How Does Intraday Trading Works

Last Updated: 5 Sep 2025

Stock market trading requires making calculated moves to get the best returns on investment. This phenomenon is specifically true in intraday trading, where you can buy and sell stocks within the same trading day. To begin with this investment option, you will need a demat account to digitally hold and transact financial securities such as stocks and mutual funds.

In this aspect, this guide will explain how intraday trading works, the tools and strategies, its advantages, risks and how it differs from regular trading.

What is Intraday Trading?

Intraday or day trading is a type of buying and selling of financial products, like stocks or ETFs, on the same day. As an example, XYZ Ltd opens at ₹500 per share, and you have bought 100 shares. The price surges to ₹520 a few hours later due to strong earnings news. You sell at that point, and you earn ₹2,000 on these shares.

How Does Intraday Trading Work?

Intraday pertains to buying and selling a trade on the same day. The following steps help to understand how intraday works across different phases:

• Making a Stock or Instrument Selection: The process starts with the selection of liquid stocks or exchange-traded funds with good price trends.
• Market Analysis: You research charts, technical indicators or news flow before you make a trade. Moving averages, candlestick patterns and volume analysis tools allow you to determine the potential price directions.
• Placing the Buy or Sell Order: After you have identified an opportunity, either place a buy order when you believe prices will increase, or place a sell order when you believe prices will fall. You can indicate the trade as intraday sell order, especially if you are short-selling with the plan to buy back before market close.
• Tracking of Price Movement: You can place a stop-loss order so that your losses are automatically capped in case the price moves unfavourably.
• Trading to the close: Before the market closes, you have to close the position. In case you forget, your broker will square it off.

Indicators for Intraday Trading

Understanding intraday indicators is essential to grasping intraday trading meaning, which makes you learn about momentum, trend, and potential reversals. Here are some of them as follows:

• Candlestick Charts: The candles display the open, high, low and close of a particular share. Patterns like Doji, Hammer or Engulfing may indicate the possible turning point in price.
• Moving Averages (MA): Simple Moving Average (SMA) and Exponential Moving Average (EMA) smooth price data and display the general trend. When the price crosses the moving average on the upward side, it is usually a sign of a bullish movement. Crossing it on the downside can be a sign of a bearish movement.
• Relative Strength Index (RSI): RSI is used to measure how the price changes and how fast the price changes on a scale of 0-100. A reading above 70 signals overbought conditions, while a reading below 30 signals oversold. You can apply this to time entries and exits.
• Moving Average Convergence Divergence (MACD): The indicator compares two moving averages and also includes a signal line. You can consider buying shares when the MACD line crosses the signal line. When it crosses below, selling them is suggested.

Key Features of Intraday Trading

Intraday trading allows purchasing and selling stock on the same day. Apart from that, there are more features you can look for:

Same-Day Square-Off

All the positions of the day should be squared off prior to the close of the trading session. In case you overlook closing your trade, the system automatically closes the trade towards the end of the market.

No Share Delivery

Intraday trades are never deposited to your demat account. Instead, it only credits or debits the profit or loss due to a difference in prices. This occurrence makes intraday trading a speculative activity and not an ownership-type investment.

Specialised Product Types

Brokers offer order categories that are only used in intraday trading, like MIS, bracket orders and cover orders. These products would enable you to get leverage and preset the stop-loss or target levels.

Margin and Leverage

The capital needed in intraday trades is only a fraction of the capital in delivery trades. Brokers’ leverage allows you to trade higher volumes with lower funds. This increases the likelihood of profit, but it increases the risk of losses.

Benefits of Intraday Trading

Intraday trading has become popular among investors because of the following benefits:

• No Overnight Market Risk: In this way, all trading is done before the market closes. This aspect offers an element of security, as it prevents unexpected fluctuations in the prices of the stock.
• Ability to Trade Both Ways: Intraday enables you to make up in both the up-marketing and the down-marketing markets. Through the short-selling facility, you can sell initially and then repurchase later in the event of a downturn.
• Lower Costs and High Liquidity: Intraday orders are typically charged lower broker fees, so more frequent trades are more cost-effective.

