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What is Intraday Trading: Basics of Day Trading

6 Mins 21 Feb 2022 0 COMMENT
Intraday trading

India's securities and stock market offer numerous investing opportunities for wealth enhancement. Making regular stock market investments is the most popular investment opportunity among all available options. All the investment options call for a reasonable approach that not only safeguards the investor's wealth but also helps them to continue these investments for a longer period.

Stock market investors may experience long- and short-term gains. Short-term trading requires more attention to detail and spontaneous decision-making ability. To understand this type of trading let us deep dive and learn how everything about intraday trading.

What is Intraday Trading?

Buying and selling stocks on the same day is referred to as intraday trading. It is also known as day trading. In short-term trading, traders buy and sell financial instruments within the same trading day. Intraday trading in the stock market requires quick decision-making, disciplined execution, and a comprehensive understanding of the market. 

While doing intraday trading, traders have an agenda to leverage the rise and dips in the stock price, and profit from the differences. This is done by monitoring fluctuations in stock prices. Typically, in intraday trading, the volumes of trade are high. This helps you make more profit since the shifts in stock prices may be marginal. The ownership of the shares does not change in intraday trading, as the trade is settled within the day itself.

Additional Read: Five suggestions for intraday trading

How to do Intraday Trading?

1. Choose Liquid and Volatile Stocks

When selecting stocks for intraday day trading, focus on liquid and volatile stocks. Liquidity ensures that there are enough buyers and sellers in the market that ensure quick execution of trades without significant slippage. On the other hand, volatility provides opportunities for booking the profits because of the price movements.

2. Follow a Watchlist

Create a stock watchlist to closely monitor trading opportunities. This list should be made by aligning the trading strategies and showing promising patterns. Traders should regularly monitor their watchlist and keep a close watch on their targeted companies’ financial positions or major events.

3. Utilize Technical Analysis

Doing a technical analysis of the stocks is important for the intraday traders as it helps in identifying the potential entry and exit points, price patterns, momentum, and trends. This technical analysis can be done with the help of technical indicators like moving averages, RSI, and Bollinger Bands.

4. Set Realistic Targets

Intraday trading is a game of quick profits, so it's crucial to set realistic profit targets. Determine your risk-reward ratio before entering a trade, ensuring that the potential profit outweighs the potential loss. Set profit targets based on technical levels and when your targets are met, avoid the temptation to hold on for higher gains, as market conditions can change rapidly.

5. Use Stop-Loss Orders

Always set stop-loss orders for every trade you enter during an intraday trade. This helps in limiting your potential losses by automatically exiting the trade if the price moves against the set targets. The stop-loss levels can be determined based on the technical analysis conducted in earlier steps.

6. Manage Risk and Position Sizing

Risk management is key for long-term gains in day trading. Risk tolerance must be decided before entering into intraday trading and always avoid putting a bulk portion of the assessed capital on a single trade to minimize the risk. This risk management can be done by using techniques like the fixed percentage method or the Kelly criterion

7. Stay Informed and Adapt

Always stay updated with the latest market news, economic events, and company announcements that can impact the stocks you trade. Reliable sources of information such as financial statements, press releases, or stock research of well-known stock brokers must be considered to make informed decisions

Additional Read: Is Intraday Trading Possible Without a Demat Account?

Benefits of Intraday Trading

There are several benefits of intraday trading:

  1. Positions are not affected by the probability of negative overnight news that could have a potential impact on stock prices.
  2. Ability to utilize stop-loss orders—the act of raising a stop price to minimize losses from a long position
  3. Enhanced access to margin and, as a result, the increased leverage.
  4. Traders get more possibilities to learn the stock market
  5. Lower or nominal brokerage fees is charged on intraday trading as delivery expenses of transferring security in the name of an investor are forgone. 

Important Indicators for Intraday Trading

The best indicators for day trading are:

  1. Moving Average Convergence Divergence: It is the difference between fast and slow exponentially moving averages and is used for determining the momentum, strength, directional changes, and trend duration of a share price
  2. Momentum Oscillators: When traders miss the share price movements because of a short time in intraday trading, momentum oscillators are used. They generate signals for price movements and trend reversals. Being one of the best intraday trading indicators, these indicate when the share market fluctuations will face any modification   
  3. Relative Strength Index (RSI): This intraday trading indicator provides a visual representation of share price trend shift by comparing the magnitude of average loss and gain of the respective share price. It is used to identify the strengths and weaknesses of a stock with the help of stock details like overbought and oversold levels.
  4. Bollinger Bands: Bollinger bands are two lines that envelop the stocks’ moving average and price lines or bars where the upper line has a standard deviation of +2 and the lower has a standard deviation of -2. These lines keep on moving based on the share price volatility.
  5. Moving averages: Being one of the easiest intraday trading indicators, the moving average is used to determine the average share price over a particular period. It is used to analyze the market trends which Is further used by intraday traders for investment decisions. 

