What is Intraday Trading? How to Start, Benefits, and Tips

Intraday trading requires quick judgement, dynamic skills, and artful trading strategies to counter market volatility and manage price shifts that occur within a trading day.

Intraday trading is also known as day trading as trades must open and close within the same trading day. 

This kind of trading can be potentially profitable, but it may amplify risks too, so as a trader, you should know how to begin, the benefits you get, and some tips to help you along the way. 

What is Intraday Trading? 

Intraday trading is a style of trading that requires rapid decision-making, a thorough grasp of the markets, and technical analysis skills and strategies. Intraday traders or day traders have to open their trading positions and close them within the same trading day. 

That means that if profits must be realised, they should be done by the close of the markets on a particular day.

You may think that buying and selling securities is easy within a single day of trading, but there is a substantial amount of risk and pressure involved in this kind of trading as traders may have split seconds to make decisions and apply strategies.

The key aim of intraday trading is to earn returns on the securities bought and minimise the risk that comes with staying invested for long periods. 

How to Start

You may start your intraday trading journey by choosing the potentially best trading platform to trade, and one that helps you make your move quickly with an easily navigable interface.

Choosing a reputed and efficient broker is crucial to beginning your trading and investing journey on a positive note, as is setting up an open Demat account and linking this to a trading account. 

Once you have these technical tasks covered, you can embark on your trading activity by selecting the stock you want to trade. 

Choosing Stock to Trade Intraday

Perhaps one of the most significant steps in how to indulge in intraday trading is to select the stock you wish to trade. Since the risks of intraday trading are potentially higher than regular trading activity, you may want to consider certain factors while choosing stocks for intraday trading:

• Market Volatility

Intraday trading may be executed with stocks that have a medium to high degree of volatility. This is because huge losses may be avoided in case the market faces a downturn. 

• Liquid Stocks

Intraday traders select liquid stocks for intraday trading as these can be easily and quickly bought and sold when requirements arise within short periods. Small and mid-cap company stocks may be considered suitable to meet liquid conditions as well as have a high degree of volatility. 

• Benchmark Index Correlations

Stocks that have high correlations with benchmark indices may be considered for intraday trading. The assumption is that such benchmark stocks may move upwards and so may the stocks that share correlations with them, potentially leading to profits for the intraday trader. 

Benefits of Intraday Trading

Here are some benefits of intraday trading to compel you to try this style of trading: 

• Low Risk

While some investors may consider intraday trading risky as there are time restrictions to make potential profits, others may find this a low-risk trading style since securities are transacted on the same day. This prevents long-term holding that may be prone to phases of downturn in the markets. 

• Enhanced Profits

Intraday trading employs several trading strategies, even if you use the best trading platform to trade. The activity of trading may give traders the chance to amplify profits, especially if tactics are applied appropriately and the market is rising. 

• Low Charges

Typically, brokers may not charge high commissions for transactions in intraday trading. This is because no actual deliveries are taken by traders. 

• Market Shifts and Capital Gains

Day traders can benefit from bullish and bearish trending markets. Of course, this is based on the strategy of trading used, and in a bearish market stocks may be bought and sold for capital appreciation; in a bearish-trending market, profits are earned by the short-selling of securities. 

• Liquidity

Liquidity is one of the main reasons that intraday traders engage in this style of trading as securities invested can be sold at short notice as and when required. 

Tips for Intraday Trading

Intraday trading can be undertaken with a few tips and tricks that help make trading successful. Here are some tactics to help you: 

• Choose liquid stocks

• Conduct a thorough technical analysis of the company whose stocks you want to invest in

• While engaging in day trading, only invest amounts you can afford to lose potentially

• If you want to mitigate your risk, concentrate on a small quantity of scripts at a single time as this prevents overtrading

• Evaluate your trading performance daily so you can learn from your successes and errors

• Learn to use technical indicators to minimise risk and maximise returns

Trade Intraday with Confidence

Intraday trading is trading that is conducted within the same trading day.

For beginners, this may appear a daunting way to trade, but if you wish to try it, you can do some research and start with a small amount of capital. With experience and practice, this kind of trading may yield potential profits.