What is intraday trading?

Intraday trading means buying and selling stocks on the same trading day. Intraday trading is also known as Day Trading. Share prices keep fluctuating throughout the day, and intraday traders try to draw profits from these price movements by buying and selling shares during the same trading day. Intraday trading refers to buying and selling of stocks on the same day before the market closes. If you fail to do so, your broker may square off your position or convert it into a delivery trade. This kind of trading is always beneficial whether a person is an experienced trader or a beginner as the indicators and trends of the market will guide them properly.

Basics of intraday trading

Day trading refers to buying and selling of stocks on the same day. It is done using online trading platforms. Suppose a person buys stocks for a company. They have to specifically mention ‘intraday’ in the portal of the platform used. This enables the user to buy and sell the same number of stocks of the same company on the same day before the market closes. The purpose is to earn profits through the movement of market indices. Hence, it is also referred to as day trading by many.

The stock market earns you great returns if you are a long-term investor. But even in the short term, they can help you earn profits. For example, a stock opens a trade at Rs. 500 in the morning. Soon, it climbs to Rs. 550 within an hour or two. If you’ve purchased 1,000 stocks in the morning and sold it at Rs. 550, you would have made an incredible profit of Rs. 50,000 – all within a few hours. This is called intraday trading.

Intraday trading- features

On online trading platforms, you have to specify if an order is specific to intraday trading. In that case, you take a position on the stock and close it within the trading hours on the same day. If you do not close it yourself, the position gets squared off automatically at the market closing price. You don’t get ownership of the stocks you buy and sell in intraday trading. The goal of intraday trading is not to own the stocks; it is to make profits by reaping the benefit of price movements during the day.

Leveraging: Leveraging means borrowing money from your broker to enhance your buying power and amplify the potential investment returns. For example, you can take the benefit of leverage in intraday trading to take a larger exposure while paying a fraction of the open position. There are terms and conditions associated with leveraging that your broker should get you familiar with to tap its benefits.

• On online trading platforms, you have to specify if an order is specific to intraday trading
• You take a position on the stock and close it within the trading hours on the same day
• If you do not close it yourself, the position gets squared off automatically at the market closing price
• The goal of intraday trading is not to own stocks; it’s instead to make profits by reaping the benefit of price movements during the day.

Additional Read: How to start trading in India

Intraday trading indicators

• Moving average: Moving averages is the most common and widely used indicator. It is the line on the stock chart which connects the average closing rates over a given period. If you are considering a more extended period, the moving average will be more well-grounded. Moving averages let you comprehend the underlying movement of price as most of the time price of a stock doesn’t move only in one direction
• Bollinger bands: Bollinger bands are a bit more advanced than moving averages. It comprises three lines - the moving average, an upper limit, and a lower limit. With all these, you can comprehend the underlying movement of the stocks better than just by moving averages
• Momentum oscillators: Sometimes stock prices move unrelated to the bullish or bearish market trendsw
• Relative strength index (RSI): This gets calculated in the index form, narrowing the RSI score ranging between 0 to 100. The index increases when the price of the stock rises and vice versa.

Intraday trading vs delivery trading

Unlike intraday trading, if you buy a share but do not sell it on the same trading day, it is called delivery trading. In delivery trading, the stocks you buy get credited to your demat account. You hold it for as long as you want, for days, months, or years before selling it. Thus, you continue to have ownership of these stocks. In delivery trading, investors consider the long-term price movement of the stocks to book profits rather than its price fluctuations within the day.

Additional Read: How to open demat account online

Can I have more than one demat account?

Yes, it is legally possible to open more than one demat account per person. You can have multiple demat accounts in your name. But an investor can open only one demat account with a depository participant (DP) or a broker. If you intend to have another demat account, you can open a demat account with another broker or a DP. An individual cannot have multiple demat accounts with the same stockbroker.

Why is demat account needed?

A demat account is needed to hold the securities (shares, bonds, mutual funds, etc.) electronically. Demat account is a prerequisite for equity delivery trading in India. A demat account is also needed while applying for IPO (initial public offering) as the allotted shares get credited to demat account.