trading.
As the name suggests, these charts show you the highs, lows, opening and closing prices of a particular stock at an interval of even 15 minutes. You can use this chart for day trading purposes which range from few hours to few trading sessions.
Similar to the fifteen-minute charts, these two-minutes charts depict the details of a particular stock in the form of a bar or candlestick at an interval every two minutes.
Hourly charts are one of the most used charts in intraday trading. Technical analysts use these charts as these charts depict the price movements of a particular share and provide all the details in the form of a candlestick or bar.
The details which can get from these charts are high and low prices within an hour and opening and closing prices of the hour as well. You can use Hourly charts for short-term trading sessions. These short-term trading sessions can be of a day or a few days and even for a few hours as well.
This chart gives you the same details at an interval of every five minutes. These five minutes charts are one of the most used technical charts in the intraday segment.
You have to choose the time frame for which you want to details and you will get the opening and closing, highs and lows of the five minutes that you chose. These charts are useful for one trading session and within that trading session for every minute and five minutes it is a crucial chart.
Tick-Trade chart is different from the above-mentioned charts. This depicts the completed trades in the stock market. There are moving ticks while there is any trade. With no trade in the market, the line is flat.
It is a line chart on which every trade executed in the market makes a tick. This is useful for scalping and keeps a check on the ‘out of money’ trades which need to be corrected.
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What are the Intraday Trading Indicators?
Apart from the intraday charts, another crucial technical analysis tool is technical indicators. There are hundreds of Intraday Trading Indicators which are used by the traders for gauging the market.
Here, we will discuss ten Day Trading Indicators which are widely used by every trader –
Moving averages indicator is nothing but a line joining averages of the closing prices of the stock for a period of time. You increase the time frame, the more accurate the results you can expect. It is one of the most popular technical indicators useful in understanding the trend of the price movement.
It provides around 80% success when used in the right way. There are three bands – the upper band of +2 SD or Standard Deviation. The lower band is -2 SD and the middle band is of 20 day SMA. It is used for understanding the excess bought and sold level of security.
It is used for calculating the Net advances of the stocks. It is the difference between the advancing and the declining stocks. This is a breadth indicator required for analyzing the sentiments of the market.
This is a momentum trading indicator. This indicator compares the closing price of a stock against an array of prices. This is done for a specific period of time.
Since the momentum of the share price changes before the price of the share, it is helpful in indicating the upcoming price change.
Commodity Channel Index or CCI:
CCI is useful in the commodity market and can be used in the share market as well. It warns about extreme conditions in the market. The primary use of this indicator is to predict a change in the trend.
Moving Average Convergence Divergence:
This is another very reliable and widely used momentum trading indicator. This indicator provides information about the momentum, direction and trend duration as well. It is based on the convergence and divergence of two moving averages.
Relative Strength Index or RSI:
This simple indicator is quite effective in depicting the bought and sold levels of a share. It indicates whether the stock is overbought or oversold and chances of reversal.
Average Directional Index or ADX:
It is one of a kind of an indicator in the technical analysis arena. This gives you the idea of the trend as well as the strength of the trend as well. It is crucial to know the strength of the trend. This enables you to reduce the chances of making a loss from your trades and increase the potential of profit.
It is one of the best indicators for trading signals. In a trending market buy and sell signals are very important and this indicator provides the same. It uses period and multiplier and also average true range.
It helps in the calculation of the value for buy and sells signal. This indicator is based on the prices, MA and also the trend is depicted by placement on the line.
It is another momentum trading It uses the volume flow to anticipate the change in the price of shares. By adding the volume on up days and vice versa, it calculates the pressure of buying and selling in the market.
Benefits of Intraday Trading
Intraday trading has its own benefits and some of them are –
No Overnight Risk:
In intraday trading, as you square off your position by the end of the trading session for the day, you let no market overnight risk hamper your profitability.
Anything can happen over a night that can alter the prices of the stocks but when you don’t take the delivery of them, you do not have the risk of losing on the price as well.
Returns are higher:
If you are a pro trader in the intraday segment you can garner great profits. With the right strategy and right timing, you can reap great profits from the day trading session only.
For the intraday segment, the broker houses provide great exposure and leverage. In fact, there are certain brokerage houses which provide up to 40 times leverage for this segment. So, for the traders who have less capital to invest, can take this advantage.
Learn while you earn:
In an Intraday trading pace, you can learn a lot about the market. It is a place where you learn while earning. The short-time frame makes you understand the critical details of the market.
How to learn Intraday Trading?
For learning intraday trading you can –
Stock Market Seminars:
There are many big brokerage houses that organizes seminars related to intraday trading. They invite eminent traders and analyst to talk about trading and the shares tips and strategies. You can attend those seminars to increase your knowledge about intraday trading.
Online Knowledge Banks:
Apart from the seminars, these brokerage houses also organizes webinars. In addition to that, they also have huge information related to the intraday trading on their websites.
You can read different journals, papers related to trading. You can find different trading strategies on these websites. One can make use of all these resources to understand intraday trading.
Stock Market Courses:
There are stock exchanges and other institutes which organise courses on the stock market and intraday trading. There you can learn technical analysis, learn about the charts, indicators and also practice demo trading.
In addition to all the above, the best possible way to learn about intraday trading is to trade by yourself. Open an account, read about the stocks, learn technical analysis and trade. The market will make you learn the tactics with time.
Rules for Intraday Trading
There are some basic rules for intraday trading which one must adhere to make profits out of this segment of trading –
Many intraday trading experts and analysts suggests traders take position between noon and 1 p.m. They suggest that positions taken between this period make most of the profits. In addition, they also suggest not to trade within the first hour of the trading session of the day.
If you see an unexpected price reversal, it is better to book profits and close the open position.
Research is mandatory for choosing stocks:
Without a thorough technical analysis and knowledge about the stocks, do not ever invest in the stock even for intraday trading. You must always choose liquid stocks from the large-cap segment which have high trading volumes.
Planning and implementing investment strategies:
Always plan and choose your investment strategies for individual stocks. It is recommended that you stick to your strategy and do not get diverted by sudden gains or losses.
Squaring off is crucial:
Some intraday traders sometimes get tempted by rising prices and do not square off their open positions. This kind of trading in the intraday segment can lead to heavy losses. It is important that you close all the positions by the day session ends.
Intraday Trading or Day Trading – Conclusion
Intraday Trading is one of the most popular forms of investment and trading in the world. It involves buying and selling of the shares and other financial instruments within the same trading day session.
It is risky but profitable at the same time. If the intraday trader can manage the risks well, he or she can reap great profits. Day Trading can be highly profitable for the traders who plan and stick to their investment strategies and do not get greedy.
Intraday Tips and strategies mentioned above can be of great use for any new traders entering this segment.
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