Intraday Trading: Complete Beginner’s Guide

On most of the days, during market timings, various stocks and indexes, move a lot before closing for the day.

And when you have enough time during market hours, with a stable internet connection and the right trading account, why not take the benefit of these movements?

Intraday trading or day trading refers to trading when you trade but don’t carry your positions overnight. You take benefit of intraday movements of stocks & index and close your positions by the end of the day.

For example, let’s say SBIN (State Bank of India) share price is at 195/-, you think it will go up. You buy at this price, and it does go up to 200/- within the same day. You sell it for 200/-.

That’s ₹ 5 profit within same day. Which means if you had bought 1000 shares then that would be ₹ 5,000/- profit. In one day.

This is what intraday trading is all about and this is what we are going to learn in depth in this post.


Why Intraday trading

One of the most fascinating ideas about trading is to take benefit of price movements of the index (Nifty, Bank Nifty) and stocks.

Every trading day, one stock or the other or the index themselves are in news. And it leads to price movements throughout the market hours.

Which means, every trading day, you get a chance to take benefit of these price movements and can earn money with intraday trading.

What is the difference between intraday trading & positional trading?

Intraday trading

Intraday trading is buying and selling stocks on the same day. There is no delivery of stocks. The position is clear by the end of the day (EOD).

As there is not overnight position, the risk that the market may open in the opposite direction of your trade is not a risk anymore.

One more intention of intraday trading techniques is to trade in bigger quantities and book the profit(or loss) within the same day.

At the end of the day, whatever profit or loss you made in the day is added or subtracted from your trading account.

Positional trading

Positional trading means when you take your positions (in future and options) over to next trading day, or you take delivery of the stock to sell later.

For such trades, if the stocks purchased are in the equity segment, then money equal to the total value of the transaction is deducted from your account. As this trading involves the delivery of shares to your Demat account, it is also called delivery trade.

Once the trading day is over, that stock is marked to be delivered to your demat account.

If it is futures & options trade, then Margin equal to span margin is blocked in your trading account. And then on daily closing price basis, MTM is added or deducted from your trading account.

Advantages of Intraday trading

Less margin requirement

As there is no delivery of stocks, the  trading margin required for intraday trading is quite small too. You can check the margin required for Intraday trading by both Zerodha and Upstox.

As you can see from the links above, the margin required is partial as compared to full margin. The reason is that intraday positions are squared off by 3:15-3:20 before the closing bell of the stock exchange.

No overnight position risk

Indian stock market or any stock market for that matter rarely opens flat. It always opens positive or negative. And, when the Index volatility index is high, chances of gap openings is not ruled out.

Which means anyone with a position in the market is always exposed to the risk of market opening against his position.

Intraday trading takes care of that by eliminating the overnight position risk.

Disadvantages of intra-day trading

It’s not all rosy with intraday trading. There are several disadvantages of intraday trading.

Volatile movements

It is quite normal for stocks to move up and down in the trading day. This means, a stock or even the index, might be moving trend-wise, still, they can have intraday movements.

This volatility is something that needs to be taken into account, when day trading any stock.

More leverage, more risk

With low margin comes the ability to trade in higher quantity. Which means more loss of money when stop losses are hit.

No trading strategy is 100% right, stop losses getting hit are parts and parcels of trading system.

But with increased leverage, the loss per trade also increases.

You can’t ride the trend positionally

In intraday trading, you need to exit by end of the day. So, let’s say you are long in some stock and you close that trade by end of the day.

Now the next day when the stock opens a gap up in your favor, you have missed that gap.

Can you make money in intraday trading?

Yes, you can make money from intraday trading. It’s not very difficult.

The real question is how much money can you make from trading intraday in Indian stock market?

From my experience of over 12 years in the stock market, I can say one thing, how much money you make in day trading depends on the trading style and personality of the trader.

(And same is true for even swing and medium-term trading. Overall trading in the stock market to make money depends on these two factors only.)

I have seen traders making consistent make money with intraday trading following simple strategies. Then I have seen swing traders making consistent money by following simple methods.

So, if you are a trader with focus and quick action required for intraday trading, you can make good consistent money in day trading.

Most of the time though, money made in intraday trading is less as compared to money from several longer duration trading strategies.

The reason is that you may be forced to exit early due to intraday movements as compared to carrying your positions overnight.

The best idea is to try out your strategies on paper trading or start with a small amount before making it your main trading style.

How to make money in intraday trading – Step by Step Approach

Actual Trading is similar to running a business. A full fledged business.

Just like art, you need right set of tools, a proper mindset & dedication to make it work in trading.

When you are learning about intraday trading along with this post, then here are the tools you need to have:

  • Open your trading account at any of the discount brokers.
  • Get a good charting & screener website (Here is the list of technical screeners)
  • A good laptop/desktop and a good internet connection.
  • Trading app from your broker.
  • Trading capital

One important thing, don’t trade using your real money, until you have at least tested your trading strategy.

Paper trade to find your best method before trading on real money.

