Advantages of Intraday Trading

Introduction

Intraday trading is fundamentally different from investing in the market for the long-term. The practice of buying or selling stocks the same day without the need of taking ownership overnight is called intraday trading. There are many benefits of intraday trading for market participants when done right. Let us learn about some.

Intraday Trading Advantages

No need to take overnight positions

In the stock market, there is tangible risk in holding shares overnight.  This risk is eliminated when it comes to intraday trading. The primary advantage of intraday trading is that all the positions are squared off on the same day. There is, therefore, no chance of your capital getting “stuck” as there is no ownership after the close of the trading session.

Additional Read: Five suggestions for intraday trading

Gain when the markets are falling

Amongst other intraday trading benefits is the fact that you can profit from a falling market too. This is made possible by using a technique called “short selling”. Short selling is essentially selling a stock at a higher price and buying it when the price reduces or falls later. Unlike the cash segment, you can sell first and buy later, thus benefitting from a decline in the stock price.

Use of margins

Intraday trading in India can be even more profitable for day traders owing to the margins that brokers provide. As a day trader, you will only need to pay a small amount of the value of your total order. This is used as a leverage against losses. For seasoned players, it may be as much as 10-15 times, because they generate high brokerage. However, even as a beginner, you can place bigger bets simply by using the fixed margins that stockbrokers provide as a facility to all day traders. When used prudently, margins can be really advantageous and profitable for day traders.

Alternate Read: Margin trading – Features and Benefits

Ace it with technical analysis

If you are a serious investor in the cash segment of the stock market, fundamental analysis of a company is necessary. It is the study of a company’s financial status, its position in the industry it operates in and the economy. This can be tedious and time-consuming. Another benefit of intraday trading in India, is that you need not spend so much time on fundamental analysis. You can rely on technical analysis instead. Technical analysis is the study of charts to analyse patterns and predict a stock’s movement. With time and patience, it is possible to decipher clear patterns that make it easier for you to chalk out intraday trading strategies.

Reading the pulse of the market

Another clear advantage is that intraday traders get first-hand information of any changes in market sentiment or mood. Be it an economic or a social occurrence, day traders are the first to feel the impact. If you are quick to gauge the signals of such events, you stand to make profits.

Opportunity to earn a regular income

There is no denying that intraday trade is risky, but the one reason it is steadily gaining popularity is that the returns are substantial. With appropriate trading strategies, you can easily build an alternative source of income by simply trading for a few hours each day. This can be done from the comfort of your home or office. Over time, with carefully-structured investment strategies, it may well become your primary source of income.

Alternate Read: What is technical analysis in equity trading?

Conclusion

There are many benefits of intraday trading in India, but for beginners it is prudent to advance slowly and with caution. To become a successful trader, it is important to know your risk appetite, do the requisite research and have enough patience to see your trading strategies work. The necessary support of a good broker with the right research and advanced charting tools will make your trading journey smoother. 

Disclaimer:

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.