Intraday trading is when a trader buys and sells securities on the same day. Traders aim to earn quick profits while minimising the risk of keeping money locked in for a long period through this trading strategy.
Often, people are unaware of the most appropriate intraday trading time; they believe it would be beneficial to limit their day trading to a few hours instead of buying and selling stocks throughout the day. Financial experts have observed that limiting intraday trading to strategically chosen hours yields great benefits.
What is the timing for intraday trading?
As mentioned, the opening and closing of positions in intraday trading happen on the same day. There are instances when a trader does not manage to close his/her position on the same day. If an intraday position does not close on the same day in a rolling statement, it gets converted to compulsory delivery. One can place and close intraday trade orders from 9.15 am to 3.10 pm on a trading day.
While, technically, the intraday trading closing time is 3.30 pm, traders usually do not wait that long; otherwise, they may face massive losses due to unfavourable market movements. Suppose a trader places an intraday order; in this case, the broker will wait until 3.15 pm for the order to get closed. However, if it remains open, the broker’s risk management system will close his/her open positions at the prevalent market price.
Intraday trading time for commodities
In India, the commodity market opens at 9 am and closes at 11.30 pm. The market is closed on Saturdays and Sundays, and on holidays declared by the exchange in advance.
Commodity traders can choose the timing of intraday trading at their convenience. However, they must focus on a few commodities because every commodity has unique influencing factors.
Traders must keep track of domestic and international factors that influence the price of these commodities. Certain commodities share both positive and negative correlations with various assets. For example, gold has a negative correlation with the US Dollar, i.e., when the price of gold increases, the value of the US Dollar declines.
Furthermore, traders of agricultural commodities must be aware of information related to weather forecasts.
Additional Read: Difference Between Intraday and Positional Trading
Optimal time frames for Intraday trading success
Intraday traders need to find an ideal time for carrying out trades. Many experts state that the time frame between 9.30 am and 10.30 am is the best for intraday trading. Trading during these hours is considered beneficial.
Intraday traders should avoid trading for the entire day because they might not be able to get sufficient rewards. Experienced traders have frequently lost money or received lower returns after trading all day long.
The first one-two hour after the stock market opens is the ideal time for intraday trading. While experienced traders can start intraday trading at 9.15 am, beginners should wait until 9.30 am. It is because, during the first fifteen minutes, stock prices get affected by the previous day’s news.
Should I trade in the first fifteen minutes?
While the first hour of the trading day can be tempting for intraday trades (especially in India where markets open at 9:15 am), beginners should wait until 9:30 am.
Reasoning:
- The initial market movements are often volatile due to reactions to overnight news.
- These price swings can be unpredictable, making them risky for inexperienced traders.
- Experienced traders can capitalise on these movements, but beginners might mistake them for overall market trends.
In short, waiting 15 minutes allows the market to settle and reduces the risk of making trades based on misleading information.
Best candlestick charts for intraday trading
Candlestick charts are visual representations of trading data within specific time frames. These charts utilise red and green bars with two lines at either end called candlesticks. Candlestick patterns help traders visualise market sentiments and trends.
The '5-minute Candlestick chart' and 15-minute Candlestick chart' are common intraday candlestick patterns. Candlesticks have four points, commonly known as ‘open high low close’ (OHLC). Traders can check the OHLC for the previous 5 minutes in the ‘5 minutes Candlestick chart’. Many people consider this an ideal strategy for intraday trading as it indicates short-term market volatility.
Additional read: What is fear and greed index
Trading at the opening of the market
Volatility can be a double-edged sword for beginners. While the first hour offers:
- Ample opportunities: The initial price swings can present good entry and exit points for trades.
- High liquidity: Stocks are actively traded, making it easier to buy and sell quickly.
- Potentially larger gains: Some of the biggest daily price movements happen in this window.
However, there are also risks:
- Misleading volatility: Early price swings can be fueled by ‘dumb money’ reacting to overnight news, not reflecting the actual market trend.
- High risk, high reward: The potential for large gains comes with the potential for significant losses.
- Time constraints: Exiting positions before the market closes (3:30 PM) becomes more challenging after 11 AM.
Therefore, for beginners, it's safer to wait until 9:30 AM when the market settles. However, experienced traders might find the 9:30 AM to 10:30 AM window ideal due to the volatility and liquidity.
Remember, success depends on your skill level and risk tolerance.
Intraday trading square off time
All open positions in intraday trading must be squared off by 3:20 pm. If it is an automatic square-off, there will be a charge of Rs. 50 + GST per position. The experts advise planning the square-off for open positions in advance.
How to start trading in India?
To start trading in India, people must create a Demat and trading account with a Depository Participant (DP). A bank account, a Demat account and a trading account are necessary for trading with stocks and other securities.
First, an individual opens an account in the trading platform of their choice. Next, he/she needs to link a bank account and a Demat account to the platform to receive/send money and securities, respectively.
Conclusion
A Demat account is where stocks remain stored. A trading account is mandatory because one needs it to place buy/sell orders with the stock exchange. Traders buy and sell stocks on the same day in intraday trading. While knowing the correct details of intraday trading time is a must, traders should take measures such as stop-losses to protect their capital. It is important to note that day trading in a volatile market is generally a bad idea. The ideal time for intraday trading is when one can predict the market's direction and momentum.
