Intraday trading is the buying and selling of stocks on the same trading day. It is also popularly called Day Trading or square-off trading. Intraday trade can either be on the long side or on the short side. This means that you can buy a stock on a particular day and sell the stock on the same day (long trade – in the expectation that the asset’s value will rise). Alternatively, you can also sell the stock first and buy it back before the close of trade on the same day (short trade - in the expectation that the asset’s value will fall).
What you must know about intraday trading
Intraday trading in India became popular after rolling settlements were introduced in 2001. Currently, Indian markets operate on T+2 rolling settlements. This means that if your trade is not squared off on the same day, it will compulsorily go for delivery on the T+2 day (i.e., trading day + 2 days). Essentially, you will have to pay the money (if purchased) or give delivery of shares (if sold) by the T+1 day. In intraday trading, there is no delivery involved and hence, intraday trades do not impact your demat account.
How to place an intraday trade order?
If you want to trade intraday, you must specifically select the “MIS” order option when putting in the trade. Only then you will get the facility to trade on margin. Thus, intraday trading is a kind of leveraged trade wherein you put a small margin and then take a position that is a multiple of the margin. One very important thing to remember is that all trades marked for intraday have to be necessarily closed out on the same day in your trading account. Normally, brokers run their Risk Management System (RMS) check at around 3.15 pm and if any intraday trade is open, it is automatically closed out at the best price available. Hence, the onus is on the trader to ensure that it is closed out.
Unique features of intraday trading. Here are five unique features about intraday trading you must remember.
Intraday trading is meant for traders who want to wind up their positions on the same day
Intraday trading must be done with strict stop losses and profit targets
The intraday trader must preferably have good knowledge of technicals and charts
Brokerage charges on intraday trading are lower than on delivery trades
You need a demat account to trade intraday, although it does not result in delivery