Intraday trading refers to the practice of buying and selling financial instruments within the same trading session. Unlike long-term investing, intraday trading focuses on capturing short-term price movements that occur during market hours. Positions are opened and closed on the same day, ensuring that no exposure is carried overnight.
In India, intraday trading has become increasingly popular among retail investors and active traders due to improved market access, online trading platforms, margin facilities, and the availability of liquid stocks and derivatives. However, while intraday trading offers opportunities for quick profits, it also demands discipline, planning, and risk management.
This article explains what intraday trading is, how intraday trading works, commonly used intraday trading strategies, and the benefits and risks traders should understand before participating.
What Is Intraday Trading?
Intraday trading, also known as day trading, involves executing trades where both entry and exit take place on the same trading day. The primary objective is to profit from short-term price fluctuations rather than long-term appreciation.
For example, a trader may buy a stock in the morning and sell it a few hours later once the price moves in the expected direction. All intraday positions must be closed before market close, failing which brokers usually square them off automatically.
Intraday Trading vs Delivery Trading
Parameter | Intraday Trading | Delivery Trading |
|---|---|---|
Holding period | Same trading day | Multiple days or longer |
Capital requirement | Lower due to margin | Full value required |
Risk exposure | No overnight risk | Subject to gap risk |
Objective | Short-term price movement | Long-term growth |
Intraday trading can be carried out in equity stocks, index and stock derivatives (F&O), and commodities, provided there is adequate liquidity and volatility.
How Intraday Trading Works?
Understanding how intraday trading works is essential before placing your first trade. Intraday trading operates on margins, fast execution, and strict timelines.
Step-by-Step Intraday Trading Process
1. Selection of Instrument
Traders usually select stocks or derivatives that show good liquidity and intraday movement. Highly traded stocks are preferred as they allow easy entry and exit.
2. Margin and Leverage
Intraday trading allows traders to use margin, meaning only a portion of the trade value needs to be deposited. This leverage amplifies both gains and losses.
3. Placing the Trade
Traders place buy or sell orders depending on their market view. Precision in execution plays a critical role in intraday trading outcomes.
4. Monitoring the Trade
Intraday trades require active monitoring during market hours. Price movement, volatility, and market cues influence exit decisions.
5. Square-Off Before Close
All positions must be closed before market close to avoid overnight exposure. Brokers may auto-square positions if traders fail to do so.
Common Order Types in Intraday Trading
- Market Order: Executes immediately at the best available price
- Limit Order: Executes at a specified price or better
- Stop-Loss Order: Automatically exits a trade when price moves against the position
Using stop-loss orders is critical for controlling risk in intraday trading.
Intraday Trading Strategies
Intraday trading strategies help traders bring structure and consistency to their decisions. Different strategies suit different trading styles and risk appetites.
1. Trend Following Strategy
This strategy involves identifying the prevailing trend and trading in the same direction. Traders look for confirmation that the trend is likely to continue during the session and avoid trading against market momentum.
2. Scalping Strategy
Scalping focuses on making multiple small trades throughout the day, aiming to capture minor price movements. This strategy requires quick decision-making, high discipline, and strong execution skills.
3. Momentum Trading
Momentum traders focus on stocks that are moving sharply due to news, results, or increased activity. These trades are usually short-term but rely heavily on timing and volatility.
4. Breakout Trading
Breakout trading involves entering trades when prices move beyond key levels where they were previously restricted. The idea is to participate in a fresh directional move once the price clears important levels.
Strategy Comparison
Strategy | Holding Time | Suitable For | Risk Level |
|---|---|---|---|
Trend Following | Few hours | Beginners | Medium |
Scalping | Few minutes | Experienced traders | High |
Momentum Trading | 30–120 minutes | Active traders | Medium-High |
Breakout Trading | 1–3 hours | Beginners & active traders | Medium |
Beginners are generally advised to start with trend-following or breakout strategies due to their relatively structured nature.
Benefits of Intraday Trading
Intraday trading offers several advantages when executed with discipline:
- Opportunity to generate profits within a single trading session
- No overnight market risk or gap exposure
- Lower capital requirement due to margin availability
- Faster learning through active market participation
- Flexibility to trade both rising and falling markets
For traders who prefer short-term engagement and faster feedback, intraday trading can be appealing.
Risks of Intraday Trading
Despite its benefits, intraday trading carries notable risks:
- Sudden volatility can lead to sharp losses
- Emotional decision-making may result in overtrading
- Continuous monitoring is mentally demanding
- Leverage can accelerate capital erosion if misused
Intraday trading without a defined plan and risk limits often leads to inconsistent outcomes.
Tips for Successful Intraday Trading
- Always use predefined stop-loss levels
- Focus on liquid stocks with consistent activity
- Avoid trading every price movement
- Limit the number of trades per day
- Start with small capital and scale gradually
- Maintain a trading journal to review performance
Long-term success in intraday trading depends more on discipline and risk control than on frequent profits.
Frequently Asked Questions
1. What is intraday trading?
Intraday trading involves buying and selling financial instruments within the same trading day.
2. How does intraday trading differ from delivery trading?
Intraday trades are closed the same day, while delivery trades can be held for longer durations.
3. Which intraday trading strategy is best for beginners?
Trend-following and breakout strategies are commonly preferred by beginners.
4. Can beginners succeed in intraday trading?
Yes, provided they focus on learning, risk management, and gradual capital deployment.
Conclusion
Intraday trading offers an opportunity to participate actively in the markets and benefit from short-term price movements. However, it is not a shortcut to easy profits. Successful intraday trading requires discipline, preparation, and consistent execution.
Traders should focus on understanding how intraday trading works, adopt a limited number of well-defined strategies, and prioritize capital protection. With the right approach, intraday trading can become a structured and sustainable trading activity rather than a speculative gamble.
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