Intraday Trading Tips & Strategy

Intraday trading is considered to be risky. This is because as you are required to complete – or square off - your transaction on a given day, irrespective of making a profit or loss. That's why you need to know the ground rules of intraday trading well to make accurate and profitable decisions. Here are some go-to intraday trading tips:

Stop-loss strategy

A stop-loss strategy helps screen you from unexpected losses and make profits. This is done by helping you exit the market by selling the stock once it crosses a certain price point. It is crucial to establish this stop-loss mark as per your risk appetite in intraday trading, especially if you are a beginner. You could consider having multiple target points for profit as well as losses.

Correct timing is key

You should analyze past favorable intraday trading patterns to understand the right time to enter and exit the market. They help you identify the best time to buy and sell scrips. These past trends will give you a good head-start. The ideal time to exit the market is when you have crossed your stop-loss mark or reached your target profit mark.

Study historical trends

Research is a key weapon in any financial trade. This holds true for day trading as well. Historical trends in movement and characteristics of indices and scrips can give you valuable insights into areas such as which scrips should be your pick, what should your ideal trading volume be, etc. Studying the ongoing market trends could also provide valuable insights.

Stay calm and focused

A minute missed here and there can cost you thousands if not more in intraday trading. That's why it can be nerve-wracking at times. However, it is very important to stay calm in every scenario – be it profit or loss. You may miss opportunities, but that doesn't mean it is doomsday. Be alert and focus single-mindedly while trading. Using logical reasoning and practical rationale instead of greed and emotional outbursts will benefit you greatly here.

Start small

You may have beginners’ luck or be inspired by someone’s success story, but avoid large bets in the beginning. Start small instead. One or two stocks are good to deal in when you are a newbie. This will give you the bandwidth and cushion to learn from your mistakes till you gain enough experience. Thereafter, slowly and cautiously, you can increase your trade volumes. Another important point is consistency - it is important to be consistent in intraday trading.

Avoid volatility

Volatile markets offer good opportunities to profit in a big way, as well as make great losses. But too much volatility may do more damage than good. That's why you should ideally adopt the middle path at the start. A good strategy here may be to first identify stocks as per their categories such as large caps, midcaps, small caps, penny stocks, etc and accordingly pick stocks from these for trade. Each category typically has a unique volatility quotient. Large caps are usually the least volatile, whereas penny stocks  can be highly volatile.

Brokerage Charges in Intraday Margin Trading

Prime Plan (Rs.)







Stock Intraday (% of Trade Value)







Option Intraday (Per Lot)

Rs 35

Rs 35

Rs 25

Rs 20

Rs 10

Rs 7

Currency & Commodity (Futures and options) (Per Order)

Rs 20

Rs 20

Rs 20

Rs 20

Rs 20

Rs 20


These tips can be very handy for you to start intraday trading, but this is just the tip of the iceberg. The more you expose yourself to the intraday market, the more you get a knack of dealing with different scrips and devising your strategy. You should also know that not all financial instruments function on the same principles. For instance, commodities and stocks can be poles apart fundamentally. So, you should consider having unique plans for each segment.

Additional Read: 5 smart tips for beginners in the Stock Market

Intraday Trading FAQs

1. Is Intraday good for trading?

The first rule in the intraday trading guide is that you should not get lured into intraday trading if you cannot commit to the market trends. To efficiently charter the day trading waters, the following is needed:

  • Technical analysis
  • Time
  • Technologically Conversant

2. What time is best for Intraday?

As per experts, the best time to do intraday trading is between 10.15 AM and 2.30 PM as the morning volatility often subsides by 10.00 to 10.15 AM.

3. What is the difference between Day trading and Intraday Trading?

Intraday trading is also called day trading as it is bought and sold on the same day.

4. Can I do intraday after 3 pm?

The intraday trading closes at 3:10 pm. Ideally, the traders should not wait till 3:30 to sell off their shares as an unforeseen market movement of technical issues may become a hindrance in their intraday trading strategy.