Everything you need to know about Intraday trading

by Pankhudi Dave Head Finance Manager

Intraday trading means buying and selling stocks on the same trading day. You do not purchase the stocks with the intention to invest, but for earning profits by harnessing the movement of stock indices. Hence, the stock price fluctuations are harnessed for earning returns. Before getting into trading, you should gain thorough knowledge of intraday trading.

The difference between regular and intraday trading is the stock delivery. In intraday trading, you square off from their positions the same day. Meanwhile, regular trading settles over days if not longer. So, you get the delivery of the shares bought while sold stocks moves out of your Demat Account. In intraday trading, an investor must square off their position before the market closes. Thus, it is important that you select stocks which have enough funds to liquidate the trades.

You side-by-side need trading account, be it for intraday trading or stock trading. While doing intraday trading, give out the specific commands. Day trading is the type of trading where orders are squared off before the trading day ends.

Intraday trading basics is challenging than regular share market investment. You can avoid losses if you understand the concept well. Invest only the funds you can afford to lose. It should not hinder your day to day expenditure.

Intraday traders usually face maximum risks which exist in the stock markets. The price volatility and daily volume are some factors which are crucial in the stocks picked for daily trading.

Intraday trading basics deals with purchasing stocks on the same day, during the trading hours prescribed by the exchange. The stocks are bought and sold in large numbers strategically with the intention of booking profits in a day. One of the strategies that you can swear by is purchasing shares above the opening high range and selling when the stock moves below the opening range. Having the perfect tools is important for increasing the intraday trades. The fluctuations of range are only indicators.

Tips for investors who are going to begin with intraday trading are listed below:

1. Select two to three liquid shares. It diversifies your portfolio and ensures you receive steady returns in case of adverse market and economic conditions.

2. Start with small budget. Allocate 10 per cent budget and then understand how the intraday trading happens. Once you get the desired results, you get confidence and invest more.

3. Conduct a thorough research. You must know about the charts, levels, volumes, announcements, etc. Be you own chartist.

4. Keep the stock universe limited, i.e. not more to 10 to 12. This way you can track charts, levels, supports, resistances, volumes, new flows, announcements, etc.

5. Set three-level capital loss limit while doing day trading. First, be sure of how much you want to trade. Second, set limit on the losses you want to incur. Third, know the overall capital depletion you can manage.

6. Risk capacity is the key element here. Always be aware of the losses you can incur.

7. Avoid overtrading. It not only adds on to your transaction costs but also reduces your net profit.