A Complete Guide on the Basics of Intraday Trading

Basics of Intraday Trading

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Intraday Trading is the act of buying and selling shares on the same day before the close of the stock market which is usually by 3:30 in the afternoon. By reading this definition it might seem like a walk in the park but let me assure you that it is not. The reason is that most new traders need to learn the Basics of Intraday Trading and then practice them every day to become a successful day trader.

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Why Indulge in Intraday Trading?

Most people do intraday trading to earn quick profits on a daily basis, but profits are not the only reason to start intraday trading. Here are some of the benefits of Intraday Trading:

  • Brokerage charged on Intraday Trading is very low which is less than a quarter of normal positional trading with most brokerages.
  • Intraday Trading provides the trader with fresh capital at the start of the day to trade in different stocks and also to meet their personal needs.
  • Traders don’t have to worry about the risks associated with holding the positions in the stocks for a longer period of time.
  • Traders can also use this as a good opportunity to learn about strategies and techniques which also help them when trading over longer time periods.
  • Intraday also requires a disciplined approach in order to make successful trades.
  • Intraday Trading also allows you to gain knowledge of macroeconomic details of particular companies, sectors, currencies, etc.

Hopefully, these benefits would have gotten you interested in Intraday Trading, now let’s have a look at the things one must keep in mind before starting Intraday Trading.

Fundamentals of Intraday Trading

Learn to trade Volatile Stocks

Intraday Traders need to learn to trade highly volatile stocks as most liquid stocks have a lot of buying and selling activity which can cause highly volatile scenarios for trading and hence its important to identify upward and downward trends in these volatile stocks to make successful trades.

Trade Volatile stocks
Perform Thorough Research

It is important to research companies extensively when you are looking to invest in them. Research is very important in making successful trades and only those who do proper research are the ones who win in the market while those who jump into the market without any background research end up with most losses. 

It is also important to research stocks along with their volumes, volatility, and price movements. Apart from this, it is important to research the news to understand the daily happenings which can have a huge impact on the profitability of stocks.

You can also refer to websites like Moneycontrol, Economic Times, etc. for researching stocks.

Understanding correlations between different stocks, sectors, and Indices

To be a successful trader one must understand the correlations that exist between stocks from the same sectors/industries and see similar movements in their stock prices on a daily basis. A good example of this would be IT sector companies like Infosys and Wipro who see very similar movements in their stocks on a daily basis.

Comparison of similar 1-D price movements in correlated IT stocks Infosys and Wipro
Ride Trends using Technical Analysis

For an Intraday Trader, it is very important to catch trends early and be able to trade with that trend in order to make a quick profit. A good example for this would be the announcement of a  rate cut from the government which would see most companies stock price rise which would eventually result in the growth of the overall Indices like Nifty. Hence, a bet on Nifty or anyof your favorite stocks should give you good profits.

Traders who are unable to ride trends almost always lose in the Intraday market. If you are looking to learn more about identifying trends using technical analysis, kindly refer to this blog

Paper Trading

Paper Trading is a good way to understand the basics of Intraday trading without using real money. Using this you can create a real-life trading simulation where you can understand the possibilities of making profits and avoid situations that might lead to losses.

This technique should be used by beginners to gain real-life trading experience and it can be done either on a piece of paper or spreadsheets and provides a trader with useful insight to improve their skills or develop strategies that can be used in real-life scenarios.

Good understanding of risk management and Stop Loss

Intraday Trading comes with its own risks and hence traders should determine their entry and exit points before entering a trade and should apply a stop losses according to that to limit further potential loss on a particular trade.

Look for Liquidity

When trading Intraday, it is important to trade in stocks which are highly liquid meaning stocks with high buying and selling power as it is easy to trade in these stocks in high quantities without affecting their price, and traders can easily enter and exit these stocks without much difficulty.

Develop new Strategies while being creative

Nowadays markets keep evolving and changing every minute and hence it is important to become creative with your trading. A good trader should realize the importance of developing new strategies that are flexible so that they can modify it as per the market conditions which can change anytime.

It is also important to test any new strategies to different scenarios before implementing them to first understand the possibility of losing money on that strategy and formulating a plan in case adverse scenarios actually happen in real-life situations.

Intraday Vs Positional Trading

Intraday Trading involves buying and selling of stocks on the same day without holding on to them for a longer time period and hence traders usually square off their trades at the end of the day.

Positional trading involves investing into stocks by taking long or short position in them for longer period of time which exposes them to systematic risk( risk faced by the entire market) as well risks specific to the company itself. These trades are not squared off at the end of the day.

Disadvantages of Intraday Trading

  • Intraday Trading gives high returns but this is coupled with high risk, hence it is not meant for Conservative investors as a lot of risk-taking is involved. 
  • Those who intend to excel at Intraday Trading need to study and research stocks well. Moreover, Intraday Trading requires a disciplined approach and revolves around planning and executing different strategies coupled with the technicalities of buying and selling stocks and interacting with brokers.
  • The most important thing to understand about Intraday Trading is that it is a full-time job and requires your hard work and attention on a daily basis. For the investors who can’t devote a lot of their time to trading should stick to positional trading.


Intraday Trading is a good way to gain knowledge of trading and investing in the markets. It provides the opportunity for the trader to learn new skills and develop strategies to make short term profits. It is meant for disciplined investors who are not afraid to take risks. This blog has further outlined the skills and characteristics required to become a successful day trader. If you are looking to open a trading account you should fill this form to start trading with one of the best brokers in India.

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