What is Intraday Trading?
- Feb, 2024
- By SmartBulls Team

What is Intraday Trading?
Intraday trading, also known as day trading, is a strategy where traders buy and sell stocks within the same trading session, aiming to profit from short-term price movements. This fast-paced approach requires active monitoring, technical analysis, and quick decision-making. Let's explore the intricacies of intraday trading, including its benefits, requirements, timing, limits, precautions, and a practical example to understand its implementation.
Understanding Intraday Trading
Intraday trading involves buying and selling stocks within a single trading day, with the objective of capitalizing on short-term price fluctuations. Unlike long-term investing, where investors hold onto stocks for extended periods, intraday traders seek to profit from volatility and liquidity in the market. By entering and exiting positions swiftly, they aim to generate quick profits based on small price movements.
Why Intraday Trading?
1. Profit from Volatility: Intraday traders leverage price fluctuations and market volatility to generate quick profits within a single trading session.
2. Avoid Overnight Exposure: By closing out positions before the market closes, intraday traders avoid overnight exposure to market risks, such as gap openings or adverse news developments.
3. Leverage: Intraday trading allows traders to utilize leverage, amplifying their buying power and potential returns. Margin funding options enable traders to trade larger positions with relatively small capital.
What are the requirements for intraday trading?
1. Trading Account: Traders need to open a trading account with a registered stockbroker to participate in intraday trading.
2. Margin or Funds: Sufficient margin or funds must be available in the trading account to cover margin requirements set by the exchanges.
3. Market Analysis Tools: Active monitoring of market trends, technical analysis tools, and risk management strategies are essential for successful intraday trading.
Intraday trading requires active monitoring of market trends, technical analysis, and risk management strategies. Traders often use various tools and techniques such as charts, indicators, and stop-loss orders to make informed trading decisions.
What is timing for intraday trading?
Intraday trading in equity markets typically begins at 9:15 am when the market opens and concludes at 3:30 pm when the market closes. Traders must execute their trades and square off their positions before the market closes for the day.
Is there any limit for intraday trading?
No. you are only limited by your capital and ability to take a risk. If you opt for margin funding option, you can trade up to ten times your account value and increase profit opportunities.
Can I sell intraday-shares the next day?
If you don’t trade intraday-shares on the same day, they are delivered to your account automatically. However, it depends on the policy of the broking house. Some broking houses have classifications like intraday options and delivery options. That’s because they charge different brokerage for different categories. Under the intraday category, shares selected for day-trading will automatically get sold at 3:00 pm.
Example: Understanding Intraday Trading
Let's consider a practical example to understand how intraday trading works
Scenario: A trader identifies a stock, ABC Ltd., which has shown strong intraday momentum based on technical indicators such as relative strength index (RSI) and moving averages.
Trade Execution: At 10:00 am, the trader buys 200 shares of ABC Ltd. at Rs. 200 per share, anticipating a short-term price increase.
Monitoring the Trade: Throughout the day, the trader actively monitors the stock's price movements, market trends, and relevant news updates.
Exit Strategy: By 2:00 pm, the price of ABC Ltd. rises to Rs. 220 per share, meeting the trader's profit target. The trader decides to sell all 200 shares, realizing a profit of Rs. 4000 (Rs. 20 per share x 200 shares).
Square Off: Before the market closes at 3:30 pm, the trader ensures that all positions are squared off, thereby closing the intraday trade.
Advantages of Intraday Trading
1. Quick Profits: Intraday trading offers the potential for quick profits, allowing traders to capitalize on short-term price movements.
2. Liquidity: Stocks traded in the intraday market are highly liquid, enabling traders to enter and exit positions swiftly.
Disadvantages of Intraday Trading
High Risk: Intraday trading involves high levels of risk due to the fast-paced nature of trading and potential for significant losses.
Emotional Stress: Rapid price movements and constant monitoring can lead to emotional stress and impulsive decision-making.
Note of precaution
Intraday trading is a high-risk strategy that demands discipline, knowledge and experience. While it offers the potential for quick profits, traders must exercise caution and adhere to risk management principles. Beginners are advised to practice with a virtual money over paper trading app SmartBulls and seek guidance from professionals before venturing into real-money intraday trading. With proper precautions and continuous learning, traders can navigate the challenges of intraday trading and potentially achieve their financial goals.