Select stocks for intraday trading

  1. The stock of the day:  These are news-based stock picks. Some important news is expected (results announcements, management announcements, stocks being affected by some Govt. policy announcement, etc.) related to these results, and hence their prices are expected to move significantly more than other stocks.
  2. Pre-selected Stocklist: If you have developed an intraday trading strategy, then there are high chances that it is applicable and tested on certain stocks. Most of the successful intraday traders, trade selected few stocks only.
  3. Stock at significant technical points: This strategy is based on scanning stocks on a regular basis and trading in stocks who are at important technical analysis based juncture, like breaking out of flag pattern, trading at resistance levels, etc.

Always choose stocks with high liquidity. It will help you to enter and exit the stock easily as compared to stocks with less volume.

Important: Once you have selected a strategy, don’t jump to other strategies based on some news or tip. No strategy is 100% foolproof, not even long term investments. It is always better to stay with what works for you. And always manage risk.

Suitable time frame to choose for day trading

If you are trading based on news or events, then this section is not for you.

In the beginning, it is best is to look for a time frame that you can track easily.

The sweet spot is 15 min chart. Though 5 min chart is good option too. 

I personally use 30 min timeframe as minimum to check the trend.

Time frame bigger than makes you loose the trading opportunities and less than 5 min has too much volatility and noise.

Try all the time frames and see what suits you. A time frame which helps you in finding high profit low risk entry, then you have best chances to make handsome profits.

Entry and Exit points

In intraday trading, entry and exit points are very important. A trade can go wrong if any of these two is missed.

In most cases, the first bar (candlestick chart) gives a good idea about the entry point of a trade. And the exit can be based on price movements or chart-based.

You can set a target price as exit price to exit from a stock based on it’s usual movements. That’s why the focus is to trade only liquid stock.

It’s good practice to book profits on good points and not to be greedy about it. And if couple of small profits add up to create good overall profit, then stop trading for rest of the day.

Points to be careful about in intraday trading in the stock market

There are few simple rules to protect you trading capital from losses in day trading. Follow these rules strictly and you will easily make money from stock market in intraday trading.

Stop Loss

No trade is 100% sure. Ever.

The only thing that will always protect your capital is your stop loss. Keep a sensible stop loss and not just an arbitrary number.

And always put your stop loss into the system. Don’t just remember in your mind. Sometimes your internet has disruptions at very wrong times.

Especially in high volatility, stop losses can save you a lot of money.

Don’t over trade

Keep a selected list of stocks in which you will trade. Once you have a good profit in couple of trades, reduce your size of trades. This is very important.

I will strongly suggest to trade not more than 2-3 times in a single trading session.

In intraday trading, you have very limited time. And you won’t make profit everyday. This leads to over trading on the days when your first couple of trades were not profitable. This, almost always lead to more losses.

Again, don’t over trade. If you are not having a good day, just log out and trade the next day.

If market is rising, then most of the stocks will go up. Same is true when market is falling.

To have the high probability of success, try to look for stocks (in your list) which is moving in the direction of bigger trend.

For example, if Index is in uptrend, then it is good idea to trade in stocks which are showing long trades. Avoid stocks which are showing short trades when overall market is moving up.

Final thoughts about intraday trading

Intraday trading is good option for people who are free to sit in front of trading terminal to trade, have requisite focus and alertness to enter and exit positions quick.

Professional traders who generate regular profits have a solid trading strategy, and they follow it strictly in each trading session. This discipline is required to make money from intraday trading.

If you try one method today and another method tomorrow, you will reduce your chances of making money from intraday trading.

Actually, the fact is, if you keep changing your strategy, you reduce your chances to make money from trading at all.

It is not recommended for those who are trading on the side of doing a regular job or some other work.

Frequently Asked Questions

Is intraday trading profitable?

Yes, intraday trading is profitable. The problem is more of emotional control from trader’s part. For small number of traders, who manage their risk and use a tested trading strategy, intraday trading is indeed profitable.
There are many profitable intraday trading strategies, like ORB etc. But they need to be fine tuned to make a profit for you. Test your system on paper before putting in real money.

How much can I earn in intraday trading?

There is no fixed number. If you are just starting out, the main goal is not to loose the trading capital. Slowly, you get confidence and way of applying your strategy to start earning money from intraday trading.
This is step by step process, and it depends a lot on your patience, risk management and overall liquidity of instrument you are trading.

How much money is required for intraday trading?

You need very limited amount of money for intraday trading.
For example, one lot of Nifty futures requires around ₹ 89-91,000 as margin money. But when you trade in intraday with Cover Order – you can do that with only ₹ 20,000 or even less.
For details, you can check out the intraday margin requirements from margin calculator links of your broker.

How to make money in intraday trading?

If you are new, learn a system, practice it on selected stocks or index. And then start with small quantity or single lot of these instrument. Only when you are consistently making profit, you shift your focus to doing it full time.

If you are a medium term or swing trader, then you need to start with same process, though you can start without trying on paper trading. As you know the trading process, most of the time, you can try to fit your existing strategy to intraday.

For example, I was able to fit my daily trading strategy to intraday on 15 min and 30 min timeframe.

Trader’s Pit is working on developing real-time stock simulator to practice on your trading skills. If you are interested in the same, please sign up. Besides, if you are interested in receiving expert trader’s opinion about Bank Nifty, Nifty and major trending stocks, then subscribe to our updates

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