Risks of Intraday Trading

Intraday trading provides fast trades but presents high challenges that any investor should be aware of. It is crucial to be aware of these risks to control capital operations and prevent unwanted losses:

• High Volatility Exposure: The intraday market is extremely sensitive to news, global suggestions and trader sentiment.
• Leverage Risk: Brokers are providing margin facilities, which allow you to trade larger positions using a limited amount of capital. Even though this is going to increase your potential profit, it also increases the potential losses in case the market turns against you.
• Dependence on Timing: Success in intraday trading relies heavily on accurate entry and exit points. Any delay in execution can reduce profits or even reverse a profit to a loss.
• Brokerage and Cost Impact: Brokerage and other transaction Costs apply to every intraday trade. High-frequency trading multiplies the costs, which can impact the overall returns.

Difference Between Intraday and Regular Trading

Stock market trading may be done in various forms, the most frequent ones being intraday and regular (delivery) trading. The table below highlights the key differences between the two methods across their important aspects:

Aspect	Intraday Trading	Regular Trading
Definition	Buying and selling securities on the same trading day.	Buying securities and holding them for more than one day.
Ownership of Shares	Shares are not transferred to your demat account.	Shares are transferred to your demat account, and you become the owner.
Time Frame	Positions must be squared off before the market closes.	Positions can be held for days, months, or years.
Objective	Capture short-term price movements for quick profits.	Build wealth over the long term through price appreciation and dividends.
Risk Level	Higher risk due to volatility, leverage, and strict timing.	Lower relative risk, as investments are less affected by daily prices.

Alternative to Intraday Trading

Here are a few similar alternatives to Intraday trading, which you can look at:

• Delivery Trading: You purchase shares and have them in your demat account longer than one day.
• Swing Trading: Stances are maintained for a few days or weeks to capture medium-term changes in price.
• Positional Trading: The trades are held for weeks or months, with regard to the market’s overall trend.
• Futures and Options: Trading contracts depend on underlying assets like commodities, stocks or indices.

Strategies Used in Intraday Trading

Some of the key strategies you can use for intraday trading are as follows:

• Scalping: You make several rapid trades in a few minutes to grab small price movements. It is most effective with very liquid stocks.
• Momentum Trading: By following this process, you can trade stocks that move intensely in a particular direction and heavy volumes follow, and hold until the momentum dwindles.
• Breakout Trading: You can jump into a trade as prices pass critical support or resistance levels, and the move can be expected to continue aggressively.
• Reversal Trading: You can seek indicators of a declining trend and place yourself in a position that will profit from the turnaround.
• Moving Average Strategy: It often relies on cross-overs of the short and long-term averages to enter and exit systems in a more methodical manner.

Conclusion

Intraday is a good option for investing in stocks and other securities because it offers same-day buy and sell facilities. By following the indicators of intraday trading, you can leverage this investment to optimise and earn better returns from shares. Furthermore, being aware of its benefits and limitations can help you choose the ideal stock that can gain you profits through this investment option.

Frequently Asked Questions

1. How intraday trading works with examples?

In intraday trading, you purchase and sell stocks within the same day. For example, purchasing a stock at ₹500 and selling at ₹520 before the market closes would have a profit per share of ₹20.

2. What are the key aims of intraday trading?

Intraday trading is primarily performed to achieve profit from the short-term price change. This function allows you to buy and sell stocks on the same day.

3. Do I need to have a demat account for intraday trading?

You need to open a demat account to keep and trade financial securities online. It helps to make a smooth process of the trades, although shares are not delivered in intraday trading.

4. What is the risk associated with intraday trading?

Intraday trading is highly sensitive to the market, news and timing errors. Moreover, leverage may increase the profits and losses of your investment.