Intraday Trading Guide for Beginners

Last Updated: 17 Jan 2025

Most investors who started decades ago and have become successful in the stock markets are long-term investors. In the past, the stock market followed an open outcry system that did not have technology backed investing platforms and widespread financial tools for detailed analysis. Hence, long-term investing was the default tool to create wealth through equity investments. However, the recent technological revolution in the Indian financial market has given rise to extremely short-term investments in trading, establishing Intraday trading as one of the most popular types of trading methods.

What is intraday trading?

Intraday trading is a form of ultra-short-term trading technique that requires the trader to buy and sell securities or other financial instruments on the same day. Intraday trading involves squaring off all the open positions before the closure of the market on the day the securities are bought. Intraday trading doesn’t involve any change in the ownership of the securities. Intraday trading was largely a domain of financial companies and professional traders, but with the advent of electronic and margin trading, even novice investors can opt for intraday trading.

How is intraday trading different from regular trading?

The biggest difference between intraday trading and regular trading (delivery trading) is the transfer of the ownership of the shares. Intraday trading doesn’t involve the transfer of shares as you have to square off all the positions within a day. Regular trading involves the delivery of shares where after T+2 days, the shares reflect in your Demat account online. Regular trading allows you to hold on to the shares for the long term. However, intraday trading mandatorily requires the liquidation of shares before the market closes for the day.

Should you participate in intraday trades?

Intraday trading sounds enticing, with a significant amount of money to be made within a short period. However, intraday trading could lead to huge losses without the right risk mitigation strategies. Moreover, to get positive returns through intraday trading, you have to follow the market closely and track every movement. If you can take risks and monitor market movements daily, only then you should opt for intraday trading. Furthermore, you should garner deep financial knowledge before entering Intraday trades.

How to start with intraday trading?

• You need to have a suitable stockbroker to open Demat accounts online with zero opening charges with the required technological support.
• The stockbroker should provide access to advanced charting tools and research reports as they are vital in generating profits and mitigating losses.
• Intraday trading requires multiple trades in a day, so choosing a broker that charges minimal brokerage is important.
• After opening the Demat account online, you have to shortlist the stocks you can trade as Intraday.
• The stock selection in the case of intraday trading and regular trading is different. Intraday positions have to be squared off within the market hours.
• If you have a stock with low liquidity, you may get stuck, leading to a loss. Hence, you should choose stocks with adequate liquidity like shares of blue-chip companies for intraday trading.

Tips For Intraday Trading

Intraday trading, also known as day trading, involves buying and selling financial instruments within the same trading day. It’s a fast-paced and exciting way to engage with the markets, but it also comes with its share of challenges and risks. For those wondering how to do intraday trading, here are some essential tips to get started and thrive in this dynamic arena.

1)Educate Yourself

Before diving into intraday trading, it’s crucial to understand how intraday trading works. Familiarize yourself with basic trading concepts, technical analysis, chart patterns, and market indicators. Numerous resources, including books, online courses, and blogs, offer valuable insights into how to trade intraday effectively.

2)Choose the Right Broker

Selecting a broker with low fees, fast execution, and a reliable trading platform is essential for intraday trading for beginners. Ensure the broker provides robust research tools and real-time data, as these are critical for making informed trading decisions.

3)Develop a Trading Plan

A well-thought-out trading plan is vital for success in intraday trading. This plan should outline your trading goals, risk tolerance, entry and exit strategies, and the maximum amount you’re willing to lose on a single trade. Having a plan in place helps you stay disciplined and avoid impulsive decisions.

4)Practice with a Demo Account

Before committing real money, practice how to trade intraday using a demo account. This allows you to hone your skills, test your strategies, and gain confidence without risking your capital. Most brokers offer demo accounts with virtual money to simulate real trading conditions.

5)Stay Updated with Market News

Market news and events can significantly impact intraday trading. Keep yourself updated with the latest economic indicators, corporate earnings reports, and geopolitical developments. Understanding how news affects market sentiment is crucial for making timely and informed trading decisions.

6)Use Technical Analysis:

Technical analysis is a key component of how intraday trading works. Utilize various technical indicators, such as moving averages, relative strength index (RSI), and Bollinger Bands, to analyze price movements and identify potential entry and exit points. Chart patterns like head and shoulders, triangles, and double tops/bottoms can also provide valuable trading signals.

7)Implement Risk Management:

Risk management is paramount in intraday trading for beginners. Set stop-loss orders to limit potential losses and protect your capital. A common rule is to risk only a small percentage of your trading capital on a single trade, typically around 1-2%. This helps ensure that a single losing trade doesn’t significantly impact your overall portfolio.

8)Keep Emotions in Check:

Emotions can be a trader’s worst enemy. Fear and greed often lead to impulsive decisions and can result in significant losses. Stick to your trading plan, remain patient, and avoid chasing after every market movement. Maintaining emotional discipline is crucial for long-term success in intraday trading.

9)Monitor and Review Trades:

Regularly review your trades to identify what worked and what didn’t. Keeping a trading journal helps track your performance, understand your strengths and weaknesses, and refine your trading strategies over time. Learning from both successful and unsuccessful trades is an ongoing process that contributes to continuous improvement.

10)Stay Persistent and Patient:

Intraday trading requires persistence and patience. Success doesn’t come overnight, and there will be times when you face losses. Stay committed to your trading plan, keep learning, and be prepared to adapt your strategies as market conditions change. With dedication and perseverance, you can achieve consistent profitability in how to do intraday trading.

Mastering how to trade intraday involves education, planning, practice, and emotional discipline. By following these tips and continually refining your approach, you can navigate the complexities of intraday trading and capitalize on the opportunities it offers.

When to trade?

Similar to the stock selection, the timing of intraday trading is critical for generating profits. If you initiate an Intraday trade at the wrong time, you may not be able to make money from your trades. The market is extremely volatile, so one should avoid taking large positions just after the opening of the market.

Why intraday trading?

While the investing strategy depends entirely on the investor’s risk appetite and capital availability, intraday trading has some unique advantages. For starters, the margin provided by the stockbroker for intraday trading is substantially higher than in other segments. With more leverage, you can take bigger positions and increase the overall profit potential. Generally, stockbrokers charge lower brokerage for intraday trades as the frequency of trades is high.

Conclusion

Intraday trading can be a rewarding experience if done with proper research. One needs short to medium term strategies to gain through intraday trading. You can opt for an IIFL Demat and trading account and get started with intraday trading. IIFL Demat and trading account provide advanced analytics and access to quality research, which can help immensely in day trading and allow you to earn hefty profits in the process.