What is Intraday Trading?

Intraday Trading is commonly known as “Day Trading”. It refers to the process of buying and selling shares in the stock market within the same trading session. If a person fails to close their position within the day, it will be squared-off by their stockbroker. The main objective of intraday trading is to make profits with the help of price fluctuations and the movement of the market during the day. In Intraday Trading, the ownership of the shares is not changed between the buyer and seller. Any trader who wants to trade in intraday needs to open an online Demat and trading account.

To trade in Intraday, a trader should be aware of the price trends and monitor market behavior closely. If a trader is not keeping a close watch on market movements, he/she may incur a loss. Therefore, tracking the market consistently becomes a priority especially for a day trader to make a profit out of it. There are many techniques and strategies which are followed by the day traders, one of the popular techniques is to follow the news and trade. Apart from this, a trader keeps track of the economic stats, past market trends and volatility of the shares in which they want to trade.

Features of Intraday Trading



Intraday Trading Indicators

The price fluctuations in the stock market appear to be erratic and incomprehensible. But several statistical tools are used by traders to find patterns in these price movements and draw insights into the future trends. A few Intraday Trading indicators are described below:

  1. Moving Average: Moving Average is one such technical analysis tool that traders use to predict price trends. It smooths the price fluctuation graph by creating data of average price over a specific interval. Traders can set this interval to 1 day, 10 days, 1 hour, 5 min, 1 min, etc., whatever the trader wishes to. It is beneficial for both long term investors and short-term traders. It smooths out the short-term fluctuations and gives a broader view of the ongoing trend within the time interval.
  2. Bollinger Bands: Bollinger Band is a more advanced technical analysis tool which helps the trader identify if the shares are overbought or oversold. It consists of 3 lines. The first line is the 20-day simple moving average line, and there are two lines at two standard deviations in the positive and negative direction from it. In more volatile markets, the bands tend to widen, and in non-volatile markets, they tend to contract.
  3. Relative Strength Index (RSI): RSI is a technical analysis tool that considers the prevailing price changes to identify if the stock is trading in the overbought or oversold state. Its value oscillates between 0 to 100. Traditionally, an RSI value above 80 suggests overbought condition; an RSI value below 20 suggests an oversold condition.
  4. Moving Average Convergence Divergence (MACD): MACD, a trading indicator is used to identify signals for trend reversal or continuation in stocks’ price movement. It is arrived at by finding the difference between the fast-moving average and the slow-moving average. MACD is depicted with a histogram which signals whether the momentum (of bullish or bearish trend) is high or low.

Intraday Trading Vs Delivery Trading

  1. When the shares are bought and sold within the same trading day, it is called Intraday Trading whereas in Delivery Trading, the shares are bought and held for months or years before selling.
  2. In Day Trading, it is mandatory to square-off the position before the market closes whereas delivery trading allows the traders to hold the shares for long-term.
  3. In Day Trading, the price movement during one day matters as both buying and selling has to be done on the same day. On the other hand, in Delivery Trading the return is expected in long-term, so the price movement during the day doesn’t affect delivery trader.
  4. The ownership of shares is transferred in delivery trading and not in day trading.

Intraday Trading Charges

With Bajaj Financial Securities Limited (BFSL), you can get the benefit of low brokerage rates for intraday trading. Through affordable subscription plans, trade at a flat fee per order and save significantly.

Brokerage charges for intraday trading for the 3 subscription packs offered by BFSL

Subscription packs from BFSL Equity Intraday trading brokerage
Freedom Pack ₹ 17 / order
Professional Pack ₹ 10 / order
Bajaj Privilege Club ₹ 5 / order

Advantages and Disadvantages of Intraday Trading

Advantages:

  • If trade turns favorable, one can make profit in a very short interval of time.
  • Intraday Trading increases the market knowledge for people who wants to gain experience in trading.
  • You can sell shares in Intraday without needing to submit Power of Attorney (POA) to the broker or using EDIS, which is mandatory for selling shares in Delivery order.

Disadvantages

  • There is insufficient time span to see increase in profit for a position, since position must be squared-off within the day.
  • Ownership of share is not transferred to the trader.
  • Involves higher risk

How to choose stocks for Intraday Trading?

Volume and liquidity are the most important aspects of intraday trading according to investors. Intraday traders choose stocks with high liquidity and high trading volume. It is important to do your due diligence (research, check news, use technical indicators) along with analyzing the volume and liquidity for that stock, before choosing a stock for intraday. It is always recommended by traders to analyze stocks through various technical indicators to get a better understanding about the price movements of the stocks.

Intraday Trading at BFSL

BFSL is an ideal place for intraday traders, as traders have a great opportunity to save a lot on brokerages. Intraday traders can choose the Bajaj Privilege Club pack on BFSL to avail brokerages as low as Rs. 5 flat, per order. Along with such low brokerages, BFSL also offers various other features with this membership. Intraday trading experience is elevated for a trader with BFSL’s simple and effective user interface.

Download the intraday trading app to start trading!

Intraday Trading - FAQs

If you buy a share but do not sell it on the same trading day, it is called delivery trading. In delivery trading, the stocks you buy get credited to your Demat Account. You hold it for as long as you want, before selling it. In delivery trading, investors consider the long-term price movement of the stocks to book profits rather than its price fluctuations within the day. Whereas a position in intraday trading is closed on the same day it is taken.

Traders across, use various types of indicators to identify buying and selling signals. No indicator can be considered as the best indicator, considering each indicator is used differently. After using the indicators in multiple scenarios and on multiple occasions traders may be able to decide the indicator that suits them better. Traders, usually choose indicators that will analyze the trend, momentum, volatility, volume, etc. for a stock.

A trader will select the option of intraday trading in the platform. The brokerage charges for intraday trading are different from the delivery trading. A trader needs to identify the stocks and take a position accordingly. Traders also need to ensure that they close the position by the end of the market hours or else the position will be auto squared off.

Volume and liquidity are the most important aspects of intraday trading according to investors. Intraday traders choose stocks with high liquidity and high trading volume. It is important to do your due diligence (research, check news, use technical indicators) along with analyzing the volume and liquidity for that stock, before choosing a stock for intraday. It is always recommended by traders to analyze stocks through various technical indicators to get a better understanding about the price movements of the stocks.

There is no fixed amount to start intraday trading. You can start with any amount you want. If you are a new trader, then it is recommended to start small. An advantage of trading in Intraday is that all brokers provide leverage, that means you can buy shares worth more than available funds. There are risks involved as well and thus it is recommended by traders to use a stop-loss order on trades.

Yes, a Demat account is mandatory for trading along with a trading account. Usually brokers across offer Demat & Trading A/c together.

A Demat account is needed to hold the securities (shares, bonds, mutual funds, etc.) electronically. Demat account is mandatory for delivery/intraday/derivative trading in India. A Demat account is also needed while applying for IPO (initial public offering) as the allotted shares get credited to Demat account.

If you do not trade through your Demat account for more than a year it will be inactive and you may have to reactivate or renew the account through your broker.

A Demat account is mandatory for investing and you will not be able to invest without it.
Opening a Demat account with Bajaj Financial Securities Limited is free and you can access a host of benefits if you open your Demat and Trading account with BFSL and start investing.

Stop loss is a sell/buy order that is placed to close the existing long/short position on a trade. A stop loss order is used to control the losses. During volatile market situations, stop-loss order acts as damage control in case the market moves in the opposite direction.